Scottish Canals Framework Document
Governance and accountability
Legal origins of powers and duties
14. The BWB was established by the Transport Act 1962 to manage and maintain the inland waterways, and certain of the docks, originally nationalised under the Transport Act 1948 and managed by the British Transport Commission. Prior to devolution, the sponsorship of BWB lay fully with the then Department of the Environment, Transport and the Regions (DETR).
15. As a consequence of the Scotland Act 1998, legislative competence regarding inland waterways in Scotland was devolved to the Scottish Parliament - at that time BWB was designated as a cross-border public authority under the Scotland Act 1998 (Cross-Border Public Authorities) (Specification) Order 1999. The Scotland Act 1998 (Cross-Border Public Authorities) (Adoption of Functions etc.) (No.2) Order 2000 made under section 89 of the Scotland Act 1998 transferred responsibilities to the then Scottish Executive on 13 December 2000 and resulted in Scottish Ministers holding largely the same functions with regard to BWB in Scotland as those held by UK Ministers with regard to BWB in England & Wales.
16. Accordingly BWB was jointly sponsored by SG in relation to its activities in Scotland and by the Department for Environment, Food and Rural Affairs (Defra) in England and Wales. Defra were the lead sponsor department, with BWB classed as a Public Corporation of the UK Government for National Accounts purposes, because its overall (GB) income from trading activities exceeded 50% of its overall revenues. This classification was determined at a GB level from the scale of its trading activities, reflecting mostly the scale of activities in England & Wales but is proposed to be retained for Scottish Canals as income from trading is expected to exceed 50% of its overall revenues in the near future.
17. In October 2010 the UK Government decided that BWB's functions and assets in England & Wales would transfer to a new waterways charity, Canal & River Trust (CRT). Scottish Ministers decided to make no change to the arrangements for the ownership, care and maintenance of the Scottish canals. The UK Government used powers under the Public Bodies Act 2011 to promote The British Waterways Board (Transfer of Functions) Order 2012 ("the BW Order") which provided for the transfer of BWB's functions in England & Wales to this charity. The removal of England & Wales operations, and of UK Ministers' powers in relation to the organisation, led to a requirement for the BW Order to include a number of consequential amendments for Scotland, necessary to allow BWB to continue to operate effectively in Scotland on a self-standing basis, without involvement from UK Ministers and to remove BWB's status as a cross-border public authority.
18. On 2nd July 2012, BWB, operating as "Scottish Canals", became a public corporation in the Scottish public sector wholly accountable to Scottish Ministers. The board of SC assumed responsibility and accountability for SC in accordance with the Transport Act 1962 Schedule 1 (as amended by the BW Order). SC does not carry out its functions on behalf of the Crown.
19. The Scottish Ministers are ultimately accountable to the Scottish Parliament for the activities of SC and use of related resources. They are not however responsible for day to day operational matters. Their responsibilities include:
- agreeing the SC's strategic aims and objectives and key targets as part of the corporate planning process;
- agreeing the budget and the associated grant in aid requirement to be paid to SC, and securing the necessary Parliamentary approval;
- those specified in the Transport Acts 1962 and 1968 such as making appointments to the board of SC and issuing relevant directions;
- other matters such as approving the SC pay remit and laying the annual report and accounts before the parliament.
Responsibilities of the board of Scottish Canals
20. The board of SC consists of the Chair, Vice Chair and between one and four other members who are appointed by the Scottish Ministers following good practice principles (the Code of Practice for Ministerial Public Appointments in Scotland). Scottish Ministers agreed that the Chief Executive should be appointed to the board initially for a 12 month period from 2 July 2012, but with scope for extending this by mutual agreement. No other executive staff shall sit on the board.
