UKSBS Sponsorship Framework Document: central government company

Question 1

General background and information

Accepted Answer

1. Introduction

1.1 This guidance should be read in conjunction with Chapter 7 of Managing Public Money and its accompanying annexes. It includes a specimen framework document that should be complied with as set out in Managing Public Money. Departures from the specimen framework document should be agreed first with the Sponsor department, Corporate Governance Team or Financial Governance Team or equivalent, before seeking clearance from Principal Accounting Officer of the Sponsor department and cleared with the appropriate HM Treasury Spending Team and the Treasury Officer of Accounts.

1.2 A framework document sets out arrangements for departments to monitor and understand their Arm’s Length Bodies’ strategy, performance, and delivery. Framework documents constitute a core constitutional document of the Arm’s Length Body (ALB) and it is imperative that Accounting Officers, Board members and senior officials are familiar with them, ensure they are kept up to date and use them as a guide to govern the collaborative relationship between the Arm’s Length Body, the Sponsor department, and the rest of government. There is a joint obligation on officials and employees within the ALB and within the Sponsor department to be familiar with, update and comply with its terms as appropriate. Departments are able to insert additional terms to the framework document.

1.3 This specimen framework document is intended for central government companies. These may be limited by shares or by guarantee. Due to being part of central government these may have higher level of financial control than might be expected of that between a shareholder and Company in the private sector. It will be important to ensure expectations of directors under their statutory responsibilities under the Companies Act marry with the requirements of central government guidance. Where such conflicts are common it may be appropriate to amend the articles of the Company or consider where exemption to central government requirements may be possible or appropriate.

1.4 There is an alternative specimen framework document intended for the most common form of Arm’s Length Body, the Non-Departmental Public Body (NDPB). These are usually created by statute. While central government companies may also be administratively classified as Non-Departmental Public Bodies for companies the central government company specimen should be used in order to ensure that the interactions between Companies Act obligations and obligations as public body are reflected.

1.5 As central government entities Parliament will have similar expectations to those concerning NDPBs. This will be an expectation requiring departmental and financial oversight from the department and from the centre while maintaining functional independence as set out in founding legislation or Company articles and the policy intent behind the use of the corporate form. (MPM 7.1.3)

1.6 It may also be appropriate to adapt this framework document for Charities that are classified to central government. Under those circumstances steps should be taken to ensure that the framework does not conflict with the law in relation to charitable bodies and HM Treasury should be engaged early in the framework drafting process..

1.7 It may also be appropriate to use the central government company specimen for ALBs which have material governance complexity, and/or a significant commercial element or significant private sector interface. Departments considering this should consult with HM Treasury Spending teams and may also seek advice from the Cabinet Office Public Bodies Governance Team and from UK Government Investments (UKGI), the government’s centre of excellence in corporate finance and corporate governance.

1.8 When establishing central government companies, public corporations or ALBs whose function is of material complexity, and/or which have a significant commercial element or significant private sector interface, UKGI should be consulted. In the case of such organisations, departments should also consider whether UKGI is best placed to deliver the shareholder function itself on behalf of the department, or if not, systematically seek the advice and use the expertise of UKGI during the life of such Arm’s Length Bodies.

1.9 As set out in MPM Annex 7.2 departures from the specimen framework document should be clearly signposted, explained and justified. However, it may be that Sponsors and the Company agree additions to the specimen that reflect their particular circumstances and working arrangements. Such additions should not be viewed as departures save where they are in conflict with or limit the obligations and duties and expectations as set out in these core terms.

1.10 When drafting legislation or articles for the creation of a new company expected to be classified as central government and an NDPB it may be appropriate to consider the expectations as set out in this framework specimen to ensure that appropriate and consistent standards of corporate governance are met.

2. Purpose of the document

2.1 This framework document has been agreed between The Department for Science, Innovation and Technology (referred to as ‘the Department’ or ‘DSIT’ in this document) and UK Shared Business Services Ltd (referred to as ‘the Company’ in this document) in accordance with HM Treasury’s handbook Managing Public Money (“MPM”) (as updated from time to time) and has been approved by HM Treasury.

2.2 The framework document sets out the broad governance framework within which the Company and the Department for Science, Innovation and Technology will operate. It sets out the Company’s core responsibilities, describes the governance and accountability framework that applies between the roles of the Department for Science, Innovation and Technology and the Company, and sets out how the day-to-day relationship works in practice, including in relation to governance and financial matters.

