Background and applicability
1. The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance to the Scottish Government (SG) and other relevant bodies on the proper handling and reporting of public funds. It sets out the relevant statutory, parliamentary and administrative requirements, emphasises the need for economy, efficiency and effectiveness, and promotes good practice and high standards of propriety.
2. The Scotland Act 1998 is essentially the Scottish Constitution and the financial aspects are covered in sections 64 to 72. Section 119 translates the references to the UK Consolidated Fund in legacy legislation to the Scottish Consolidated Fund (SCF). Section 53 provides for all the statutory, prerogative or other executive powers and duties of Ministers in the UK Government (Ministers of the Crown) in devolved areas to be transferred to the Scottish Ministers. Section 126 states that "Minister of the Crown" includes Treasury. References in legacy legislation to Treasury are therefore translated to the Scottish Ministers and guidance issued by Treasury has no direct application to devolved areas of responsibility unless explicitly adopted by the Scottish Ministers.
3. Section 64 (1) of the Scotland Act makes provision for the SCF. The UK Parliament provides the Secretary of State for Scotland with the resources to pay into the SCF. The management of those resources falls thereafter to the Parliament and to the Scottish Ministers - including their officials. The Secretary of State operates within the procedural framework which applies to the UK Parliament. The financial relationships between the UK Government and the Scottish Ministers are set out in the Statement of Funding Policy, the Memorandum of Understanding and Supplementary Agreements between the devolved administrations and the UK Government and the Concordat between HM Treasury and the SG.
4. The Public Finance and Accountability (Scotland) Act 2000 (PFA Act), which is framed in resource terms, sets out the rules for spending money, accounting requirements, accountability of officials and auditing arrangements. The basic principle is that spending can take place only if authorised by the Parliament in Budget Acts and must not exceed any amount so authorised in relation to that purpose. The only exception (section 65 of the Scotland Act) is where expenditure is charged on the SCF (e.g. judges' salaries, certain payments to the Secretary of State). The PFA Act leans heavily on the recommendations of the Financial Issues Advisory Group (FIAG). FIAG was set up to assist the then Scottish Office in offering advice to the Consultative Steering Group on financial aspects of its remit.
5. Section 21 of the PFA Act covers the audit of accounts that, as a result of any enactment or prerogative instrument, are subject to audit by the Auditor General for Scotland (AGS). Section 22 of the PFA Act sets out the matters that the AGS - or qualified person appointed by the AGS - must include in their report on an account. In particular the auditor must report their findings on whether the expenditure and receipts shown in the accounts were incurred in accordance with relevant enactments, including the Budget Act (as amended) for the period in question.
6. The auditor must also report on: whether any sums paid out of the SCF were applied in accordance with section 65 of the Scotland Act; whether the account complies with any applicable direction issued under any enactment (e.g. accounts directions issued by the Scottish Ministers under section 19 of the PFA Act); and whether expenditure and receipts have been incurred or applied in accordance with any applicable guidance issued by the Scottish Ministers.
7. The guidance contained in the SPFM (and any other relevant guidance issued by the Scottish Ministers e.g. Finance Guidance Notes) should be regarded as "applicable guidance" by all bodies the accounts of which are subject to audit by the AGS as a result of any enactment or prerogative instrument. In addition the guidance contained in the SPFM (and any other relevant guidance issued by the Scottish Ministers) is made applicable to any bodies sponsored by the SG where the accounts are not required by enactment or prerogative instrument to be audited by the AGS. This is achieved by the inclusion of an appropriate provision in the framework document that the relevant SG Accountable Officer is required to put in place setting out the relationship between the SG and individual sponsored bodies.
8. The bodies to which the guidance in the SPFM is directly applicable therefore includes:
- the constituent parts of the Scottish Administration (i.e. the core SG, the Crown Office and Procurator Fiscal Service, SG Executive Agencies and non-ministerial departments);
- bodies sponsored by the SG;
the Scottish Parliament Corporate Body; and
bodies sponsored / supported by the Scottish Parliament Corporate Body.
9. Bodies sponsored by the SG essentially means those commonly referred to as non-departmental public bodies (NDPBs). NDPBs include Executive NDPBs, Public Corporations and NHS Bodies. Details of NDPBs, listed by category, are published in the National Public Bodies Directory on the Scottish Government website. Other organisations which do not meet the NDPB criteria may also be regarded as sponsored bodies where the activities of the organisation and the nature of the relationship between the SG and the organisation makes it appropriate to do so.
10. Much of the guidance included in the SPFM is aimed primarily at the constituent parts of the Scottish Administration with other bodies to which the SPFM is applicable being required to ensure compliance with any specific provisions and arrange for procedures consistent with the guidance to be put in place. However, as a general rule all of the guidance included in the SPFM should be considered relevant and applicable to all of the bodies covered by the preceding paragraphs except guidance that clearly has limited application and any provisions that would be inconsistent with statutory requirements.
Other direct funded bodies
11. Other direct funded bodies refers to those bodies other than the Scottish Administration funded direct from the SCF. They are identified separately in the Budget Act and currently consist of the Scottish Parliament Corporate Body (SPCB) and Audit Scotland. The guidance in the SPFM is directly applicable to the SPCB (and the bodies sponsored / supported by the SPCB), as regards Scotland, as a result of relevant accounts being subject to audit by the AGS under statute. However, Audit Scotland are not subject to audit by the AGS. It is open to Audit Scotland to adopt or adapt relevant guidance issued by the Scottish Ministers. However, the Parliament authorises expenditure by Audit Scotland on the understanding that guidance consistent with relevant provisions contained in the SPFM is being followed.
Page published / Updated: February 2021