Budget management and delegated authority

Each year the Portfolio AO or their delegate will notify Transport Scotland of its budget provision, any related matters and details of the budget monitoring information required. Transport Scotland will comply with the format and timing of the monitoring information requested and with any requests for further information.

The statement of budgetary provision will set out the budget within the classifications of resource Departmental Expenditure Limits (RDEL), capital DEL (CDEL) and Ring-fenced (non-cash) (RfDEL) – and, where applicable, Annually Managed Expenditure (AME). These categories are explained in Annual Budget Processing in the SPFM. Transport Scotland will not transfer budgetary provision between the categories without the prior approval of the SG Finance Directorate, and the Portfolio AO should be made aware of any such transfers. Transfers within the categories are at the discretion of the Chief Executive, if these do not breach any other constraints, for instance the approved pay remit.

Where budgetary provision includes projected income, including any income from disposal of non-current assets, the Chief Executive will ensure that the SG Finance Directorate and Portfolio AO are made aware promptly of any forecast changes in income – usually via the monthly budget monitoring statement. The Scottish Ministers expectation is that any shortfall in income will be offset by a matching reduction in gross expenditure, and prior approval from the SG Finance Directorate and the Portfolio AO must be sought for any alternative arrangement. Similarly, if income is higher than originally projected, this may only be used for additional spending or to meet pressures with the prior approval of the SG Finance Directorate and Senior Lead Officer. Failure to obtain prior approval for the use of excess income to fund additional expenditure may result in corresponding reductions in budgets for the following financial year.

Transport Scotland’s specific delegated financial authorities are set out in Annex A. The Chief Executive will obtain the prior written approval of the Portfolio AO and SG Finance before entering into any undertaking to incur any expenditure that falls outside these delegations, and before incurring expenditure for any purpose that is or might be considered novel, contentious or repercussive or which has or could have significant future cost implications. 

Governance and risk

Guidance on governance requirements is available in several documents referred to earlier in this framework document including the Scottish Public Finance Manual (SPFM) and the Audit and Assurance Committee Handbook.

If in any doubt about a governance issue, the Chief Executive should consult Portfolio AO in the first instance, and may also consult the SG Public Bodies Unit, the SG Governance and Risk Branch and/or other teams with relevant expertise.

The Chief Executive and any non-executive advisers should pay particular attention to guidance on the following issues.

Risk management

Transport Scotland must develop an approach to risk management consistent with the Risk Management section of the Scottish Public Finance Manual and establish reporting and escalation arrangements with the Portfolio AO or Senior Lead Officer. In doing so, they should consider alignment with the SG approach to risk management as appropriate.

The Chief Executive and any non-executive advisers should have a clear understanding of the key risks, threats and hazards the Agency may face in the personnel, accommodation and cyber domains, and take action to ensure appropriate organisational resilience, in line with the guidance in: Having and Promoting Business Resilience (part of the Preparing Scotland suite of guidance) and the Public Sector Cyber Resilience Framework.

Internal control

The Chief Executive should establish clear internal delegated authorities for other members of staff and establish an assurance framework consistent with the internal control framework in the SPFM.

Counter-fraud policies and practices should be adopted to safeguard against fraud, theft, bribery and corruption - see the Fraud section of the SPFM.

Any major investment programmes or projects undertaken should be subject to the guidance in the Major Investment Projects section of the SPFM and in line with delegated authorities. The Portfolio AO must be kept informed of progress on such programmes and projects and Ministers must be alerted to any developments that could undermine their viability. ICT investment plans must be reported to the SG’s Office of the Chief Information Officer.

Transport Scotland must comply with the requirements of the Freedom of Information (Scotland) Act 2002 and ensure that information is provided to members of the public in a spirit of openness and transparency. Transport Scotland is covered by the Scottish Ministers’ registration with the Information Commissioner’s Office and must ensure compliance with the Data Protection Act 2018 and the General Data Protection Regulations, commonly known as GDPR.

Budget and finance

Non-standard tax management arrangements should always be regarded as novel and/or contentious and must therefore be approved in advance by the Portfolio AO and SG Finance. Relevant guidance is provided in the Tax Planning and Tax Avoidance section of the SPFM. Transport Scotland must comply with all relevant rules on taxation, including VAT, recover input tax where it is entitled to do so.

An accurate and up-to-date record of current and non-current assets should be maintained, consistent with the Property: acquisition, disposal and management section of the SPFM. Transport Scotland is also subject to the SG Asset Management Policy, including the requirement for acquisition of a new lease, continuation of an existing lease, decision not to exercise a break option in a lease or purchase of property for accommodation / operational purposes, to be approved in advance by Scottish Ministers. The Property Controls Team should be consulted as early as possible in this process.