2.3. The document does not convey any legal powers or responsibilities but both parties agree to operate within its terms.

2.4. References to framework document sets out the broad governance framework within which the Company and the Department for Science, Innovation and Technology will operate. It sets out the Company’s core responsibilities, describes the governance and accountability framework that applies between the roles of the Department for Science, Innovation and Technology and the Company, and sets out how the day-to-day relationship works in practice, including in relation to governance and financial matters.

2.5. Copies of the document and any subsequent amendments have been placed in the Libraries of both Houses of Parliament and made available to members of the public via UKSBS site.

2.6. This framework document should be reviewed regularly and updated at least every 3 years unless there are exceptional reasons that render this inappropriate that have been agreed with HM Treasury and the Principal Accounting Officer of the Sponsor department. The latest date for review and updating of this document is July 2027.

2.7. The framework will reflect formal governance documentation relating to the Company already in existence to avoid duplication or contradiction. These are:

The Partnership Services Agreement between the Company and the Departments for Science, Innovation and Technology, for Energy Security and Net Zero, and for Business and Trade, and UK Research and Innovation (UKRI);
The Company’s Shareholders’ Agreement and Articles of Association;
The Company’s customer governance arrangements.

3. Objectives

3.1 The Department for Science, Innovation and Technology and the Company share the common objective of delivering shared services to a number of departments and ALBs, that include ensuring people, suppliers and grants are paid accurately and on time. To achieve this the Company and the Department for Science, Innovation and Technology will work together in recognition of each other’s roles and areas of expertise, providing an effective environment for the Company to achieve its objectives through the promotion of partnership and trust and ensuring that the Company also supports the strategic aims and objectives of the Department for Science, Innovation and Technology and wider government as a whole.

4. Classification and Ownership

4.1. The Company is classified as a central government organisation by the ONS/HM Treasury Classifications team.

4.2. It is administratively classified as a Non-Departmental Public Body by the Cabinet Office.

4.3 The Company is non-profit making and limited by shares. It is owned by the Department for Science, Innovation and Technology (51% shareholding), the Department for Business and Trade (DBT) (7% shareholding), the Department for Energy Security and Net Zero (DESNZ) (7% shareholding), and UKRI (35% shareholding).

Question 2

Purpose, aims and duties

Accepted Answer

5. Purpose

5.1 The Company provides shared services to government, working in partnership with its Shareholders (who are sometimes referred to as owners) to help in the advancement of the UK’s economy and society. It provides HR and Payroll, Finance, Procurement and IT business services and specialist expertise to its Shareholders and other public sector clients. It operates entirely within the public domain and is subject to public sector accounting and financial disciplines, to public and company law and operates as a Public Contract Regulations 2015 Regulation 12 entity. Its purpose, power and duties are set out in the Articles of the Company and Shareholders’ Agreement.

6. Aims

6.1 The Company’s strategic aims are to become the leading public sector business service provider, offering ever-improving user experience, utilising standardised processes and increasing value for money for the taxpayer.

6.2 The Company’s vision is to be the leading UK public sector business service provider, actively sought by public bodies.

6.3 The Company’s mission is to provide high quality and easy-to-use business services that add value to its partners, so they can focus on achieving the best outcomes for the British people and the UK economy.

6.4 The strategic priorities of the Company, as set out in its five-year business plan 2024-2029, are:

Service excellence - to deliver the highest possible quality of service to our partner organisations, within the bounds of their affordability;
User and client experience - user and client experience of the Company’s services will be more mobile, digital, intuitive, and engaging;
Cost transparency - the cost to the public is evidenced and understood, with further cost reductions and service improvements constantly sought;
Organisational design - adopting a more agile and flexible approach, reacting to external and internal demands, and driving continuous improvement;
Engaged workforce - develop the capacity and capability in the organisation to meet the evolving concurrent demands of quality service and major programme delivery.

Question 3

Role of the department as shareholder

Accepted Answer

7. The Responsible Minister

7.1. The Parliamentary Under-Secretary of State for the Department of Science, Innovation and Technology will account for the Company on all matters concerning the Company in Parliament on behalf of its Shareholders.

