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These notes refer to the Public Finance and Accountability
(Scotland) 2000 (asp 1)
which received Royal Assent on 17 January 2000
PUBLIC FINANCE AND ACCOUNTABILITY
(SCOTLAND) ACT 2000
EXPLANATORY NOTES
INTRODUCTION
1. These Explanatory Notes have been
prepared by the Scottish Executive in order to assist the reader of
the Public Finance and Accountability (Scotland) Act 2000 (asp 1), which
received Royal Assent on 17 January 2000. They do not form part of the
Act and have not been endorsed by the Parliament.
2. The Notes should be read in conjunction
with the Act. They are not, and are not meant to be, a comprehensive
description of the Act. So where a section or schedule, or a part of
a section or schedule, does not seem to require any explanation or comment,
none is given.
THE ACT SECTION 1:
USE OF RESOURCES
General Purpose
3. This section, together with sections
2 and 3, paves the way for the introduction of resource budgeting and
accounting. This is a system whereby expenditure is authorised and accounted
for on an accruals basis. Accruals accounting links the accounting for
resources to when the resources are actually consumed. For example goods
and services are accounted for, and thus count against a resource budget,
when they are used, not when they are paid for. Capital assets are accounted
for over the life of the asset, and the budget will carry annual charges
reflecting the financing and opportunity costs of the asset.
4. Not all resource 'spending' has implications
for the actual handing over of cash in the same year; and not all cash
spending will count against a resource budget in that year. Taken together
with section 4, however, this section means that spending can only take
place if it is within both the approved resource budget and an
overall cash authorisation.
5. The Executive intends to introduce
resource budgeting as soon as possible; but initially will present budgets
in the traditional 'cash' way.
Subsection (1)
6. This subsection is intended to limit
the "use of resources". It ensures that the use of resources by the
Scottish Administration and other direct funded bodies must be authorised
on an annual basis by a Budget Act. The Budget Act may specify the purpose
for which the resources may be used and/or the maximum amount of resources
that may be used in the particular financial year to which the Budget
Act relates.
7. The other direct funded bodies are
those whose expenditure is, by virtue of statutory provision, payable
out of the Scottish Consolidated Fund i.e.-
(a) the Scottish Parliamentary Corporate Body
(SPCB), whose expenses are payable out of the Fund under 21(6) of
the Scotland Act 1998,
(b) Audit Scotland (established by section 10
of the Act), whose expenditure, so far as not met out of charges
income, will be payable out of the Fund under section 11(7) of the
Act,
(c) the Forestry Commissioners, whose expenditure
as regards Scotland is payable out of the Fund under section 41(4)
of the Forestry Act 1967, as amended by the Scotland Act 1998 (Cross-Border
Public Authorities) (Adaptation of Functions etc) Order 1999 (S.I.
1999/1747), and
(d) any other body or office-holder where
statutory provision is made for its expenditure to be "payable out
of the Scottish Consolidated Fund" (the Food Standards Act 1999
(c.28) would provide for expenditure of the proposed Food Standards
Agency to be payable out of the Fund).
Subsection (2)
8. This requires separate authorisation
for expenditure supported directly from the Scottish Consolidated Fund
and for expenditure supported by "accruing resources".
Subsection (3)
9. This defines the term "use of resources".
For the purposes of the Act, use of resources means, spending or consuming
or reducing the value of resources.
SECTION 2: EMERGENCY ARRANGEMENTS
General Purpose
10. This section makes provision for
temporary arrangements for authorising the use of resources in any financial
year where a Budget Act has not been agreed by the start of that financial
year. This is to enable the Scottish Administration and other bodies
dependent on funding derived from the Scottish Consolidated Fund to
continue to provide services on an interim basis until a Budget Act
can be enacted. Parallel provisions for the use of cash will be included
in Budget Acts.
Subsection (1)
11. Subsection (1) explains that if
a Budget Act has not been agreed before the start of a financial year,
then resources (including accruing resources) may be used in accordance
with the rules set out in subsections (2) and (3).
Subsection (2)
12. Subsection (2)(a) states that resources
used in the current financial year may only be used for the same purposes
as authorised in the previous year's Budget Act. Subsection (2)(b) limits
the amount of resources that may be used. It states that for each month
in the current financial year that resources are used under this procedure,
the amount of resources used may not exceed whichever is the greater
of:
(a) one-twelfth of any amount authorised for
the previous financial year, or
(b) the amount used for that purpose in the equivalent
month in the previous financial year.
