Annual Financial Monitoring Return

Annual Financial Monitoring Return

Annual Financial Monitoring Return

Requirement for Voluntary Organisations in receipt of funding under a Service Arrangement.

Introduction

The HSE provide over €3.4 billion in funding to over 2,000 Voluntary Organisations for the provision of health and personal social services, this represents over 25% of the total available budget.

The HSE are obliged to ensure that appropriate systems are in place, to effectively manage the services and funding, and applies a Governance Framework which provides for national standard governance documentation and administrative processes, which seek to ensure both the HSE and the recipient organisations comply with their respective obligations, and the services delivered provide best outcomes for the service user and represent effective use of public exchequer funding.

The Service Arrangement (SA) that your organisation has signed with the HSE outlines the compliance requirements in relation to corporate, clinical and financial governance; this document provides further information with regards to specific information and assurance required in relation to financial governance.

The Service Arrangement outlines that each organisation must prepare Annual Financial Statements (AFS) which comply with generally accepted accounting principles (GAAP).

Best practice regulation GAAP for all organisations for the preparation of AFS is Financial Reporting Standard (FRS) 102, mandated by the Company’s Act 2014 for incorporated entity’s from 1.1.2015. For Charities the statement of recommended practice (SORP) for Charities is considered best practice, acknowledging that it is not mandatory. While it is accepted that unincorporated Voluntary Hospitals may continue to follow the Accounting Standards for Voluntary Hospitals as issued by the Department of Health, the provisions of FRS102 should be considered as updating specific references to FRSs which are now obsolete.

Please note that the accounts are required to be audited regardless of exemptions under S358 of the Companies Act 2014. It should also be noted, while organisations may fall within the abridged reporting thresholds of the Companies Act, the accounts to be submitted to the HSE, filed with the CRO, and published on the organisations Website must be the unabridged version and contain the disclosure requirements outlined above. The Detailed income and expenditure is also required to be submitted to the HSE.

Your Service Arrangement with the HSE sets out various terms and conditions attached to the funding, including financial requirements, in order to ensure the funding is properly administered.

Primarily the HSE seek assurance from the annual financial statements that:-

*  The funding is administered in accordance with good financial governance within your books and records.

*  A transparent audit trail exists for all financial transactions, which allows for a separation of the funding under the HSE’s Service Arrangement from other financial activities.

*  The funding is spent for the purposes intended and the related expenditure is capable of being vouched to original invoices, receipts and / or other relevant supporting documentation, as appropriate.

*  The public accountability requirements are fulfilled, e.g. with regard to tendering, tax clearance certificates and prompt payments legislation.

*  The principles as outlined in the Statement of Principles in DPER circular 13/2014, in relation to Clarity, Governance, Value for Money and Fairness are adhered to.

In addition the HSE as an agency funded from the exchequer and all organisations funded from public exchequer sources which includes those funded by the HSE, are subject to the requirements of Department of Public Expenditure and Reform (DPER) specifically Circular 13/2014 Management and Accountability for Grants from Exchequer funds, as outlined in Clause 10.4 (X) of your Service Arrangement with the HSE.

In order to standardise the financial information received from the vast array of organisations which it funds, the following Annual Financial Monitoring Return (AFMR) is now a requirement as an addendum to the audited financial statements and must be signed by the Chief Financial Officer and the Chief Executive Officer, or equivalents and returned to the HSE with the AFS.

The AFMR provides a reconciliation of the allocation made under the SA, against figures reported in the Annual Financial Statements (AFS), and an assurance statement on specific financial governance. The reconciliation will provide the HSE with assurance that the funding received, and the related expenditure, is accurately treated, and correctly reflected in the Audited Financial Statements. These Guidelines will assist you and your Accountant in fulfilling the HSE’s requirements.

Guidance

General

The HSE requires assurances regarding the propriety of your financial transactions as disclosed in the audited financial statements, particularly in the context of the Service Arrangements specific terms and conditions attached to the funding provided.

As an Organisation funded from the exchequer through the HSE, it is your responsibility to ensure that the required assurances are completed by competent personnel either within your own organisations or through a professional engagement.

The HSE require that the Annual Financial Statements (AFS) are audited as soon as possible after the year end, and that the audited AFS are approved, signed and returned to the HSE, in a timely manner.