7.2 Through the exercise of these powers the Minister:

is responsible for the policy framework within which the Company operates;
provides guidance and direction to ensure the strategic aims and objectives of the Company are consistent with those of the Department and government;
delegates authority to the Department for Science, Innovation and Technology’s Chief Operating Officer to act on behalf of the Shareholder and approve the Company business plan;
has a power of approval in relation to the appointment of the CEO and Chair once unanimous agreement has been received by the Shareholders;
has a power of approval in relation to Independent Non-Executive Directors once unanimous agreement has been received by the Shareholders.

8. Other Shareholder Reserved Matters

8.1 The responsible Minister and CEO, as accounting officer, is answerable to Parliament for all matters concerning the Company.

8.2 In addition, the Shareholders will review and, if in agreement, give prior written approval to the following “Shareholder Reserved Matters”:

Business Plan (as defined in paragraph 21 below) (following development and updating by the Board, the Shareholders will review and approve this annually);
Matters regarding spending approvals acquisitions, disposals, and joint ventures in line with delegations as set out in the delegation letter;
Such other matters as may be appropriate and proportionate as set out within the Shareholders’ Agreement.

8.3 Each Shareholder shall be entitled to require the Board to convene a general meeting by notice in writing to the Secretary of the Company at any time to consider and propose a resolution in respect of any matter regarded by that Shareholder as a strategic objective of the Company or a significant decision affecting the Company.

8.4 The Shareholder is committed to giving the Board the freedom to operate the Company in line with the spirit of this framework document and in accordance with their statutory, regulatory, common law and fiduciary duties. Decisions on the day-to-day management of the Company will be taken by the CEO and the Executive Team.

9. The Principal Accounting Officer (PAO)

9.1 The Principal Accounting Officer is the Permanent Secretary of the Department for Science, Innovation and Technology.

9.2 The Principal Accounting Officer of the Department for Science, Innovation and Technology designates the Chief Executive as the Company’s Accounting Officer and ensures that they are fully aware of their responsibilities. The PAO issues a letter appointing the Accounting Officer, setting out their responsibilities and delegated authorities.

9.3 The respective responsibilities of the PAO and Accounting Officers for the Company are set out in Chapter 3 of Managing Public Money.

9.4 The PAO is accountable to parliament for the issue of any grant-in-aid to the Company.

9.5 The PAO is also responsible for advising the responsible Minister on:

an appropriate framework of objectives and targets for the Company in the light of the Department’s wider strategic aims and priorities;
an appropriate budget for the Company in the light of the Sponsor department’s overall public expenditure priorities;
how well the Company is achieving its strategic objectives and whether it is delivering value for money; and
via the Sponsorship team the exercise of the Ministers’ statutory responsibilities concerning the Company as outlined above.

9.6 The PAO via the sponsorship team is also responsible for ensuring arrangements are in place in order to:

monitor the Company’s activities and performance.
address significant problems in the Company, making such interventions as are judged necessary.
periodically carry out an assessment of the risks both to the Department and the Company’s objectives and activities in line with the wider Departmental risk assessment process.
inform the Company of relevant government policy in a timely manner; and
bring Ministerial or Departmental concerns about the activities of the Company to the Company’s full Board, and, as appropriate to the Departmental Board requiring explanations and assurances that appropriate action has been taken.

10. The role of the Sponsorship Team

10.1 The Shared Services Management Team is the primary contact for the Company and is responsible for delivering the sponsor role and associated activities. The responsible Senior Civil Servant for this relationship is the Chief Operating Officer in the Department for Science, Innovation and Technology. They are the main source of advice to the responsible Minister on the discharge of their responsibilities in respect of the Company. They also support the PAO on their responsibilities toward the Company.

10.2 Officials of the Shared Services Management Team will liaise regularly with Company officials to review performance against plans, achievement against targets and expenditure against its DEL and AME allocations. The Shared Services Management Team will also take the opportunity to explain wider policy developments that might have an impact on the Company.

11. The role of the Shareholder Representative(s)

11.1 The Shareholder Representative is responsible for discharging the responsibilities of the Shareholders and will seek regular input from the Department.

11.2 The Shareholder Representative shall:

promote effective objectives, business planning and performance against the business plan;
promote the organisational capability of the Company to deliver against the business plan;
promote effective leadership (high quality Boards and senior management);
promote effective relationships between the Shareholder, Shareholder representative on the Board and the Company; and
support and supplement the activities outlined above by providing experienced Non-Executive Director(s) on to the Board of the Company.

