Strategic commercial interventions - initiating companies in public ownership: standard operating procedures - part 2

Chapter 1: Effective Sponsorship of Public Bodies

The SPFM’s Business Investment Framework (BIF), states where Ministers take control of a business, an appropriate governance regime will need to be in place, both in terms of the appointment of a Chair, Board and CEO as well as an institutional framework that is appropriate to the classification status of the body. Unless the business was managed/operated by an existing public body, sponsorship arrangements might also need to be arranged, either through an appropriate Agency/NDPB specialising in the sector or directly by a policy team in the core Scottish Government (SG). In part, governance will need to be influenced by the size of any shareholding, in the event of equity purchase. A dedicated resource will be required to manage sponsorship, and this should be kept in mind.

1.2. Sponsorship Functions & Models

Sponsorship functions may be divided into two broad areas: policy and corporate sponsorship, (also characterised as the shareholder function for certain public bodies):

• Policy sponsor: this function relates to what public bodies deliver on behalf of SG. It is responsible for agreeing the public body’s purpose and strategy, setting policy outcomes aligned to Ministerial and government priorities and assuring delivery of those outcomes.

• Corporate sponsor (also known as ‘shareholder’): this function relates to how public bodies perform and deliver, including risk and financial oversight, governance, and accountability. For example, UK Government Investments (UKGI) is UKG’s centre of excellence in corporate governance and performs the shareholder function for a number of complex Arms’ Length Bodies.

Clarity of roles between policy and corporate sponsorship is important to achieve success for public bodies of complexity or scale. Where this is not beneficial to the performance and management of the body, sponsorship teams should retain the flexibility to deploy different operating models depending on their public body and sponsorship team construct.

1.3. Models

The sponsorship team approaches may be grouped into three broad models based on how responsibility for delivering each function is apportioned. They are as follows:

a) Decentralised model: Where the policy and corporate sponsorship functions are delivered by separate divisions.

b) Hybrid model: Where policy and corporate sponsorship are delivered separately by two units but within the same division.

c) Centralised sponsorship model: Where the same unit within the division discharges both the policy and corporate sponsorship functions.

The model should align with both the objectives of the public body and enable the sponsorship team to provide support and oversight.

Across each model, functional experts either deliver on behalf of or support the delivery of corporate sponsorship functions. Sponsorship should never seek to be delivered in a vacuum - it requires engagement at appropriate levels to the relationship across the sponsorship team.

Co-Sponsoring is the act in which two (or more) sponsorship teams may wish to sponsor one public body. Where co-sponsorship is considered, clear lines of accountability should be defined for each sponsorship team. Memorandums of Understanding (MoU) governing the relationships between the public body and other sponsorship teams, or public bodies should be in place.

1.4 Principles for an Effective Sponsorship Function

SG sponsorship teams undertaking sponsorship functions should apply these principles across six key capabilities:

1. Governance and accountability (refer to the accountability: key roles and responsibilities guidance note).

2. Agreeing strategy and setting objectives (refer to strategic direction and priorities and planning and monitoring guidance notes);

3. Outcome assurance (refer to planning and monitoring guidance note);

4. Financial oversight (refer to Financial Controls, Audit, Annual Reports and Accounts guidance note);

5. Risk management (refer to Financial Controls, Audit, Annual Reports and Accounts guidance note), and

6. Relationship management (refer to Effective Boards guidance)

SG Sponsorship teams will be best placed to consider proportionality in relation to the sponsorship of their bodies. However, sponsorship teams should provide the appropriate evidence by applying a ‘comply or explain’ approach when implementing the sponsorship principles by way of their Framework Documents between them and their public bodies. Sponsorship plays an essential role in providing Portfolio Accountable Officers with assurance that the bodies for which they are accountable are operating effectively, managing, and escalating risks appropriately, and operating with a high degree of probity. Equally, ineffective sponsorship can undermine the relationships between sponsorship teams and public bodies. This can, in turn, have a detrimental effect on the delivery of effective public outcomes that offer value for money. For example, if a public body does not have a clear set of agreed objectives for the year, it may fail to meet the expectations of the sponsorship team.

