Finance Glossary

Note: This glossary focuses in particular on financial terms relevant to the UK

Government.

Accounting Officer
The senior official ultimately responsible for all spending of a government department or
arm’s length body. The accounting Officer for a government department is usually the
Permanent Secretary. The Accounting Officer must personally sign off the Annual Report
and Accounts of the s/he has responsibility for, and may be called to appear before a
select committee to answer questions on financial management.

Accounts Direction
A written document instructing official how to prepare accounts.

Accruals Direction
A method of recording expenditure as it is incurred (i.e. when the activity which
generates the costs arises), and income as it is earned, rather than when cash is paid or
received. This method of accounting is now used in the UK throughout public and private
sectors (with the exception of very small charities and businesses). In the public sector
context it is also sometimes known as ‘Resource’ accounting. UK Government Budgets
(the DEL and AME limits) are also set in accruals rather than cash terms, and although
departments still have to forecast cash movements, they are free to seek as high a cost
requirement in their Estimates as is necessary to support the accruals budgets allocated.

The principal advantage of accruals accounting over cash accounting (where cash
movements are all that is recorded) is that accruals accounting allows better financial
management and scrutiny by:
 Matching expenditure in any period to revenues earned and obligations incurred
in that period; and
 Matching the cost of assets to the period in which they are used or consumed, by
charging depreciation on them.

Administration budget
Budget limits controlling the resources set aside for the running costs (largely staff and
associated costs) of a government department, and which form part of its Resource
Departmental Expenditure Budget (DEL). Administration budgets are ring-fenced
budgets, set at the time of a Spending Review. The other part of the Resource DEL,
outside of the Administration Budget is referred to as programme expenditure. If the
departments administration budget is breached, the department’s accounts will be
qualified by the auditor (see qualified accounts).
Foreword

About this document

i. This document updates the version published in 2007. Like the original, it sets
out the main principles for dealing with resources in UK public sector
organisations. Some of the specifics, especially those in the annexes, relate to
England rather than the devolved administrations, which have their own detailed
rulebooks. But the same basic principles generally apply in all parts of the UK
public sector, with adjustments for context.

ii. The key themes also remain. They are fiduciary duties of those handling public
resources to work to high standards of probity; and the need for the public
sector to work in harmony with parliament.

iii. While these principles are invariant, the advice in this document cannot stand
forever. The law, business practices, and public expectations all change. So
public sector organisations can and should innovate in carrying out their
responsibilities, using new technology and adopting good business practice.
Throughout parliament always expects the government and its public servants to
meet the ethical standards in this document and to operate transparently.

iv. As before, the main text of the document is intended to be timeless, The
Treasury will revise the annexes from time to time as need arises. All the text is
available freely on the [Link] website.

v. Above all, nothing in this document should discourage the application of sheer
common sense.
Chapter 1
Responsibilities

The relationship between the government, acting on behalf of the Crown, and parliament,
representing the public, is central to how public resources are managed. Ministers implement
government policies, and deliver public services, through public servants; but are able to do so
only where parliament grants the right to raise, commit and spend resources. It falls to the
Treasury to respect and secure the rights of both government and parliament in this process.

1.1 Managing public money: principles

1.1.1 The principles for managing public resources run through many diverse
organisations delivering public services in the UK. The requirements for the
different kinds of body reflect their duties, responsibilities and public
expectations. The demanding standards expected of public services are set out in
box 1.1.
Box 1.1: standards expected of all public services

honesty impartiality openness accountability accuracy

fairness integrity transparency objectivity reliability
carried out
in the spirit of, as well as to the letter of, the law
in the public interest
to high ethical standards
achieving value for money

1.1.2 The principles in this handbook complement the guidance on good

governance in the Corporate Governance Code1applying to central government
departments. Some of the detail applies to England only, or just to departments of
state. There is separate guidance for the devolved administrations. Where
restrictions apply, they are identified.
1.1.3 Much of this document is about meeting the expectations of parliament.
These disciplines also deliver accountability to the general public, on whose
behalf parliament operates. The methods of delivery used evolve as technology
permits. Public services should carry on their businesses and account for their
 stewardship of public resources in ways appropriate to their duties and context
and conductive to efficiency.
1.2. Ministers
1.2.1 In the absence of a written constitution, the powers used to deploy public
resources are a blend of common law, primary and secondary legislation,
parliamentary procedure, the duties of ministers, and other long-standing
practices. This mix may of course charge from time to time.
1.2.2 As the Corporate Governance Code makes clear, the minister in charge of a
department is responsible for its policy and business as part of the broad sweep of
government policy determined in Cabinet. They:
 determines the policies of the departmental group;

 chairs the departmental board;

 allocates responsibilities among the ministers in the department;

 chooses which areas of business to delegate to officials, and so on what

conditions;

 looks to the department’s accounting officer (see chapter 2) to delegate

within the department to deliver the minister’s decisions and to support the
minister in making policy decisions and handling public funds; and

 also has general oversight of other bodies on whose behalf they may
answer in parliament, including the department’s arms length bodies
(ALBs).
1.2.3 The Ministerial Code2 requires ministers to heed the advice of their
accounting officers about the proper conduct of public business. See section 2.4
for how the minister may direct the accounting officer to proceed with a policy if
a point of this kind cannot be resolved.
1.2.4 The minister in charge of a department may delegate defined areas of its
business, or its parliamentary work, to their junior ministers. Ministers have wide
powers to make policies and to instruct officials.
1.2.5 Only ministers can propose legislation to parliament to raise public revenue
through taxation, or to use public funds to pursue their policy objectives. Specific
primary legislation is normally required to spend public funds (see section 2.1).
Similarly, taxes may be collected, and public funds may be drawn only with
parliamentary authority; and only as parliament has authorised.
1.2.6 It is not normally acceptable for a private sector organisation to be granted
powers to raise taxes, nor to distribute their proceeds. Parliament expects these
responsibilities to fall to ministers, using public sector organisations.
1.2.7 The House of Commons (and not the House of Lords) enjoys the financial
privilege to make decisions on these matters.

2
[Link]
 1.3 Parliament
1.3.1 Parliament approves the legislation which empowers ministers to carry out
their policies. It also allows finance for services when it approves each year’s
Estimates. See the Estimates Manual3 for more.
1.3.2 From time to time parliament may examine government activity. Select
committees examine policies, expenditure, administration and service delivery in
defined areas. The Committee of Public Accounts (PAC – see section 3.5)
examines financial accounts, scrutinises value for money and generally holds the
government and its public servants to account for the quality of their past
administration.
1.4 The Treasury
1.4.1 Parliament looks to the Treasury to make sure that:
 departments use their powers only as it has intended; and

 revenue is raised, and the resources so raised spent, only within the agreed
limits.
1.4.2 Hence it falls to the Treasury to:
 set the ground rules for the administration of public money; and

 account to parliament for doing so.

