The Scottish Government Consolidated Accounts for the year ended 31 March 2018

Accountability Report

Corporate Governance

Information about the structure of the Scottish Government and details of the Scottish Government Ministers and senior officials can be found in the Performance Report and in the Governance Statement.

Statement of Accountable Officer's Responsibilities

In accordance with the accounts direction (reproduced on page 122) issued under Section 19(4) of the Public Finance and Accountability (Scotland) Act 2000 the Scottish Ministers are required to prepare resource accounts for each financial year in the form and on the basis set out in the Government Financial Reporting Manual, detailing the resources acquired, held, or disposed of during the year and the use of resources by the Scottish Ministers during the year.

The resource accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Scottish Government, the net resource outturn, resources applied to objectives, recognised gains and losses and cash flows for the financial year.

The Permanent Secretary is the most senior member of the staff of the Scottish Administration and as the Principal Accountable Officer is the Accountable Officer responsible for preparing the accounts and submitting them to the Auditor General for Scotland.

In preparing the accounts the Principal Accountable Officer was required to comply with the Government Financial Reporting Manual (FReM) and in particular to:

• observe the accounts direction including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
• make judgements and estimates on a reasonable basis;
• state whether applicable accounting standards as set out in the FReM have been followed and disclose and explain any material departures in the accounts; and
• prepare the accounts on a going concern basis.

The Principal Accountable Officer confirms that the Annual Report and Accounts as a whole are fair, balanced and reasonable.

The responsibilities of the Principal Accountable Officer are described in the Memorandum to Accountable Officers from the Principal Accountable Officer published in the Scottish Public Finance Manual^[11].

For the purposes of the audit, so far as the Principal Accountable Officer is aware, there is no relevant audit information of which the auditors are unaware and all necessary steps have been taken by the Principal Accountable Officer to ensure awareness of relevant audit information and to establish that the Scottish Government's auditors are aware of that information.

The Principal Accountable Officer authorised these accounts for issue on 24 September 2018.

Governance Statement

Scope of Responsibility

As Permanent Secretary to the Scottish Government I am responsible for ensuring that appropriate arrangements are in place for governance and that these arrangements support the Scottish Government's purpose and the achievement of Scottish Ministers' policies, aims and objectives.

As Principal Accountable Officer for the Scottish Administration (under the terms of the Public Finance & Accountability (Scotland) Act 2000), I am also responsible for ensuring the propriety and regularity of finances and the economic, efficient and effective use of resources. In discharging these overall responsibilities I am supported by the designated Accountable Officers within the core Scottish Government, in the Crown Office and Procurator Fiscal Service, in Scottish Government Executive Agencies and in Health Bodies.

Detailed information on the role and responsibilities of Accountable Officers is set out in the Accountability chapter of the Scottish Public Finance Manual^[12].

Governance Framework

The Governance Review commissioned in November 2015 was implemented in 2016-17 with the Scottish Government's governance arrangements being revised with effect from 1 October 2016. As a result of this review, until January 2018, the Governance framework was as set out at Figure 1. Further improvements have, in 2017-18, been identified by a follow up review and these are set out in Figure 2 and the text below.

The governance frameworks that were in place throughout the 2017-18 financial year complied with all governance related guidance in the Scottish Public Finance Manual, the Civil Service Code^[13] and relevant elements of the Good Governance Standard for Public Services^[14] produced by the Independent Commission on Good Governance in Public Services.

Figure 1 (position at start of the reporting year)

Figure 2 (position at the end of the reporting year)

The Scottish Government's improvement priorities as the Civil Service supporting the Scottish Government are encapsulated in our SG2020 vision – to be more open, capable and responsive. Responsibility for the delivery of this vision rests with the Executive Team, consisting of myself and the six Directors General. The Executive Team meets twice a week. The Executive Team reported directly to the Executive Board (April 2017 to January 2018) and under the new governance arrangements it now reports to the Corporate Board (January – March 2018).

The Scottish Government Assurance and Audit Committee (SGAAC) has met quarterly over the year and attendees include myself, all Directors General, the Chief Financial Officer, the Director of Internal Audit, Audit Scotland as well as the Committee's members, four of our Non-Executive Directors of the Scottish Government who are Janet Hamblin (Chair); Annie Gunner Logan; Linda McKay and Hugh McKay. Director General Assurance meetings also occur quarterly and highlight issues to the SGAAC as required. These meetings are attended by the partner Non-Executive Director, and both the Chair of the Scottish Government Assurance and Audit Committee and Audit Scotland have an open invitation to attend as they deem fit. Both have used the opportunity to do so having attended an assurance meeting for each Director General family during the period of this report.

In recognition of emerging areas of importance for the Scottish Government, the Corporate Board has agreed to the creation of new sub-boards. The remit of the Economy Board was approved by Corporate Board in February 2018 and the Board met for the first time in May 2018. This sub-board will meet every two months and will ensure a coordinated approach to sustainable economic growth. The Constitution and Europe Programme Board has also been formally brought into the Corporate Governance structure. Further improvements, including the creation of an Exchequer Board to support the work of the Director General Scottish Exchequer, will be implemented in reporting year 2018-19.

Corporate Governance Review

To give me assurance as Principal Accountable Officer that the new Governance arrangements were meeting the original principles and objectives established for the new structures I asked the Director of Internal Audit and the Crown Agent to conduct a review of the arrangements. This follow up review identified further recommendations to maximise the efficiency and effectiveness of our governance arrangements and these, along with an implementation plan, were agreed by the Executive Board on 3 October 2017.

The key accepted recommendations of the review, along with the relevant sections of the implementation plan, are as follows:

That the Executive Board be re-named the Corporate Board and its membership be reviewed to give consideration to the balance of executive and non-executive members. The first meeting of the Corporate Board took place on 23 January 2018 with a refreshed membership. The number of Non-Executive Directors has been increased to five (from three) with introductory support for new members. The Corporate Board section of the internal website Saltire has also been updated and a programme of communications activity has been undertaken to promote the change across the organisation.

That the function of the Corporate Board be clearly separated from the Executive Team, with the former focusing on strategic issues, and clarity provided on the delegation of responsibilities to each sub-board. New terms of reference for the Corporate Board have been agreed. A review of each of the sub-boards has also been undertaken to articulate more clearly the delegation of roles and responsibilities to each from the Corporate Board. The updated terms of reference will inform an updated Governance Manual which will be reviewed annually. The Corporate Board will have, in addition to regular Board meetings, a minimum of two off-site strategic sessions each year.

That the role of 'Board Secretary' be established to ensure efficiency and synergy between the work of all the Corporate Boards. A short term appointment of a Board Secretary was made in December 2017. This will be reviewed in March 2019 to confirm that the grading of the post is appropriate and the role still required in its current form.