12.1 Any disputes between the Sponsor department and the Company will be resolved in as timely a manner as possible.

12.2 The Department for Science, Innovation and Technology and the Company will seek to resolve any disputes through an informal process in the first instance. If this is not possible, then a formal process, overseen by the Senior Sponsor, will be used to resolve the issue. Failing this, the Senior Sponsor will ask the relevant Director General to oversee the dispute. They may then choose to ask the Permanent Secretary to nominate a Non-Executive Member of the Department’s Board to review the dispute, mediate with both sides and reach an outcome, in consultation with the Minister.

13. Freedom of Information requests

13.1 Where a request for information is received by either party under the Freedom of Information Act 2000, or the Data Protection Act 1998 or 2018, the party receiving the request will consult with the other party prior to any disclosure of information that may affect the other party’s responsibilities.

Question 4

The company governance and structure

Accepted Answer

14. Governance and Accountability

14.1 The Company shall operate corporate governance arrangements that, so far as practicable and in the light of the other provisions of this framework document or as otherwise may be mutually agreed, accord with good corporate governance practice and applicable regulatory requirements and expectations.

14.2 In particular (but without limitation), the Company should:

comply with the principles and provisions of the Financial Reporting Council’s UK Corporate Governance Code (as amended and updated from time to time) to the extent appropriate to the Company or specify and explain any non-compliance in its annual report;
comply with the principles and provisions of the Corporate Governance in Central Government Departments Code of Good Practice to the extent appropriate to the Company;
comply with Managing Public Money;
in line with Managing Public Money have regard to the relevant Functional Standards[^1] as appropriate and in particular those concerning Finance, Commercial and Counter Fraud; and
take account of and comply with, the codes of good practice and guidance set out in this framework document, as they apply to central government companies.

14.3 In line with Managing Public Money Annex 3.1, the Company shall provide an account of corporate governance in its annual governance statement including the Board’s assessment of its compliance with the Code with explanations of any material departures to the extent appropriate to the Company. Where the Company does intend to materially depart from the Code, the Sponsor should be notified in advance and their agreement sought to this approach.

15. The Chief Executive Appointment

15.1 The Chief Executive of the Company is appointed by the unanimous resolution of the Shareholders in accordance with the Company’s Articles of Association.

Responsibilities of the Company’s Chief Executive as accounting officer

15.2 The Chief Executive as Accounting Officer is personally responsible for safeguarding the public funds for which they have charge; for ensuring propriety, regularity, value for money and feasibility in the handling of those public funds; and for the day-to-day operations and management of the Company. In addition, they should ensure that the Company as a whole is run on the basis of the standards, in terms of governance, decision-making and financial management, that are set out in Box 3.1 of Managing Public Money. These responsibilities include the below and those that are set in the Accounting Officer appointment letter issued by the Principal Accounting Officer of the Sponsor department.

Responsibilities for accounting to parliament

15.3 The accountabilities include:

signing the accounts and ensuring that proper records are kept relating to the accounts and that the accounts are properly prepared and presented in accordance with any directions issued by the Secretary of State;
preparing and signing a Governance Statement covering corporate governance, risk management and oversight of any local responsibilities, for inclusion in the annual report and accounts;
ensuring that effective procedures for handling complaints about the Company are established and made widely known within the Company;
acting in accordance with the terms of Managing Public Money and other instructions and guidance issued from time to time by the Department, HM Treasury and the Cabinet Office;
ensuring that as part of the above compliance they are familiar with and act in accordance with:
- their fiduciary duties under the Companies Act;
- any governing legislation;
- this framework document;
- any delegation letter issued to body as set out in paragraph 17.1;
- any elements of any settlement letter issued to the Sponsor department that is relevant to the operation of the Company; and
- any separate settlement letter that is issued to the Company from the Sponsor department.
ensuring they have appropriate internal mechanisms for the monitoring, governance and external reporting regarding compliance with any conditions arising from the above documents; and
giving evidence, normally with the PAO, when summoned before the PAC on the Company’s stewardship of public funds.

Responsibilities to the Department for Science, Innovation and Technology

15.4 Responsibilities to the Department for Science, Innovation and Technology include:

establishing with UKRI and the Departments for Business and Trade; and for Energy Security and Net Zero in conjunction with the Company’s Board, the Company business plan in the light of the Department’s wider strategic aims and agreed priorities;
informing the Department of progress in helping to achieve the Department’s policy objectives and in demonstrating how resources are being used to achieve those objectives; and
ensuring that timely forecasts and monitoring information on performance and finance are provided to the Department; that the Department is notified promptly if over or under spends are likely and that corrective action is taken; and that any significant problems whether financial or otherwise, and whether detected by internal audit or by other means, are notified to the Department in a timely fashion.