1.4.3 This document sets out how the Treasury seeks to meet these parliamentary
expectations. The key requirements are regularity, propriety, value for money and
feasibility (see box 3.2). The Treasury:
 designs and runs the financial planning system4 and oversees the operation
of the agreed multiyear budgets to meet ministers’ fiscal policy objectives;

 oversees the operation of the Estimates through which departments obtain

authority to spend year by year;

 sets the standards to which central government organisations publish

annual reports and accounts in the Financial Reporting Manual (FReM).
This adapts International Financial Reporting Standards (IFRS) to take
account of the public sector context;

 may also work through the Cabinet Office to set certain standards
applicable across central government, for example functional standards5.

3
[Link]
4
See the Consolidated Budgeting Guidance for more –
[Link]
5
See Functional Standards – [Link] ([Link]).
 1.5 Departments
1.5.1 Within the standards expected by parliament, and subject to the overall
control and direction of their ministers, departments have considerable freedom
about how the organise, direct and manage the resources at their disposal. It is for
the accounting officer in each department, acting within ministers’ instructions,
and supported by their boards, to control and account for the department’s
business.
1.5.2 A departmental board, chaired by the senior minister, leads each department.
Boards can bring to bear skills and experiences from elsewhere in, and outside of,
the public sector (see section 4.1).
1.5.3 Within each department, there should be adequate delegations, controls and
reporting arrangements to provide assurance to the board, the accounting officer6
and ultimately ministers about what is being achieved, to what standards and with
what effect. These arrangements should provide timely and prompt management
information to enable plans to be adjusted as necessary. Similarly, ministers
should have enough evidence about the impact of their policies to decide whether
to continue, modify or end them. This is discussed further in chapter 4.
1.5.4 In supporting ministers, civil servants should provide politically impartial
advice. Should they be asked to carry out duties which appear incompatible with
this obligation, the accounting officer should take the matter upn with the minister
concerned (see also the Civil Service Code7).
1.5.5 Departments often operate with and through a variety of partners to deliver
their ministers’ policies. It is important that these relationships operate in the
public interest: see chapter 7.
1.6 The Comptroller and Auditor General
1.6.1 Supported by the National Audit Office (NAO), the Comptroller and
Auditor General (C&AG) operates independently to help parliament scrutinise
how public funds have been used in practice. Further information abouyt the roled
of the NAO is available on their website8 and in annex 1.1.
1.6.2 The C&AG provided parliament with two sorts of audit:
 financial audit of the accounts of departments and ALBs,
covering:

– assurance that accounts have been properly prepared and

are free of material misstatements9; and

– confirmation that the underlying transactions have

appropriate parliamentary authority;

 value for money reports assessing the economy, efficiency and

effectiveness with which public money has been deployed in
selected areas of public business. A programme of these reviews
covers a variety of subjects over a period, taking account of the risks
to value for money and parliament’s interests.

6
If there is a change of Accounting Officer in the course of the year, the Accounting Officer in place at
the year end takes responsibility for the whole year’s accounts, using assurances as necessary.
7
[Link]
8
The NAO website address is [Link]
9
See Audit Practice Note 10 of the Audit Practices Board on the FRC website at
[Link]
 of subjects over a period, taking account of the risks to value for
money and parliament’s interests.
1.6.3 The C&AG has a general right to inspect the books of a wide variety of
public organisations to further these investigations. When the NAO investigates
any public sector organisation, it should get full cooperation in provision of
papers and other oversight. It is good practice to draw the NAO’s attention to the
confidentiality of any sensitive documents provided in the process. It is then for
the independent C&AG to judge what material can be published in the public
interest.
1.6.4 In addition, the C&AG publishes other independent reports to parliament.
The PAC (see section 3.5) may hold hearings to examine evidence on any of these
reports and on other related matters.
Chapter 2
Use of Public Funds
This chapter explains the process for parliamentary authorization of public resources.
Parliament consents in principle to use of public funds through legislation to enable specified
policies. It then approves use of public resources to carry out those policies year by year by
approving Estimates. Only rarely can lesser authority suffice. At the close of each financial
year, parliament expects a clear account of the use of the public funds it has authorised.
Parliament expects the Treasury to oversee the operation of these controls. The PAC may
investigate specific issues further.

 Ministers have very broad powers to control and direct their

departments. In general, they may do anything that legislation does
not prohibit or limit, including using common law powers to
administer their operations or continue business as usual.

 Ministers also need parliamentary authority for use of public funds

before each year’s expenditure can take place. The full list of
requirements is set out in box 2.1.
Box 2.1: requirements for use of public funds

 budget cover in the collectively agreed multi-year budgets

 with a few exceptions1, parliamentary authorization for each year’s drawdown of
funds through an Estimate, which is then approved as a Supply and
Appropriation Act (see section 2.2)
 adequate Treasury consents (see section 2.3)
 assurance that the proposed expenditure is regular and proper (section 2.4)
 sufficient specific legal powers – though see section 2.5 for some limited
exceptions

2.1.1 The Treasury runs the controls process because parliament expects the
Treasury to control public expenditure as part of fiscal policy. The primary means
through which the Treasury controls public expenditure is multi-year budgets,
agreed collectively at spending reviews. The Consolidated Budgeting Guidance
sets out the rules for their use. (See also chapter 4).
2.2 Using the Estimate
2.2.1 The requirements in box 2.1 are to some extent interrelated. The accounting
officer of a department (see also chapter 3) is responsible for ensuring that:
2.2.2 the Estimate(s) presented to parliament for the department’s annual
expenditure (consolidating its ALBs) are within the statutory powers and within
the government’s expenditure plans; and
2.2.3 use of resources is within the ambit of the vote and consistent with the
Estimte(s) –
and must answer to parliament for stewardship of the responsibilities.
2.3 Treasury consents
2.3.1 Departments also need Treasury consent before undertaking expenditure or
making commitments which could lead to expenditure (see annex 2.1). Usually
the Treasury agrees some general approvals for each department subject to
delegated limits and/or exclusions.
2.3.2 Some common approaches to setting delegations are shown in box 2.2 and
are discussed further in annex 2.2. It is good practice to review delegations from
time to time to make sure that they remain up to date and appropriate. Delegations
can be tightened or loosened at reviews, depending on experience.
Box 2.2: examples of approaches to delegated authorities

 objective criteria for exceptions requiring specific Treasury scrutiny or approval

 a sample mechanism to allow specimen cases to be examined
 a lower limit above which certain kinds of projects must achieve specific consent

2.3.3 In turn departments should agree with each of their arm’s length bodies
(ALBs – the public sector organisations they sponsor or finance) a similar set of
delegations appropriate to their business2 (see also chapter 7).
2.3.4 There is an important category of expenditure commitments for which the
Treasury cannot delegate responsibility. It is transactions which set precedents,
are novel, contentious or could cause repercussions elsewhere in the public sector.
Box 2.3 gives examples. Treasury consent to such transaction should always be
obtained before proceeding, even if the amounts in question lie within the
delegated limits.
 Box 2.3: examples of transactions requiring explicit Treasury consent

