The Lord Chancellor's Department supports the magistrates' courts service through the payment of specific grant to paying authorities (county councils, metropolitan district councils, outer London boroughs and, in magistrates' courts committee areas with several unitary authorities - a lead authority) at the rate of 80% of the net expenditure of the service for each paying authority. The total grant available for the service is cash limited, and cash limited allocations of grant on current expenditure are made on the basis of a formula. Allocations of grant for capital expenditure are made following a bidding process. The grant provision available to the Lord Chancellor's Department is determined by a procedure introduced for the first time in 1998 - the three year public spending settlement.
The main purposes underlying cash limiting are to ensure that the service's current grant expenditure is kept in line with grant provision voted by Parliament and, as a matter of general financial discipline, to encourage local managers to achieve the best value for money in the use of their resources.
In setting the method of cash limiting, the Lord Chancellor has considerable freedom. Part V of the Criminal Justice Act 1991 gives the power to cash limit but does not prescribe the method. It also empowers the Lord Chancellor to decide the amount of grant to be available for each paying authority. The amount constitutes the cash limit grant for that authority and, subject to the provision of the Act, is the maximum of grant payable by the Department to the authority. There is no obligation on any local authority to fund expenditure above that implied by the cash limit, but it remains free to do so although such expenditure will not rank for grant.
The current formula was reviewed in 1998 with the aim of providing a measure of stability to grant allocation, while still recognising elements of performance. This review was inconclusive and, at the time of writing, further consideration is being given to linking magistrates' courts committee grant to the achievement of standards of performance in key areas (outcomes).
It is for a magistrates' courts committee to determine the resources it needs to run the service locally in consultation with its paying authority. The resources have to be determined within the cash limit unless a paying authority wishes to fund expenditure 100% which it is at liberty to do. Magistrates' courts committees may devolve budgets to individual justices' clerks/senior managers.
There are occasions on which agreement is not reached during consultation. The committee will then make a formal determination as to its requirements and the paying authority has 28 days to appeal to the Lord Chancellor (Justices of the Peace Act 1997, section 56(3)). The Lord Chancellor will consider each appeal on its merits. Appeals do not always relate to budget and, for example, may turn on arguments about the necessity for a post or its grading, or whether a courthouse should be closed.
All expenditure on the magistrates' courts service locally is met in the first instance by the paying authority which, at the end of each year, claims grant up to 80% of the net expenditure from the Lord Chancellor's Department. Responsibility for the payment of grant rest with the Resources Division of the Lord Chancellor's Department. Grant is paid quarterly in advance. The quarterly advances are usually based on 90% of anticipated expenditure for the current year and 10% for the previous year. Final adjustments to grant paid are made on the basis of audited grant claim forms after the end of the financial year in question.
The grant allocated to magistrates' courts committees must be spent, or the balance returned to the Lord Chancellor's Department, within the financial year subject to the magistrates' courts committee being able to carry forward up to 2% of its budget to the next financial year or to overspend in one financial year to make good the deficit in the next.
The Lord Chancellor may exclude certain items of expenditure for grant purposes. As far as grant on certain expenditure is concerned, exclusions are Joint Negotiating Committee pay settlements which may not be implemented until approved for grant purposes by the Lord Chancellor, and local pay arrangements outside the framework of JNC settlements not approved by the Lord Chancellor. Committees do have discretion, however, with the existing JNC framework to extend pay scales beyond their maxima providing the incremental pattern follow the existing structures.
The primary responsibility of the local authorities in relation to magistrates' courts under the Justices of the Peace Act 1997 is to provide the necessary resources for the running of the local courts service (section 55). In the past many magistrates' courts committees depended upon local authorities for personnel and financial advice but increasingly committees have recognised the benefits of providing such services "in house". Local authority ownership of court buildings has tendered to forge a close working relationship between them and committees to ensure proper provision, maintenance and servicing of courthouses and office accommodation.
Magistrates' courts committees receive their annual revenue grant allocations
determined by a cash-limit formula.
20% of the grant is provided by local government and 80% by the Lord Chancellor's
Department.
Local government may provide additional funds to magistrates' courts committees
but no grant would be made on this additional amount.
Items of capital expenditure (eg plant, machinery, improvements to buildings,
computer and office equipment) must be bid for by magistrates' courts committees
to the Lord Chancellor's Department on an annual basis.
Committees have limited discretion to carry forward or overspend (subject
to a similar reduction in their following year's allocation) up to 2% of their
budgets. Further flexibility may be offered in the future as part of the introduction
of the government's three year planning cycle.
Propriety & Regularity of Public Funds
Committees have substantial responsibilities to account for and make proper use of large amounts of public money. This takes the form of revenue and capital grants used to run the service in their areas and in collecting and distributing monies due to government and others in the form of fines, compensation, confiscation, costs, fees, legal aid and maintenance payments.
In fulfilling their responsibilities they must ensure that not only do they fully meet the statutory obligations imposed on them and act in accordance with Parliament's intentions but also adopt practices which respect the values and behaviours appropriate to the public sector.
