Scottish Government relationships with public bodies: progress review

5 Assurance Arrangements

5.1 As shown in the description of the Portfolio Accountable Officer role in Table 3 above, the primary accountability of NMOs is to Parliament and the Portfolio Accountable Officer role in relation to those is more limited. For NDPBs and agencies, the focus of the Portfolio Accountable Officer role is assurance and advice to Ministers – establishing Ministers' priorities, putting in place the assurance framework and ensuring that it is operated effectively. This section discusses how those assurance arrangements should work for NDPBs and Agencies. NMOs will, of course, have their own priorities and assurance frameworks, but the direct responsibility of Portfolio Accountable Officers and their teams will in most cases involve providing input to the NMO on its corporate plan, eventual advice to Ministers on agreeing the corporate plan and taking any other actions to manage the relationship with the body that are identified as SG's responsibility in the Framework document.

5.2 A sponsor team or senior sponsor supporting a Portfolio Accountable Officer in assurance arrangements for an NDPB or agency will have to develop a good understanding of the work and internal governance arrangements of the public body and to exercise judgement on what risks, issues or questions need to be escalated to a senior sponsor or ultimately to the Portfolio Accountable Officer. Several interviewees from NDPBs said they would like to see a precise definition of 'sponsorship'. Some interviewees identified that a key characteristic of a good sponsor team is an in-depth knowledge of the public body, so that the sponsor team is not merely a post-box for requests for briefing or information from other parts of Scottish Government. Sponsorship work done well also requires a deep understanding of accountabilities and good judgement in how to respond effectively to the range of questions and challenges that can arise.

5.3 The introduction to the new, online sponsorship training introduced in SG recently includes the following answer to the question 'What does a Sponsor Team do?'.

The sponsor team is the normal point of contact for the Non-Departmental Public Body (NDPB) in dealing with the SG. The unit, under the direction of the Director/Deputy Director, is the primary source of advice to the Scottish Ministers on the discharge of their responsibilities in respect of the NDPB and undertakes the responsibilities of the Portfolio Accountable Officer on their behalf.

5.4 Real progress has been made through the implementation of Smarter Sponsorship and other work in recognition that effective sponsorship is not a 'tick-box' function. Many interviewees commented on the importance of personal relationships built on openness and trust, and one said explicitly that sponsorship was about relationships rather than process. Several interviewees commented on the potential negative impact of issues with relationships, however – comments were made about the 'impact of personalities' and that 'egos can be a problem'. It was clear from the interviews that there needs to be a foundation of governance arrangements that can be used to resolve problems in relationships as well as in delivery. Relationships are necessary for effective sponsorship but they are not sufficient on their own to provide the assurance to Ministers that the public body is performing effectively.

5.5 Relationships need to be underpinned by a systematic approach to assurance. There are two broad aspects of assurance which sponsor teams and senior sponsors, on behalf of Portfolio Accountable Officers, need to address:

• assurance that the body is performing satisfactorily against the objectives, targets and performance measures agreed by Ministers – the 'controllability' dimension of accountability described above; and
• assurance that the body is meeting the requirements of legislation and guidance – the 'transparency' and 'responsibility' dimensions of accountability described above.

5.6 The starting point for 'controllability' is establishing what success looks like for the NDPB or agency. Although public bodies are established with an expectation of operational freedom, and in some cases a very clear separation from Ministers is established in legislation, where Ministers appoint the Board or Office Holder and/or provide public funding, the public body must take account of Ministers' priorities and in some cases the body can be directed by Ministers in a variety of ways.

5.7 A well-thought-out set of objectives, targets and/or performance measures – in short, a performance framework – between SG and a public body will be relatively short and will specify what is wanted but leave the public body with significant freedom to decide how to achieve it. It must also relate clearly to the National Performance Framework, breaking down what the public body is expected to contribute towards the achievement of the relevant national outcomes and how that will be measured or assessed. The work done by Jennifer Henderson and Jennie Barugh on Accountability for Outcomes is highly relevant here, as is work on intermediate outcomes being led by Tim Ellis reporting to the Performance Board and overall work on Public Service Reform As these arrangements mature, public bodies should increasingly be collaborating amongst themselves on how best to achieve the outcomes – but SG will retain an overall responsibility for setting priorities and targets and ensuring that activity is directed towards these.