Subsection (3)
13. This in effect provides that resources
must be used in accordance with the Budget Act for the financial year
in question when it is enacted.
SECTION 3: CONTINGENCIES
General Purpose
14. This section sets out contingency
arrangements to allow for the use of resources in certain circumstances
where the proposed use of resources has not been authorised by a Budget
Act. Parallel provisions on cash will be made in Budget Acts. This is
intended to cover instances where there is an urgent need, but no time
to seek Parliamentary approval. All use of the power must be reported
to the Parliament.
Subsection (1)
15. This explains that this section
applies where the Scottish Administration or any other direct funded
body proposes to use resources in any financial year without the authority
of a Budget Act relating to that year.
Subsection (2)
16. This subsection ensures that the
use of resources under these contingency arrangements must have the
authority of the Scottish Ministers.
Subsection (3)
17. This subsection sets out the circumstances
in which Scottish Ministers may authorise the use of resources where
there is no Budget Act authority. These are where:
(a) Scottish Ministers consider the use of resources
is necessary in the public interest; and
(b) resources are required so urgently that Budget
Act authority could not be obtained in time.
Subsection (4)
18. This limits the total amount of
the resources which the Scottish Ministers may authorise under this
section in any financial year to no more than 0.5% of the aggregate
amount of resources authorised at the beginning of the year by Budget
Act to be used in that year.
Subsection (5)
19. This ensures that where the use
of resources is authorised under this section, the Scottish Ministers
are required, as soon as possible, to lay before the Parliament a report
setting out the reasons for using these contingency arrangements.
SECTION 4: PAYMENTS OUT OF THE SCOTTISH CONSOLIDATED FUND
General purpose
20. This section, and sections 5 and
6, set out the rules for payment of sums out of the Scottish Consolidated
Fund which are contemplated by section 65(1)(c) of the Scotland Act
1998. They are intended to give effect to an annual budget process for
each financial year culminating in a Budget Act.
Subsection (1)
21. This ensures that payments from
the Scottish Consolidated Fund to meet the expenditure of the Scottish
Administration or of the other direct funded bodies may be made only
in accordance with the rules set out in this section and in sections
5 and 6 of the Act.
Subsection (2)
22. This subsection ensures that any
sum paid out of the Fund is within the "overall cash authorisation"
defined in subsection (4) (approved by the Scottish Parliament in a
Budget Act) for the financial year in which it is to be paid.
Subsection (3)
23. This subsection ensures that any
payment from the Scottish Consolidated Fund is for a use of resources
authorised by a Budget Act for that financial year under sections 1
to 3.
Subsection (4)
24. This defines the term "overall cash
authorisation" for a given financial year. For the purposes of the Act,
this term means the maximum amount that may be paid from the Fund in
that year. The amount is set in the Budget Act for the year.
Subsection (5)
25. This allows for a Budget Act to
make separate overall cash authorisations for the Scottish Administration
and each of the other direct funded bodies.
SECTION 5: CREDITS FOR PAYMENTS OUT OF THE FUND
General purpose
26. This section, as well as being part
of the rules for payment of sums out of the Scottish Consolidated Fund,
also makes the provision required by section 70(2)(a) of the Scotland
Act.
Subsection (1)
27. This ensures that payments from
the Scottish Consolidated Fund can only be made in accordance with a
credit granted on the Fund by the Auditor General for Scotland. A credit
in this context means a written authority.
Subsection (2)
28. This subsection is to ensure that
credits are only granted by the Auditor General at the request of the
Scottish Ministers.
Subsection (3)
29. This subsection prevents the Auditor
General from granting a credit where he/she considers that the proposed
payment from the Fund would not comply with sections 65(1) and (2) of
the Scotland Act 1998. Those provisions set out the circumstances under
which payments may be made from the Scottish Consolidated Fund.
Subsection (4)
30. This provision means that a credit
does not need to be granted by the Auditor General in respect of repayments
from the Fund made in accordance with section 6.
SECTION 6: REPAYMENTS FROM THE FUND
31. This section allows for repayments
from the Scottish Consolidated Fund. If a body or office holder pays
a sum into the Fund and it is then established that payment into the
Fund need not have taken place, then the sum may be repaid to the body
or office holder concerned. Any repayment must be approved by the Auditor
General for Scotland but the Auditor General need not issue a formal
credit for the repayment.