The Annual Financial Monitoring Return (AFMR) to be completed by your Accountant and signed by the Chief financial Officer and Chief Executive should be included with your AFS submission from 2016.

The recommendation is that the audited accounts together with this AFMR should be available within five months of the year end and organisations should work towards this timeframe, we are also asking that once available they should be filed with the CRO and published on your website.

Organisations should ensure that finance personnel or external accountants that have responsibility for the preparation of the AFS are aware of all relevant regulation applicable to your organisation, so that they can take it into account during the AFS preparation process, they should ensure that they are familiar with the terms of the Service Arrangement, as well as the requirement to familiarise themselves with public accountability requirements generally.

As an exchequer funded organisation you are subject to the requirements of DPER circular 13/2014, including the specific disclosure requirements relating to Exchequer Funding allocations, which are required to be isolated and separately identified in the Annual Financial Statements, with a detailed separate analysis for each individual grant source income and expenditure e.g. HSE, Education, Community Employment Schemes, Pobal, etc. as outlined in Clause 10.4 (X) of your Service Arrangement with the HSE.

The required HSE Annual Financial Monitoring Return (AFMR) should be accommodated by your organisations compliance with the requirements of the circular in the preparation of your AFS, which requires a separate analysis of the income and expenditure relating to your allocation from the HSE.

The “Total as per AFS” in the AFMR should be clearly referenced back to and identifiable within the AFS.

A clear audit trail must exist to reconcile the figures included within the AFS to what was received from the HSE and reported in the AFMR.

The HSE’s Annual Financial Monitoring Return is available in excel format and may be required electronically.

Circular 13/2014 Management and Accountability for Grants from Exchequer funding.

The table below outlines the requirements of the circular your obligations and the HSE’s requirements arising.