5.8 Much of the work on development of the performance framework for a public body is likely to be done by the senior management team in the body itself and will be subject to scrutiny and sign off by the Board for bodies where the Board is accountable for overall delivery. Ministers' role will be limited to approval of high-level priorities and measures in the Corporate Plan for some bodies and much more detailed for others, depending on the nature of the public body. The accountability for ensuring that an effective performance framework is in place lies with the Portfolio Accountable Officer and work will be delegated as appropriate within their team. Working with a public body to develop a succinct and outcome-focused performance framework will be one of the hardest tasks for any senior sponsor and/or sponsor team but probably the single most important. Some interviewees still spoke of very long and detailed grant letters setting out many individual requirements from SG, and although some reported good joint work with sponsors in recent years to reduce the level of detail and focus on a smaller number of key aspects, there is still room for improvement. Other interviewees reported that although their respective bodies had done a lot of work to set out their objectives and performance measures in their corporate plans and to ensure alignment with the NPF, they had little input on this from sponsors and it was not used as the core means of assessing their performance. If SG were to take only one action as a result of this review, a focus on collaborative development of a performance framework with each public body that sets out what is expected of the body, how that aligns to the NPF and how progress will be measured is the one that seems likely to have the greatest positive impact.

5.9 The complexity of the landscape within which public bodies and their sponsors work is also important to acknowledge here. SG is a government, not a department of government, with a very wide spectrum of competing demands on its resources. It is not surprising that policies, priorities and funding need to change, sometimes at short notice, to respond to developments in Scotland and the wider world. Absolute certainty on the priorities for a public body over the coming years and absolute certainty of the funding that will be provided to support their delivery is not realistic or achievable – but the more certainty that can be provided, the better the overall outcomes are likely to be. SG should continue to do all it can to provide as much stability and certainty as possible.

Recommendation 5: Portfolio Accountable Officers should ensure that each NDPB and agency in their area of responsibility has in place a well-developed performance framework that sets out Ministers' priorities within the overall National Performance Framework outcomes, defines as clearly as possible how success will be measured and ideally covers expectations over several years. This performance framework would usually be a central feature of the body's Corporate Plan and should be aligned with a medium-term financial plan and the projected budget for the public body.

5.10 The other aspect of assurance, looking at compliance with relevant legislation and guidance, will have many common features across all public bodies including ensuring that the body is complying with requirements on public money, staff management, freedom of information, project and programme management disciplines (especially for IT projects) and risk management. In addition, sponsors have to ensure that proper procedures are followed on public appointments, including the terms and conditions of Chairs and Board members.

5.11 There is a range of guidance and templates in place, owned by several central teams. All or most of these aspects are covered in training. One of the frequent points at interview was that guidance is not consistently followed, in some cases due to lack of awareness and in others because the circumstances of the body were judged to require a different approach. Interviews suggested that when a decision was taken not to follow guidance or a standard template, the reasons were not always fully understood or had been forgotten due to turnover of personnel. Ensuring that decisions are properly captured for the corporate record would be in line with the recommendations of the recent Review of Corporate Information Management.^[7]

5.12 If sponsors think improvements in the guidance or templates are required, this should be raised with the central team responsible – or with the Public Bodies Unit, if there is any doubt about ownership.

Recommendation 6: Portfolio Accountable Officers should require that sponsor teams and senior sponsors who report to them are using the templates and following the guidance, and require that any decisions not to follow the guidance or template are clearly documented for the corporate record.

5.13 The assurance role requires sponsor teams and senior sponsors to exercise judgement about the information requested. Some interviewees were still suggesting that detailed information is requested without a clear explanation of how this is used. There were also complaints about requests for information at very short notice, typically to contribute to briefing requested by Ministers. Occasional, short-notice requests for information are inevitable if Ministers have to respond to immediate questions and issues, but if short-notice requests are frequent, the sponsor team should work with the senior team to identify the reasons for this and try to put arrangements in place to minimise the need for them – for instance, by building up a bank of written material in the sponsor team about the work of the body and/or by trying to anticipate requests on topical issues.

