Suspense Accounts

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 Checklist

Scope

1. This section provides guidance on the use, management and control of suspense accounts. within the Scottish Administration (i.e. the core Scottish Government (SG), the Crown Office and Procurator Fiscal Service, SG Executive Agencies and non-ministerial departments). Other organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable 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 annual 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 finance areas 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 accounts for the year. Any balance held on a suspense account at the end of a financial year falls to be recorded in the annual 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

7. 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

8. Only specialist finance areas may authorise the opening of suspense accounts within the Scottish Administration. For each suspense account there must be a designated (by the relevant finance area) suspense account manager 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 relevant finance area 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 finance area 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 finance area, what action (including formal write-offs) may be required to clear long-standing or slow moving balances. 

Review and Closure

9. 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 the relevant finance area at least once during the financial year and at the year-end. Checklists for reviews undertaken by suspense account managers and finance areas 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 the relevant finance area. Action can be then be initiated to close the suspense account(s). This is the responsibility of the relevant finance area 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

10. All suspense accounts within the Scottish Administration are subject to scrutiny by the external auditors and any year-end balances are likely to attract attention.

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Page Published / Updated: June 2009