21. The role of the board is to provide leadership, direction, support and guidance to ensure SC delivers and is committed to delivering its functions effectively and efficiently and in accordance with the aims, policies and priorities of the Scottish Ministers. It has corporate responsibility, under the leadership of the Chair, for
- taking forward the strategic aims and objectives agreed by the Scottish Ministers;
- determining the steps needed to deal with changes which are likely to impact on the strategic aims and objectives of SC or on the attainability of its operational targets;
- promoting the efficient, economic and effective use of staff and other resources by SC consistent with the principles of Best Value, including, where appropriate, participation in shared services arrangements and ensuring that effective arrangements are in place so that SC acts corporately in accordance with the priorities set out in the SG's statement of corporate expectations;
- ensuring that effective arrangements are in place to provide assurance on risk management, governance and internal control. (The board must set up an audit committee chaired by a non-executive member to provide independent advice and assurance on the effectiveness of the internal control and risk management systems.);
- in reaching decisions, taking into account relevant guidance issued by the Scottish Ministers;
- ensuring that the board receives and reviews regular financial information concerning the management of SC and is informed in a timely manner about any concerns regarding the activities of SC;
- appointing the SC Chief Executive and, in consultation with the SG, set appropriate performance objectives and remuneration terms linked to these objectives which give due weight to the proper management and use of public funds and use of resources within the stewardship of SC and the delivery of outcomes; and
- demonstrating high standards of corporate governance at all times, including openness and transparency in its decision making.
Further guidance on how the board should discharge its duties is provided in appointment letters and in 'On Board - A guide for Board Members of Public Bodies in Scotland'.
The Chair's Responsibilities
22. The Chair is accountable to the Scottish Ministers and, in common with any individual with responsibility of devolved functions, may also be held to account by the Scottish Parliament. Communications between the board of SC and the Scottish Ministers should normally be through the chair. He or she is responsible for ensuring that the SC's policies and actions support the Scottish Ministers' wider strategic policies and that its affairs are conducted with probity.
23. In leading the board the Chair must ensure that:
- the work of the board is subject to regular self-assessment and that the board is working effectively;
- the board has a balance of skills appropriate to directing SC's business, in accordance with recognised good practice in corporate governance;
- the board members are fully briefed in terms of appointment, duties, rights and responsibilities;
- he or she, together with the other board members, receives appropriate induction training, including on financial management and reporting requirements and, as appropriate, on any differences that may exist between private and public sector practice;
- the Scottish Ministers are advised of SC's needs when board vacancies arise;
- there is a code of conduct for board members in place, approved by the Scottish Ministers.
24. The Chair assesses the performance of individual board members on a continuous basis and undertakes a formal appraisal at least annually. The Chair, in consultation with the board members (other than the Chief Executive), is also responsible for undertaking an annual appraisal of the performance of the Chief Executive.
Individual Board Members' Responsibilities
25. Individual members should act in accordance with the responsibilities of the board as a whole and comply at all times with the code of conduct adopted by SC and with the rules relating to the use of public funds and to conflicts of interest. (In this context "public funds" means not only any funds provided to SC by the Scottish Ministers but also any other funds falling within the stewardship of SC, including trading and investment income, gifts, bequests and donations.) General guidance on board members' responsibilities is summarised in their appointment letters and is also provided in On Board: A Guide for Board Members of Public Bodies in Scotland.
Responsibilities of Scottish Canals' Chief Executive
26. The SC Chief Executive is employed and appointed by the board. He/she is the board's principal adviser on the discharge of its functions and is accountable to the board. His/her role is to provide operational leadership to SC and ensure that the board's aims and objectives are met and SC's functions are delivered and targets met through effective and properly controlled executive action. His/her general responsibilities include the performance, management and staffing of SC. General guidance on the role and responsibilities of the Chief Executive is contained in 'On Board'. Specific responsibilities include:
- advising the board on the discharge of its responsibilities - as set out in this document, in the founding legislation and in any other relevant instructions and guidance issued by or on behalf of the Scottish Ministers - and implementing the decisions of the board;
- ensuring that financial considerations are taken fully into account by the board at all stages in reaching and executing its decisions, and that appropriate financial appraisal and evaluation techniques, consistent with the Appraisal and Evaluation section of the Scottish Public Finance Manual (SPFM), are followed;
- ensuring that SC adheres, where appropriate, to the Programme and Project Management Principles;
- having robust performance and risk management arrangements - consistent with the Risk Management section of the SPFM - in place that support the achievement of SC's aims and objectives and that facilitate comprehensive reporting to the board, the SG and the wider public;
- ensuring that adequate systems of internal control are maintained by SC, including effective measures against fraud and theft consistent with the Fraud section of the SPFM;
- establishing appropriate documented internal delegated authority arrangements in accordance with the Delegated Authority section of the SPFM;
- advising the board on the performance of SC compared with its aim[s] and objectives.