32. The purpose of this section is purely
to allow the correction of errors and to avoid an incentive for bodies
to hang on to money due to the Fund in case of error. Without such a
provision the only way to obtain repayment would be for a further authorisation
under a Budget Act.
SECTION 7: APPLICATION OF RECEIPTS
33. This section applies to receipts
of the Scottish Administration and other direct funded bodies received
in connection with accruing resources whose use was authorised in the
same or any earlier financial year. Such receipts may be used in the
same financial year in connection with any authorised use of resources
instead of being paid into the Scottish Consolidated Fund.
SECTION 9: KEEPER OF THE REGISTERS OF SCOTLAND: FINANCIAL ARRANGEMENTS
General Purpose
34. The purpose of this section is to
put in place financial arrangements for the Registers of Scotland (the
Department of the Keeper of the Registers of Scotland) having broadly
the same effect as the Trading Fund arrangements under which it currently
operates. The Registers of Scotland Executive Agency Trading Fund was
established in 1996 by an Order under the Government Trading Funds Act
1973 (the Register of Scotland Executive Agency Trading Fund Order 1996
(S.I. 1996/1004)). The Trading Fund is continued in existence until
31 March 2000 by transitional provisions put in place under the Scotland
Act (see article 22 of the Scotland Act 1998 (Transitory and Transitional
Provisions)(Finance) Order 1999 (S.I. 1999/441)). Under the arrangements
in this section the Keeper will be authorised to keep and apply the
income from fees (although the level of the fees will be controlled
by the Scottish Ministers under existing legislation). The Scottish
Ministers will be able to supply capital to the Keeper, either by loan
or by the issue of public dividend capital (broadly equivalent to equity
finance). The Keeper will be put under a financial duty by the Scottish
Ministers (currently a 6% return on net assets).
Subsection (1)
35. This ensures that the Keeper of
the Registers of Scotland is able to retain certain sums of money paid
to him and use these to meet his expenditure. He is able to retain money
that is paid to him in respect of the exercise of any of his functions.
Subsection (2)
36. This enables the Scottish Ministers
to issue public dividend capital to the Keeper.
Subsection (3)
37. This enables public dividend capital
deemed to have been issued to the Registers of Scotland Executive Agency
Trading Fund in terms of the Government Trading Funds Act 1973 to be
treated as if it had been issued by the Scottish Ministers under this
Act. This provision is to ensure that the same treatment is applied
to sums of public dividend capital deemed, before commencement of this
Act, to have been issued to the Trading Fund under the existing arrangements
and those issued under the Act after this Act comes into force.
Subsection (4)
38. This provision requires the Keeper
to make payments into the Scottish Consolidated Fund of any sums the
Scottish Ministers may determine as appropriate by way of a return of
the public dividend capital issued or deemed to have been issued to
the Keeper by the Scottish Ministers under the Act. It also requires
the Keeper to pay into the Scottish Consolidated Fund principal repayments
or interest in respect of sums deemed to have been issued to the Registers
of Scotland Executive Agency Trading Fund when the Fund was established.
The outstanding liabilities, as at 1 July 1999, of the Trading Fund
in respect of these sums were transferred to the Scottish Ministers
on that date by virtue of the Scotland Act 1998 (Transfer of Borrowing
of the Registers of Scotland Executive Agency Trading Fund) Order 1999
(S.I. 1999/1596). The Scottish Ministers are required to repay these
liabilities to the National Loans Fund by virtue of that Order and section
71(6) of the Scotland Act. This provision enables this outstanding debt
to continue to be serviced as part of the Registers of Scotland's
Subsection (5)
39. This enables the Scottish Ministers
to lend money to the Keeper on terms and conditions defined by them.
Subsection (6)
40. This ensures that interest charged
on a loan under subsection (5) is not less than the lowest rate of lending
from the National Loans Fund that applies on the day the loan is made.
This replicates provision set out in section 68(1) of the Scotland Act
1998.
Subsection (7)
41. This subsection requires the Keeper
to pay to the Scottish Ministers certain sums that relate to the liabilities
of the Scottish Ministers. The sums concerned are payments made by the
Scottish Ministers in terms of section 51 of the Scotland Act 1998 in
relation to the Keeper himself and to members of staff of the Scottish
Administration who have been assigned to assist the Keeper. These sums
include salary, allowances and contributions to pensions schemes.