Accounting for the Collection and Distribution of Fines, Compensation, Confiscation, Costs, Fees, Legal Aid and Maintenance Payments
The Justices' Clerk's (Accounts) Regulations 1973 impose a requirement that justices' clerks should keep clear and accurate accounts in relation to these matters. Guidance in the form of the Justices' Clerk's Accounting Manual (JCAM) is issued to justices' clerks by the Lord Chancellor's Department with the objective of:-
"providing advice and guidance to justices' clerks and the staff of the magistrates' courts committee to account properly for the money administered by the magistrates' courts service."
On the 17th December 1997 the Lord Chancellor made a direction requiring MCCs to ensure compliance with his Department's Management Assurance Programme. This Programme, first issued in May 1997, describes a range of checks of key financial and accounting controls to be carried out by a justices' clerk or other members of staff so as to provide reasonable assurance that the functions covered by the checks are effectively controlled. This Direction requires a committee to ensure, through its chief executive, that appropriate arrangements are put into place to ensure compliance and to receive regular reports to confirm compliance.
The accounting and financial controls in relation to these matters are the subject of regular audits.
Internal Audits carried out by the Lord Chancellor's Department's Internal Assurance Division have the objective of providing the Accounting Officer of the Lord Chancellor's Department an assurance on the adequacy and effectiveness of the magistrates' courts internal control systems and the extent to which it can be relied upon.
External Audits carried out by an organisation outside the Lord Chancellor's Department or MCC have the objective of providing an opinion to be given to the Lord Chancellor that the annual consolidated return of fines and fees and other sums are properly presented and drawn up under the regulations and policies laid down under the Justice of the Peace Act 1997.
The reports from auditors will be placed before MCCs identifying any weaknesses evident in the control systems and recommending actions to be taken. Committees must ensure that appropriate actions are taken to meet recommendations.
Accounting for and Proper Use of Revenue/Capital Monies
There is currently no statutory provision for MCCs to be subject to audit to ensure that their financial systems in relation to these matters meet appropriate standards of probity. In the Inspectorate's thematic review "Relationships between MCCs and Local Authorities" published in May 1998, it recommended, as a matter of priority, that the Lord Chancellor's Department:-
"address the mechanisms for clarifying and assessing MCC financial accountability". In particular, (to) address:-
who (or what) is the accounting officer (or body);
the need for the Lord Chancellor to issue regulations requiring MCC accounts
and audit arrangements;
whether MCCs should be required to adopt their own financial regulations;
guidance which could be provided for any paying authorities on mechanisms
which will assure proper expenditure of local funds.
and
how issues of propriety and regularity should be handled."
Until national advice/direction is given on such matters it is essential for
all committees to ensure, as a minimum, that they:-
their senior managers and staff are fully conversant with the statutory provisions
and related policies which govern the procurement and expenditure of revenue
and capital grants;
present annual accounts clearly demonstrating the income received and expenditure
made (the Lord Chancellor's guidance issued in October 1997 to MCCs on the
presentation of annual reports contained a format for presenting accounts
which provides some assistance in this regard);
agree and implement comprehensive financial policies/regulations which guarantee
financial probity;
require regular external audits to be carried out and reported to them as
a means of monitoring performance.
In developing such policies and procedures committees need to keep to the
forefront of their minds the "seven principles of public life" set
out in the Nolan Committee's first report "Standards in Public Life"
as these capture the key characteristics of propriety.
The Seven Principles of Public Life
Selflessness
Holders of public office should take decisions solely in terms of the public interest. They should not do so in order to gain financial or other material benefits for themselves, their family, or their friends.
Integrity
Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.
Objectivity
In carrying out public business, including making public appointments, awarding contracts, or recommending individuals for rewards and benefits, holders of public office should make choices on merit.
Accountability
Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office.
Openness
Holders of public office should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands.
Honesty
Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest.
Leadership
Holders of public office should promote and support these principles by leadership and example.
Key Points
In relation to keeping fines and fees, etc., accounts
Committees must ensure that:-
justices' clerks comply with the Management Assurance Programme;
they receive reports prepared by internal/external auditors and that justices'
clerks draw up and implement timely action plans to meet recommendations made.
In relation to accounting for revenue/capital monies
Committees must ensure that:-
their senior managers and staff are fully conversant with the statutory provisions
and complimentary policies which govern the procurement and expenditure of
public monies;
they have in place and regularly review financial policies and procedures/regulations
which guarantee financial probity and which have proper regard to the "Seven
Principles of Public Life";
they have in place appropriate external auditing arrangements to enable them
to be satisfied that their financial policies and procedures are being adhered
to and remain relevant to their purpose.
Further Reading
1. Justices' Clerk's Accounting Manual - Available from the Justices' Chief Executive
2. Management Assurance Programme - Available from the Justices' Chief Executive
3. MCSI Thematic Review "Relationships between MCCs & Local Authorities" - Available from the Justices' Chief Executive
4. Guidance on Annual Reports - Available from the Justices' Chief Executive
5. Nolan Committee's First Report - Available from the Justices' Chief Executive