Accordingly, sponsorship teams should aim for continuous improvement, delivering best practice by progressing through the three maturity stages described in the table below according to the priority’s sponsorship teams determine for their sponsorship development:

Table 1 Maturing Stages of Sponsorship

Capability

Governance and Acountability

Emerging

1. SPFM is not well understood nor applied by the body.

2. The Portfolio Accountable Officer does not appoint a DD in respect of each body or appoints a single sponsor to oversee an excessive number of bodies.

3. The Portfolio Accountable Officer does not prioritise resources to ensure that the DD is supported by a sponsor team, or equivalent, with appropriate capability and capacity to deliver consistently high-quality sponsorship.

4. The sponsorship team has insufficient processes and oversight in place to ensure good governance or accountability is in place within the body.

5. The sponsorship team’s engagement with the body frequently undermines the body’s own governance structures and processes.

Maturing

6. The Portfolio Accountable Officer appoints a DD, but they may have limited time to build and maintain an effective relationship with the body.

7. The DD is supported by a working-level sponsor team or equivalent, but this team may lack the capacity and capability to provide consistently high-quality support to the DD.

8. The sponsorship team monitors whether the body has met the requisite standards of governance and accountability and highlights deficiencies to the body’s senior leadership team at formal accountability meetings.

9. The sponsorship team has named individuals in place for the sponsorship team’s and body’s accountabilities.

10. The Portfolio Accountable Officer is assured that the body is meeting the mandatory elements set out SPFM and relevant functional standards.

Advanced

11. The Portfolio Accountable Officer appoints a DD to each body and balances these appointments with DD’s other responsibilities so that each body receives an appropriate degree of oversight from the DD.

12. The DD is supported by a working-level sponsorship team, or equivalent, with the capability and capacity to provide consistently high-quality support.

13. The Portfolio Accountable Officer has confidence that the body has a comprehensive picture of improved delivery performance, including evidence about how progress is being maintained.

Capability

Agreeing strategy and setting objectives

Emerging

1. The responsible Minister (or Portfolio Accountable Officer, if delegated) does not communicate priorities to the body, for example via an annual chair’s letter or direct communication.

2. There is limited engagement between the sponsorship team and body on what success looks like, how it can be delivered and how it is measured.

3. The DD has limited engagement with the body in the production of its annual business plan and multi-year corporate strategy and is unable to influence its direction.

4. The body is insufficiently responsive to sponsorship team priorities, to change delivery through lack of awareness or inability to flex resources.

5. The body’s plans to deliver ministerial objectives are not. clearly articulated in an annual business plan and multi-year corporate strategy.

Maturing

6. The responsible Minister (or Portfolio Accountable Officer, if delegated) clearly articulates the priorities for s for the body

7. DD engagement on the business plan and corporate strategy is limited to final review.

8. A vision of what success looks like, how it can be delivered and how it is measured is clearly articulated by the sponsorship team to the body but may be over- or under-stretching and not accurately reflect Ministerial priorities and/or the reality of the body’s operating context.

9. Priorities for the body from the sponsorship team change frequently and can at times be inconsistent with the longer-term strategic direction and/or any statutory underpinning.

Advanced

10. The priorities for the body are set out in documents such as an annual chair’s letter issued by the responsible Minister (or Portfolio Accountable Officer, if delegated) sets SMART outputs or objectives for the body to deliver.

11. Outputs provide a stretching but realistic target that drives continuous improvement in effectiveness and efficiency for the body.

12. The sponsorship team and the body engage collaboratively on an annual business plan that sets out how these SMART outputs will be delivered, underpinned by key performance indicators that are informed by timely Management Information (MI). There is a constructive yet challenging dialogue between individuals at all levels that underpins this work.

13. This document makes up the first year of a multi-year corporate strategy that sets out how the body’s annual outputs contribute to the delivery of longer-term impacts.