- Preparing SC's corporate and business plans, in the light of the strategic aims and objectives agreed by the Scottish Ministers.
- Ensuring effective relationships with SG officials; and
- Ensuring that timely forecasts and monitoring information on performance and finance are provided to the SG; that the SG is notified promptly if over or underspends are likely and that corrective actions is taken; and that any significant problems, whether financial or otherwise, and whether detected by internal audit or other means, are notified to the SG in a timely fashion.
Responsibilities of Scottish Canals' Accountable Officer
27. The Principal Accountable Officer for the Scottish Administration (the Permanent Secretary of the SG) will designate the Chief Executive as the Accountable Officer for SC. Accountable Officers are personally answerable to the Scottish Parliament for the exercise of their functions, as set out in the Memorandum to Accountable Officers for Other Public Bodies. These include:
- ensuring that the propriety and regularity of SC's finances and that there are sound and effective arrangements for internal control and risk management;
- ensuring that the resources of SC are used economically, efficiently and effectively and that appropriate arrangements are in place to secure Best Value;
- ensuring compliance with relevant guidance issued by the Scottish Ministers, in particular the SPFM;
- signing the annual accounts and associated governance statements;
- a statutory duty to obtain written authority from the board/Chair before taking any action which he/she considered would be consistent with the proper performance of the Accountable Officer functions.
28. It is incumbent on the Chief Executive to combine his/her Accountable Officer responsibilities to the Scottish Parliament with his/her wider responsibilities to the board. The board/Chair should be fully aware of, and have regard to, the Accountable Officer responsibilities placed upon the Chief Executive, including the statutory duty described above.
Responsibilities of Transport Scotland Accountable Officer and Director
29. The Principal Accountable Officer for the Scottish Administration (the Permanent Secretary of the SG) designates the Chief Executive of Transport Scotland as Accountable Officer for all Transport Scotland's responsibilities.
30. Within Transport Scotland, the Director for Aviation, Maritime, Freight and Canals (The Director) has responsibility for overseeing and ensuring effective relationships between the SG and SC which support alignment of SC's business to the Government's Purpose and National Outcomes and high performance by SC. The Director will work closely with SC's Chief Executive and be answerable to the Transport Scotland Accountable Officer for maintaining and developing positive relationships with SC characterised by openness, trust, respect and mutual support. The Director shall also be responsible for assessing the performance of the Chair of SC, at least annually.
31. In discharging these functions, the Director will be supported by a sponsor unit.
Sponsor unit responsibilities
32. The Freight and Inland Waterways branch within the TS Directorate of Aviation, Maritime, Freight and Canals, sponsors Scottish Canals and is the normal point of contact for SC in dealing with the TS and SG. The branch, under the direction of the TS Chief Executive/ Director of Aviation, Maritime, Freight and Canals, is the primary source of advice to the Scottish Ministers on the discharge of their responsibilities in respect of SC and undertakes the responsibilities of the Portfolio Accountable Officer on his/her behalf. Specific responsibilities include:
- discharging sponsorship responsibilities in line with the principles and framework set out in the document 'Strategic Engagement between the Scottish Government and Scotland's NDPBs' and ensuring that sponsorship is suitably flexible, proportionate and responsive to the needs of the Scottish Ministers and SC;
- ensuring that appointments to the board of SC are made timeously and follow good practice similar to that in the Code of Practice for Ministerial Appointments to Public Bodies in Scotland;
- proportionate monitoring of SC's activities through an adequate and timely flow of appropriate information, agreed with SC, on performance, budgeting, control and risk management;
- addressing in a timely manner any significant problems arising in SC, alerting the portfolio Accountable Officer and the responsible Minister(s) where considered appropriate;
- ensuring that the objectives of SC and the risks to them are properly and appropriately taken into account in the SG's risk assessment and management systems; and
- informing SC of relevant SG policy in a timely manner.