5.14 One key point is that for NDPBs, the information that is routinely required by sponsors to provide assurance for Portfolio Accountable Officers should usually be a subset (or the full set) of information that is being provided anyway to the Board. The Board has primary responsibility for scrutiny of the NDPB's performance and overall compliance, and SG's assurance arrangements should not undermine that responsibility. Many sponsors routinely receive copies of Board papers, and this is seen as valuable. A few interviewees reported having to provide information to sponsors that is beyond what is provided to the Board. If sponsors are routinely requesting information that is not of interest to the Board then it is possible that they are asking for too much detail or alternatively that the Board is not properly scrutinising some aspects of the work of the public body. This should be discussed between sponsors and the public body, potentially between the senior sponsor and the Chair if it proves difficult to resolve.

5.15 The different approaches taken by SG to attendance at public body Board meetings were discussed above (see paragraph 4.9). Auditors and the Public Audit and Post Legislative Scrutiny Committee of the Scottish Parliament had taken different views on the appropriateness of SG attending the Board of one body as observers. Most interviewees were keen to see senior sponsors, Portfolio Accountable Officers and/or the Minister attending part of a Board meeting occasionally to discuss overall priorities and issues face by the public body, and this should be encouraged. Interviewees had more mixed views on the practice of having an SG sponsor team member attend board meetings as an observer: some public body interviewees and some sponsors found this helpful but others suggested that it undermined clear lines of accountability. In general, if there is a clear performance framework in place so that the Board knows what is expected by SG and how success will be measured and if the assurance framework is working effectively with a good sharing of information and regular contact between sponsors and the public body team, there should be no real need for SG sponsors to attend Board meetings as observers. Where there are circumstances that make it important to SG to be present for all Board discussion, this should be treated as an escalation beyond the normal governance arrangements – discussed in the next section.

Recommendation 7: Portfolio Accountable Officers should ensure that there is regular contact between NDPB Boards and both Ministers and SG officials, particularly senior officials. This is likely to include attendance at Board meetings for discussion of relevant topics, to ensure a good understanding of strategic priorities and issues. Routine attendance of SG officials at all NDPB Board meetings as observers can undermine the proper accountabilities within the system so should only be approved by Portfolio Accountable Officers where this is justified as an escalation beyond normal governance arrangements.

5.16 How sponsor teams are organised within SG was another aspect explored in interviews. SG interviewees from teams which operate a 'hub' model, where the same team of staff works with multiple public bodies, were positive about this approach. They identified benefits from being able to take a consistent approach and to focus on sponsorship as a key activity in its own right. The downside for sponsorship hub staff was the need to work harder to maintain close links with relevant policy teams. Central teams in SG generally reported positive experiences working with sponsorship hubs and viewed them as effective. Public bodies themselves were more equivocal – interviewees who had experienced the sponsorship relationship with a single sponsor team and then with a hub reported that it was marginally better working with the hub on sponsorship, but the difference was not sufficient from the public bodies' point of view to suggest rolling out hubs as the model across SG. Where hub arrangements for sponsorship were accompanied by a policy coordination group, this aspect was much more warmly welcomed by public body leaders. Overall, there appears to be value in the hub model where there is a group of public bodies with significant policy and operational links and where the hub can work with the bodies on coordination of policy as well as sponsorship itself. Senior sponsors should consider sponsorship hubs as a model where they are working with multiple public bodies, and if they choose to establish a hub ensure that it stays close to the relevant policy teams to ensure consistent messages on priorities.

5.17 Another common model across SG is for a public body to be sponsored by the team which also has responsibility for the relevant policy area. This can work well provided that the team has the capacity and capability to carry out both the policy and the sponsorship work, and that the urgency of demands on the policy side do not crowd out the systematic attention required for effective sponsorship. It is important to recognise that effective sponsorship takes time, and that there is a substantial amount of work required to be an effective sponsor of even a very small public body. Portfolio Accountable Officers and senior sponsors should satisfy themselves that the sponsorship arrangements in their teams:

• have the right skills and understanding to establish the performance framework asks and the overall assurance framework for the public body;
• have sufficient capacity to work effectively with the public body within these frameworks and to resolve or escalate any concerns that arise; and
• promote policy and operational links between public bodies contributing to overall national outcomes.