Capability

Outcome assurance

Emerging

1. There is a lack of understanding of what good delivery [operation] should look like for the body throughout the sponsorship team. The sponsorship team has limited discussions and opportunities to review and challenge the outcomes delivered by the body.

2. The processes implemented by the sponsorship team to ensure the outcomes delivered by the public body are not sufficiently effective or broad enough to understand its operational delivery.

3. MI provided to the sponsorship team is limited scrutiny is cursory and unsupported by relevant functional expertise or lacks timeliness.

4. The body’s MI is not available to the sponsorship team, or it is not scrutinised appropriately.

5. Functional support is not sought and/or provided to help scrutinise outcomes by the sponsorship team and the application of functional standards is limited and not considered appropriately.

6. The sponsorship team makes frequent and/or unnecessary changes to the MI that it requires from the body.

Maturing

7. There are discussions between the body and sponsorship team at working level and with the DD on performance. However, there is no ‘join up’ between the body’s outcomes and the sponsorship team’s wider governance and delivery system.

8. MI is provided to the sponsorship team in a timely manner, but assurance is process driven and not undertaken collaboratively or to drive continuous improvement at all levels.

9. The sponsorship team and the body agree MI reporting arrangements at the beginning of the year and minimise in-year changes to those requirements.

Advanced

10. Discussions take place at all levels, including active constructive challenge on the outcomes the body has delivered. These outcomes flow into the sponsorship team’s wider governance and are discussed by the sponsorship team and board. The sponsorship team facilitates the body discussing its outcomes with bodies that constitute any wider delivery system they are part of.

11. MI is widely used to inform decision making and to drive continuous improvement at all levels. It is presented in an accessible manner and the sponsorship team, and the body consider the same versions of the body’s MI.

12. MI is considered at regular formal accountability meetings between the responsible Minister and the body’s chair and between the DD and the body’s chief executive, as well as at working level.

13. The sponsorship team and the body keep the effectiveness of reporting arrangements under active and critical review and agree changes in a spirit of partnership where clear gains to the quality of the accountability and feedback loop can be achieved.

Capability

Financial Oversight

Emerging

1. There is a limited relationship between the body and sponsorship team and SG finance team - interactions only take place through the minimum required processes.

2. The Portfolio Accountable Officer or relevant budget holder does not provide the body with the framework

documents at an appropriate time, hampering the body’s business planning.

3. The body goes beyond the delegated limits and budget allocations set out in the delegated authority letter and there is limited discussion on justification.

4. In-year assurance of the body’s financial position by the sponsorship team is inadequate, either through the absence of timely and accurate financial data being provided by the body, or through the sponsorship team not having effectively scrutinised and acted upon that data.

5. An excess of controls and approval processes: the sponsorship team adds additional financial controls over the body, impacting on the body’s operational freedom and effectiveness.

6. There is a lack of engagement or information on the body’s financial position and therefore issues are not visible to the sponsorship team.

Maturing

7. There are relationships at a working level between the body and sponsorship team and SG finance team - but this does not extend to senior or board levels. Suspicion remains within the relationship about expenditure and/or the sharing of relevant data, though there is a degree of in-year spending assurance.

8. The update of the framework

Documents the sponsorship team to the body’s Accountable Officer (AO) fails to provide the body with an appropriate degree of operational autonomy or the sponsorship team with an appropriate degree of control.

9. The sponsorship team (SG Finance) sets an appropriate spending approval framework, but does not consistently deliver service standards, for example in relation to business case turnaround times, hampering the body’s operational delivery.

Advanced

10. There is a well established and trusting but constructively critical relationship between the body’s finance team and the sponsorship team’s finance team at all levels. Both the body and the sponsorship team function as ‘one team’ when it comes to significant expenditure requests, or any proposals that need to be submitted to the Centre.

11. The Sponsorship Team, reporting to the Portfolio

Accountable Officer. should update the framework

documents setting out the key relationships between these entities and the core SG, the body’s AO, balancing the body’s need for operational autonomy with the sponsorship team’s need for control.