That a formal programme of on-going Board development should be undertaken. This programme, led by the Board Secretary with DG Organisational Development and Operations and People Director, began in January 2018 and continues to be developed over 2018.

That the Non- Executive Director cohort be expanded and support for all Non-Executive Directors to evolve. A process to recruit additional Non-Executive Directors is underway. Work is also underway to ensure that all Non-Executive Directors receive a consistent level of support, including support from the Director of Communications, Ministerial Support and Facilities and Board Secretary in Non-Executive Director network meetings, as well as regular one to one meetings supported by regular updates and tailored communications on developments in the Scottish Government.

That a senior Non-Executive Director be appointed. The Non-Executive Director paired with myself, Ronnie Hinds, already fulfils this role and I am working with him to consider how the role might evolve further in future.

That membership of the Scottish Government Assurance and Audit Committee be reviewed. The requirement for Non-Executive Director attendance has been reduced from five to four, with three required to be quorate. The Chief Financial Officer, with the support of the Director of Internal Audit and the Board Secretary, is leading the work to further improve the effectiveness of the Scottish Government Assurance and Audit Committee's financial scrutiny in consultation with the chair and its members.

That the Scottish Government looks to strengthen the support it gives to Audit Scotland to discharge their functions. Audit Scotland now attend Director General Assurance meetings and meet regularly with the Board Secretary to discuss the support provided and any further improvements. There are also regular meetings throughout the year with the Chief Financial Officer on the relationship with Audit Scotland, as well as the overall audit programme and its effectiveness in driving scrutiny.

Governance arrangements for separate accounting entities

The separate accounting entities within the Scottish Government consolidation boundary have corporate governance arrangements in place appropriate to their individual circumstances and in compliance with relevant guidance. The effectiveness of governance arrangements for the separate accounting entities is addressed in the governance statements provided by the entities concerned as part of their annual accounts. As with the Scottish Government, these arrangements comply with relevant guidance in the Scottish Public Finance Manual and generally accepted best practice principles

National Performance Framework

The effectiveness of Scottish Government governance arrangements is ultimately linked to the achievement of policies, aims and objectives set by the Scottish Ministers. Further information on how the NPF operated with the Scottish Government during the 2017-18 Financial year is detailed within the Performance Review Section of this document.

The introduction of the National Performance Framework (NPF)^[15] and the outcomes approach to government in 2007 have been the foundation for a transformative shift in how policy is made and for our organisational evolution and development as civil servants. Our "Scottish Approach" is focused on outcomes – on driving improvement; on building on the strengths and assets of individuals and communities; and on services which are shaped and co-produced by both service providers and the people and communities who receive and engage with those services.

The NPF sets out in the Purpose and the National Outcomes, a clear, unified vision for Scotland. A wide range of indicators are used to assess progress towards this vision. These provide a broad measure of national and societal wellbeing, incorporating a range of economic, social and environmental indicators and targets. Progress against the measures can be found on the Scotland Performs website^[16]. After ten years, the principles of the NPF have stood the test of time and they are as relevant now as they were ten years ago. Introduced in 2007 the NPF has been refreshed twice since and respectively in 2011 and 2016. With the introduction of the Community Empowerment (Scotland) Act 2015 the outcome–based approach has been put on a statutory footing and the Scottish Government has taken this opportunity to undertake a wholesale review of the NPF. The scope of the review, included building wider consensus around the framework, improving alignment with the UN Sustainable Development Goals, and other frameworks, such as Scotland's National Action Plan for Human Rights^[17] and Scotland's Economic Strategy^[18], simplifying the language and look of the framework to make it more accessible, hence more meaningful.

The new NPF has been developed as a result of an extensive consultation and engagement process, and following the statutory scrutiny period by the Scottish Parliament as required by Community Empowerment (Scotland) Act 2015,^[19] the new NPF was formally launched in June 2018. Making real and sustained progress toward Scotland's National Outcomes must be a collective endeavour and all sectors of society have a role to play. To achieve the vision for Scotland set out in the NPF will require us all to behave in ways that promote trust, collaboration and partnership.

Budget Process Review Group

The Budget Process Review Group made recommendations for the Scottish Parliament's budget process following the devolution of further powers in the Scotland Act 2012 and Scotland Act 2016. The Group recommended that the revised budget process should include a full year approach involving parliamentary committees, a continuous cycle of scrutiny, a focus on outcomes, fiscal responsibility and an understanding of the interdependence between policies within the budget.

As a result, the Scottish Government made changes to the budget process for 2018-19 to provide a greater delineation between factual content and policy priorities, to provide further numerical detail and to publish the associated data digitally. Further changes resulting from the Group's recommendations have followed during 2018-19 including a revised Written Agreement with the Parliament's Finance Committee, publication of a Medium Term Financial Strategy and the expected publication of a Fiscal Framework Outturn Report this Autumn.

Assurance Framework

An annual assurance on the adequacy and effectiveness of the core Scottish Government's internal control system, including risk management and safeguards against losses - and the extent to which it can be relied upon is provided through the professional opinion of the Scottish Government's Director of Internal Audit. In the annual assurance report submitted to the Scottish Government Assurance and Audit Committee on 13 July 2018, the Director of Internal Audit confirmed that reasonable assurance could be placed on the internal control arrangements.

In their role as External Auditors to the Scottish Government, Audit Scotland assess the extent to which they will use the individual reviews undertaken by Internal Audit to inform their opinion on the financial statements, and meet their wider responsibilities, depending on their direct relevance to their work. Each year they also undertake a review of Scottish Government's Internal Audit arrangements. Audit Scotland confirmed that their work did not identify any internal audit reports where the underlying evidence would suggest an incorrect audit opinion or conclusion. The Scottish Government Audit and Assurance Committee has therefore concluded that it can use the work of the Internal Audit function to inform its assessment of the overall controls and assurance environment operating across Scottish Government.

Following the Strategic Review of the Internal Audit function undertaken by the Scottish Government in 2015-16 a significant range of improvements have been taken forward within the function. However, this year the Audit Scotland review of Internal Audit identified a number of important areas, particularly in terms of planning, documentation, reporting and management review, where improvement is needed for compliance with Public Sector Internal Audit Standards. Internal Audit has already recognised these and as a result has undertaken a project to address them. The Scottish Government Audit and Assurance Committee will continue to monitor the Internal Audit Directorate to ensure on-going continuous improvement and compliance with Public Sector Internal Audit Standards.

The process for the provision of annual assurances by senior staff within the core Scottish Government (and the other constituent parts of the Scottish Administration) is set out in the Scottish Public Finance Manual^[20].