Responsibilities to the Board

15.5 The Chief Executive is responsible for:

advising the Board on the discharge of the Company responsibilities as set out in this document, the Articles of Association, the Company’s Shareholders’ Agreement, and in any other relevant instructions and guidance that may be issued from time to time;
advising the Board on the Company performance compared with its aim[s] and objectives;
ensuring that financial considerations are taken fully into account by the Board at all stages in reaching and executing its decisions, and that financial appraisal techniques are followed.

Managing conflicts

15.6 The Chief Executive should follow the advice and direction of the Board, except in very exceptional circumstances with a clear cut and transparent rationale for not doing so.

15.7 The Company’s accounting officer (the CEO) must take care that their personal legal responsibilities do not conflict with their duties as a Board member. In particular, the Accounting Officer should vote against any proposal which appears to cause such a conflict; it is not sufficient to abstain.

15.8 If the Chair or Board of the Company is minded to instruct its accounting officer to carry out a course inconsistent with their duties as accounting officer, then the accounting officer should make their reservations clear, preferably in writing. If the Board is still minded to proceed the Company accounting officer should then:

ask the Accounting Officer of the Sponsor department to consider intervening to resolve the difference of view, preferably in writing;
if the Board’s decision stands, seek its written direction to carry it out, asking the Sponsor department to inform HM Treasury;
proceed to implement without delay; and
follow the routine in paragraph 3.6.6 of Managing Public Money

16. The Chairperson and Board

Composition of the Board

16.1 The Company will have a Board in line with good standards of Corporate Governance. The role of the Board is outlined at paragraph 16.11, in accordance with the purposes as set out above, their statutory, regulatory, common law duties and their responsibilities under this framework document. Detailed responsibilities of the Board shall be set out in the Board terms of reference. Remuneration of the Board will be disclosed in line with the guidance in the Government Financial reporting manual.

16.2 The Board will consist of a Chairperson, together with the Chief Executive and a number of Non-Executive Directors (NEDs) that have a balance of skills and experience appropriate to directing the Company’s business. The majority of the NEDs on the Board should be nominated by Shareholders, alongside at least two independent Non-Executive Directors. There should be members who have experience of its business including but not limited to, operational delivery, stakeholder engagement, risk, commercial, finance, transformation, digital technology, corporate services such as HR, and performance management.

Board Committees

16.3 The Board may set up such committees as necessary for it to fulfil its functions. As is detailed below at a minimum this should include an Audit and Risk Committee chaired by a Non-Executive Director of the Board with appropriate skills, knowledge, and experience.

16.4 While the Board may make use of committees to assist in its consideration of appointments, succession, audit, risk, and remuneration it retains responsibility for, and endorses, final decisions in all of these areas. The Chair should ensure that sufficient time is allowed at the Board for committees to report on the nature and content of discussion, on recommendations, and on actions to be taken.

16.5 Where there is disagreement between the relevant committee and the Board, adequate time should be made available for discussion of the issue with a view to resolving the disagreement. Where any such disagreement cannot be resolved, the committee concerned should have the right to report the issue to the Sponsor team, Principal Accounting Officer, and responsible Minister. They may also seek to ensure the disagreement or concern is reflected as part of the report on its activities in the annual report.

16.6 The Chair should ensure Board committees are properly structured with appropriate terms of reference. The terms of each committee should set out its responsibilities and the authority delegated to it by the Board. The Chair should ensure that committee membership is periodically refreshed and that individual Non-Executive Directors are not over-burdened when deciding the Chairs and membership of committees.

Appointments to the Board

16.7 The Chairperson is appointed by unanimous agreement of the Shareholders. The responsible Minister endorses the appointment.

16.8 Independent Non-Executive Directors are appointed by unanimous agreement of the Shareholders on recommendation from the Company Board. The responsible Minister endorses the appointment.

16.9 Non-Executive Directors nominated by Shareholders are appointed by the Company Board.

16.10 All appointments should have regard to the principle that appointments should reflect the diversity of the society in which we live, and appointments should be made taking account of the need to appoint Boards which include a balance of skills and backgrounds.

