Internet Banking Policy
Date policy approved and adopted: 8 April 2024. Dates reviewed: 12 May 2025, 11 May 2026. Date of next review: May 2027 (AMPC)
Background
This policy is based on the advice issued by the National Association of Local Council (NALC) relating to parish councils’ use of online banking and the implications for the way in which the Parish Council operates with regards to the authorization of payments.
Banking arrangements have changed significantly in recent years, with more transactions being carried out online. As a result of this, the use of cheques is becoming rare. Many businesses prefer to receive payment by electronic means and are now discouraging the payment of invoices by cheques. This has become particularly apparent during the COVID-19 pandemic.
Legislation
The Legislative Reform (Payments by Parish Councils, Community Councils and Charter Trustees) Order 2014 (SI2014/580) came into effect on 12th March 2014. This Legislative Reform Order repeals the statutory requirement (Local Government Act 1972 section 150(5) which states that “every cheque or other order for the payment of money shall be signed by two members of the council”. The removal of this particular legal requirement enables the Parish Council to take an overall approach to how it controls its money as well as taking advantage of modern technology including internet banking.
Internal Controls
The Parish Council must ensure that it maintains robust controls on payments as an integrated part of its overall financial control system and proposes an Internet Banking Policy as part of its governance.
At all times the advice of NALC in relation to dual authorization will be followed: “Councils must not relinquish the “two member signatories” control over cheques and other orders for payment until they have put in place safe and efficient arrangements in accordance with the guidance noted from the NALC Finance and Audit Advisor “the overriding requirement resulting from the abolition of S150(5) is that each and every local council seeking to depart from the two signature rule must “implement and maintain robust controls on expenditure as an integrated part of their overall financial control system”.
It is not a requirement that two people authorize electronic payments, however it is a general principle that more than one person should be involved in any payment, whether that is before, at or after the point at which the payment is made. Councils must consider the appropriate systems, procedures and controls available by banking providers”.
Banking position
The Parish Council has a bank account Unity Trust bank with internet banking facilities set up for the day-to-day payment of invoices and receipt of income on this current account. The Clerk reports
The Council will have a minimum of 2 Councillors as authorised signatories at any one time. With 2 further councillors in reserve who can authorise as required.
Policy
1. Wherever possible, payments will be made using online banking and should be initiated as per the procedures set out below within three days of being agreed at a council meeting.
2. Payment for items made by internet banking transfer must have evidence retained showing which members approved release of the payment.
3. Where internet banking arrangements are made with any bank, the Clerk shall be appointed as the Administrator. The Clerk will operate a ‘create and submit only’ authorisation and will be able to transfer funds between accounts held at the same bank. The Clerk will be the only authorised person enabled to set up a beneficiary or a payment.
4. The Bank Mandate approved by the Council shall identify a minimum of 2 Councillors as Signatories who will be authorised to ‘approve only’ transactions on those accounts. Councillors will check the amount agreed for payment matches the transaction to be authorised.
5. Access to internet banking accounts will be directly to the banks log-in page and not through a search engine or e-mail link. Remembered or saved password facilities must not be used on any computer used for council banking work. Breach of this requirement will be treated as a very serious matter.
6. The Council, and those signatories using computers for the Council’s internet banking, shall ensure that anti-virus, anti-spyware and firewall software with automatic updates, together with a high level of security, is used.
7. No employee or Councillor shall disclose any PIN or password, relevant to the working of the Council or its bank accounts, to any person not authorised in writing by the council.
8. New beneficiary details and changes to beneficiary details used for internet banking must be supported by hard copy or email notification for checking and supported by hard copy authority for change signed by the Clerk and a Signatory.
9. A programme of regular checks of standing data with suppliers will be followed.
Procedure
The actual process of operating the online account will be the subject to the rules and security authorisation process of the agreed bank:
1. All orders for payment will be verified for accuracy by the Parish Clerk and included on the payment schedule.
2. The schedule of all payments shall be prepared by the Parish Clerk and presented to each meeting of the Council together with any supporting invoices or other documentation for approval. The approved schedule will be signed by the Clerk as Responsible Financial Officer and Chairman of the meeting.
3. The Parish Clerk will initiate payment.
4. Two of the four authorised Councillors will confirm the payments online (from the list of authorised Councillors held by Unity Trust Bank. Councillors are expected to authorise payment requests within two days of the payment being initiated by the Parish Clerk.
5. Where a councillor is to be reimbursed for expenditure, they should not be an authoriser (in the case of internet payments), or a signatory (in the case of cheque payments).