Subsection (8)
42. This provision enables the Scottish
Ministers to specify the financial objectives the Keeper must achieve
in exercising his functions.
Subsection (9)
43. This requires that financial objectives
should be determined so as to ensure that the sums received by the Keeper
are sufficient to meet his expenditure, taking one year with another.
The provision is intended to allow for payments and expenditure in any
single financial year not to be equal, but for them to be broadly equal
over a period of years.
Subsection (10)
44. This makes clear that expenditure
in this section means expenditure by the Keeper in exercise of his functions
and that it includes payments he is required to make under this section.
This is the expenditure which the Keeper will be required to meet out
of his income.
Subsection (11)
45. In view of the detailed financial
arrangements for the Keeper of the Registers of Scotland put in place
by section 9(1) to (10), this subsection ensures that the general provisions
of Part 1 of the Act (with the exception of section 6) do not apply
to the use of resources by, and the cash expenditure and receipts of,
the Keeper.
SECTION 10: AUDIT SCOTLAND
General Purpose
46. This section makes provision for
the establishment of a new public sector audit service which is to be
known as Audit Scotland. Audit Scotland is to be a body corporate whose
functions are to provide the administrative support and services, etc
that the Auditor General for Scotland and the Accounts Commission for
Scotland require for the carrying out of their own (statutory) functions.
The more detailed arrangements necessitated by the establishment of
this new body are at schedule 2.
Subsection (1)
47. This states that a body corporate
known as "Audit Scotland" will be established, exercising the functions
outlined in this Act, or conferred on Audit Scotland by other enactments.
Subsection (2)
48. This subsection sets out the membership
of Audit Scotland. Audit Scotland will consist of the Auditor General,
the Chairman of the Accounts Commission for Scotland plus 3 other persons
appointed jointly by the Auditor General and the Chairman of the Accounts
Commission.
Subsection (3)
49. This subsection sets out Audit Scotland's
main function. It provides that Audit Scotland is to provide any assistance
and support required by the Auditor General and the Accounts Commission
in the course of their respective functions. Such assistance is to include
providing or arranging the provision of the property, staff and services
that the Accounts Commission or the Auditor General for Scotland may
need in order to be able to carry out their respective functions.
Subsection (4)
50. This allows the Auditor General
for Scotland and Accounts Commission to give Audit Scotland directions
relating to their own respective functions. By virtue of section 27(4)
such directions must be given in writing and may be varied and revoked.
Subsection (5)
51. This allows Audit Scotland to provide
audit services to any public body or office holder.
Subsection (6)
52. This subsection brings into effect
schedule 2 to this Act, which makes further provision about Audit Scotland.
SECTION 11: AUDIT SCOTLAND: FINANCIAL PROVISIONS
Subsection (1)
53. These provisions enable Audit Scotland
to make reasonable charges in respect of the following circumstances:
(a) services provided by Audit Scotland on a
voluntary basis to or in respect of another public body or office-holder
(see section 10(5)).
(b) audits of and reports on accounts required
to be undertaken under the Act under the control of the Auditor
General (sections 21 and 22), other than audits of the accounts
of the Scottish Administration and any other direct funded bodies
(sections 19(1) to 19(3)) or audits of consolidated public accounts
(section 20).
(c) economy, efficiency and effectiveness examinations
carried out under the Act under the control of the Auditor General
(section 23), other than examinations in respect of office holders
in the Scottish Administration or any other direct funded body.
(d) audits of accounts in pursuance of Part VII
of the Local Government (Scotland) Act 1973, which mainly deals
with the audit of local authority accounts under the control of
the Accounts Commission.
(e) studies undertaken under sections 97A or 105A
of the 1973 Act, which mainly concerns studies in relation to local
authorities under the control of the Accounts Commission.
(f) work undertaken on behalf of the Accounts
Commission under section 1 of the Local Government Act 1992. This
concerns the giving of directions requiring local authorities and
other relevant bodies to publish performance standards relating
to their activities in any financial year.
Subsection (2)
54. This provides that charges may be
set on a case by case basis or may be set in relation to particular
classes of case.