5.18 There is a particular challenge for Portfolio Accountable Officers and senior sponsors in establishing and operating an assurance framework for agencies and NMOs that have no sponsor team to carry out the detailed work. As mentioned above (see paragraph 4.2), there is usually no sponsor team for these bodies, and when detailed work needs to be done – for instance, on the performance framework for the body or a periodic review of the framework document – senior sponsors and Portfolio Accountable Officers may find their teams do not have the capacity or detailed knowledge of the public body to carry it out. Senior sponsors and Portfolio Accountable Officers will in many cases have made existing arrangements to cover this and creating sponsor teams for all of the agencies and NMOs would take a lot of additional resource for probably little value added. Where there is currently a gap in the support for senior sponsors and Portfolio Accountable Officers working with agencies and NMOs, though, filling it should be a priority. There may be scope to fill this by expanding capacity slightly in current NDPB sponsor teams or sponsorship hubs dealing with related bodies or by expanding the capacity of DG or Director business management teams.

Recommendation 8: Portfolio Accountable Officers and senior sponsors should review the capacity and capability needed in their teams to ensure that relationships are being managed well with all public bodies, and consider how best to organise that – through policy teams or sponsorship hubs, for instance – to ensure that there is a proper focus on sponsorship activity and a strong link with policy development. In reviewing the capacity and capability, it will be important to have nominated people who can provide support to Portfolio Accountable Officers and senior sponsors in managing relationships with NMOs and agencies as well as NDPBs.

5.19 DG's have many other responsibilities, both as Portfolio Accountable Officers and in their wider roles, so will need support to ensure that the recommendations in this report can be implemented. Internal Audit provide an essential support to Portfolio Accountable Officers in ensuring that relationships with public bodies within their area of responsibility are being well-managed. The Public Bodies Unit will have the key role in supporting work across SG on relationships with NDPBs, NMOs and agencies, and they will also draw in advice from other central teams depending on the issues under discussion. This may include Internal Audit, particularly where there is a need to interpret findings from internal or external audit reports on public bodies, in considering the most effective governance option as part of a business case for establishment of a new public body or in planning and carrying out a review of governance arrangements for an existing body.

5.20 Portfolio Accountable Officers should work with Internal Audit to build relationships with public bodies into overall internal audit planning based on risk assessment of these compared to other aspects of governance that may need to be considered. As Internal Audit resource is limited, the Internal Audit team intend to work with the Public Bodies Unit to develop a self-assessment toolkit which can be used by sponsors in a DG area, working with their public bodies, to assess the overall effectiveness of the management of relationships and to provide some assurance to Portfolio Accountable Officers. There may be value in involving one or two experienced sponsors from a different DG area in undertaking any self-assessment, in order to help share good practice and experience across SG.

5.21 Key aspects which Internal Audit will want to cover in the self-assessment toolkit include:

• framework documents – do these clearly set out the roles and responsibilities of all those who have accountability in both the public body and SG;
• performance frameworks – are objectives, targets and performance measures for public bodies clear and succinct, linked to the National Performance Framework and also proportionate to the funding being provided to the body;
• overall assurance – is the information requested from the body on its performance and compliance clearly related to the performance framework, legislation and guidance in place and mainly a subset (or all) of the information being provided to the Board – and if there are significant differences between the information requested by the sponsors and the Board, are steps being taken to resolve this;
• risk and issue escalation – are risks or issues being escalated by the public body and/or the sponsors being considered appropriately, either through DG Assurance meetings or separately, and are decisions on actions being clearly communicated and recorded to all involved (these are discussed in the next section);
• business cases and options for proposed new public bodies – have these been considered fully and captured for the record, and are the business cases for recently-established bodies available to and understood by newly-appointed sponsors.

Internal Audit would also be keen to assist development work on the management of public body relationships across SG and will aim to make time for advisory support to Portfolio Accountable Officers and their teams

Recommendation 9: Portfolio Accountable Officers should work with Internal Audit to draw on their advisory support on the management of public body relationships and to build self-assessment reviews of public body relationships in their areas, using the toolkit which Internal Audit and Public Bodies Unit plan to develop, into their overall assurance planning. Specific internal audits of relationships with an individual body should be built into audit planning where risk assessment suggests this is necessary.

5.22 In addition to support from Internal Audit and the Public Bodies Unit, DGs may find it helpful to share good practice and development work being carried out between their teams. As an example, Annex C includes a brief overview of work being carried out on overall assurance arrangements for DG Communities.