The culmination of this process is the provision of Certificates of Assurance from Directors General to me, which reflect any internal control issues raised by Directors as well as any other issues raised throughout the course of the year in either the DG Assurance or SGAAC meetings, by Non-Executive Directors, the annual assurances by Internal Audit and consideration of information on control issues received in respect of any associated executive agencies, non-ministerial departments and sponsored bodies.

Each portfolio reports annually to the Scottish Government Assurance and Audit Committee to provide assurances that they are operating in accordance with Scottish Public Finance Manual guidance and to draw the Committee's attention to relevant issues. Directors General have sought assurance from their respective Directors and have met with the Scottish Government Assurance and Audit Committee, prior to the finalisation of the Scottish Government consolidated accounts, to discuss their reports and any relevant issues. At this meeting on 24 September 2018, no significant control weaknesses were raised.

The Scottish Government Assurance and Audit Committee provides me with an annual assurance, timed to support the signature of the Scottish Government consolidated accounts and the associated governance statement, following consideration of the accounts by Corporate Board on 4 September 2018. In providing such assurance the Scottish Government assurance framework, the reliability and integrity of assurances provided and the findings of both internal and external auditors. The Scottish Government Assurance and Audit Committee also advises on which, if any, issues arising during the financial year, and the period up to signature of the accounts, would warrant being recorded in the governance statement for the Scottish Government consolidated accounts. This process was completed in the course of the Scottish Government Assurance and Audit Committee meeting on 24 September 2018.

A similar process is in place in each of the separate accounting entities within the Scottish Government consolidation boundary.

Counter Fraud Activity

Guidance on the prevention, detection, reporting and handling of fraud is included in the Scottish Public Finance Manual (SPFM)^[21].

The Integrity Group is responsible for improving fraud prevention measures across the Scottish Government as well as monitoring relevant cases of suspected external and internal wrongdoing made through formal reporting lines. This includes supporting and reporting on the concerns that are raised under the Public Interest Disclosure Act 1998. The Group is also available to advise on the handling of specific allegations of external and internal wrongdoing where required.

The Scottish Government has continued to engage with cross-government groups, sharing our approach and supporting the prevention agenda through the Fraud, Error and Debt Team within the UK Cabinet Office.

The Scottish Government also continues to participate in the biennial National Fraud Initiative (NFI) data matching exercise led by Audit Scotland to help public bodies minimise fraud and error in their organisations and is also working with Audit Scotland to consider improvements to the NFI in Scotland, following the Public Audit and Post-legislative Scrutiny Committee report in September 2017.

Data Security Framework

Information assurance and security are strategic risks for the Scottish Government. Director General Organisational Development and Operations, as the Senior Information Risk Owner, is the owner for these risks at Executive Team level. Corporate policies and guidance are in place to ensure that the Scottish Government meets its legislative and procedural obligations to protect our information assets and minimise the likelihood of a data loss incident.

Eighteen data security incidents were internally reported to the SG Data Protection and Information Assets team in 2017-18, of which four were reported to the Information Commissioner's Office (ICO) throughout the year. While no enforcement action was taken by the Information Commissioner, appropriate actions were taken in each case to ensure that the probable impact of any loss was minimised. Additional local procedures were also put in place to minimise the likelihood of any future recurrence.

A programme to manage the implementation of the new General Data Protection Regulation (GDPR) successfully completed ahead of the new Regulation coming into force on 25^th May 2018. The programme developed a range of internal guidance to support Information Asset Owners and staff across the organisation to meet their obligations under GDPR, published a mandatory e-learning package on data protection which all staff are expected to complete on an annual recurring basis, and appointed a new Data Protection Officer (DPO) for Scottish Government.

In addition, the Scottish Government has continued to make good progress towards implementing actions set out in the Public Sector Action Plan on Cyber Resilience^[22], which will enhance the cyber and information security controls already in place within the organisation.

Risk Management Arrangements

The Scottish Government approach to risk management is consistent with the principles highlighted in the Scottish Public Finance Manual^[23] and is published on the Scottish Government intranet and website.

The Scottish Government operates in a dynamic environment, delivering the priorities of the Scottish Ministers whilst managing associated risks and opportunities. Over the last year a number of key risks have been scrutinised at a corporate level in the organisation. These include:

• Through Common Agricultural Policy (CAP) the delivery of accurate, timely payments worth around £0.5 billion to farm business and crofters.
• New powers over social security are successfully implemented, with smooth transition from DWP to new Scottish policies and administrative arrangements.
• The Scottish Government's capability and capacity to deliver the Government's priorities while maintaining high standards of competence.
• The Scottish Government's strategy to ensure that Scotland's interests are protected in the UK withdrawal from the EU.
• Health and Social Care Partnerships to assure the quality of outcomes achieved and sustainability of services.
• The Scottish Government ensures the long term sustainability of the public finances through effective budget-setting and medium term strategic financial planning, providing clarity on financial management and spending priorities, and contributing to achieving value for money and delivery of key outcomes.
• Public Service Reform activities expedite the delivery of improved outcomes and contribute to the sustainability of public services.
• Maintaining the confidence of survivors in the independence of the Scottish Child Abuse Inquiry and in our commitment to deliver wider measures, particularly the possibility of financial redress.
• The Scottish Government's ability to respond to cyber-attacks and its role in ensuring a common approach to achieving higher standards of cyber resilience amongst Scotland's public sector organisations.
• The Scottish Government's capacity to support our business critical IT systems and robustly deliver business critical IT/digital dependent projects.
• Resilience arrangements, staffing levels, skills and understanding across Scottish Government are sufficient to deal with major and sustained incidents in a changing threat landscape and that disrupt everyday activities in Scotland.
• Enterprise and business initiatives are appropriately developed, targeted and implemented to boost sustainable economic growth by improving the long-run drivers of economic competitiveness and by tackling inequality through boosting investment and innovation, promoting internationalisation, and encouraging inclusive growth.
• Culture in Scottish Government supports and enables greater diversity and inclusion, demonstrating it is an exemplar employer by committing to and working towards our published equality outcomes for 2017-18.
• Ensuring policy decisions are tested against European Commission State aid rules to maintain Scottish Government reputation and minimise risk of aid being clawed back from the beneficiary with interest. State aid regulation will be an important part of future trading arrangements with the EC.

Significant Internal Control Issues

Freedom of Information (FOI): In order to address concerns regarding FOI performance, throughout the period 2017-18, the Director General Constitution and External Affairs has taken a range of steps to support the organisation in raising its performance. As an organisation we have progressed from responding in time to 83% of requests in 2017 (against a target of 85%) to 93% of requests on time (against a 90% target) in the first eight months of 2018. For reviews, we have improved from responding in time to 65% in 2017 (against a target of 85%) to 87% (against a 90% target) for the first eight months of 2018.