55. This provision requires Audit Scotland
to ensure that the charges received by them under subsection (1) are
broadly equivalent to the expenditure incurred by them in connection
with the activities in respect of which the charges are imposed, taking
one year with another. The provision is intended to ensure that excessive
charges cannot be levied, and equally that sufficient funds are received
to cover costs. But it also recognises that income and expenditure in
any single financial year may not be precisely equal, by allowing for
income and expenditure to be considered over a period of years.
Subsection (4)
56. This directs that charges are payable
by the body or office holder whose accounts are being audited, or in
respect of whom an examination or study is carried out or a direction
given.
Subsection (5)
57. This provides that where an examination
or study is carried out that involves more than one body or office holder,
Audit Scotland shall determine what proportion of the charge each body
should pay. This may be the case in respect of some studies carried
out under the control of the Accounts Commission in relation to local
authorities.
Subsection (6)
58. This ensures that charges received
by Audit Scotland are retained and used to meet the expenditure incurred
by it in connection with the activities for which the charges are imposed.
Subsection (7)
59. This ensures that any other sums
received by Audit Scotland are to be paid into the Fund, unless any
enactment (including the Public Finance and Accountability (Scotland)
Act itself) authorises such sums to be applied for another purpose,
such as meeting expenses incurred by Audit Scotland.
Subsection (8)
60. This provides that any expenditure
of Audit Scotland which is not met by charges is payable from the Scottish
Consolidated Fund. In general terms, this covers expenditure on audits
and studies in relation to the accounts of the Scottish Administration
and the other direct funded bodies.
Subsection (9)
61. This subsection requires Audit Scotland
to prepare proposals for its use of resources and expenditure for each
financial year and submit these to the Scottish Commission for Public
Audit, which is constituted under section 12, which is required to examine
the proposals and report on them to the Parliament.
SECTION 12: SCOTTISH COMMISSION FOR PUBLIC AUDIT
General Purpose
62. This section establishes the Scottish
Commission for Public Audit which is to: examine the proposed budget
of Audit Scotland (section 11(9)); appoint the auditors of Audit Scotland
(section 25(1)); initiate value for money examinations into Audit Scotland
(section 25(4)); consider the audit and value for money reports and
ensure such reports are both laid before the Parliament and published
(section 25(6)). Detailed arrangements for the management of the Commission
are at schedule 3 to the Act.
Subsection (1)
63. This subsection establishes the
Scottish Commission for Public Audit and provides for it to have the
functions conferred on it by the Act.
Subsection (2)
64. This states that the Commission
will comprise the convenor of the Audit Committee and 4 other members
of the Parliament appointed in accordance with standing orders.
Subsection (3)
65. This gives the Commission the powers
to require Audit Scotland to provide it with the information it needs.
Subsection (4)
66. This subsection requires the Commission
to report periodically to the Scottish Parliament.
Subsection (5)
67. This subsection gives effect to
the detailed arrangements set out in schedule 3.
SECTION 13: AUDITOR GENERAL FOR SCOTLAND
General Purpose
68. The office of Auditor General for
Scotland was established in section 69 of the Scotland Act 1998. This
section makes provision for payment of the Auditor General for Scotland's
salary, pension and expenses. It also makes provision in connection
with the discharge of his functions.
Subsection (1)
69. This provides that the salary and
allowances of the Auditor General are to be determined by, the Scottish
Parliamentary Corporate Body (the SPCB).
Subsections (2) to (4)
70. These provisions are to ensure that
Audit Scotland pay the salary and allowances of, and any expenses incurred
by, the Auditor General and make arrangements for the post to be pensionable.
Provision is included for Audit Scotland to contribute to a pension
scheme or to establish and administer one, as well as to make arrangements
for pension and related payments to be made to any person who has ceased
to hold the position of Auditor General.
Subsection (5)
71. This subsection makes provision
for the resignation and retirement of the Auditor General and for the
SPCB to set the other terms and conditions of the appointment.
Subsections (6) to (8)
72. These subsections make provision
as to the extent to which the Auditor General can delegate his/her functions.
The functions under sections 21(4) and 23(8) must be performed by the
Auditor General personally except when he is incapable on medical or
other grounds. Subsection (8) ensures that the Auditor General remains
ultimately responsible for his functions even though he may delegate
these.
Subsections (9) to (11)
73. These provisions deal with temporary
vacancies in the office of Auditor General, thereby enabling the public
audit service to continue functioning under a person appointed by the
Scottish Commission for Public Audit on a temporary basis until a new
Auditor General can be appointed.
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