Scottish Public Finance Manual

Governance statements

Scope

This section gives guidance on the governance statements to be provided by Accountable Officers as part of the annual accounts.

Applicability

The guidance is relevant to all organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable.

Definitions

Shall/must: denotes a requirement; a mandatory element
Should: denotes a recommendation; an advisory element
May: denotes approval
Might: denotes a possibility
Can: denotes both capability and possibility
Is/are: denotes a description

Links to relevant guidance

Principles:

• Defined in the Public Finance and Accountability Act (PFA Act) under sections 1-20

SG guidance:

• is available on the Governance hub and on the below public sector guidance

Public sector bodies guidance:

• Governance hub

• SG website

• Annual Accounts

• Accountability

• Certificate of Assurance

• Risk Management

Review/update

Lead area: Scottish Government Finance Directorate; Risk Control and Assurance Division – Governance and Accountability Team.

For update/review of this principle please refer to Guidance and Procedure available on the SG intranet or from the Governance and Accountability team, this includes information on ministerial approval.

Accessibility guidance is available on the SG intranet.

The Governance Statement

The Governance Statement is a key feature of the organisation’s annual report and accounts. It provides a clear understanding of the organisation’s internal control structure and its management of resources, covering the accounting period and the period up to the date of signature. Under section 15 of the Public Finance Accountability (Scotland) 2000 Act Accountable Officers are required to sign the accounts of the expenditure and receipts of the part of the Scottish Administration, or body or office-holder, in question, ensure the propriety and regularity of the finances of that part, body or office-holder, and ensure that the resources of that part, body or office-holder are used economically, efficiently and effectively. The application of these functions are also provided for in the Accountability section of the SPFM.

The Accountable Officer takes personal responsibility for the governance statement, and it must be informed by work undertaken throughout the period to gain assurance about risk management, corporate governance, and compliance with internal control frameworks. The statement provides an insight into the organisation’s stewardship of public resources, control structures, risk profile and how it has responded to identified and emerging risks.

The Governance Statement forms part of the Corporate Governance Report which is part of the wider Accountability Report within the Annual Accounts. The Corporate Governance Report includes the Directors General Report; Statement of Principal Accountable Officer’s responsibilities and the Governance Statement. These are prepared annually in accordance with the requirements outlined in the relevant Government Financial Reporting Manual.

The responsibilities of Accountable Officers for “parts of the Scottish Administration", are designated by the Principal Accounting Officer in accordance with the Accountability section in the SPFM. The Principal Accountable Officer signs the governance statement in respect of the Scottish Government consolidated accounts. Assurances to the Principal Accountable Officer from Portfolio Accountable Officers and Accountable Officers of Bodies within the Scottish Government Consolidation are based on assurances provided in accordance with the Certificate of Assurance guidance within the SPFM.

Preparation of the Governance Statement

Preparation of the governance statement should be informed by: 

• the boards annual review of its own processes and practices, informed by the views of its audit and assurance committee on the organisation’s assurance arrangements
• the views of the organisation’s audit and assurance committee on the assurance arrangements
• Internal and external audit insight into the organisations performance including an audit opinion on the quality of the systems of governance, management, and risk control
• feedback from the delegation chain(s) within the organisation about its business, its use of resources, its responses to risks, the extent to which in year budgets and other targets have been met, and any other internal accountability mechanisms; including:
  • bottom-up information and assessments to generate a full appreciation of performance and risks as they are perceived from within the organisation
  • end-to-end assessments of processes, since it is possible to neglect interdependent and compounded risks if only the components are considered
  • a high-level overview of the organisation’s business so that systemic risks can be considered in the round
  • any evidence from internal control failures or poor risk management
  • potentially, information from whistle-blowers via material from any arm’s length bodies (ALBs) connected with the organisation which may shed light on the performance of the organisation or its board
• material factors affecting the organisation in the round, not neglecting the more serious (if remote) risks, emerging technology, and other cutting-edge developments. It should also mention any protective security concerns in suitably careful terms, with details reported to the external auditor
• consideration of views of Non-Executive Directors

Content

It is the Accountable Officer’s responsibility to decide how to organise the governance statement. Subjects that should always be covered are as follows:

• the governance framework of the organisation, including information about the committee structure of the governing board (or equivalent) and the coverage of its work
• the operation, performance, and effectiveness of the governing board (or equivalent) during the period; an assessment of corporate governance with reference to compliance with generally accepted best practice principles and relevant guidance, and explanations where a different approach has been adopted
• an assessment of the organisation’s risk management arrangements and risk profile, including, subject to a public interest test, details of significant risk-related matters arising during the period
• assurance around the quality of the data used by the board in the context of performance and delivery)
• assurance on how resources are distributed
• assurance on how Accountable Officer duties outlined in the Accountability section of the SPFM have been adhered to
• a record of any written authorities provided to the Accountable Officer
• details of any significant lapses of data security

Significant issues

In preparing the governance statement the Accountable Officer must take a view on the extent to which issues are significant enough to warrant recording. Questions that may be helpful include:

• might the issue prejudice achievement of the business plan or other priorities?

• could the issue undermine the integrity or reputation of the organisation?

• what view does the audit and assurance committee take on the issue?

• what advice or opinions have internal audit and/or external audit given?

• might the issue make it harder to resist fraud or other misuse of resources?

• does the issue put a significant programme or project at risk?

• could the issue divert resources from another significant aspect of the business?

• could the issue have a material impact on the accounts?

• might financial stability, security or data integrity be put at risk?

External audit

The organisation’s external auditor will review the governance statement for its consistency with evidence collected in the course of auditing the financial statement and with other work undertaken by the external auditor during the period.

Page Reviewed: August 2026