The Scottish Government has co-operated fully with the Scottish Information Commissioner's intervention into FOI process and practice. The Commissioner has published a report requiring us to produce, by September 2018, a draft action plan - for his approval - setting out how we will address his recommendations.

While we have made significant progress on our FOI performance and work has started on the draft action plan, to maintain sufficient progress work will be required across all Directorates to ensure we do.

Constitution and Europe (EU Exit) Programme: The Scottish Government has developed cross-government structures to support readiness for EU exit. Those structures have enabled readiness assessments by Directorates across the Scottish Government, indicating that challenges relate most significantly to capacity and capability, financial implications and the ability to influence decisions taken by the UK Government and the EU. They extend across the whole organisation, with the most significant impact in the areas most involved in EU regulation, payments and policy initiatives, in particular the Parliamentary Counsel Office, Legal Directorate and Directorates for External Affairs and Strategy and Constitution.

All Directors General and their staff have been working to ensure that we are as prepared as possible, supported by clear governance structures which now includes consideration by Directors General of EU exit issues as part of this formal assurance work. While I am assured that Scottish Government Directorates are well focussed on readiness work, I am not yet fully assured of readiness for a withdrawal from the EU whose terms and timings remain subject to significant uncertainty. These risks are monitored and managed within our programme and standing governance processes.

Making payments to farmers: Agriculture and Rural Economy Directorate continued to experience a risk to the delivery of IT functionality and necessary controls to support implementation of the Common Agricultural Policy (CAP) and payments of around half a billion pounds to farmers. The 95.24% threshold for Pillar 1 payments was, however, met in June 2018, avoiding late payment penalties. In 2017-18, we also faced risk in relation to the paying agency accreditation audit in relation to Audit Scotland's assessment of the quality of relevant internal audit reports. Through significant management action, the EU accounts were submitted to the European Commission by the February 2018 deadline. The Commission proposed the accounts for clearance and paying agency accreditation status was maintained. The priorities for 2018-19 include maintaining the delivery of IT functionality, working to minimise disallowance penalties, improving the quality of the control statistics submitted annually to the EC, which were the subject of a qualification on the Management Declaration for the EU accounts, and the delivery of Internal Audit Directorate's improvement action plan to manage future accreditation risk.

NHS Boards Financial Position: In 2017-18, three boards forecast an outturn deficit that required brokerage amounting to £50.7 million – NHS Tayside, NHS Ayrshire and Arran, and NHS Highland. Arrangements have been put in place to escalate the position of all three Boards, with additional support provided to help address the financial challenge in 2018-19 and beyond.

NHS Tayside

• Ministerial Intervention at NHS Tayside: As a result of NHS Tayside's financial position and issues identified in relation to eHealth funding and endowment fund monies, the Cabinet Secretary for Health and Sport exercised Ministerial powers of intervention under section 78a of the National Health Service (Scotland) Act 1978 and moved NHS Tayside to the highest level of escalation. Following this, steps were taken to strengthen the Board's leadership and a new Chair and Chief Executive were appointed.
• eHealth Funding: On 23 February 2018 it was identified that inappropriate allocations were being issued relating to eHealth projects to NHS Tayside via NHS National Services Scotland (NSS). Grant Thornton were appointed to carry out a review to identify control deficiencies and recommend improvements. A number of improvement actions have subsequently been taken since this report was published on 23 March 2018, with a further review carried out by Grant Thornton at NHS Tayside, an Internal Audit review at NHS NSS and a review by the Scottish Government's Internal Audit team also being undertaken in order to consider improved controls in both the Health Finance and eHealth teams.
• NHS Endowment Funds: On 3 April the Scottish Government became aware that in 2013-14, Trustees of NHS Tayside's Endowment Fund had suspended their rules to allow for the retrospective approval of funding for projects, which had previously been approved for exchequer funding. OSCR opened an inquiry into the NHS Tayside Endowment Fund, and wrote to all Boards, asking for assurance to be provided that endowment funds are being used appropriately. Responses have been shared with OSCR, who will consider what further action may be required for all NHS Boards. The Scottish Government also commissioned an independent review by Grant Thornton of the financial governance of NHS Tayside, including the circumstances relating to the use of endowment funds to bridge the Board's financial position in 2013-14. The review reported in May 2018.

Written Authority

Under the terms of the Public Finance & Accountability (Scotland) Act 2000 there is a statutory duty on the Principal Accountable Officer and designated Accountable Officers to obtain written authority from, as the case may be, Ministers or governing boards before taking any action which we consider to be inconsistent with the proper performance of our functions as Accountable Officers.

No such written authority was required during the 2017-18 financial year, or the period up to the signature of the accounts, by Accountable Officers within the Scottish Government consolidation boundary.

Remuneration and Staff Report

The information in the Performance and Accountability Reports is reviewed by the external auditors for consistency with the financial statements, and the information relating to the remuneration and pension benefits of ministers, law officers, senior management and non-executive directors; staff numbers; staff Costs and number of exit packages has been audited by them.

Appointments

Civil service appointments are made in accordance with the Civil Service Commissioners' Recruitment Principles, which require appointments to be on merit on the basis of fair and open competition but also include the circumstances when appointments may otherwise be made.

Directors-General members of the Scottish Government Corporate Board are appointed following approval by the Head of the Home Civil Service, following consultation with the First Minister in accordance with the Constitutional Reform and Governance Act 2010. Prior to the introduction of the Constitutional Reform and Governance Act 2010, appointments were approved by the Prime Minister.

All of the Executive members of the Scottish Government Corporate Board, covered by this report, hold appointments which are open-ended until they choose to retire. The rules for termination of appointments are set out in chapter 11 of the Civil Service Management Code. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. The Scottish Government, its Agencies and the Crown Office and Procurator Fiscal Service, in line with the rest of the UK Civil Service, introduced a policy of no mandatory retirement age for the Senior Civil Service from 1 October 2009, in line with the implementation of the Employment Equality (Age) Regulations 2006. Under current arrangements, an individual's pension will become payable from age 60 if they were employed in the Civil Service prior to 30 July 2007, and in these circumstances that employee can choose to leave work and collect his or her pension at any time from age 60, subject only to compliance with the basic notice of leave requirements. The Government announced a number of reforms to civil service pensions which were applied from 1 April 2015.

The Civil Service Commissioners website^[24] provides further information about their work.

Independent Non-Executive Directors of the Scottish Government Corporate Board are appointed by the Permanent Secretary up to a maximum of six years. Such appointments can be terminated with one month's notice period.

Remuneration Policy

The salaries of the Scottish Government Ministers were established under section 81(1) and (2) of the Scotland Act 1998. They are paid through the Scottish Parliamentary Corporate Body (SPCB).

The remuneration of senior civil servants (SCS) is set in accordance with the Civil Service Management Code (available via civilservice.gov.uk) and with independent advice from the Review Body on Senior Salaries (SSRB).