 Extra statutory payments similar to but outside statutory schemes

 Ephemeral ex gratia payment schemes, eg payments to compensate for official
errors
 adequate Treasury consents (see section 2.3)
 assurance that the proposed expenditure is regular and proper (section 2.4)
 sufficient specific legal powers – though see section 2.5 for some limited
exceptions

2.3.5 It is improper for a public sector organisation to spend or make

commitments outside the agreed delegations. The Treasury may subsequently
agree to give retrospective consent, but only if the expenditure in question would
have been agreed if permission had been sought at the right time.
2.3.6 Sometimes legislation calls for explicit Treasury consent, eg for large or
critical projects. There are also Whitehall wide controls on key progress points for
the very largest projects3. In such cases it is unlawful to proceed without Treasury
consent – and Treasury consent be given retrospectively.
2.4 Regularity and propriety
2.4.1 The concepts of regularity and propriety, fundamental to the right use of
public funds, are set out in box 2.4. The term regularity and propriety is often
used to convey the idea of probity and ethics in the use of public funds – that is,
delivering public sector values in the round, encompassing the qualities
summarized in box 1.1. Supporting this concept are the Seven Principles of Public
Life – the Nolan principles4 – which apply to the public sector at large. In striving
to meet these standards, central government departments should give a lead to the
partners with which they work.

Box 2.4: regularity and propriety

Regularity: compliant with the relevant legislation and wider legal principles such as subsidy
control and procurement law, delegated authorities and following the guidance in this
document.
Propriety: meeting high standards of public conduct, including robust governance and the
relevant parliamentary expectations, especially transparency.

2.4.2 Each departmental accounting officer should make sure that ministers in
their department appreciate:
 the importance of operating with regularity and propriety; and
the need for efficiency, economy, effectiveness and prudence in the
administration of public resources, to secure value for public money5.
2.4.3 Should a minister seek a course of action which the accounting officer
cannot reconcile with any aspect of these requirements, they should seek
instructions in writing from the minister before proceeding (see chapter 3).
2.4.4 Should departments need to resolve an issue about regularity or propriety,
they should consult the relevant Treasury spending team. Similarly, ALBs should
consult their sponsor departments about such issues, and the department
concerned may in turn consult the Treasury.
2.4.5 Neither improper nor irregular expenditure achieves the standards that
parliament expects. So, any such expenditure must be noted in the department’s
annual report and accounts. If the discrepancy is material it can result in a
qualification to the accounts. When any expenditure of this kind comes to light, it
should be drawn to the attention of both the NAO and the Treasury. The
immediate follow up action is to identify the source of any systematic problems of
that there is no recurrence. The PAC may also call the accounting officer the
matter at a public hearing.
2.5 Securing adequate legal authority
2.5.1 Parliament usually authorizes spending on a specific policy or service by
approving bespoke legislation setting out in some detail how it should work. It is
not normally acceptable to use a royal charter as an alternative to primary
legislation, for this approach robs parliament of its expectations for control and
accountability. Departments should ensure that both they and their ALBs have
adequate legal cover for any specific actions they undertake.
2.5.2 The Treasury takes this requirement seriously. It is fundamental to the trust
and understanding between the government and parliament on which management
of the public finances is founded. In the Concordat of 1932 (see annex 2.3), the
Treasury undertook that departments would not spend without adequate legal
authority.
2.5.3 There are some general exceptions. These kinds of expenditure do not
require specific legislation in order to avoid burdening parliamentary time:
 routine matters covered by common law (the main examples are in
box 2.5);

 a very limited range of Consolidated Fund Standing Services (see

section 5.3);
2.5.4 Projects or services which are modest or temporary (see box 2.6). This
exception cannot be used to plug a gap in spending authority before specific
legislation for an ongoing service is passed. The temporary services derogation
only applies to initiatives lasting no more than two years in total, and it is
therefore important to note that this does not provide a two-year grace period for
spending on a new, ongoing service before specific legislation is required.
 Box 2.5: expenditure which may rely on a Supply and Appropriation Act

 routine administration costs: employment costs, rent, clearning etc

 lease agreements, eg for photocopiers, lifts
 contractual obligations to purchase goods or services (eg where single year contracts
might be bad value)
 expenditure using prerogative powers such as defence of the realm and international
treaty obligations

In all the three cases in paragraph 2.5.3, departments may rely on the sole
authority of a Supply and Appropriation Act (the culmination of the Estimates
process) without the need for specific legal authority, provided that the other
conditions in box 2.1 are met.

Box 2.6: modest or temporary expenditure which may rely on a Supply and Appropriation Act

either services or initiatives lasting no more than two years, eg a pilot study or one off
intervention
or expenditure of no more than £1.75m a year (amount adjusted from time to time) provided
that there is no specific legislation covering these matters before parliament and existing
statutory restrictions are respected.
These conditions are demanding. Treasury consent is required before they may be relied on.

2.6 New Services

2.6.1 When ministers decide on a new activity, all the conditions in box 2.1 must
be met before it can begin. In practical terms this means that most significant new
policies which are intended to persist require specific primary legislation.
Sometimes ministers want to start early on a new policy which is intended to
continue but whose enabling legislation has not yet sucured royal assent. It may
be possible to make limited preparation for delivery of the new service before
royal assent, but to do it will usually be necessary to consider borrowing from the
Contingencies Fund (see annex 2.4). Access to this Fund is controlled by the
Treasury, subject to the conditions in box 2.7. Specific Treasury consent is always
required.
Chapter 3
Accounting Officers

This chapter sets out the personal responsibilities of all accounting officers in central
government. Essentially accounting officers must be able to assure parliament and the
public of high standards of probity in the management of public funds. This chapter is
drawn to the attention of all accounting officers when they are appointed.

3.1.1 Each organisation in central government – department, agency, trading fund,

NHS body, NDPB or arm’s length body – must have an accounting officer. This
person is usually its senior official. The accounting officer in an organisation
should be supported by a board structured in line with the Corporate Governance
Code.
3.1.2 Formally the accounting officer in a public sector organisation is the person
who parliament calls to account for stewardship of its resources. The standards
the accounting officer is expected to deliver are summarized in box 3.1. The
equivalent senior business managers of other public sector organisations are
expected to deliver equivalent standards.
3.2 Appointment of accounting officers
3.2.1 The Treasury appoints the permanent head of each central government
department to be its accounting officer. Where there are several accounting
officers in a department, the permanent head is the principal accounting officer.
3.2.2 Within departments, the Treasury also appoints the chief executive of each
trading as its accounting officer.
3.2.3 In turn the principal accounting officer of each department normally
appoints the permanent heads:
 of its executive agencies, as agency accounting officers for their agencies;
and