Assets should be recorded on the balance sheet at the appropriate valuation basis in accordance with the FReM. When an asset (including any investment) suffers impairment, when there is significant movement in existing provisions and/or where a new provision needs to be created, this should be communicated to the Portfolio AO and SG Finance as soon as possible to determine the implications for the Agency’s budget.

Any funding for expenditure on assets by a third party should be subject to appropriate arrangements to ensure that they are not disposed of without prior consent and that a due share of the proceeds can be secured on disposal or when they cease to be used by the third party for the intended purpose, in line with the Clawback guidance in the SPFM.

Unless covered by a specific delegated authority, prior approval from the Portfolio AO and SG Finance is required before making gifts or special payments or writing off losses. Special payments and losses are subject to the guidance in the Losses and Special Payments section of the SPFM. Gifts by management to staff are subject to the guidance in the Non-Salary Rewards section of the SPFM.

Unless covered by a specific delegated authority Transport Scotland must not enter into any finance, property or accommodation related lease arrangement – including the extension of an existing lease or the non-exercise of a tenant’s lease break - without prior approval from the Senior Lead Officer. Before entering/ continuing such arrangements the Agency must be able to demonstrate that the lease offers better value for money than purchase and that all options of sharing existing public sector space have been explored. Non-property/ accommodation related operating leases are subject to a specific delegated authority. There must be capital DEL provision in the budget allocation for finance leases and other transactions which are in substance borrowing. 

Procurement policies should reflect relevant guidance in the Procurement section of the SPFM and any other relevant guidance issued by the SG’s Procurement and Property Directorate. The SG’s directory of SG Framework Agreements, is available to support organisations but they should check the Framework Agreement’s ‘buyer’s guide’ before proceeding to ensure they are eligible to use the Framework

All matured and properly authorised invoices relating to transactions with suppliers should be paid in accordance with the Expenditure and Payments section of the SPFM wherever possible and appropriate within Scottish Ministers’ target of payment within 10 working days of their receipt.

Transport Scotland is subject to the SG policy of self-insurance. Commercial insurance must however be taken out where there is a legal requirement to do so and may also be taken out in the circumstances described in the Insurance section of the SPFM - where required with the prior approval of the Portfolio AO and SG Finance. In the event of uninsured losses being incurred the SG shall consider, on a case by case basis, whether or not it should make any additional resources available to the Agency. 

Unless covered by a specific delegated authority Transport Scotland must not provide grant funding to a third party without prior agreement from the Portfolio AO and SG Finance. Guidance on a framework for the control of third party grants is provided as an annex to the Grant & Grant in Aid section of the SPFM. Subsidy control requirements for any such funding are discussed below.

The EU State aid regime was effectively revoked from UK law from 1 January 2021 and subsidy control provisions are now covered by the UK-EU Trade and Cooperation Agreement (TCA). They are also covered by the UK’s international obligations, including various Free Trade Agreements and those arising as a consequence of World Trade Organisation membership. Currently, any activity that Transport Scotland undertakes itself, or funds other bodies to undertake, that can be offered on a commercial market for goods and services, is subject to the TCA subsidy rules. A full assessment is required prior to disbursing any funding, subject to the guidance in the subsidy regime section of the SPFM. The UK Subsidy Control Act received Royal Assent in April 2022 and the current position will be subject to change when the new regime comes into force.

Remuneration

Remuneration, allowances and any expenses paid to any non-executive advisers must comply with the latest SG Pay Policy for Senior Appointments and any specific guidance on such matters issued by the Scottish Ministers.

Staff pay, pensions and any severance payments must be in line with the requirements of Public Sector Pay Policy and the responsibilities described in the section on Agency Staff Management Responsibilities.

All individuals who would qualify as employees for tax purposes should be paid through the payroll system with tax deducted at source.

Banking and cash management

Banking arrangements must comply with the Banking section of the SPFM.

Cash management arrangements need to be addressed as well as overall budget management. The cash provided to Transport Scotland by the SG to support the allocated budget for the year in question will be authorised by the Scottish Parliament in the annual Budget Act. Transport Scotland will normally receive monthly instalments based on updated profiles and information on unrestricted cash reserves and will not seek any payment in advance of need. Transport Scotland is not permitted to hold cash reserves so any budget allocation not drawn down by the end of the financial year will lapse.