In reaching its recommendations, the SSRB is to have regard to the following considerations:

• The need to recruit, retain, motivate and where relevant, promote suitably able and qualified people to exercise their different responsibilities;
• Regional/local variations in labour markets and their effects on the recruitment, retention and, where relevant, promotion of staff;
• Government policies for improving the public services including the requirement on departments to meet the output targets for the delivery of departmental services;
• The funds available to departments as set out in the Government's departmental expenditure limits; and
• The Government's inflation target.

Further information about the work of the SSRB can be found via the Office of Manpower Economics^[25].

Within the Scottish Government, the Top Level Pay Committee, comprising the Permanent Secretary, the Directors-General, Chief Executive of the Crown Office and Non-executive members of the Corporate Board, ensures that the Pay and Performance Management policy falls within the parameters set by the SSRB and Cabinet Office. The Scottish Government's Top Level Pay Committee has agreed that for SCS pay in 2017-18:

• all SCS staff, apart from poor performers and those near the maximum of the pay range will receive a 1% uplift to their base pay;
• Deputy Directors and Directors who have over 5 substantive years in the grade as at 31 March 2017 and are at the lowest end of the pay range will receive a higher increase; and
• in line with Scottish Public Sector Pay Policy there will be no non-consolidated performance payments.

The Permanent Secretary's salary and performance-related pay are set as part of a UK Cabinet Office framework and agreed by the Prime Minister.

Non-Executive Directors receive a flat quarterly fee for their role. Non-Executive Directors' expenses incurred in attending these meetings are also reimbursed.

Remuneration

The remuneration of the Ministers who served over the year to 31 March 2018 and members of the Scottish Government Corporate Board is noted below.

Ministers and Law Officers

The remuneration of the First Minister and the Cabinet Ministers during the year to 31 March 2018 is shown in the table below. Ministerial salaries are additional to salaries and entitlements as MSPs. The full year salary rate for the First Minister is £89,493 (2016: £87,910) and for all other Cabinet Ministers is £46,426 (2016: £45,605).

	Salary	Salary	Pension Benefits	Pension Benefits	Total Remuneration	Total Remuneration
	2017-18	2016-17	*2017-18	*2016-17	2017-18	2016-17
	£	£	£	£	£	£
Nicola Sturgeon, MSP (1)	92,680	91,024	29,937	44,016	122,617	135,040
John Swinney, MSP	46,426	45,605	15,530	22,832	61,956	68,437
Keith Brown, MSP	46,426	45,605	17,461	18,601	63,887	64,206
Roseanna Cunningham, MSP	46,426	45,605	17,461	18,601	63,887	64,206
Angela Constance, MSP	46,426	45,605	19,622	20,800	66,048	66,405
Shona Robison, MSP	46,426	45,605	15,530	22,832	61,956	68,437
Michael Matheson, MSP	46,426	45,605	17,461	18,601	63,887	64,206
Fiona Hyslop, MSP	46,426	45,605	15,530	22,832	61,956	68,437
Derek Mackay, MSP (2)	46,426	39,721	17,868	15,497	64,294	55,218
Fergus Ewing, MSP (2)	46,426	39,721	17,868	15,497	64,294	55,218
Alex Neil, MSP (3)	-	6,007	-	-	-	6,007
Richard Lochhead, MSP (3)	-	6,007	-	-	-	6,007

(1) The First Minister's salary and total remuneration includes a benefit-in-kind for 2017-18 of £3,187 arising from the provision of accommodation at Bute House (restated 2016-17: £3,114). Due to an error by the Scottish Government when the benefit-in-kind was calculated for the financial years from 2007 to 2017, an Employer Settlement of £16,765 was reached with HM Revenue & Customs in 2017-18.

(2) Derek Mackay and Fergus Ewing were appointed as Cabinet Ministers on 18 May 2016. The full year equivalent salary in 2016-17 was £45,605.

(3) Alex Neil and Richard Lochhead resigned as Cabinet Ministers on 18 May 2016. The full year equivalent salary is £45,605. Pension benefits information was not gathered in 2016-17 and therefore is not available to publish as a prior year figure.

* Pension benefits are calculated as the real increase in pension multiplied by 20 plus the real increase in any lump sum less the contributions made by the individual. The real increases exclude increases due to inflation or any increase or decreases due to a transfer of pension rights.

Scottish Government Ministers' Pay Freeze Commitment

The Scottish Parliament Corporate Body (SPCB) is required under Chapter 46, Section 81 of the Scotland Act 1998 to make provision for the payment of salaries to MSPs, Officeholders of the Parliament and Ministers. A resolution of the Parliament to pay salaries in accordance with the Scottish Parliamentary Salaries Scheme was passed by the Parliament on a free vote on 21 March 2002. The Scheme determines that the Scottish Parliamentary Corporate Body should decide the salary levels for Members and Officeholders including the Law Officers. The Scheme determines that Members' and Officeholders' salary rates should be increased annually from 1 April in line with public sector pay rises in Scotland, using the Annual Survey of Hours and Earnings published by the Office for National Statistics.

Scottish Government Ministers and the Law Officers have previously agreed to freeze pay as at their April 2009 pay level. The Salaries Scheme does not give the power to withhold an annual increase. To achieve the required reduction, pay increases are deducted from the Ministers' and the Law Officers' net salaries and repaid to the Scottish Consolidated Fund. The disclosure reflects the salary awarded under the Scottish Parliamentary Salaries Scheme.

Law Officers

The remuneration, comprising of salary and pension benefits, of the serving Law Officers for the year to 31 March 2018 is shown below:

	Salary	Salary	Pension Benefits	Pension Benefits	Total Remun-eration	Total Remun-eration
	2017-18	2016-17	*2017-18	*2016-17	2017-18	2016-17
	£'000	£'000	£'000	£'000	£'000	£'000
James Wolffe, QC (1)	122	100	47	39	169	139
Alison Di Rollo, QC (2)	106	86	41	34	147	120
Frank Mulholland, QC (1)	-	21		9	-	30
Lesley Thomson, QC (2)	-	18		8	-	26

*Pension benefits are calculated as real increase in pension multiplied by 20 plus the real increase in any lump sum less the contributions made by the individual. The real increase excludes increases due to inflation or any increase or decrease due to a transfer of pension rights.

(1) On 2nd June 2016 James Wolffe QC superseded Frank Mulholland QC as Lord Advocate. The full year equivalent gross salary for James Wolffe QC was £120,000.

(2) On 2nd June 2016 Alison Di Rollo QC superseded Lesley Thomson QC as Solicitor General. The full year equivalent gross salary for Alison Di Rollo QC was £104,000.

No Law Officers received benefits-in-kind.

