Scottish Government relationships with public bodies: progress review

Executive Summary

Overall position

• Managing relationships with public bodies is a complex activity taking up considerable staff time at all levels across Scottish Government (SG). Ensuring that expectations of public bodies are outcome-focused, clear and consistent is essential to allow them to achieve their full potential and to avoid creating a situation where accountabilities are creating contradictions in what a body needs to achieve ('multiple accountabilities disorder', according to Koppell).^[1]
• The Public Audit and Post-Legislative Scrutiny Committee said in their legacy paper in March 2021 that 'it is simply unacceptable that there continue to be examples of weak and inconsistent challenge being provided by Scottish Government officials and of problems not being identified or acted upon until it is too late.' There is no magic bullet to address this point. A clear, consistent and outcome-focused approach, with a proportionate assurance framework, will ensure that SG can work with bodies to manage risks and issues that will inevitably arise from time to time and be ready to respond to scrutiny of its actions.
• Progress has been made on the overall risk-based, proportionate approach to sponsorship of non-departmental public bodies (NDPBs) proposed in the 'Smarter Sponsorship' review carried out in 2016, but further progress is required to ensure full consistency and to provide assurance to Director-Generals (DGs) as Portfolio Accountable Officers. A range of actions are required both centrally and in individual DG areas. Many of these actions require senior sponsor and DG attention, which needs to be well-supported by the Public Bodies Unit and other central teams.
• Agencies and non-ministerial offices (NMOs) have different governance structures which must be respected. These bodies are not 'sponsored' but the relationships with them are equally important and also require a consistent approach.
• There are four key elements to the case for change in SG's current approach to managing public body relationships: maximising the contribution which public bodies can make to the achievement of national outcomes; mitigating the reputational risk to SG of operational and governance failures in public bodies; ensuring that managing public body relationships is seen as a key area in which SG needs to build and maintain capability; and ensuring that the considerable cost of staff time spent on managing public body relationships is being used efficiently.

Outcomes

• Setting clearer expectations of public bodies on their contribution to achieving National Performance Framework outcomes and Public Service Reform priorities is still an area for further development for many bodies and their sponsor or equivalent teams, with many bodies still reporting a focus on individual outputs and commitments. Aligning overall planning to projected budgets and medium-term financial plans is also important. Progress on this area has the greatest potential positive impact on what SG and public bodies can collectively achieve. Other actions to improve SG's approach to public body relationships are also important but mainly about mitigating risks and having robust arrangements to deal with issues that arise.

Creation of new bodies

• Creating public bodies commits SG to long-term costs, the business case for which needs to be considered carefully and should include a thorough evaluation of governance options. Getting the governance and relationships right at the start of the process will save effort in the long run and achieve better results.
• There should be a strong presumption against creating small public bodies in particular, as the overhead costs of running the body are disproportionate for small bodies and they also have particular resilience challenges. Where the case for creating a small body is overwhelming, taking steps to ensure access to shared services and/or shared contracts may help ensure resilience.

Roles, responsibilities and accountability

• There is widespread recognition that effective sponsorship (or equivalent) is about relationships rather than process and must reflect the individual circumstances of the public body, but also concern that approaches should not be driven too much by personalities. A strong understanding of the different accountabilities of all involved in both SG and public bodies is important as the foundation on which to build relationships. Aspects of accountability for different types of body are explored in some detail in section 4 and summarised in Table 2 and Table 3.
• One important point is that DGs are Portfolio Accountable Officers and are accountable for the overall relationship with public bodies in their areas of responsibility, including communications and the assurance framework, but they are not directly accountable for the public body's performance.
• Attendance by SG officials and/or Ministers at public body board meetings for discussion of particular topics is helpful in building relationships and understanding, but having observers from the SG sponsor team attend all of an NDPB's board meetings can undermine the proper lines of accountability.
• Public body boards have a key role but the focus of relationship management is between SG and public body officials. SG should seek input from chairs and board members on how to ensure the relationship between SG and public body boards is effective.
• In a situation where a public body is facing a particular challenge or crisis, SG will naturally work closely with the body. If required, it is important that any intervention in the operation of a public body which crosses normal lines of accountability is a formal decision of the Portfolio Accountable Officer and is communicated clearly, along with reasons.

Sponsorship staffing

• Around 200 staff in bands A-C are involved in sponsorship activity across SG (excluding sponsorship of Health Boards), amounting to around 100 full-time equivalent staff in total, of whom more than 33 full-time equivalent staff are at C band. There has been very significant churn, particularly due to Covid response, so there are many staff currently inexperienced in sponsorship and also many vacant posts.
• There are very significant variations in the levels of staffing in individual sponsor teams. Given resource pressures on SG and the need for Portfolio Accountable Officers to be properly supported, this would be a good time to review the capacity and capability required for sponsorship or equivalent work in each DG area and how this is organised.

Sponsorship practice

• Training, guidance and templates are already in place covering much of what is required for a robust approach to sponsorship. Internal Audit plan to work with the Public Bodies Unit to develop a toolkit for self-assessment of public body relationships. Existing training, guidance and templates and the new toolkit all need to be used consistently. Internal Audit can also provide advisory support or, if risk assessment suggests this is necessary, carry out a full audit of the relationship with a particular body.
• Portfolio Accountable Officers need to be sighted appropriately on significant risks or issues emerging from public bodies in their areas of responsibility. There needs to be a clearly-understood way for a public body or its sponsor or equivalent team to escalate a risk or issue, and there must be a response capturing key points considered and any actions agreed so that all involved understand SG's expectations – and this must be captured for the audit trail. Public bodies need to understand that escalation of a risk or issue does not transfer ownership.

Public Bodies Unit role and possible hub

• Implementing change will require a strong central team which can assist Portfolio Accountable Officers by supporting and challenging sponsor and equivalent teams, carrying out and coordinating improvement work and providing expertise when issues arise. The minimum additional capacity required will be two team leaders with significant experience of public body sponsorship and/or governance. Given the challenging resource position, it may be helpful to think of this as a reorganisation of the overall resource devoted to sponsorship across SG.
• There would be value in building a Public Bodies hub, which would also address points emerging from the review of Ministerial appointments. Options for this and the staffing implications should be considered.