12. Regular ‘open book’ engagement between the sponsorship team and the body provides both parties with assurance that the body’s expenditure is affordable, sustainable, and within agreed limits and allocations.

13. The body has a good understanding of and operates in accordance with the SPFM and with SG Finance spending controls.

Capability

Risk management

Emerging

1. The body has limited implementation of appropriate risk management framework in accordance with SG’s principles for managing risk.

2. The sponsorship team does not discuss and provide clarity to the body as to the risks that it is willing to take to achieve objectives - its risk appetite. Alternatively, the body exceeds the sponsorship team’s position.

3. The sponsorship team has limited processes and opportunities for the body to routinely escalate risks to the sponsorship team, or the body fails to employ these processes appropriately.

4. The sponsorship team and the body do not engage at appropriate frequency on risk identification and management.

5. Risk management is viewed as a process-driven exercise in the sponsorship team, body, or both.

Maturing

6. The sponsorship team provides a balance of opportunity and risk to the body that is either too restrictive to operate delegated decision making or too lax to discharge respective accountabilities and responsibilities

7. Although there are some processes in place to routinely escalate risk from the body to the sponsorship team, the sponsorship team does not identify and deliver cross-cutting risks and mitigation strategies within the sponsorship team or to support bodies in managing those risks by identifying and sharing best practice

8. The value of an effective risk management framework, including appropriate escalation, is understood and processes are proportionate.

Advanced

9. Aligned risk management processes are applied and within the sponsorship team and the body

10. The sponsorship team provides a clear and balanced risk appetite to the body that meets the needs of the sponsorship team for control and of the body for operational autonomy.

11. The sponsorship team and the body have a mutual understanding of risk, both within the body and of cross-cutting risks within the sponsorship team.

12. The sponsorship team supports bodies in managing risks by identifying and sharing best practice in risk management and by delivering cross-cutting interventions.

13. Effective risk management is seen as a key strategic tool at all levels and is approached by the sponsorship team and the body in the spirit of partnership and constructive challenge.

Capability

Relationship management

Emerging

1. Engagement between the

sponsorship team and the bodies are ad hoc and unfocused.

2. Understanding of the body’s purpose within the sponsorship team is limited to those officials who engage routinely with the body.

3. Sponsorship team over-identify with the body’s interests and are unable to give the appropriate level of constructive challenge.

4. Trust is yet to be established between the sponsor team and the body and constructive challenge is limited and lacks the appropriate sharing of views.

5. Risks are not surfaced early enough to be resolved quickly and efficiently, leading to operational concerns and delays.

Maturing

6. The sponsorship team and the body are engaging regularly, but not at an appropriate degree of seniority to be effective.

7. The body’s purpose is well understood within the business units of the sponsorship team adjacent to the body’s policy area but not the wider sponsorship team.

8. There is some leverage of the body’s expertise as part of the sponsorship team’s policy development cycle.

9. Sponsorship team officials are engaging routinely with the body, striking an appropriate balance between advocating for the body within the sponsorship team and holding the body to account for meeting its objectives.

10. There is trust between the body and the sponsorship team at some levels. Constructive challenge is undertaken but is ad hoc and lacks detailed understanding of body’s operations.

Advanced

11. Engagement between the sponsorship team and the body is regular and effective at all levels at the relevant points across the sponsorship team.

12. Engagement is strategic, delivering a shared understanding of risks, opportunities, Ministerial priorities, and the body’s operating context.

13. The body’s purpose is communicated and understood throughout the sponsoring sponsorship team at all levels of seniority and publicly.

14. Where appropriate and applicable, processes are in place to draw on the body’s expertise in policy development by the sponsorship team.

15. Trusting, mature relationships are well established. Challenge is welcomed and is a norm in engagements.

16. Crisis management is characterised by a culture of collective responsibility, early identification and mutual problem solving.