Senior Management Team

The remuneration for the Permanent Secretary and members of the Scottish Government Corporate Board for the year to 31 March 2018 were as follows:

	Salary	Salary	Pension Benefits	Pension Benefits	Total Remun-eration	Total Remun-eration
	2017-18	2016-17	*2017-18	*2016-17	2017-18	2016-17
	£'000	£'000	£'000	£'000	£'000	£'000
Leslie Evans	165-170	160-165	22	28	185-190	190-195
Sarah Davidson	115-120	115-120	40	46	155-160	160-165
Graeme Dickson (1)	-	15-20	-	3	-	20-25
Liz Ditchburn (2)	115-120	110-115	30	124	145-150	230-235
Paul Gray	145-150	145-150	-	-	145-150	145-150
Paul Johnston	115-120	115-120	41	93	155-160	205-210
Alyson Stafford CBE	140-145	135-140	45	53	185-190	190-195
Ken Thomson	120-125	115-120	21	11	140-145	125-130
Gordon Wales (3)	105-110	15-20	29	23	130-135	40-45
Nicola Richards (4)	90-95	-	37	-	130-135	-
Barbara Allison (4)	95-100	-	15	-	110-115	-

*Pension benefits are calculated as real increase in pension multiplied by 20 plus the real increase in any lump sum less the contributions made by the individual. The real increase excludes increases due to inflation or any increase or decrease due to a transfer of pension rights.

(1) Graeme Dickson left on 31 May 2016. The full year salary band was £115-£120k.

(2) Liz Ditchburn joined on 18 April 2016. The full year salary band was £115-120k.

(3) Gordon Wales joined on 30 January 2017 and he was Acting DG until the end of June 2017 when he became Chief Financial Officer. The full year salary band was £105-110k.

(4) Barbara Allison and Nicola Richards joined on 1^st April 2017.

No members of the Scottish Government Corporate Board received benefits-in-kind.

In accordance with the FReM, reporting bodies are required to disclose the relationship between the remuneration of the highest-paid member of the Senior Management Team in their organisation and the median remuneration of the organisation's workforce. The median calculation includes directly employed staff paid through SG Core payroll. It covers both permanent staff and those on fixed term contracts. It does not include temporary agency staff paid locally by invoice, as these invoices are not processed through the payroll system. The ratio is calculated as the mid-point of the highest band divided by the median total remuneration.

The pay system within Scottish Government is such that there are a large number of staff on relatively few pay steps with significant gaps between some of them, resulting in a median pay figure occasionally changing markedly from one year to the next.

	2017-18	2016-17
	£'000	£'000
Minimum Total Remuneration	18	17
Maximum Total Remuneration	165	164
Band of Highest Paid member of the Corporate Board Total Remuneration (1)	165-170	160-165
Median Total Remuneration	34,764	31,811
Ratio	4.8	5.1

Equivalent information relating to senior managers of the other bodies consolidated within these accounts is given in their respective annual accounts.

Total remuneration includes salary, non-consolidated performance-related pay, and benefits-in-kind. It does not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.

Non-Executive Directors

Remuneration

Fees are paid on a quarterly basis for their position as Scottish Government Non-Executive Director.

Benefit-in-Kind

The monetary value of benefits-in-kind covers any benefits provided by the Scottish Government and treated by HM Revenue and Customs as a taxable emolument.

No Non-Executive Members of the Scottish Government Corporate Board received benefits- in-kind. The Non-Executive members do not participate in the Civil Service Pension Scheme.

The fees for the Non-Executive Directors who are members of the Scottish Government Corporate Board are as follows:

	2017-18 Fees	2016-17 Fees
	£'000	£'000
Christina Allon (until September 2016)	-	5-10
Janet Hamblin (from September 2015)	5-10	5-10
Linda McKay	5-10	5-10
Ronnie Hinds (from October 2016)	5-10	0-5
Hugh McKay (from January 2018)	0-5	-
Annie Gunner Logan (from January 2018)	0-5	-

Pension Benefits

Ministers and Law Officers

The pension entitlements of the Cabinet Team for the year to 31 March 2018 are shown below:

	Accrued pensionat age 65 as at 31-Mar-18	Real increasein pension at age 65	CETV at 31-Mar-18	CETV at 31-Mar-17	Real Increase in CETV
	£'000	£'000	£'000	£'000	£'000
Nicola Sturgeon	20-25	0-2.5	278	241	21
John Swinney, MSP	10-15	0-2.5	170	147	14
Fiona Hyslop, MSP	10-15	0-2.5	170	147	14
Angela Constance, MSP	0-5	0-2.5	55	39	12
Shona Robison, MSP	10-15	0-2.5	161	139	13
Keith Brown, MSP	0-5	0-2.5	59	40	12
Michael Matheson, MSP	0-5	0-2.5	47	31	9
Roseanna Cunningham, MSP	0-5	0-2.5	75	51	16
Derek Mackay, MSP	0-5	0-2.5	21	10	7
Fergus Ewing, MSP	0-5	0-2.5	37	16	15

New factors are used in the calculator for the CETV values at the start and end of the period. This means CETV values shown at 31 March 2017 may not match those shown in last year's accounts.

The Cash Equivalent Transfer Value (CETV)

This is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits they have accrued in their former scheme.

The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total ministerial service, and not just their current appointment as a Minister. The Ministers are members of the Scottish Parliamentary Pension Scheme, full details of which are available from www.sppa.gov.uk.

CETVs are calculated in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

The pension entitlements of the Law Officers are shown below:

	Accrued pension at pension age as at 31-Mar-18	Real increase in pension at pension age	CETV at 31-Mar-18	CETV at 31-Mar-17	Real Increase in CETV
	£'000	£'000	£'000	£'000	£'000
James Wolffe, QC *	5-10	2.5-5	83	36	33
Alison Di Rollo, QC *	0-5	2.5-5	74	32	29

* On 2nd June 2016 James Wolffe QC and Alison Di Rollo QC superseded Frank Mulholland QC and Lesley Thomson QC as Lord Advocate and Solicitor General respectively.

