Strategic governance arrangements in relation to the Scottish Consolidated Fund (the Fund) are covered in this governance statement. Although the Fund itself sits outside the Scottish Government's internal governance arrangements, the operation of the Fund is carried out within Scottish Government Finance, and is subject to the same controls and assurance procedures that apply to the Scottish Government, in particular the certificates of assurance and risk management arrangements, overseen by the Director General Organisational Development and Operations. The governance arrangements within which the Fund operates are assessed by the Scottish Government, and the Scottish Government confirms that these arrangements comply with generally accepted best practice and relevant guidelines. Assurance is also provided by the work of internal and external audit and to a more limited extent by the Scottish Government Audit and Assurance Committee ( SGAAC). Although SGAAC has no formal role in relation to the Fund, it is informed of any issues pertaining to the Fund, and hence exercises some oversight of the Fund's operations.
The operation of the Fund is governed by the provisions of the Scotland Act 1998, the Public Finance and Accountability (Scotland) Act 2000, the Scotland Act 2012, the Revenue Scotland and Tax Powers Act 2014 and the Scotland Act 2016, which set out the conditions for payments to be made out of the Fund and sums to be paid into the Fund. The Fund uses and relies on the financial management systems of the core Scottish Government to carry out associated accounting and payment functions. Specific assurances on the reliability of these central systems have been provided by the Director General Organisational Development and Operations and relevant senior members of staff within her command.
The following procedures to identify, evaluate and manage significant risks have already been implemented:
The risks associated with the operation of the Fund have been identified and incorporated within the Scottish Government Financial Management Directorate Risk Register together with the determination of a control strategy for each risk which is kept under constant review.
The Scottish Government's external auditors, Audit Scotland, provide reports on the adequacy and effectiveness of the systems of internal control with recommendations for improvement as part of their annual audit review of the Scottish Government. Appropriate action is taken to address any weaknesses identified and to ensure the continuous improvement of the system.
The Scottish Government's internal auditors provide reports on the adequacy and effectiveness of Financial Services Division's systems of internal control together with recommendations for improvement. Such reports include the Division's operation of the Fund where appropriate. Appropriate action is taken to address any weaknesses identified and to ensure the continuous improvement of the system.
An annual assurance on the adequacy and effectiveness of the core Scottish Government's internal control system, including risk management and safeguards against losses - and the extent to which it can be relied upon is provided through the professional opinion of the Scottish Government's Director of Internal Audit. In the annual assurance report submitted to the Scottish Government Assurance and Audit Committee on 13 July 2018, the Director of Internal Audit confirmed that reasonable assurance could be placed on the internal control arrangements.
In their role as External Auditors to the Scottish Government, Audit Scotland assess the extent to which they will use the individual reviews undertaken by Internal Audit to inform their opinion on the financial statements, depending on their direct relevance to their work. Each year they also undertake a review of Scottish Government's Internal Audit arrangements. Audit Scotland confirmed that their work did not identify any internal audit reports where the underlying evidence would suggest an incorrect audit opinion or conclusion. The Scottish Government Audit and Assurance Committee has therefore concluded that it can use the work of the Internal Audit function to inform its assessment of the overall controls and assurance environment operating across Scottish Government.
Following the Strategic Review of the Internal Audit function undertaken by the Scottish Government in 2015-16 a significant range of improvements have been taken forward within the function. However, this year the Audit Scotland review of Internal Audit identified a number of important areas, particularly in terms of planning, documentation, reporting and management review, where improvement is needed for compliance with Public Sector Internal Audit Standards. Internal Audit has already recognised these and as a result has undertaken a project to address them. The Scottish Government Audit and Assurance Committee will continue to monitor the Internal Audit Directorate to ensure on-going continuous improvement and compliance with Public Sector Internal Audit Standards.
In the 2017-18 financial year, Financial Services Division in its operation of the Fund has:
- Monitored the balance on the account and taken appropriate action to maintain the balance at an appropriate level whilst remaining within the cash limits set by the UK and Scottish Parliaments.
Kept its processes and procedures under review, ensuring that they are documented and were amended where appropriate to reflect any changes to the Fund's operation. In particular, processes and procedures were reviewed and updated to implement the borrowing provisions of the Scotland Act 2012, which came into effect from 2015-16 onwards, as amended by the Scotland Act 2016, and which have had a significant impact on the operation of the Fund, and have had a similar impact on its accounts.
Identified and kept under review any risks arising from the operation of the Fund, and included these where appropriate in the Divisional and Directorate risk registers.
Assessed the risk management arrangements in place and confirmed that they are operating effectively.
Carried out operations on the Scottish Government IT network and on systems managed by the Scottish Government, and hence has been subject to its IT and data security arrangements. There were no breaches of data security during the year.
Ensured that during the year staff have received training on any revision to processes and procedures in relation to the operation of the Fund.
- During 2017-18, reviewed and updated procedures for the draw down and repayment of loans under the enhanced borrowing powers introduced by the Scotland Act 2012 to accommodate changes to the borrowing powers introduced by the Scotland Act 2016 and put in place procedures to allow surpluses of the Crown Estate Scotland to be paid into the fund, and to amend the treatment of fines, forfeitures and fixed penalties receipts in accordance with the changes introduced by the Scotland Act 1998 (Designation of Receipts) Order 2017.
Principal Accountable Officer
24 September 2018
There is a problem
Thanks for your feedback