1.5. Governance & Accountability

As with sponsorship teams, Parliament expects public bodies to operate to the highest of standards of professionalism and probity. Ministers are responsible for the performance of their public bodies and Portfolio Accountable Officers for ensuring that robust local accountability arrangements are in place. Ministers and Portfolio Accountable Officers should be provided with appropriate assurance in relation to those points, including through the provision of appropriate scrutiny. The below information can help complement the Public Bodies Unit’s established guidance on effective corporate governance and accountability which should be consulted before reading the below.

1.6. Outcomes

Sponsorship teams should strive to assure their Portfolio Accountable Officer that public bodies within the sponsorship team operate effectively and to a high standard of probity, meeting the requirements set out in the SPFM.

1.7. Behaviours

The following behaviours underpin the outcomes:

a) The sponsorship team prioritised a relationship that consistently delivered high quality support. The DD was supported by a sponsorship team or equivalent with appropriate capability and capacity.

b) A culture of active assurance is central to activity. The body supported early conversations about governance and accountability activities.

c) Both parties were respectful of the assurance required by the Portfolio Accountable Officer and AO.

1.8. Activities

The public bodies support unit has worked with internal audit to develop a self-assessment toolkit for both the sponsor team and the public body. It is designed to be used as a tool to regularly aid a self-assessment of the relationship between the sponsor and the public body, rather than as a compliance-based list that should be followed to the letter.

The performance of board members and chairs should be regularly reviewed throughout the term of their appointment. The appraisal guidance for non-sponsorship team public bodies outlines good practice and considerations for sponsor teams and public bodies.

Further activities that enable outcomes and behaviours are set out in the checklist below.

Table 2 – Governance and Accountability Activities Checklist

GOVERNANCE ANDACCOUNTABILITY ACTIVITIES CHECKLIST

1. Ensure that the public body challenges [or requires] the body to have:

a) A management board or equivalent that meets at least four times annually and that includes appropriate non-executive representation.

b) A Terms of Reference for each board sub-committee, which should be reviewed annually.

c) A Scheme of Delegation setting out the delegated responsibilities of each sub-committee

d) A published Annual Report and Accounts, if required, that is laid before Parliament annually. The table of reporting requirements on Scottish public bodies outlines the requirements that derive from legislation and wider policy. This document may not be fully accessible.

e) A schedule of meetings and an attendance register for the board and each of its sub-committees that is published in the governance statement of the public body’s Annual Report and Accounts, which should be laid before Parliament annually.

f) Completed an annual board Effectiveness Review and, at least triennially, an externally led board effectiveness review.

g) Completed annual appraisals of non-executive members led by the Chair and that the DD or an appropriately senior official has completed an annual appraisal of the Chair. The performance of board members and chairs should be regularly reviewed throughout the term of their appointment. The appraisal guidance for non-departmental public bodies outlines good practice and considerations for sponsor teams and public bodies.

h) A Diversity Action Plan - Board chairs are required to have a diversity objective in place. The chair's improvement plan provides guidance on agreeing an appropriate diversity objective.

i) A board Operating Framework or Terms of Reference, or equivalent in place, which should be reviewed annually.

j) A board Operating Code in place, which should be published and reviewed biennially.

k) A clear conflicts of interest policy and a register of interest that captures the interests of all board members. These documents should be published and reviewed regularly.

l) A whistleblowing policy in place that is consistent with the Public Interest Disclosure Act 1998.

m) Integrated the management of functional work into its overall management arrangements, to meet functional standards.

n) A business continuity plan within the annual business plan.

2. Support early conversations between the Chair, your sponsorship team’s appointments team and your Ministers about succession planning for board appointments, and the planning/running of individual appointment campaigns.

3. The sponsorship team and public body should provide mutual support in undertaking Parliamentary and public engagement, including in responding to requests made under the Freedom of Information, Parliamentary Questions, and Ministerial Correspondence.