Senior Management Team

The pension entitlements of the Permanent Secretary and executive members of the Scottish Government Corporate Board are as follows (equivalent information relating to senior managers of other bodies consolidated within these accounts is given in their respective annual accounts):

	Accrued pension at pension age and related lump sum as at 31-Mar-18	Real increase in pension and related lump sum at pension age	CETV at 31-Mar-18	CETV at 31-Mar-17	Real Increase in CETV
	£'000	£'000	£'000	£'000	£'000
Leslie Evans	70-75 plus lump sum 210-215	0-2.5 plus lump sum 2.5-5	1,649	1,525	22
Sarah Davidson	35-40 plus lump sum 85-90	0-2.5 plus lump sum 0	566	514	15
Liz Ditchburn	35-40 plus lump sum 15-20	0-2.5 plus a lump sum 0	704	631	28
Paul Johnston	25-30 plus lump sum 65-70	2.5-5 plus lump sum 0	395	354	13
Alyson Stafford CBE	30-35	2.5-5	526	470	20
Ken Thomson	55-60	0-2.5	1,019	939	17
Gordon Wales	35-40 plus lump sum 100-105	0-2.5 plus lump sum 0-2.5	674	631	19
Nicola Richards	25-30 plus lump sum 15-20	0-2.5 plus lump sum 0-2.5	427	381	17
Barbara Allison	25–30 plus lump sum of 85-90	0-2.5 plus lump sum 2.5-5	631	578	13

Paul Gray, Director General for Health & Social Care, chose not to be covered by the Civil Service pension arrangements during the reporting year.

There is no automatic right to a lump sum for officials who are members of the Premium Pension Scheme or the Nuvos Pension Scheme.

New factors are used in the calculator for the CETV values at the start and end of the period. This means CETV values shown at 31 March 2017 may not match those shown in last year's accounts.

Civil Service Pensions

Pension benefits are provided through the Civil Service pension arrangements. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or alpha, which provides benefits on a career average basis with a normal pension age equal to the member's State Pension Age (or 65 if higher). From that date all newly appointed civil servants and the majority of those already in service joined alpha. Prior to that date, civil servants participated in the Principal Civil Service Pension Scheme (PCSPS). The PCSPS has four sections: 3 providing benefits on a final salary basis (classic, premium or classic plus) with a normal pension age of 60; and one providing benefits on a whole career basis (nuvos) with a normal pension age of 65.

These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus, nuvos and alpha are increased annually in line with Pensions Increase legislation. Existing members of the PCSPS who were within 10 years of their normal pension age on 1 April 2012 remained in the PCSPS after 1 April 2015. Those who were between 10 years and 13 years and 5 months from their normal pension age on 1 April 2012 will switch into alpha sometime between 1 June 2015 and 1 February 2022. All members who switch to alpha have their PCSPS benefits 'banked', with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes.) Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a 'money purchase' stakeholder pension with an employer contribution (partnership pension account).

Employee contributions are salary-related and range between 4.6% and 8.05% for members of classic, premium, classic plus, nuvos and alpha. Benefits in classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years initial pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum. classic plus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 worked out as in premium. In nuvos a member builds up a pension based on his pensionable earnings during their period of scheme membership. At the end of the scheme year (31 March) the member's earned pension account is credited with 2.3% of their pensionable earnings in that scheme year and the accrued pension is uprated in line with Pensions Increase legislation. Benefits in alpha build up in a similar way to nuvos, except that the accrual rate in 2.32%. In all cases members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004.

The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of providers. The employee does not have to contribute, but where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer's basic contribution). Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill health retirement).

The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus, 65 for members of nuvos, and the higher of 65 or State Pension Age for members of alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes, but note that part of that pension may be payable from different ages.)

Further details about the Civil Service pension arrangements can be found at the website www.civilservicepensionscheme.org.uk

Cash Equivalent Transfer Values for Civil Service pensions

A Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member's accrued benefits and any contingent spouse's pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.

The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.

Real increase in CETV

This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period.

For 2017-18 Scottish Government employers' contributions of £61m (2016-17: £59m) were payable to PCSPS at one of four rates in the range 20% to 24.5% of pensionable pay, based on salary bands. The Scheme Actuary reviews employer contributions every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2017-18 to be paid when the member retires, and not the benefits paid during this period to existing pensioners.

For 2017-18 the value of Scottish Government employers' contributions relating to the partnership pension account is £391k (2016-17: £384k). There were no contributions due to the partnership pension or prepaid at the balance sheet date.

People and Culture

Staff numbers and related costs

Staff numbers (Full time equivalent)	No of Special Advisers	Perman-ent Staff	Other	2017-18 Total	Restated 2016-17 Total
Finance and the Constitution	0	648	28	676	701
Health and Sport	0	144,437	2,123	146,560	145,292
Education and Skills	0	1,114	200	1,314	1,571
Economy, Jobs and Fair Work	0	248	26	274	259
Justice	0	4,597	19	4,616	4,648
Communities, Social Security and Equalities	0	611	67	678	527
Environment, Climate Change and Land Reform	0	132	3	135	119
Culture, Tourism and External Affairs	0	102	12	114	71
Rural Economy and Connectivity	0	1,859	240	2,099	2,128
Crown Office and Procurator Fiscal Service	0	1,464	134	1,598	1,617
Administration	14	1,153	111	1,278	1,301
SG Corporate Board	0	7	0	7	7
Total	14	156,372	2,963	159,349	158,241
Staff costs				2017-18 £'m	2016-17 £'m
Wages and Salaries (Permanent staff)				5,699	5,517
Social security costs (Permanent staff)				581	555
Other pension costs (Permanent staff)				767	749
Sub-total				7,047	6,821
Non-Permanent Staff (including Agency, temporary, contract staff and inward secondments)				215	284
Total				7,262	7,105
Less recoveries in respect of outward secondments				(45)	(37)
Total net costs				7,217	7,068

Number and cost of exit packages

Exit Packages Cost Band	No of departures agreed 2017-18	Cost of exit packages 2017-18	No of departures agreed 2016-17	Cost of exit packages 2016-17
		£000		£000
<£10,000	22	138	23	124
£10,000 to £25,000	17	269	50	834
£25,000 to £50,000	30	1,098	40	1,406
£50,000 to £100,000	15	1,047	31	2,174
£100,000 to £150,000	4	472	1	122
£150,000 to £200,000	0	0	0	0
£200,000 to £250,000	0	0	0	0
£250,000+	1	274	0	0
Total number / cost of exit packages	89	3,297	145	4,660

There were no compulsory redundancies in 2017-18 or 2016-17.

Staff Relations, Diversity and Equal Opportunities

The Scottish Government corporate vision is to be a world-leading, diverse employer where people can be themselves at work. This is articulated clearly in our equality outcomes which state that we will increase our workforce diversity to reflect the general Scottish population by 2025; and will foster an inclusive workforce culture that values the contribution of employees from all backgrounds. Our approach to diversity and inclusion is being implemented through our People Plan which describes a collaborative and whole-systems approach to mainstreaming diversity and inclusion.

The Scottish Government supports the wider Civil Service Diversity and Inclusion Strategy in its drive to position the Civil Service as the most inclusive employer in the UK by 2020 through focusing actions across the twin priorities of increased representation and inclusion. As part of this, we have agreed challenging targets with UK Government Cabinet Office for disabled staff in the SCS grades. The Scottish Government is also committed to meeting its public sector duties under the Equality Act 2010.