 of other ALBs (including all NDBPs), as accounting officers for tehse

bodies; and

at their discretion, additional accounting officers for defined part(s) of the

department’s business.
3.2.4. In the case of appointment of principal accounting officers of departments
and accounting officers of trading funds, the relevant department should send a
draft letter of appointment directly to the Treasury Office of Accounts team via
TAOEnquiries@[Link] for the signature of the Treasury Permanent
Secretary. This should be done at least fourteen calendar days before the
accounting officer is due to take up their role.
3.2.5. In this case of appointment of an accounting officer for an arm’s length
body, the body should liaise with its sponsoring department to arrange a letter of
appointment from the principal accounting officer. Again, this should be done at
least fourteen calendar days before the accounting officer is due to take up their
role. The private office of the principal accounting officer should then promptly
notify the TOA team.
3.2.6. These actions ensure that the register of accounting officers is kept up to
date and that appropriate training can be arranged.
3.2.7. If the timeframes above cannot be met, or in the event of a temporary gap
between the standing down of an accounting officer and the appointment of a new
accounting officer, the department should the TOA team to discuss the
appropriate mechanism to ensure accountability arrangements are maintained.
3.2.8. Template letters of appointment can be found on [Link]. The TOA team is
happy to assist in the preparation of these letters.
3.3 Special Responsibilities of accounting officers
Box 3.1: standards expected of the accounting officer’s organisation
Acting within the authority of the minister(s) to whom they are responsible, the
accounting officer ensure that the organisation, and any ALBs it sponsors, operates
effectively and to a high standard of probity. The organisation should:
governance
 have a governance structure which transmits, delegates, implements and
enforces decisions

 have trustworthy internal controls to safeguard, channel and record resources as

intended

 work cooperatively with partners in the public interest

 operate with propriety and regularity in all its transactions

 treat its customers and business counterparties fairly, honestly and with integrity

 offer appropriate redress for failure to meet agreed customer standards

 give timely, transparent and realistic accounts of its business and decisions,
underpinning public confidence;
decision-making
 support its ministers with clear, well-reasoned, timely and impartial advice
 make all its decisions in line with the strategy, aims and objectives of the
organisation set by ministers and/or in legislation

 take a balanced view of the organisation's approach to managing opportunity and

risk

 impose no more than proportionate and defensible burdens on business;

 financial management

 use its resources efficiently, economically and effectively, avoiding waste and
extravagance

 plan to use its resources on an affordable and sustainable path, within agreed
limits

 carry out procurement and project appraisal objectively and fairly, using cost
benefit analysis and generally seeking good value for the Exchequer as a whole

 use management information systems to gain assurance about value for money
and the quality of delivery and so make timely adjustments

 avoid over defining detail and imposing undue compliance costs, either internally
or on its customers and stakeholders

 have practical documented arrangements for controlling or working in

partnership with other organisations, as appropriate

3.3.1. It is important that each accounting officer takes personal responsibility for
ensuring that the organisation they manage delivers the stndards in box 3.1. In
particular, the accounting officer must personally sign; the accounts; the annual
report the governance statement (see annex 3.1); and having been satisfied that
they have been properly prepared to reflect the business of the organisation, must
personally approve: voted budget limits; and the associated Estimates
Memorandum.
3.3.2. The accounting officer of a corporate arm’s length body should arrange for
a board member to sign the accounts s well as signing them himself or herself, if
(unusually) they are not a member of the board.
3.3.3. There are several other areas where accounting officers should take
personal responsibility.
 Regularity and propriety (see box 2.4), including securing Treasury
approval for any expenditure outside the normal delegations or outside
the subheads of Estimates.

 Affordability and sustainability: respecting agreed budgets and avoiding

unaffordable longer term commitments, taking a proportionate view
about other demands for resources.
  Value for money: ensuring that the organisation’s procurement, projects
and processes are systematically evaluated to provide confidence about
suitability, effectiveness, prudence, quality, good value judged for the
Exchequer as a whole, not just for the accounting officer’s organisation
(eg using the Green Book1 to evaluate alternatives).

 Control: the accounting officer should personally approve and confirm

their agreement to all Cabinet Committee papers and major project or
policy initiatives before they proceed.

Management of opportunity and risk to achieve the right balance

commensurate with the institution’s business and risk appetite.

 Learning from experience, both using internal feedback (eg through

managing projects and programmes using techniques such as
PRINCE2), and from right across the public sector.

 Accounting accurately for the organisation’s financial position and

transactions: to ensure that its published financial information is
transparent and up to date: and that the organisation’s efficiency in the
use of resources is tracked and recorded.
3.3.4. In the case of principal accounting officers, these responsibilities apply to
the business of the whole departmental group.
3.4 Accounting officer assessments
3.4.1. Accounting officers should routinely scrutinise significant policy proposals
or plans or start or vary major projects and then assess whether they measure up
to the standards in box 3.2.

Box 3.1: the standards expected for projects and proposals

 Regularity: the proposal has sufficient legal basis, parliamentary authority,
and Treasury authorization; and is compatible with the agreed spending
budgets.

 Propriety: the proposal meets the high standards of public conduct and
relevant Parliamentary control procedure and expectations.

 Value for money: in comparison to alternative proposals or doing nothing,

the proposal delivers value for the Exchequer as a whole.

 Feasibility: the proposal can be implemented accurately, sustainably, and

to the intended timetable.

3.4.2. A systematic written accounting officer assessment helps to ensure good

decision making and provides positive assurance that the four standards have been
properly considered.
3.4.3. An accounting officer assessment should be produced for projects or
projects which form part of the Government Major Projects Portfolio (GMPP):
 alongside the request for the accounting officer’s approval of the Outline
Business Case (or at the point when it enters the GMPP if this is later)

 at subsequent stages of the project if it departs from the four standards or

the agreed plan – including any contingency – in terms of costs, benefits,
timescales, or level of risk, which informed the accounting officer’s
previous approval.

