Framework Document between The Scottish Government and Crown Estate Scotland

11. Financial activities: general principles

11.1 Delegated Authority

Crown Estate Scotland’s specific delegated financial authorities - as agreed in consultation between the Board and the Scottish Ministers - are set out in Appendix A. Crown Estate Scotland will obtain the prior written approval from the Scottish Government before entering into any undertaking to incur any expenditure that falls outside these delegations, and before incurring expenditure for any purpose that is or might be considered novel, contentious or repercussive or which has or could have significant future cost implications.

11.2 Novel, Contentious or Repercussive Proposals

Crown Estate Scotland shall obtain prior approval from the Sponsor Team before committing to proposals which are, or may be considered novel, contentious or repercussive.

For the purposes of this document and in addition to the requirements of the SPFM novel, contentious and repercussive are defined as follows:

• Novel: Includes proposed expenditure or financial arrangements of a sort not previously undertaken or entered into by Crown Estate Scotland or that could not be considered, reasonably, to be the standard practice. In particular, novel proposals will involve a substantially new type of business form or arrangement unprecedented in Crown Estate Scotland and unusual in the Scottish public sector.
• Contentious: Involving a matter which is likely to generate nationally significant stakeholder reaction; or involving a matter likely to be of significance in relation to Scottish Government policy priorities; or involving a departure from Scottish Crown Estate plans and policies that have been communicated to Ministers; or departure from the Crown Estate Scotland risk appetite. This includes proposed expenditure or financial arrangements where there is doubt as to regularity (i.e. compliance with relevant legislation and guidance) or propriety (i.e. compliance with the standards expected of public bodies or officials).
• Repercussive: Committing to significant multi-annual expenditure or liability which annually exceeds Crown Estate Scotland’s delegated authority limits; or committing to a change or practice which could reasonably be deemed to have a significant material impact on Crown Estate Scotland and/or other parts of the Scottish public sector.

11.3 Procurement

Crown Estate Scotland shall ensure that it complies with any relevant procurement legislation. Procurement policies should reflect relevant guidance in the Procurement section of the SPFM and any other relevant guidance issued by the Scottish Government’s Procurement and Property Directorate (taking account of any derogations which stems from Crown status) and it shall be decided, on a case by case basis, the applicability of procurement legislation to activities it undertakes, or funds other bodies to undertake, relating to the management of Scottish Crown Estate assets.

Procurement should be treated as a key component of achieving Crown Estate Scotland's objectives, as well as a means of finding the most cost-effective method for securing the quality of assets and/or services.

The Scottish Government's directory of Frameworks and Contracts, is available to support Crown Estate Scotland.

11.4 Subsidy Control

The EU State aid regime was effectively revoked from UK law from 1 January 2021. Following an interim period, the UK Government introduced the Subsidy Control Act 2022 which saw a new UK subsidy control regime come into effect on 4 January 2023.

All UK public funding bodies are legally obliged to adhere to the conditions set out at Part 1 section 2 of Subsidy Control Act 2022 before awarding a subsidy. Currently, any activity that Crown Estate Scotland undertakes itself, or funds other bodies to undertake, that can be offered on a commercial market for goods and services, means that Crown Estate Scotland or that other party may be an enterprise for the purpose of the Subsidy Control Act 2022. All measures deemed to be a subsidy must be awarded in a compliant manner. There are various options for this, including Minimal Financial Assistance, awarding under either a streamlined route or a compliant scheme or using the standalone provision which would require the measure to be assessed against the seven principles as set out in Schedule 1 in the Subsidy Control Act 2022. Further information is available via the UK Governments Statutory Guidance and the Scottish Governments Subsidy Control webpages.

11.5 Timeliness In Paying Bills

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

11.6 Governance and risk

Guidance on governance requirements is available in several documents referred to earlier in this framework document:

• the Scottish Public Finance Manual (SPFM)
• the Audit and Assurance Committee Handbook
• On Board – A Guide for Members of Statutory Boards

If in any doubt about a governance issue, the Chair or Chief Executive should consult the Sponsor Team in the first instance, and sponsors may in turn consult the Scottish Government Public Bodies Unit, the Scottish Government Governance and Risk Branch and/or other teams with relevant expertise.

11.7 Risk Management

Crown Estate Scotland must develop an approach to risk management consistent with the Risk Management section of the SPFM and establish reporting and escalation arrangements with the Sponsor Team or Portfolio AO. Crown Estate Scotland shall take reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter into a contract with or to award a grant to.

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

Consideration should be given by the Accountable Officer on the maintenance of a minimum level of Capital funds for potential emergency expenditure and to ensure that Crown Estate Scotland’s legal obligations can be met.

The Scottish Government/Crown Estate Scotland Memorandum Of Understanding outlines how risks associated with decommissioning of Offshore Renewable Energy Installations under the Energy Act 2004 should be managed.

11.8 Internal Control

The Board should establish clear internal delegated authorities with the Chief Executive, who may in turn delegate responsibilities to other members of staff and establish an assurance framework consistent with the internal control framework in the SPFM.

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

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

Crown Estate Scotland must comply with the requirements of the Freedom of Information (Scotland) Act 2002 and ensure that information is provided to members of the public in a spirit of openness and transparency. Crown Estate Scotland must also register with Information Commissioners Office and ensure that it complies with the Data Protection Act 2018 and the General Data Protection Regulations, commonly known as GDPR.