Scottish Public Finance Manual

The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance on the proper handling and reporting of public funds.

Annex: regularity, propriety and value for money

Internal controls

1. It is essential that public bodies have effective internal controls in place, thus ensuring that:

  • senior management give proper consideration to the establishment of schemes of the type described in this section; and
  • expenditure on those schemes is incurred only as intended by senior management.

2. The scope of propriety in public bodies goes wider than common usage elsewhere and includes the standards of behaviour which the Parliament and the public would expect from public servants in the way they spend public money.

Assessment of schemes

3. As in other areas, organisations should adopt a risk-based approach to the systems they design and operate to control the use made of non-salary rewards. They should first consider the objectives which the organisation is seeking to achieve in its use of non-salary rewards. Next, the risks which might prevent those objectives from being met need to be considered and then controls put in place which are proportionate to those risks. Finally appropriate governance arrangements need to be in place to ensure that the whole process operates properly and that any emerging difficulties are drawn to the attention of the appropriate level of management in good time.

4. When constructing objectives, organisations should take care that they are meaningful and focussed: for example by measuring performance against competitors in local labour markets in order to recruit suitable staff. Broad objectives such as "to improve morale" should be accompanied by proposals on monitoring relevant indicators such as staff attitudes or retention and on how such monitoring will inform decisions on the effectiveness and future use of non-salary benefits.

5. An assessment of risk should be conducted within the context of the organisation's strategic risk management. The positive benefits of using non-salary rewards as part of a human resources strategy need to be set against the risks of these schemes being seen as improper use of public funds. Organisations will want to consider other factors as they relate to their own circumstances. For example staff expectations may be unrealistically raised, risking a lowering of morale, or there could be value for money or budgetary implications of an "uncapped" amount of non-salary reward. Organisations may also identify risks associated with bad publicity including being perceived to favour local suppliers of the benefits on offer.

6. The nature of appropriate controls will naturally depend on the degree of risk identified. A robust financial framework will be fundamental to most systems of control although the precise nature may vary.

7. Given the sensitivities associated with this area, Accountable Officers will wish to ensure that emerging issues are brought to their attention in good time. The system of corporate governance in place will determine how that might be done. Relevant Accountable Officers should ensure that politically sensitive proposals are cleared with Scottish Ministers.

8. Accountable Officers will wish to consult internal auditors on all these matters.

Updated: August 2009

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