 if the Senior Responsible Owner (SRO) of the project decides one is

merited at any other stage of the project
3.4.4. In addition, it is good practice to prepare an accounting officer assessment
for each novel and contentious transaction or proposal involving the use of public
funds. This may be particularly useful where it is not possible to produce a fully
developed business case, for examples due to lack of time and/or data, or the risk
environment is higher than usual. The Treasury often asks spending departments
and organisations for such analyses before clearing them to proceed, as will the
National Audit Office (NAO) when conducting any review of the issue.
3.4.5. Beyond that, in many cases, the normal governance procedures, such as
production and approval of business cases, should provide sufficient assurance
against the accounting officer standards, without need for a bespoke accounting
officer assessment.
3.4.6. All draft accounting officer assessments must be signed off by the
organisation’s senior officer for finance (usually Finance Director, Chief
Financial Officer or Director General for Finance) or alternate senior member of
the finance function within the department before being submitted to the
Accounting Officer for final sign off.
3.4.7. Whenever an accounting officer assessment is produced for a GMPP
project, a summary of the key points should also be prepared and published.
Accounting officers may also choose to publish similar information from
assessments made in other circumstances at their discretion.
3.4.8. Further guidance on producing and publishing accounting officer
assessments can be found in Accounting Officer Assessments: guidance2.
3.5 Working with other organisations
3.5.1. It often makes sense for two or more departments to work together to
deliver public services. In such circumstances, each accounting officer remains
personally responsible for the resources of their own organisation. It is good
practice for participating bodies to document their respective responsibilities, for
example by way of a memorandum of understanding.
3.5.2. It may also be the case that, in assessing a project or proposal, the
accounting officer will want to draw on expertise from another department or
public body. Where this happens, the accounting officer may ask the organisation
to provide written assurances of the robustness of the analysis and any underlying
methodology. However, the ultimate judgement in each case lies with the
accounting officer personally.
3.6 Directions
3.6.1. The accounting officer cannot simply accept the minister’s aims or policy
without examination. Each departmental accounting officer should take care to
bring to the attention of their minister(s) any conflict between the minister’s
instructions and the standards set out in box 3.2.
3.6.2. Where a departmental accounting officer determines that a proposal does
not meet one or more of these standards, the best next step is to consider whether
the policy or proposed course of action can be modified to make it fit. If not, and
the minister decided it is nevertheless appropriate to continue with the proposal,
the accounting officer should ask their senior minister for a formal written
direction to proceed. An oral direction should be confirmed promptly in writing.
3.6.3. Before finalizing direction request, it is good practice for accounting
officers to discuss the matter with the Treasury, often by their nature, issues that
might call for a ministerial direction are novel, contentious, or repercussive, and
therefore require Treasury consent. Where this is the case, Treasury consent
should be obtained before the direction request is finalized.
3.6.4. As always, the ultimate judgement in each case must lie with the
accounting officer personally. The acid test is whether the accounting officer
could justify the propose activity if asked to defend it.
3.6.5. There is no set form for requesting a direction, though the accounting
officer should be specific about their nature and the standard or standards that
is/are not satisfied.
3.6.6. When a direction is made, the Accounting Officer should:
 follow the minister’s direction without further ado

 promptly copy the direction request, the direction and other papers the
accounting officer considers relevant to the Comptroller and Auditor
General and the Treasury Officer of Accounts
 unless it is in the public interest that the matter is kept confidential,
arrange for the direction request and direction itself to be published on the
[Link] website promptly, notifying the chairs of the PAC and the
relevant departmental select committee as soon as this occurs.

 where confidentiality is required, in addition to copying to the Comptroller

and Auditor General and the Treasury Officer of Accounts as usual, share
the direction request and the direction with the chairs of the PAC and the
relevant departmental select committee, along with an explanation of
when they expect the need for confidentiality to fall away and publication
to take place

if asked, explain the minster’s course of action – this respects ministers’

rights to frank advice, while protecting the quality of internal debate.
3.6.7. A direction on regularity or propriety ground does not change that position
– that is it does not make the action regular or proper. It is important to note that a
direction does not permit unlawful action and does not protect against a court
finding unlawfulness.
3.7 Public Accounts Committee
3.7.1. The PAC may hold public hearings on the accounts of central government
organisations laid in parliament (see section 1.6). In practice most PAC hearings
focus on NAO value for money studies. The NAO seeks to agree the text of these
reports with the accounting officer(s) concerned so there is a clear undisputed
evidence base for PAC scrutiny.
3.7.2. When a hearing is scheduled, the PAC normally invites the accounting
officer(s) of the relevant institution(s) to attend as witness(es). An accounting
officer may be accompanied by appropriate officials. Where it is appropriate, and
the PAC agrees, an accounting officer may send a substitute. The PAC may also
invite other witnesses who may not be public servants to give insight into the
background of the subject in hand.
3.7.3. In answering questions, the accounting officer should take responsibility for
the organisation’s business, even if it was delegated or if the events in question
happened before they were appointed accounting officer. In response to specific
PC or Select Committee requests, previous accounting officer. In response to
specific PAC or Select Committee requests, previous accounting officers may
also attend relevant PAC hearings. Recalls of this kind should be assessed case by
case, depending on the circumstances. They are acceptable if the business in issue
was recent, and where the former accounting officer has had an opportunity to
comment before publication on any NAO report which the PAC is to investigate.
3.7.4. The PAC expects witnesses to give clear, accurate and complete evidence.
If evidence is sensitive, witnesses may ask to give it in private. Witnesses may
offer supplementary notes if the information sought is not hand at the meeting.
Any such notes should be provided within one week unless the PAC is willing to
grant an extension. They should do so without delay.
3.7.5. The TOA (or an alternate) attends all PAC hearings. This enables the PAC
to explore any more general issues arising out of the hearing.
3.7.6. The evidence given by accounting officers at public hearings often feeds
into reports published by the PAC. These reports detail its findings, conclusions
and recommendations.
3.7.7. For each PAC report, the government responds to recommendations by
means of Treasury Minutes presented to Parliament by a Treasury minister,
indicating those the government accepts and those it does not accept. For those it
accepts, Treasury Minutes will include target implementation dates. For those it
does not accept, they will set out reasons for non-acceptance.
3.7.8. In addition, government departments and organisations are required to
report twice annually to Parliament on progress in implementing Committee
recommendations accepted by government. Treasury Minute Progress Reports are
used for this purpose.
3.7.9. The PAC expects the government to respond promptly and transparently
through both the initial Treasury Minute and subsequent Progress Reports.
Accounting officers should ensure the internal clearance processes within their
organisation are arranged to fit with deadlines for responses.
3.7.10. In addition, if a department determines it is necessary to revise the target
date for implementing an agreed recommendation, the accounting officer should
write immediately to the PAC, copied to the Treasury Officer of Accounts, and
provide a detailed explanation for the deferral. Departments should not leave
notification of the delay in implementation until the publication of the next
Treasury Minutes Progress Report.
3.8 When the accounting officer is not available
3.8.1. Each public sector organisation must have an accounting officer available
for advice or decision as necessary at short notice. When the accounting officeris
absent and cannot readily be contacted, another senior official should deputise.
3.8.2. If a significant absence is planned, the principal accounting officer may
invite the Treasury to appoint a temporary acting accounting officer.
3.8.3. In these circumstances, a temporary acting accounting officer stands in the
shoes of the principal accounting officer. They are not acting on behalf of the
Principal Accounting Officer but are personally responsible by the principal
accounting officer and their role should only be activated if the principal
accounting officer is unable to fulfill their obligations. To all intents and purposes
the temporary acting accounting officer replaces the principal accounting officer.
3.8.4. A similar logic can also apply for an accounting officer in an arm’s length
body (ALB), whereby the arrangement must be agreed and formalized between
the department and the ALB.

3.9 Conflicts of Interest

3.9.1. Sometimes an accounting officer faces an actual or potential conflict of
interest. There must be doubt that the accounting officer meets the standards
described in box 3.1 without divided loyalties. Possible ways of managing this
issue include:
 for a minor conflict, declaring the conflict and arranging for
someone other than the accounting officer to make a decision on
the issue(s) in question

 for a significant but temporary conflict, inviting the Treasury (or

the sponsor department, as the case may be)to appoint an interim
accounting officer for the period of the conflict of interest

 for serious and lasting conflicts, resignation.