Scottish Government has a number of arrangements in place to deliver on our equality outcomes. Our vision is being implemented through our People Plan which describes a collaborative and inclusive approach to delivering its work streams. Our Equal Opportunities policy states that all staff must be treated equally irrespective of their sex, marital/civil partnership status, age, race, ethnic origin, sexual orientation, disability, religion or belief, work pattern, employment status, gender identity (transgender), maternity or paternity status, caring responsibility or trade union membership.

Diversity and equality considerations underpin our employment policies and practices, and employment and promotion are solely on merit. Our recruitment approach carries positive action statements that welcome applications from all suitably qualified people, in particular those from under-represented groups, and we have made changes to our recruitment and promotion practices to remove any risk of discrimination wherever possible and to mitigate the impacts of unconscious bias. We are committed to developing all our staff, whilst ignoring all irrelevant differences in their management and development, and positively valuing the different perspectives and skills of all our staff and make full use of these in our work.

Policies are in place to guard against bullying, harassment and discrimination, to ensure that there is no unfair or unlawful discriminatory treatment or any barriers to employment or advancement in the Scottish Government.

Scottish Government has a dedicated Diversity & Inclusion team whose remit has recently been refreshed to position it as a central subject matter resource for policy areas and stakeholders and an enabler of others, empowering and working through internal D&I stakeholders to effect organisation-wide change that staff will see, hear and experience. Scottish Government has a number of staff diversity networks which play a key role in raising profile of lived experience, shifting perceptions and helping to shape inclusive policies and practices. We have appointed senior Champions who support staff networks and act as advocates, forging connections and supporting cultural change in the workplace to enable us all to be ourselves at work. In the past year we have implemented mutual mentoring between members of our Race Equality Network and Senior Civil Service.

The Scottish Government is committed to becoming an exemplar employer on LGBTI equality and inclusion. We have undertaken Stonewall's Role Models and Allies training for our staff and Champions and are currently refreshing our existing trans policy to create a comprehensive policy and support package for trans, intersex and non-binary staff and managers.

In 2017-18 an average of 7.6 working days (2016-17: 7.4) were lost per staff year for the Scottish Government. The NHS Bodies in Scotland report their sickness absence rates based on contracted hours lost rather than days lost due to different shift patterns in the NHS Scotland workforce. The sickness absence rate across NHS Scotland for the year to 31 March 2018 was 5.4% of total contracted hours (2016-17: 5.2% of total contracted hours). Sickness absence rates for agencies and other consolidated bodies can be found in their individually published annual accounts.

During 2017-18 there were 45,697 male staff, 148,017 female staff and 9 who prefer not to say. Within these totals were 1,619 male and 1,282 female Senior Civil Servants or equivalent. These are measured as head count numbers and not full time equivalents as used in the staff numbers table.

Facility time used by recognised trade union representatives of the Scottish Government has been reported for the period between 1 April 2017 and 31 July 2018^[26].

Employment of Disabled People

The Scottish Government follows Civil Service good practice guidance on the employment of disabled people and has been awarded the Disability Confident Level 3 standard which recognises organisations' evidence of best practice in employing, retaining and developing disabled applicants and disabled staff. As such, the Scottish Government ensures that there is no discrimination on the grounds of disability and that access to employment and career advancement is based solely on merit, competence and suitability for the work.

The Scottish Government has also been awarded the Carers Kitemark for its policies and commitment to carers in the organisation and by carrying the "Happy to Talk Flexibly" strapline is open about the commitment to ensuring staff are able to work flexibly and have a positive work life balance.

Scottish Government is committed to reducing by half the employment gap between disabled and non-disabled people, and are developing a recruitment and retention plan to increase the proportion of disabled people in our workforce. This includes a programme of innovative work, in collaboration with disabled employees, to refresh our approach to reasonable adjustments and ensure that we design and deliver services that empower disabled people and remove unnecessary barriers in the workplace.

The average number of disabled employees employed by the Scottish Government, its Executive Agencies, Health Bodies and the Crown Office and Procurator Fiscal Service over the year to 31 March 2018 was 2,492 (2016-17: 1,791).

Losses and special payments

The following losses and special payments have been audited by the Scottish Government's auditors. Losses and special payments are in the nature of transactions which Parliament cannot be supposed to have contemplated when approving the annual Budget Act and subsequent Amendment Orders. The Scottish Public Finance Manual requires a formal approval procedure to regularise such transactions and their notation in the annual accounts.

Losses Statement

Portfolio	2017-18	2017-18	Restated 2016-17
	No of Cases	£m	£m
Finance and the Constitution	1	0.04	-
Health and Sport	4,551	3.64	3.11
Education and Skills	2	0.22	0.05
Economy, Jobs and Fair Work	1,395	4.44	1.67
Justice	534	0.06	0.48
Communities, Social Security and Equalities	1	0.002	-
Rural Economy and Connectivity	42	1.04	0.48
Culture, Tourism and External Affairs	1	0.01	-
Administration	19	0.01	0.20

Details of cases over £0.25m:

Portfolio	Details	2017-18
		£m
Rural Economy and Connectivity	A grant to support the building of a new processing facility but the scheme was subsequently abandoned.	0.80
Economy, Jobs and Fair Work	In year write offs relating to current and historic cases.	2.38

There was one case over £0.25m in 2016/17.

Special Payments

Portfolio	2017-18	2017-18	2016-17
	No of Cases	£m	£m
Finance and the Constitution	15	0.02	0.03
Health and Sport	1,096	32.53	32.89
Justice	283	3.67	1.53
Rural Economy and Connectivity	-	-	0.03
Administration	25	0.14	0.02

Details of cases over £0.25m:

Portfolio	2017-18	Details	2017-18	2016-17
	No of Cases		£m	£m
Health and Sport: NHS Boards:		Clinical Compensation Payments:
	2	Ayrshire and Arran Health Board	2.27	0.5
	4	NHS Dumfries and Galloway	1.90	-
	2	Fife Health Board	2.76	3.17
	-	Forth Valley Health Board	-	3.02
	4	Grampian Health Board	2.02	0.83
	-	Greater Glasgow and Clyde Health Board	-	3.14
	-	NHS Highland	-	0.35
	4	Lanarkshire Health Board	1.89	2.60
	3	Lothian Health Board	1.29	2.04
	2	Tayside Health Board	0.80	0.54
	-	NHS 24	-	0.53
	-	Western Isles Health Board	-	0.27
Justice	1	Industrial Tribunal - non-operational staff claim	2.45	-

Gifts

The Scottish Government made gifts in the year as follows:

Portfolio	2017-18	2017-18	2016-17
	No of Cases	£m	£m
Administration	93	0.002	0.002

There were no cases over £0.25m in 2017/18 (2016/17: £nil).

Principal Accountable Officer
24 September 2018