Duties of the Board

16.11 The Board is specifically responsible for:

determining the Company’s mission and vision and supporting values to be promoted throughout the Company;
establishing and taking forward the strategic aims and objectives of the Company consistent with its overall strategic direction and within the policy and resources framework determined by the Secretary of State;
providing effective leadership of the Company within a framework of prudent and effective controls which enables risk to be assessed and managed;
ensuring the financial and human resources are in place for the Company to meet its objectives;
reviewing management performance;
determining Company policies;
ensuring that the Board receives and reviews regular financial and management information concerning the management of the Company;
ensuring that it is kept informed of any changes which are likely to impact on the strategic direction of the Company’s Board or on the attainability of its targets, and determining the steps needed to deal with such changes and where appropriate bringing such matters to the attention of the responsible Minister and Principal Accounting Officer via the Executive team, Sponsorship team or directly;
ensuring that any statutory or administrative requirements for the use of public funds are complied with; that the Board operates within the limits of its statutory authority and any delegated authority agreed with the Sponsor department, and in accordance with any other conditions relating to the use of public funds; and that, in reaching decisions, the Board takes into account guidance issued by the Sponsor department;
ensuring that as part of the above compliance they are familiar with:
this framework document;
- any delegation letter issued to the body;
- any elements of any settlement letter issued to the Sponsor department that is relevant to the operation of the Company; and
- any separate settlement letter that is issued to the Company from the Sponsor department; and
- that they have appropriate internal mechanisms for the monitoring, governance and external reporting regarding any conditions arising from the above documents and ensure that the Chief Executive and the Company as a whole act in accordance with their obligations under the above documents.
demonstrating high standards of corporate governance at all times, including by using the independent audit committee to help the Board to address key financial and other risks;
- recommending the appointment of the Chief Executive to the Shareholders for unanimous approval, and in consultation with the Department, set performance objectives and remuneration terms linked to these objectives for the Chief Executive which give due weight to the proper management and use and utilization of public resource;
- recommending to Shareholders the approval of business plans;
- putting in place mechanisms for independent appraisal and annual evaluation of the performance of the Chair by the Audit Committee Chair, taking into account the views of relevant stakeholders. The outcome of that evaluation should be made available to the responsible Minister; and
- determining all such other things which the Board considers ancillary or conducive to the attainment or fulfilment by the Company of its objectives.
- The Board should ensure that effective arrangements are in place to provide assurance on risk management, governance and internal control;
- The Board should make a strategic choice about the style, shape and quality of risk management and should lead the assessment and management of opportunity and risk.
- The Board should ensure that effective arrangements are in place to provide assurance over the design and operation of risk management, governance, and internal control in line with the Management of Risk – Principles and Concepts (The Orange Book). The Board must set up an Audit and Risk Assurance Committee chaired by an independent and appropriately qualified non-executive member to provide independent advice and ensure that the Department’s Audit and Risk Assurance Committee are provided with routine assurances with escalation of any significant limitations or concerns. The Board is expected to assure itself of the adequacy and effectiveness of the risk management framework and the operation of internal control.

The Chair’s role and responsibilities

16.12 The Chair is responsible for leading the Board in the delivery of its responsibilities. Such responsibility should be exercised in the light of their duties and responsibilities as set out in the Chair’s letter of appointment and terms and conditions, the statutory authority governing the Company, this document and the documents and guidance referred to within this document.

16.13 Communications between the Company Board and the responsible Minister should normally be through the Chair.

16.14 The Chair is bound by the Code of Conduct for Board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life.

16.15 In addition, the Chair is responsible for:

Ensuring, by monitoring and engaging with appropriate governance arrangements, that the Company’s affairs are conducted with probity;
Ensuring that policies and actions support the responsible Minister’s wider strategic policies and where appropriate, these policies and actions should be clearly communicated and disseminated throughout the Company.

16.16 In addition, the Chair has the following leadership responsibilities:

formulating the Board’s strategy;
ensuring that the Board, in reaching decisions, takes proper account of guidance provided by the responsible Minister or the Department;
promoting the efficient and effective use of staff and other resources;
delivering high standards of regularity and propriety; and
representing the views of the Board to the general public.

