SUSPENSE ACCOUNTS Contents:
Scope
Key Points
Background
Use of Suspense Accounts
Managing Suspense Accounts
Review and Closure
Audit
Annex 1: Review of Suspense
Account: Manager Checklist
Annex 2: Review of Suspense
Account: Finance Team Checklist
Scope 1. This section provides guidance on the
use, management and control of suspense
accounts. within the Scottish
Administration (ie Scottish Executive
Departments, Executive Agencies and
associated Departments). Other
organisations subject to the requirements
of the Scottish Public Finance Manual
(SPFM) should, where appropriate, arrange
for procedures consistent with the guidance
to be put in place. Key Points 2. Wherever possible, transactions
should be debited or credited direct to
appropriate budget related expenditure and
income account codes and the use of
suspense accounts should be kept to an
absolute minimum. 3. Any balance held on a suspense
account at the end of a financial year
falls to be recorded in the resource
accounts according to whether it is in the
nature of an asset, or a liability. It is
essential therefore that any balances can
be fully supported and justified to the
external auditors. 4. Suspense accounts should be reviewed
(and reconciled) every 3 months by the
relevant suspense account manager. In
addition the operation and control of
suspense accounts should be reviewed by
relevant departmental Finance Teams at
least once during the financial year and at
the year-end. Background 5. A "suspense" account is a separate
category of account code opened to record
expenditure and/or income which, for the
time being at least, cannot be properly
allocated to a specific budget related
expenditure or income account code. By
definition, entries in suspense accounts
are transitional and there is a presumption
that there is no adequate authority for any
items remaining in suspense over a period
of time. For this reason, individual
entries in suspense accounts must be
capable of identification and balances in
suspense must be reviewed regularly to
confirm that their retention in suspense is
justified. 6. Business areas would be expected to
have resolved the accounting for purposes
of preparing the resource accounts for the
year. Any balance held on a suspense
account at the end of a financial year
falls to be recorded in the resource
accounts according to whether it is in the
nature of an asset, or a liability. It is
essential therefore that any balances can
be fully supported and justified to the
external auditors. Use of Suspense
Accounts Wherever possible, transactions should
be debited or credited direct to
appropriate budget related expenditure and
income account codes and the use of
suspense accounts should be kept to an
absolute minimum. The most likely use of a
suspense account is where a business area
would post items temporarily to the account
code pending a decision on the final
treatment. Business areas might also
operate suspense accounts to manage third
party transactions eg: - income tax, employees' National
Insurance contributions and voluntary
deductions;
- VAT payments and recoveries;
and
- certain EC receipts payable to
recipients in the private sector, or to
local authorities and nationalised
industries.
Managing Suspense
Accounts 7. Only departmental Finance Teams may
authorise the opening of suspense accounts
within the Scottish Executive. For each
suspense account there must be a designated
suspense account manager, from the Finance
Team or the business area responsible for
its control, review and clearance.
Procedures covering these functions should
be clearly set out in desk instructions.
The names of suspense account managers
should be notified to the appropriate
departmental Finance Teams for audit and
control purposes. The functions of suspense
account managers are: - to maintain a file for each
suspense account containing a statement
describing the purpose of the suspense
account; a copy of the relevant
departmental Finance Team approval of
the opening of the suspense account;
copies of completed quarterly review
check-lists; and any other relevant
papers;
- to ensure that all debit and credit
entries in the account can be
separately and individually
verified;
- to review and reconcile each
suspense account every 3 months and to
ensure that the balance in the account
at 31 March has been cleared so far as
possible; and
- to consider, particularly at the
end of each financial year, in
consultation with the relevant
departmental Finance Team, what action
(including formal write-offs) may be
required to clear long-standing or slow
moving balances.
Review and Closure 8. Suspense accounts should be reviewed
(and reconciled) at least every 3 months by
the relevant suspense account manager. In
addition the operation and control of
suspense accounts should be reviewed by
relevant departmental Finance Teams at
least once during the financial year and at
the year-end. Checklists for reviews
undertaken by suspense account managers and
departmental Finance Teams are provided
respectively at
Annex 1 and
Annex 2. In cases where no further need for a
suspense account is foreseen, business
areas should make this known to their
departmental Finance Team. Subject to the
Finance Team's view action can be initiated
to close the suspense account(s). This is
the responsibility of the Finance Team
which should take the necessary action to
prevent further transactions from being
applied to the relevant suspense account
codes. A suspense account cannot be closed
until any remaining balance has been
cleared. Audit 9. All suspense accounts within the
Scottish Executive are subject to audit by
the Scottish Executive Audit Services and
the external auditors ie Audit Scotland.
Under resource accounting any year-end
balances will attract the attention of
Audit Scotland.
Back to top Page Published/ Updated on: 4th November
2004 |