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The Scottish Public Finance Manual (SPFM) is issued by the Scottish Ministers to provide guidance on the proper handling and reporting of public funds.
1. This section gives general guidance on establishing and operating audit committees and providing members of audit committees with support in their roles. The guidance is aimed at all organisations to which the Scottish Public Finance Manual (SPFM) is directly applicable, including the core Scottish Government (SG), the Crown Office and Procurator Fiscal Service (COPFS), SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG.
Key points
2. All accounting entities to which the SPFM is directly applicable should establish audit committees. The board (or Accountable Officer) should establish an audit committee of at least three members, all of whom should be either non-executive directors or independent external members.
3. Committees should be chaired by a non-executive director and at least one of the committee members should have recent and relevant financial experience.
4. All audit committees in organisations to which the SPFM is directly applicable are subject to the guidance in the Audit Committee Handbook published by the SG. A degree of flexibility will be appropriate in applying the guidance in the Handbook, particularly with regard to smaller accounting entities.
6. Generally accepted good practice indicates that the boards (and Accountable Officers) of individual accounting entities should ensure that effective arrangements are in place to provide assurance on risk management, governance and internal control. In this respect, the board (and Accountable Officer) should be advised independently by an audit committee. All such bodies to which the SPFM is directly applicable should therefore establish audit committees.
7. The board (or Accountable Officer) should establish an audit committee of at least three members. The members should be either non-executive directors or, if there are insufficient non-executives, independent external members. Committees should be chaired by a non-executive director and at least one of the committee members should have recent and relevant financial experience. The terms of reference of the audit committee, including its role and the authority delegated to it by the board or Accountable Officer, should be made available publicly.
Audit Committee status
8. The audit committee supports the board and Accountable Officer with regard to their responsibilities for issues of risk, control and governance and associated assurance through a process of constructive challenge. It has no authority in its own right, either over the management of risk, control, governance etc or over the operations of those bodies which conduct audit and assurance work in the organisation. It may, however, offer opinions or recommendations on the way in which such management is conducted. An audit committee that is asked to act as a risk committee needs to take particular care to avoid taking up the executive risk management function and to maintain its independence.
Audit Committee handbook
9. All audit committees in organisations to which the SPFM is directly applicable are subject to the guidance in the Audit Committee Handbook published by the SG setting out the fundamental principles of membership and work of audit committees, including explanatory good practice notes. A degree of flexibility will be appropriate in applying the guidance in the Handbook, particularly with regard to smaller accounting entities.
10. Guidance for Audit and Risk Committee Members in the Core Scottish Government is associated guidance, entirely consistent with the SG Audit Committee Handbook, which has been produced specifically for members of the Scottish Government SG Audit and Assurance Committee (SGAAC) and Director General Assurance Meetings, which taken together cover the core SG.
Reporting significant problems
11. Audit committees in the COPFS, SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG exist essentially to service the specific assurance needs of their Accountable Officers and boards. However, they also have a role in providing the assurance required to underpin the governance statement provided by the Principal Accountable Officer (the SG Permanent Secretary) as part of the consolidated accounts of the SG.
12. Audit committees in the COPFS, SG Executive Agencies, non-ministerial departments and bodies sponsored by the SG are therefore required, at the earliest opportunity, to notify the relevant Director General Assurance Meetings if they consider that they have identified a significant problem which may have wider implications. (Where the SG sponsorship role is undertaken by an SG Executive Agency it is the Agency audit committee that should be notified in the first instance.) Director General Assurance meetings will in turn report relevant issues to SGAAC.
Updated Annex 2 Internal control checklist for Certificates of Assurance, added FGN 2025/01 re CoA checklist and added in a word version of the checklist
updated missing text in document SPFM - Non-Ministerial Offices model framework document July 2024
Adding in FGN 2024/03 re the updated AO Spend Control Template and Guidance
Updating the SRO Appointment letter in the documents section to include a point on construction projects in the Annex
Executive agencies model framework document updated.
Non-Ministerial Offices model framework document updated.
Updating the SRO Appointment letter in the documents section to this years dates
Updated link to 'On Board: A Guide for Members of Statutory Boards' within Governance statements chapter.
Updates made to model framework document templates.
Updates made to text within Procurement chapter.
Replaced non-ministerial office model framework document and advisory non-departmental public bodies model framework with updated versions.
Document updated with an additional date - Settlement Agreement supporting documentation - final confirmation of terms
Replaced Non-Ministerial Offices model framework document
Updates to the Settlement, Severance, Early Retirement and Redundancy section. The main section and Annex's A, B C have all been updated along with updated documents and a Finance Guidance Note to explain the changes
Updated the Certificates of Assurance chapter, Annex 2 with the CoA checklist questions for 2023/24 and added a Finance Guidance note outling the changes.
Updates made to proportionate due diligence wording, Accountable Officer tests guidance, risk exposure guidance, public bodies duties, monitoring and management, exit arrangements.
Procurement chapter updated.
Updated 'Major investment projects' paragraph 12 and the SRO appointment letter.
