Strategic commercial interventions: assurance playbook

Financial Appraisal and Accountable Officer Process

What is it?

Financial appraisal and evaluation are essential for financial management and detailed policy development and design. A business case, both as a product and a process, provides decision-makers and stakeholders with a management tool for evidence-based and transparent decision-making. Business cases support the processes of; scoping, analysing, appraising, planning, monitoring, evaluating, approving and implementing a proposal and are the centre of the wider evidence base.

Pre-expenditure assessments (PEAs) are a simplified version of a business case, designed to consider the expected impacts and value for money of a proposal. They allow decision-makers to make informed judgements on the relative merits of spending proposals, and act as a basis for justifying public expenditure.

Accountable Officer (AO) Assessments help officials advising an AO, and the AO themselves to make challenging decisions on policy, expenditure and project decisions. The AO role is a personal role with responsibility for the proprietary and regularity for public funds. AO assessments are used alongside PEA and Business Cases to determine if a particular policy, activity or project is within the bounds of regularity, proprietary, is feasible and can demonstrate value for money for the public sector as a whole and must be undertaken no matter the budgetary landscape.

An AO Assessment should always be produced for significant projects or programmes, including for each novel and contentious proposal involving the use of public funds. They should be done initially in principle, then again as appropriate in more detail at suitable strategic points as the policy or proposal is developed. This may be particularly useful where it is not possible to produce a fully developed business case, for example due to lack of time and/or data, or the risk environment is higher than usual.

AO assessments must be documented if AOs are considering asking Ministers for written authority to proceed with a proposal.

What is its purpose

All financial appraisals which set out investment proposals should have a valid, agreed and proportionate justification. As part of completing any appraisal, colleagues from the relevant specialism such as economists, subsidy control, finance, legal and procurement should be engaged.

The AO assessment is a method for assessing against the key AO duties as set out in Section 15 of the Public Finance and Accountability (Scotland) Act 2000 and detailed in the Scottish Public Finance Manual chapters on accountability. The assessment examines how far the policy or other spending proposal is compatible with these standards thus enabling the AO to seek a ministerial (or board as appropriate) written authority.

AO Assessments are a tool for AOs to scrutinise significant policy proposals and assess whether they measure up to the three required standards set out in the PFA (2000) Act.

• Regularity: the proposal has a legal basis, Parliamentary authority, and is compatible with the agreed spending budgets.
• Propriety: the proposal meets the high standards of public conduct and relevant parliamentary control procedures and expectations.
• Value for money: in comparison to alternative proposals or doing nothing, the proposal delivers the value for money as a whole.
• Feasibility: whether the proposal can be implemented accurately, sustainably, and to the intended timetable.

When should it be used

The right level of financial appraisal should be undertaken before any expenditure decision is made. AO Assessments must always be produced for significant projects or programmes, including for each novel or contentious proposal involving the use of public funds. They should be done initially, in principle, then again as appropriate in more detail at strategic points as the policy or proposal is developed.

Where a proposal exceeds resource implications over £1 million, or capital over £5 million, a PEA or a formal business case must be in place. For proposals below these thresholds, whilst no formal appraisal is required it is best to follow PEA / business case principles. Appraisals should be proportionate and will vary in depth and detail depending on the scale of the proposal and its complexity and risk rating. For complex / novel / contentious / high value or high-risk projects a business case should be undertaken. Officials should use their judgement on when a PEA or business case should be undertaken.

Useful Resources

Accountability - Scottish Public Finance Manual - gov.scot (www.gov.scot)

Public Finance and Accountability (Scotland) Act 2000 (legislation.gov.uk)