1.9. Agreeing strategy and setting objectives

Agreeing the strategy and setting objectives is a vital step in delivering outcomes. The information provided below complements Public Bodies Unit’s guidance on strategic direction and priorities and Planning and Monitoring both of which should be referred to in the first instance before reading the below information.

1.10. Outcomes

Sponsorship teams should strive for:

a) A unified sense of purpose and a clear mutual understanding of how agreed outcomes will be delivered;

b) Public bodies that are established, and continue to exist, only when there is best value and a clear net benefit to doing so; and

d) Clear expectations and ownership of the outputs to be delivered by the body with supporting MI, which - where possible - are benchmarked against those delivered by similar organisations to provide stretching but realistic targets that drive continuous improvement.

1.11. Behaviours

The following behaviours underpin the outcomes:

a) Both parties were conscientious in providing a shared sense of purpose and fostering a culture of support.

b) Both parties provided practical and informational support through sharing data, providing engagement, and producing collaborative outputs, defining clear expectations, and highlighting the body’s contribution to the sponsorship team's aims.

c) Both parties promoted active dialogue that is constructive yet challenging thereby creating a respectful working environment.

1.12. Activities

Further activities that may enable good outcomes and behaviours are set out in the checklist below.

Table 3 – Objectives and Strategy Activities Checklist

OBJECTIVES AND STRATEGY ACTIVITIES CHECKLIST

1. Clearly articulate:

a) The body’s purpose and objectives in the Framework Document, consistent with those agreed in the business case for the body’s establishment, where applicable, and with any

relevant enabling legislation.

b) The body’s purpose and objectives should be linked to sponsorship team’s priorities, including the body in the sponsorship team’s Outcome Delivery Plan.

c) Short-term outcomes in a published multi-year corporate strategy, informed by an annual Chair’s Letter, issued by the relevant Minister or Portfolio Accountable Officer to the body’s Chair.

d) Immediate delivery outputs in a published annual business plan.

e) Key Performance Indicators (KPIs) to measure the body’s performance against the Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) outputs agreed between the sponsorship team and the body.

2. Implement procedures or mechanisms to draw on the expertise of the body in sponsorship team’s policymaking.

3. Explore opportunities to cluster similar public bodies - within or outside of the sponsorship team- and to benchmark their performance, setting realistic but stretching targets that promote the efficient and effective delivery of public outcomes.

4. Ensure an assessment is made about how well the sponsorship team and its public bodies are currently meeting functional standards, and their ambition for meeting them more efficiently and effectively in the future; embed actions about continuous improvement into business plans

1.13. Outcome assurance

Sponsorship teams should function as critical friends to public bodies, offering support and challenge in the delivery of outcomes informed by timely MI. The Public Bodies Unit’s guidance on planning and monitoring should be consulted with the below information intended to accompany that guidance.

1.14. Outcomes

Activities that enable great outcomes and behaviours are set out in the checklist below.

Table 4 – Outcome Assurance and Activities Checklist

OUTCOME ASSURANCE ACTIVITIES CHECKLIST

1. A shared understanding at all levels as to how well the body is meeting its KPIs.

2. Ensure that:

a) Require public bodies to ensure that they undertake longer-term outcome and impact evaluation.

b) Require public bodies to publish appropriate information on outturn delivery against KPIs within the public body’s Annual Report and Accounts.

c) Ensure that appropriate arrangements are in place to allow the findings of impact evaluations to influence sponsorship team’s policy decisions as part of the policy development cycle.

3. Shared outcomes across clusters of public bodies that operate within broad ‘outcome delivery systems’; where joined up working helps minimise cost and increase benefits for the user

4. A continuous improvement culture where learning lessons is primary and ‘blame allocation’ is avoided.

1.15. Behaviours

The following behaviours underpin the outcomes:

a) Both parties prioritised an outcome focussed approach; the body was open with its MI and strived to provide it in a timely and an accessible manner. The sponsorship team was supportive of this approach and appreciated the limitations of what the MI told it.

b) The sponsorship team and the body fostered a culture of open communication; communicating any problems and solutions, both through formal reviews, the recommendations coming from them, and informally on an ongoing basis. The sponsorship team should also identify cross-cutting problems and support public bodies in solving them.

c) When things went wrong both the body and sponsorship team looked to problem solve rather than apportion blame.