3.10 Arm’s length bodies
3.10.1. The responsibilities of accounting officers in departments and in arm’s
length bodies (ALBs) are essentially similar. Accounting officers in ALBs must
also take account of their special responsibilities and powers. In particular, they
Must respect the legislation (or equivalent) establishing the organisation and
terms of the framework document agreed with the sponsor department. See
chapter 7 for more.
3.10.2. The framework document (or equivalent) agreed between an ALB and its
sponsor always provided for the sponsor department to exercise meaningful
oversight of the ALB’s strategy and performance, pay arrangements and/or major
financial transactions, eg by monthly returns, standard delegations and exception
reporting. The sponsor department’s accounts consolidate those of its ALBs so its
accounting officer must be satisfied that the consolidated accounts are accurate
and not misleading.
3.10.3. Overall, the accounting officer of a sponsor department should make
arrangements to satisfy himself or herself that the ALB has systems adequate to
meet the standards in box 3.1. Similarly, the accounting officer of an ALB with a
subsidiary should have meaningful oversight of the subsidiary. It is not acceptable
to establish ALBs, or subsidiaries to ALBs, in order to avoid or weaken
parliamentary scrutiny.
3.10.4. Exceptionally, the accounting officer of a sponsor department may need to
intervene if an ALB drifts significantly off track, eg if its budget is threatened, ts
systems re badly defective or it falls into disrepute, This may include replacing
some or all of the leaders of the ALB, possibly even its ccounting officer.
3.10.5. There are sensitivities about the role of the accounting officer in an ALB
which is governed by an independent fiduciary board, eg a charity or company.
The ALB’s accounting officer, who will normally be a member of the board, must
take care that their personal legal responsibilities do not conflict with their duties
as a board member. In particular, the accounting officer should vote against any
proposal which appears to cause such a conflict; it is not sufficient to abstain.
3.10.6. Moreover, if the chair or board of such an ALB is contemplating a course
of action that is inconsistent with the standards in box 3.1, then the accounting
officer should follow the procedure set out in the organisation’s framework
document. This process is similar to what happens in departments (see section
3.6), but will be tailored to reflect the position of the organisation’s board, which
is often appointed under statute.
3.11 In the round
3.11.1. It is not realistic to set firm rules for every aspect of the business with
which an accounting officer may deal. Sometimes the accounting officer may
need to take a principled decision on the facts in circumstances with no
precedents. Should that happen, the accounting officer should be guided by the
standards in box 3.1 in assessing whether there is a case for seeking a direction for
any of the factors in box 3.2. It is essential that accounting officers seek good
outcomes for the Exchequer as a whole, respecting the key principles of
transparency and parliamentary approval for management of public resources.
3.11.2. In addition, there may be occasions where it is necessary to respond
urgently to events, reducing the time available for analysis and requiring the
accounting officer to make an assessment. In such circumstances, all available
options may carry more uncertainty and more risk than would be acceptable in
more normal times.
Here, in assessing value for money and feasibility, the accounting officer must
assess the relative merits and costs of alternatives (including doing nothing).
3.11.3. Sometimes, it is possible to do no more than identify the scale of the
problem to be tackled and then examine why the proposed action should both be
effective have tolerable cost. Whenever proposals or projects are taken forward,
accounting officer should identify and assess risks, and design and operate the
most effective risk treatment activities (including controls) possible in the time
available.
3.11.14. The Treasury stands ready to help accounting officers think such issues
through.
Chapter 4
Governance and Management

Public sector organisations should have good quality internal governance and sound
financial management. Appropriate delegation of responsibilities and effective
mechanisms for internal reporting should ensure that performance can be kept on track.
Good practice should be followed in procuring and managing resources and assets; hiring
and managing staff; and deterring waste, fraud and other malpractice. Central government
departments have some specific responsibilities for reporting, including to parliament.

4.1.1 Each public sector organisation should establish governance arrangements

appropriate to its business, scale and culture. The structure should combine
efficient decision making with accountability and transparency.
4.1.2 In doing so, central government departments should be guided by the
Corporate Governance Code³. Each public sector organisation needs clear
leadership, normally provided by a board. Box 4.1 sets out best practice for
departmental boards.

Box 4.1: best practice for boards in central government departments

 chaired by the department's most senior minister, with junior ministers as members

 comparable numbers of official and non-executive members, including a lead non-

executive and a professionally qualified finance director (see annex 4.1)

 meeting at least quarterly

 sets the department's strategy to implement ministers' policy decisions

 leads the department's business and determines its culture

 ensures good management of the department's resources - financial, assets, people

 decides risk appetite and monitors emerging threats and opportunities

 steers performance to keep it on track using regularly updated information about

progress

 keeps an overview of its ALBs' activities

4.1.3 It is good practice for ALBs to use similar principles. In many ALBs some
structural features, such as board composition, derive from statute but
considerable discretion may remain. In some organisations it is usual, or found
valuable, for the board to include members with designated responsibility or
expertise, eg for regional affairs or for specialist professional skills.
4.1.4 In order to carry out its responsibilities each board needs to decide, and
document, how it will operate. Box 4.2 outlines the key decisions. It is not
exhaustive. Once agreed, the working rules should be reviewed form time to time
to keep them relevant. Boards should challenge themselves to improve their
working methods, so that their processes can achieve and maintain good modern
business practice.
Box 4.2: key decisions for boards

 mission and objectives

 delegations and arrangements for reporting performance

 procedures and processes for business decision making

 scrutiny, challenge and control of significant policies, initiatives and projects

 risk appetite and risk control procedures, eg maintaining and reviewing a risk register

 control and management of associated ALBs and other partnerships

 arrangements for refreshing the board

 arrangements for reviewing the board's own performance

 accountability - to the general public, to staff and other stakeholders (see section
4.13)

 how the insights of non-executives can be harnessed

 how often the board's working rules will be reviewed

4.2 Working methods

4.2.1 The accounting officer of each organisation is accountable to parliament for
the quality of the administration that they leads. The administrative standards
expected are set out in the Civil Service Code and the Ombudsman's Principles of
Public Administrations. They allow considerable flexibility to fit with each
organisation's obligations and culture. It is against these standards that failure to
deliver is assessed.
4.2.2 Another fundamental concept is the Treasury's leadership position in
managing public expenditure, and setting the rules under which departments and
their ALBs should deploy the assets, people and other resources under their
control. In turn each public sector organisation should have robust and effective
systems for their internal management. Box 4.3 outlines the key decisions each
organisation needs to make.
4.2.3 To help the Treasury carry out this task properly:
 departments should provide the Treasury with accurate and timely
information about in-year developments - their expenditure,
performance against objectives and evolution of risk (eg serious
unforeseen events or discovery of fraud);
 ALBs should provide their sponsor departments with similar
information; and
  the established mechanisms for controlling and reporting public
expenditure, including Treasury support or approval where necessary,
should be respected.
4.2.4 In particular, departments should consult the Treasury (and ALBs their
sponsor departments) at an early stage about proposals to undertake unusual
transactions or financing techniques. This applies especially to any transactions
which may have wider implications elsewhere in the public sector (see paragraph
2.3.4 and box 2.3).
4.2.5 Working with the accounting officer, the finance director of each public
sector organisation has special responsibility for seeing that the standards
described in this chapter are respected. Annex 4.1. sets this out in more detail.