16.17 The Chair also has an obligation to ensure that:

the work of the Board and its members are reviewed and are working effectively including ongoing assessment of the performance of individual Board members with a formal annual evaluation;
that in conducting assessments that the view of relevant stakeholders including employees and the Sponsorship team are sought and considered;
that the Board has a balance of skills appropriate to directing the Company business, and that all directors including the Chair and Chief Executive continually update their skills, knowledge and familiarity with the Company to fulfil their role both on the Board and committees. This will include but not be limited to skills and training in relation to financial management and reporting requirements, risk management and the requirements of Board membership within the public sector;
Board members are fully briefed on terms of appointment, duties, rights and responsibilities;
they, together with the other Board members, receive appropriate training on financial management and reporting requirements and on any differences that may exist between private and public sector practice;
the responsible Minister is advised of the Company’s needs when independent Board vacancies arise;
the Board terms of reference are in place setting out the role and responsibilities of the Board consistent with the Government Code of Good Practice for Corporate Governance;
there is a Code of Conduct for Board members in place, consistent with the Cabinet Office Code of Conduct for Board Members of Public Bodies.

Individual Board members’ responsibilities

16.18 Individual Board members should:

Comply at all times with the Code of Conduct for Board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life as well as rules relating to the use of public funds and to conflicts of interest;
Be aware of their fiduciary (meaning to be in a position of trust) and other duties owed to the Company, as codified in the Companies Act 2006. In summary, directors owe duties to:
- Act within the powers conferred by the Company’s constitution;
- Promote the success of the Company;
- Exercise independent judgement;
- Exercise reasonable care, skill and diligence;
- Avoid conflicts of interest;
- Not accept benefits from third parties; and
- Declare interests in (proposed) transactions or arrangements.
- demonstrate adherence to the 12 Principles of Governance for all Public Body Non-Executive Directors as appropriate and not misuse information gained in the course of their public service for personal gain or for political profit, nor seek to use the opportunity of public service to promote their private interests or those of connected persons or organisations;
- comply with the Company’s rules on the acceptance of gifts and hospitality, and of business appointments;
- act in good faith and in the best interests of the Company;
- ensure they are familiar with any applicable guidance on the role of Public Sector non-executive directors and Boards that may be issued from time to time by the Cabinet Office, HM Treasury, or wider government.

Question 5

Management and financial responsibilities and controls

Accepted Answer

17. Delegated authorities

17.1 The Company’s delegated authorities are set out in the delegation letter. This delegation letter may be updated and superseded by later versions which may be issued by the Sponsor department in agreement with HM Treasury.

17.2 In line with Managing Public Money Annex 2.2 these delegations will be reviewed on an annual basis.

17.3 The Company shall obtain the Department’s and where appropriate HM Treasury’s prior written approval, as well as Shareholder approval in line with the Partnership Services Agreement, before:

entering into any undertaking to incur any expenditure that falls outside the delegations, or which is not provided for in the Company’s annual budget as approved by the Department;
incurring expenditure for any purpose that is or might be considered novel or contentious, or which has or could have significant future cost implications;
making any significant change in the scale of operation or funding of any initiative or particular scheme previously approved by the Department;
making any change of policy or practice which has wider financial implications that might prove repercussive, or which might significantly affect the future level of resources required; or
carrying out policies that go against the principles, rules, guidance and advice in Managing Public Money.

18. Spending authority

18.1 Once the budget has been approved by the clients, the Company shall have the authority to incur expenditure approved in the budget without further reference to the Sponsor department, on the following conditions:

the Company shall comply with the delegations set out in the delegation letter. These delegations shall not be altered without the prior agreement of the Sponsor department and as agreed by HM Treasury and Cabinet Office as appropriate;
the Company shall comply with Managing Public Money regarding novel, contentious or repercussive proposals;
inclusion of any planned and approved expenditure in the budget shall not remove the need to seek formal departmental approval where any proposed expenditure is outside the delegated limits or is for new schemes not previously agreed;
the Company shall provide the Sponsor department with such information about its operations, performance, individual projects or other expenditure as the Sponsor department may reasonably require.

19. Banking and Managing Cash

19.1 The Company must maximise the use of publicly procured banking services (accounts with central government commercial banks managed centrally by Government Banking).

19.2 The Company should only hold money outside Government Banking Service accounts where a good business case can be made for doing so and HM Treasury consent is required for each account to be established. Only commercial banks which are members of relevant UK clearing bodies may be considered for this purpose.

19.3 Commercial accounts where approved should be operated in line with the principles as set out in Managing Public Money.

19.4 The Accounting Officer is responsible for ensuring the Company has a Banking Policy as set out in Managing Public Money and ensuring that policy is complied with.

20. Procurement

20.1 The Company shall ensure that its procurement policies are aligned with and comply with any relevant UK or other international procurement rules and in particular the Public Contracts Regulations 2015.