1.16. Activities

Sponsorship teams should refer to the public body RAG rating guidance for further information on how to apply the RAG rating which helps director generals (DGs) get assurances on the operations of, and the relationships with the public bodies within their portfolio. It’s populated by sponsors on a quarterly basis and enables DGs to more easily and quickly have sight of where things are with each of their bodies

Further Activities that enable outcomes and behaviours are set out in the checklist below.

Table 5 – Outcome Assurance Activities Checklist

OUTCOME ASSURANCE ACTIVITIES CHECKLIST

1. Hold public bodies to account for delivering their objectives through regular discussion of timely MI linked to output KPIs.

2. Ensure that:

a) public bodies undertake longer-term outcome and impact evaluation.

b) public bodies publish appropriate information on outturn delivery against KPIs within the Public body’s Annual Report and Accounts.

c) that appropriate arrangements are in place to allow the findings of impact evaluations to influence sponsorship team’s policy decisions as part of the policy development cycle.

3. In the Framework Document, agree a mechanism for sharing the public bodies MI with the sponsorship team.

4. Support the delivery of public body’s review and the implementation of recommendations or actions coming from them

1.17. Financial Oversight

Public bodies, like other public sector organisations, should follow the guidance on handling public funds that is contained within the SPFM. The sponsorship team should always consult the Public Bodies Unit’s guidance note on Financial Controls, Audit, Annual Reports and Accounts with the below information be only used to supplement that guidance.

1.18. Outcomes

Sponsorship teams should strive to:

a) Assure their Portfolio Accountable Officer that public bodies within the sponsorship team’s system spend public money with high levels of probity, delivering value for money.

b) There is a clear process with the public body Board, sponsorship team and the AO to ensure appropriate engagement in the budgeting process.

1.19. Behaviours

The following behaviours underpin the outcomes:

a) Both parties prioritised an open, frank, and conscientious relationship at all levels, ensuring guidance on handling public funds that is contained within the SPFM was adhered to.

b) A culture of regular engagement was promoted; providing both parties assurance that the body’s expenditure was affordable, sustainable, and within agreed limits and allocations.

c) Both parties were respectful of the public body’s operational autonomy in balance with the sponsorship team’s need for oversight and assurance.

1.20. Activities

Activities that enable great outcomes and behaviours are set out in the checklist below.

Table 6 – Financial Oversight Activities Checklist

FINANCIAL OVERSIGHT ACTIVITIES CHECKLIST

1. Implement proportionate oversight arrangements to assure the Portfolio Accountable Officer that the body has the systems and processes in place to reach high standards of probity in handling public funds.

2. Ensure that the financial and operational freedoms provided to the body by the sponsorship team are clearly articulated in a delegated authority letter from the Portfolio Accountable Officer or relevant budget holder to the AO, which should also set out budget limits.

3. Support public body’s business planning to assure the Portfolio Accountable Officer that the public body’s financial plans are sustainable and affordable, in addition to delivering agreed outcomes.

4. Support public body’s leaders to meet functional standards.

1.21. Relationship management

At the heart of a successful partnership between the sponsorship team and its public bodies are relationships, which support the delivery of efficient and effective public outcomes.

1.22. Outcomes

Sponsorship teams should strive for relationships characterised by:

a) Trust;

b) Honesty and openness, and

c) Constructive challenge.

1.23. Behaviours

The following behaviours underpin these outcomes:

a) Both parties prioritise investing in the relationship and its maturity at all levels, from the relationship between the responsible Minister and the body’s Chair to the working-level relationships between the sponsorship team and the body. This is particularly crucial when challenging circumstances arise.

b) A ‘no surprises’ culture exists. This enables trust and transparency to grow between the sponsorship team and the body. As trust grows the body can be granted further autonomy. The body engages with the sponsorship team on an ‘open book’ basis.

c) The sponsorship team respect the expertise of the body and the body welcome constructive challenges from the sponsorship team. Activities that enable great outcomes and behaviours are set out below.