Box 4.3: essentials of effective internal decision making

choice

 active management of the portfolio of risks and opportunities

 appraisal of alternative courses of action using the techniques in the Green Book, and
including assessment of feasibility to achieve value for money

 where appropriate, use of models (see annex 4.2) or pilot studies to provide evidence
on which to make decisions among policy or project choices

 active steering of initiatives, eg reviews to take stock at critical points of projects

operation

 appropriate internal delegations, with a single senior responsible officer (SRO) for
each significant project or initiative, and a single senior person leading each end to
end process

 prompt, regular and meaningful management information on costs (including unit

costs), efficiency, quality and performance against targets to track progress and value
for money

 proportionate administration and enforcement mechanisms, without unnecessary

complexity

 use of feedback from internal and external audit and elsewhere to improve
performance

 regular risk monitoring, to track performance and experience and make adjustments in
response
afterwards

 mechanisms to evaluate policy, project and programme outputs and outcomes,

including whether to continue, adjust or end any continuing activities

 arrangements to draw out and propagate lessons from experience

4.3 Opportunity and risk
4.3.1 Embedded in each public sector organisation’s internal systems there should
be arrangements for recognizing, tracking and managing its opportunities and
risks. Each organisation’s governing body should make a considered choice about
its desired risk appetite, taking account of its legal obligations, ministers’ policy
decisions, its business objectives, and public expectations of what it should
deliver.
This can mean that different organisations take different approaches to the same
opportunities or risks.
4.3.2 There should be a regular discipline of reappraising the opportunities and
risks facing the organisation since both alter with time and circumstances, as
indeed may the chosen responses. This process should avoid excessive caution,
since it can be as damaging as unsuitable risk taking. The assessment should
normally include:
 maintaining a risk register, covering identified risks and contingent risks
from horizon scanning;

 reputational risks, since poor performance could undermine the credibility,

and ultimately the creditworthiness, of the Exchequer as a whole;

 consideration of the dangers of maintaining the status quo;

 plans for disaster recovery;

 appraisal of end to end risks in critical processes and other significant

activities.
4.3.3 In making decisions about how to manage and control opportunity and risk,
audit evidence and other assurance processes can usefully inform choice. Audit,
including internal audit, can provide specific, objective and well-informed
assurance and insight to help an organisation evaluate its effectiveness in
achieving its objectives. It is good practice for the audit committee to advise the
governing board of a public sector organisation on its key decisions on
governance and managing opportunities and risks. It is also a good discipline for
this process to include evaluating progress in implementing PAC
recommendations, where they have been accepted.
4.3.4 In turn the board should support the accounting officer in drawing up the
governance statement, which forms part of each organisation's annual accounts.
See annex 3.1. Further guidance about managing risks is in annex 4.3 and the
Orange Book.
4.4 Insurance
4.4.1 In the private sector risk is often managed by taking out insurance. In central
government it is generally not good value for money to do so. This is because the
public sector has a wide and diverse asset portfolio; a reliable income through its
ability to raise revenue through taxation; and access to borrowed funds more
cheaply than any in the private sector. In addition, commercial providers of
insurance also have to meet their own costs and profit margins. Hence the public
purse is uniquely able to finance restitution of damaged assets or deal with other
risks, even very large ones. If the government insured risk, public services would
cost more.
4.4.2 However, there are some limited circumstances in which it is appropriate for
public sector organisations to insure. They include legal obligations, and
occasions
where commercial insurance would provide value for money7. Further
information about insurance generally is in annex 4.4.
4.5 Control of public expenditure
4.5.1 The Treasury coordinates a system through which departments are allocated
budget control totals for their public expenditure. Each department's allocation
covers its own spending and that of its associated ALBs. Within the agreed totals,
it has considerable discretion over setting priorities to deliver the public services
for which it is responsible.
4.5.2 Each public sector organisation should run efficient systems for managing
payments (see box 4.4). It should also keep its use of public resources within the
agreed budgets, take the limits into account when entering into commitments, and
generally ensure that its spending profile is sustainable.
4.5.3 Any major project, programme or initiative should be led by a senior
responsible owner (SRO). It is good practice to aim for continuity in such
appointments8.

Box 4.4: essentials of systems for committing and paying funds

 Selection of projects after appraisal of the alternatives (see the Green Book), including
the central clearance processes for larger commitments.

 Open competition to select suppliers from a diverse range, preferably specifying

outcomes rather than specific products, to achieve value for money (see annexes 4.6 and
4.7).

 Where feasible, procurement through multi-purchaser arrangements, shared services

and/or standard contracts to drive down prices.

 Effective internal controls to authorise acquisition of goods or services (including vetting

new suppliers), within any legal constraints.

 Separation of authorisation and payment, with appropriate controls, including validation

and recording, at each step to provide a clear audit trail.

 Checks that the goods or services acquired have been supplied in accordance with the
relevant contract(s) or agreement(s) before paying for them.

 Payment terms chosen or negotiated to provide good value.

 Accurate payment of invoices: once and on time, avoiding lateness penalties (see annex
4.8).

 A balance of preventive and detective controls to tackle and deter fraud, corruption and
other malpractice (see annex 4.9).

 Integrated systems to generate automatic audit trails which can be used to generate
accounts and which both internal and external auditors can readily check.

 Periodic reviews to benefit from experience, improve value for money or to implement
developments in good practice.
4.6 Receipts
4.6.1 Public sector organisations should have arrangements for identifying,
collecting and recording all amounts due to them promptly and in full.
Outstanding amounts should be followed up diligently. Key features of internal
systems of control are suggested in box 4.5.
4.6.2 Public sector organisations should take care to tract and enforce debts
promptly. The presumption should be in favour of recovery unless it is
uneconomic to do so.
Box 4.5: essential features of systems for collecting sums due

 Adequate records to enable claims to be made and pursued in full.

 Routines to prevent unauthorised deletions and amendments to claims.

 Credit management systems to manage and pursue amounts outstanding.

 Controls to prevent diversion of funds and other frauds.

 Clear lines of responsibility for making decisions about pressing claims increasingly
more firmly, and for deciding on any abatement or abandonment of claims which may be
merited.

 Arrangements for deciding upon and reporting any write-offs (see annex 4.10). Audit
trails which can readily be checked and reported upon both internally and externally.

4.7 Non-standard financial transactions

4.7.1 From time to time public sector organisations may find it makes sense to
carry out transactions outside the usual planned range, eg:
 write-offs of unrecoverable debts or overpayments;

 recognising losses of stocks or other assets;

 long term loans or gifts of assets.