Circular ref. / Summary of obligations arising affecting Organisations Funded by the HSE. / HSE Response
Section 1 Reclassification of Grants and Grant-in Aid.
“Grant –in-Aid” is now obsolete all exchequer funding is categorised as Grants. / This fundamental change means that all funding from exchequer sources is now covered by the full requirements of the circular whereas previously funding categorised under, “Grant in Aid” was not subject to the full requirements such as the overriding principle that unexpended surpluses are subject to surrender back to the originating Grantor.
This means that any organisation/body which funds organisations from funding which originated from the public exchequer is subject to the full requirements of the circular, and all organisations in receipt of such funding are also obliged to comply with the requirements of the circular. / The requirements to comply with this circular are contained within the Service Arrangement and Grant Aid Agreement.
Specific significant elements such as AFS disclosures are reproduced as Clauses and reiterated in the Schedules.
The significant assurance requirements that the HSE are required to obtain from funded organisations are being managed the development of the AFMR.
In addition to the AFMR the Annual Compliance Statement in place since 2014 for the S38 organisations, and to be extended to the larger S39 organisations for 2016 also provides additional assurances on organisation’s compliance with wider governance requirements.
Section 2
Award Principles / This outlines principles on the award of funding for personal social services which align to National Health Strategy including competition, evaluation and outcomes.
Some of our funded organisations provide onward funding to other entities and the award principles will have to align with those of this circular. / The HSE continues to develop our capacity to deliver best outcomes. The governance framework for the management of the funding provided to the non statutory sector supports those strategies.
The Service Arrangement has a specific clause stating that Agencies that provide onward funding would have systems equivalent to the HSE in place.
Section 3
Management of Grant Funding – General conditions / This outlines the requirements for Grantors for the management of funding provided to external organisations.
The management requirements include comprehensive monitoring and reporting requirements.
Specific Assurance Requirements under
11 C 6 and 11 D - provides for assurance statements signed by two members of the organisations board or executive, and stipulate adherence to public Pay policy, procurement and governance.
11 K - outlines the requirement for organisations to have adequate internal controls. / The HSE’s Governance Framework aligns to the requirements outlined.
The Service Arrangement performance review detailed within schedules 4/5 align to the monitoring requirements.
Some Assurance/declaration in the monitoring reporting requirements are being addressed by the developments outlined below.
The application of the Annual Compliance Statement with the S38s its extension to the S39s for 2016 and the development of this AFMR is in line with the assurance requirements outlined in 11 D of this circular.
Particularly the AFMR Part D Financial Assurance, Number 1 and 2.
The HSE’s Service Arrangement outlines corporate and financial governance requirements.
The AFMR Part D number 3 requires assurances in relation to internal controls.
AFMR Part D Number 7 outlines public sector pay adherence and Number 9 Procurement.
Section 4 / VOTE related issues not relevant to external HSE / Not applicable to funded organisations.
Section 5
Grantee Responsibilities / This is the section which provides the obligations and requirements for organisations funded by the HSE. / Individual elements included in the Governance Documentation and reporting returns.
Number 21 Reporting – / All Agencies funded by a Service Arrangement are subject to the full requirements in relation to Reporting. / The HSE’s Governance Framework outlines reporting requirements that are proportionate to the scale of funding provided and the scale of the organisation.
Financial Statements / Outlines the requirements for financial statements and their submission to the funder without delay. / Agencies in receipt of over €150K are required to have their accounts Audited and submit them to the HSE within four months of year end.
A - D - AFS Disclosure Requirements. / Outlines very detailed responsibilities and requirements for recipients in relation to all exchequer originating funding and related expenditure. / The Service Arrangement Clause 10.4 (x) has reproduced the requirements of the circular Number 21 A-D in total.
The disclosure requirements are provided for in the AFMR detail sections A B and C which requires a separation of the income and expenditure relating to the HSE’s allocations for each individual grant, where an individual grant for the HSE equates to each funded CHO/National Office.
The inclusion of the AFMR as an appendix to the AFS with the final totals referenced to the AFS figures will satisfy the requirements of the circular in this regard.
E Capital Grants / Outlines specific requirements in the reporting of Capital Funding. / The HSE’s Service Arrangement deals with revenue expenditure only with the HSE’s National Financial Regulation number 18 requiring the protection of the states interest in relation to funding provided for Capital Grants, the AFMR Part D financial Assurance number 11 provides a statement to provide assurances that the requirements are adhered to. In addition number 12 outlines the statutory instrument applicable to Section 38 Organisations which legislates for this requirement.
F Employees / The AFS must include a table detailing the numbers of employees in receipt of employee benefits over €60K, in bands of €10K. / This is included in Clause 18.1 of the SA but requires information for salaries in excess of €64,812.
We will accept reports which give details in the rounded bandings within the AFS
The HSE’s senior staffing template is and remains a required return with provides detail at individual employee level.
G Restrictions / Requirement to identify restrictions on the use of funding in the AFS. / The HSE allocation is restricted to the terms and conditions of the service arrangement and the services outlined therein. For Clarify where your organization is operating the Charities SORP the HSE allocation is restricted.
H Tax Clearance / Outlines responsibilities in relation to Tax Clearance. / The Service Arrangement includes this requirement in Clause 4.1.
Assurance requirement included in AFMR Part D number 10.
Number 22 Multiple Funding Sources
(also Section 3- 11 i) / Requires information on all separate funding sources and assurances on the use of same including assurance that there is no duplication in the use of funding.
Requires a declaration where funding from public exchequer sources is over 50% / The AFMR part A-2 provide for information on other sources of income which support the services which are part of the HSE Service Arrangement.
Superannuation should be included as income and expenditure as appropriate where relevant.
Examples of other sources of income would be Client contribution, fund Raising income etc.
The required assurances on no duplication on use of funding from different sources is included in the AFMR number 6 and the information required on percentage of total income from public exchequer is included in number 4.
Number 23
State Bodies / Confirmation of adherence to the Service Arrangement must be given to the Grantor. / While only sect ion 38 Agencies are considered to be State Bodies this requirement is included for all organizations as good governance.
The AFMR Part D Number 1 provides this confirmation.
Number 24 Vouched Expenditure / The circular advocates the use of the payment of funding on the basis of vouched expenditure.
Prefunding or funding as agreed under a payment schedule are permitted but require sanction from the Department. / The HSE’s Governance Framework as it applies to organizations managed by a Service arrangement does not operate on the basis of Vouched expenditure however the principles outlined apply.
Number 25
Financial Control / Organisations should be able to confirm that they have adequate financial control systems in place to manage the allocated funding. / The AFMR Part D Number 3 provides this confirmation.
Number 26
Sectoral Compliance / The requirements of the circular do not override existing Statutory or Sectoral requirements.
This means that there may be additional or alternative requirements that will continue to be applicable. / The HSE’s Governance framework provides comprehensive controls assurance requirements which stand alongside the requirements of this circular.

Glossary of Terms