1.24. Activities

The public bodies support unit has worked with internal audit to develop a self-assessment toolkit for both the sponsor team and the public body. It is designed to be used as a tool to regularly aid a self-assessment of the relationship between the sponsor and the public body, rather than as a compliance-based list that should be followed to the letter. You should read the toolkit in conjunction with guidance note 1 of the non-sponsorship team public body (NDPB) sponsorship guidance, which focusses on strategic direction, priorities and the performance framework discussion outline.

Further Activities that may enable good outcomes and behaviours are set out below

Table 7 – Relationship Management Activities Checklist

RELATIONSHIP MANAGEMENT ACTIVITIES CHECKLIST

1. Clearly articulate accountability relationships within the sponsorship team group, including with bodies, including relevant roles for functional leadership

2. Clearly articulate the nominated Accounting Officer, if applicable, and DD of each of the sponsorship team’s bodies.

3. Publish a Framework Document that has been updated in the last three years.

4. Articulate where responsibility lies for each sponsorship function - policy and corporate - of the sponsorship team in relation to each of its bodies, such as through a Terms of Reference

5. Encourage new senior executives and non-executives in the sponsorship team and in the body to be inducted appropriately. Refer to SG’s On Board: a guidance for Members of Statutory Boards) and the Public Bodies Unit’s guidance on Effective Boards, and Recruitment and Employment of Chief Executives.

1.25. Risk management

Sponsors play a vital role in overseeing the public body’s management of risk. SG’s risk framework sets out the main principles underlying effective risk management to be followed by SG sponsorship teams. The guidance note on Financial Controls, Audit, Annual Reports and Accounts provides further guidance on risk management. The sponsorship team will have a risk register for each public body and each of these will have their own.

1.26. Outcomes

The sponsorship team should strive for:

a) Risks that are well understood, managed, and appropriately escalated.

b) An appropriate assessment and management of opportunity and risk with clarity over the risks that the body is exposed to and willing to take to achieve its objectives - its risk appetite.

c) Confidence in the response to risks and transparency over the principal risks faced and how these are managed balances the needs of the sponsorship team for oversight and of the body for operational autonomy.

1.27. Behaviours

The following behaviours underpin the outcomes:

Both parties prioritised a mutual understanding of risk. Roles and responsibilities for risk management were clear and supported effective governance and decision making at each level, both within the public and of cross-cutting risks within the sponsorship team.

The sponsorship team fostered a collaborative culture; supporting public bodies in identifying, managing, and mitigating risks. They also looked to understand if and how risks of a public body may impact other public bodies both within their sponsorship team and the wider public bodies landscape.

Both parties were respectful of one another's responsibilities, delegations and governance, accounting for these in their respective risk management frameworks.

1.28. Activities

Activities that enable outcomes and behaviours are set out in the checklist below.

Table 8 – Relationship Management Activities Checklist

RISK MANAGEMENT ACTIVITIES CHECKLIST

1. Implement a proportionate process for updating the sponsorship team on the public body’s risk assessments and risk management strategies.

2. Regularly and openly discuss the sponsorship team’s risk appetite with the body.

3. Implement an effective risk escalation structure. Escalation from the body’s Audit and Risk Assurance Committee to the body’s board and then to the sponsorship team’s DG Assurance Meeting or another appropriate committee is likely to be appropriate

4. It may be appropriate for the body to invite sponsorship team’s representatives to attend the body’s Audit and Risk Assurance Committee or other risk management structures as observers from time to time.

5. The body should avoid escalating an excessive number of risks to the sponsorship team. Doing so could undermine the clear lines of accountability that exist between the Sponsorship team and the body, within which it is the responsibility of the body to manage its own risks. Likewise, the Sponsorship team should avoid intervening excessively in the body’s risk management structures.