4.7.2 In each case it is important to deal with the issue in the public interest, with
due regard for probity and value for money. Annexes 4.10 to 4.12 set out what is
expected when such transactions take place in central government, including
notifying parliament.
4.7.3 Where an organisation discovers an underpayment, the deficit should be
made good as soon as is practicable and in full. If there has been a lapse of time,
for example caused by legal action to establish the correct position, it may be
appropriate to consider paying interest, depending on the nature of the
commitment to the payee and taking into account the reputation of the
organisation and value for money for the Exchequer as a whole (see also section
4.11).
4.7.4 Similarly, public sector organisations may have reason to carry out current
transactions which would not normally be planned for. These might be:
 extra contractual payments to service providers;
  extra-statutory payments to claimants (where a similar statutory scheme
exists);

 ex gratia payments to customers (where no established scheme exists);

 severance payments to employees leaving before retirement or before the

end of their contract and involving payments above what the relevant
pension scheme allows.
4.7.5 Again it is important that these payments are made in the public interest
objectively and without favouritism. The disciplines parliament expects of central
government entities are set out in annex 4.13, which explains the notification
procedure to be followed for larger one-off transactions of this kind. The steps to
be considered when setting up statutory or extra-statutory compensation schemes
are discussed in annex 4.14.
4.8 Unusual circumstances
4.8.1 Sometimes public sector organisations face dilemmas in meeting their
commitments. They may have a legal or business obligation which would be
uneconomic or inappropriate to carry out assiduously to the letter. In such cases it
can be justifiable to seek a pragmatic, just and transparent alternative approach,
appropriately reported to parliament in the organisation's annual accounts. One-
off schemes of this kind are always novel and so require Treasury approval, not
least because they may also require legislation or have to rest on the authority of a
Supply and Appropriation Act (see section 2.5). Box 4.6 suggests precedented
examples.

Box 4.6: examples of one-off pragmatic schemes

 A court ruling could mean that a public sector organisation owed each of a large
number of people a very small sum of money. The cost of setting up and operating an
accurate payment scheme might exceed the total amount due. The organisation could
instead make a one-off payment of equivalent value to a charity representing the
recipient group.

 A dispute with a contractor might conclude that the contractor owed a public sector
organisation an amount too big for it to meet in a single year while staying solvent. The
customer might instead agree more favourable payment terms, with appropriate
safeguards, if this arrangement provides better value for money.

4.9 Staff
4.9.1 Each public sector organisation should have sufficient staff with the skills
and expertise to manage its business efficiently and effectively. The span of skills
required should match the organisation's objectives, responsibilities and
resources, balancing professional, practical or operational skills and policy
makers, and recognising the value of each discipline. Succession and disaster
planning should ensure that the organisation can cope robustly with changes in the
resources available, including unforeseen disruption.
4.9.2 Public sector organisations should seek to be fair, honest and considerate
employers. Some desirable characteristics are suggested in box 4.7.
 Box 4.7: public sector organisations as good employers

 selection designed to value and make good use of talent and potential of all kinds

 fairness, integrity, honesty, impartiality and objectivity

 professionalism in the relevant disciplines, always including finance

 arrangements to make sure that staff are loaded cost effectively

 management techniques balancing incentives to improve and disciplines for poor

performance

 diversity valued and personal privacy respected

 mechanisms to support efficient working practices, both normally and under pressure

 arrangements for whistleblowers to identify problems privately without repercussions.

4.9.3 Similarly public sector employers have a right to expect good standards of
conduct from their employees. The qualities and standards expected of civil
servants are set out in the Civil Service Code. Other public sector employees
should strive for similar standards, appropriate to their context.
4.10 Assets
4.10.1 All public sector organisations own or use a range of assets. Each
organisation needs to devise an appropriate asset management strategy to define
how it acquires, maintains, tracks, deploys and disposes of the various kinds of
assets it uses. Annex 4.15 discusses how to set up and use such a strategy.
4.10.2 It is good practice for public sector organisations to take stock of their
assets from time to time and consider afresh whether they are being used
efficiently and deliver value for public funds. If there is irreducible spare capacity
there may be scope to use part of it for other government activities, or to exploit it
commercially for non-statutory business.
4.11 Standards of service
4.11.1 Poor quality public services are not acceptable. Public sector organisations
should define what their customers, business counterparties and other
stakeholders can expect of them.
4.11.2 Standards can be expressed in a number of ways. Examples include
guidelines (eg response times), targets (eg take-up rates) or a collection of
customer rights in a charter. Even where standards are not set explicitly, they may
sometimes be inferred from the way the provider organisation carries out its
responsibilities; so it is normally better to express them directly.
4.11.3 Whatever standards are set, they should be defined in a measurable way,
with plans for recording performance, so that delivery can be readily gauged. It is
good practice to use customer feedback, including from complaints, to reassess
from time to time whether standards or their proxies (milestones, targets,
outcomes) remain appropriate and meaningful.
4.11.4 Where public sector organisations fail to meet their standards, or where
they fall short of reasonable behaviour, it may be appropriate to consider offering
remedies. These can take a variety of forms, including apologies, restitution (eg
supplying a missing licence) or, in more serious cases, financial payments.
Decisions about financial remedies - which should not be offered routinely -
should include taking account of the legal rights of the other party or parties and
the impact on the organisation's future business.
4.11.5 Any such payments, whether statutory or ex gratia, should follow good
practice (see section 4.13). Since schemes of financial redress often set precedents
or have implications elsewhere, they should be cleared with the Treasury before
commitments are made, just as with any other public expenditure out of the
normal pattern (see sections 2.1 to 2.4).
4.12 Complaints
4.12.1 Those public sector organisations which deal with customers directly
should strive to achieve clear, accurate and reliable standards for the products and
services they provide. It is good practice to arrange for complaints about
performance to be reviewed by an independent organisation such as an
ombudsman.
4.12.2 Often such review processes are statutory. The activities of central
government departments and the NHS are open to review by the PHSO", whose
Principles of Good Complaints Handling10 sets out generic advice on complaints
handling and administration of redress (see also annex 4.14). After investigation
of cases of specific complaint, the PHSO can rule on whether injustice or hardship
can be attributed to maladministration or service failure, and may recommend
remedies, either for individual cases or for groups of similar cases. If departments
decline to follow the PHSO's advice, they should lay a memorandum in
parliament explaining why.
4.13 Transparency
4.13.1 All public sector organisations should operate as openly as is compatible
with the requirements of their business. In line with the statutory public rights",
they should make available timely information about their services, standards and
performance. This material should strike a careful balance between protecting
confidentiality and open disclosure in the public interest.
4.13.2 All public sector organisations should adopt a publication scheme routinely
offering information about the organisation's activities. They should also publish
regular information about their plans, performance and use of public resources.
4.13.3 The published information should be in sufficient detail, and be sufficiently
regular, to enable users and other stakeholders to hold the organisation and its
ministers to account. Benchmarks can help local users to evaluate local
performance more easily.
4.13.4 The primary document of record for central government departments is the
report and accounts, which should consolidate information about the relevant
ALBs. It should include a governance statement (see annex 3.1).