33. SC shall:
- establish and maintain arrangements for internal audit in accordance with the Government Internal Audit Standards (GIAS) and the Internal Audit section of the SPFM.
- set up an Audit and Risk committee of its board in accordance with the Audit Committees section of the SPFM, to advise both the board and the Chief Executive in his/her capacity as the SC Accountable Officer;
- forward timeously to the SG the audit charter, strategy, periodic audit plans and annual audit assurance report, including the SC's Head of Internal Audit or equivalent's opinion on risk management, control and governance and other relevant reports as requested; and
- keep records of, and prepare and forward promptly to the SG an annual report on fraud and theft suffered by SC and notify the SG at the earliest opportunity of any unusual or major incidents.
34. The SG's Internal Audit Division has a right of access to all documents held by the SC Audit and Risk committee. The SG has a right of access to all SC's records and personnel for any purpose.
35. The Auditor General for Scotland (AGS) audits, or appoints auditors to audit, SC's annual accounts and reports on them to the Scottish Ministers who shall lay them before the Scottish Parliament, together with the auditor's report and any report prepared by the AGS. For the purpose of audit the auditors have a statutory right of access to documents and information held by relevant persons. SC shall instruct its auditors to send copies of all management reports (and correspondence relating to those reports) and responses to the SG.
36. The AGS, or examiners appointed by the AGS, may carry out examinations into the economy, efficiency and effectiveness with which SC has used its resources in discharging its functions. The AGS may also carry out examinations into the arrangements made by SC to secure Best Value. For the purpose of these examinations the examiners have a statutory right of access to documents and information held by relevant persons. In addition, SC shall provide, in contracts and any conditions to grants, for the AGS to exercise such access to documents held by contractors and sub-contractors and grant recipients as may be required for these examinations; and shall use its best endeavours to secure access for the AGS to any other documents required by the AGS which are held by other bodies.
Annual report and accounts
37. SC must publish an annual report of its activities together with its audited accounts after the end of each financial year. The annual report must cover the activities of any corporate, subsidiary or joint ventures under SC's control. It should comply with the requirements set out in the Accounts Direction issued by Scottish Ministers and outline SC's main activities and performance against agreed objectives and targets for the previous financial year.
38. The accounts must be prepared in accordance with relevant statutes and the specific accounts direction and other relevant guidance issued by the Scottish Ministers. Any financial objectives or targets set by the Scottish Ministers should be reported on in the account and will therefore be within the scope of the audit. Any subsidiary or joint venture owned or controlled by SC shall be consolidated in its accounts in accordance with applicable accounting and reporting standards.
39. Section 24 of the Transport Act 1962 requires that:-
- SC must keep proper accounts and other records;
- SC must prepare an annual statement of accounts in accordance with the accounts direction issued by Scottish Ministers;
- SC must have the accounts audited by auditors appointed annually by the Auditor General for Scotland;
- SC must send a copy of the audited accounts to Scottish Ministers, together with a copy of the report made by the auditors on that statement;
- Scottish Ministers must lay this material annually before the Scottish Parliament.
40. The draft report and accounts shall be submitted to the SG for comment and information, by 30th June. The final version should be available for laying before the Scottish Parliament by the Scottish Ministers by 31st August. Whilst the statutory date for laying and publishing accounts audited by the AGS is by 31 December, following the close of the previous financial year, there is an expectation on the part of the Scottish Ministers that accounts will be laid and published at the earliest possible date following the completion of the formal sign-off and approval process. The accounts must not be laid before they have been formally sent by the AGS to the Scottish Ministers and must not be published before they have been laid. SC shall be responsible for the publication of the report and accounts, including on SC's website.
41. Specific transitional arrangements apply to 2011/12 and 2012/13 accounts as detailed in the BW Order.