20.2 The Company shall establish its procurement policies and document these in a Procurement Policy and Procedures Manual.

20.3 In procurement cases where the Company is likely to exceed its delegated authority limit, procurement strategy approval for the specific planned purchase must be sought from the Department’s Sponsor team.

20.4 Goods, services, and works should be acquired by competition. Proposals to let single-tender or restricted contracts shall be limited and exceptional, and a quarterly report explaining those exceptions should be sent to the Department.

20.5 Procurement by the Company of works, equipment, goods, and services shall be based on a full option appraisal and value for money (VfM), i.e. the optimum combination and whole life costs and quality (fitness for purpose).

20.6 The Company shall a) engage fully with Department and Government wide procurement initiatives that seek to achieve VfM from collaborative projects, b) comply with all relevant Procurement Policy Notes issued by Cabinet Office and c) co-operate fully with initiatives to improve the availability of procurement data to facilitate the achievement of VfM.

20.7 The Company shall comply with the Commercial Standards and Grants Standards. These standards apply to the planning, delivery, and management of government commercial activity, and form part of a suite of functional standards that set expectations for management within government.

21. Risk management

21.1 The Company shall ensure that the risks that it faces are dealt with in an appropriate manner, in accordance with relevant aspects of best practice in corporate governance, and develop a risk management strategy, in accordance with the HM Treasury guidance Management of Risk: Principles and Concepts.

22. Counter Fraud and Theft

22.1 The Company should adopt and implement policies and practices to safeguard itself against fraud and theft.

22.2 The Company should act in line with guidance as issued by the Counter Fraud Function and in compliance with the procedures and considerations as set in in Managing Public Money Annex 4.9 and the Counter Fraud Functional Standard. It should also take all reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter a contract or to provide grant or grant-in-aid.

22.3 The Company should keep records of and prepare and forward to the Department an annual report on fraud and theft suffered by the Company and notify the Sponsor department of any unusual or major incidents as soon as possible. The Company should also report detected loss from fraud, bribery, corruption and error, alongside associated recoveries and prevented losses, to the counter fraud centre of expertise in line with the agreed government definitions as set out in Counter Fraud Functional Standard.

Question 6

Companies that employ their own Staff

Accepted Answer

23. Broad responsibilities for staff

23.1 The Company will have responsibility for the recruitment, retention and motivation of its staff. The broad responsibilities toward its staff are to ensure that:

the rules for recruitment and management of staff create an inclusive culture in which diversity is fully valued; appointment and advancement is based on merit: there is no discrimination on grounds of gender, marital status, sexual orientation, race, colour, ethnic or national origin, religion, disability, community background or age;
the level and structure of its staffing, including grading and staff numbers, are appropriate to its functions and the requirements of economy, efficiency and effectiveness;
the performance of its staff at all levels is satisfactorily appraised and the Company performance measurement systems are reviewed from time to time;
its staff are encouraged to acquire the appropriate professional, management and other expertise necessary to achieve the Company’s objectives;
proper consultation with staff takes place on key issues affecting them;
adequate grievance and disciplinary procedures are in place;
whistle-blowing procedures consistent with the Public Interest Disclosure Act are in place;
a code of conduct for staff is in place.

Staff costs

23.2 Subject to its delegated authorities, the Company shall ensure that the creation of any additional posts does not incur forward commitments that will exceed its ability to pay for them.

Pay and conditions of service

23.3 The Company’s staff are subject to levels of remuneration and terms and conditions of service (including pensions) within the general pay structure approved by the Sponsor department [and HM Treasury]. The Company has no delegated power to amend these terms and conditions.

23.4 If civil service terms and conditions of service apply to the rates of pay and non-pay allowances paid to the staff and to any other party entitled to payment in respect of travel expenses or other allowances, payment shall be made in accordance with the Civil Service Management Code and the annual Civil Service Pay Remit Guidance, except where prior approval has been given by the Department to vary such rates.

23.5 Staff terms and conditions are set out in employee contracts and HR policy related guidance which can be accessed via the Company’s intranet.

23.6 The Company shall abide by public sector pay controls, including the relevant approvals process dependent on the organisations classification as detailed in the Senior Pay Guidance and the public sector pay and terms guidance.

23.7 Any performance-related pay scheme that shall form part of the annual aggregate pay budget approved by the Department or the general pay structure approved by the Department and HM Treasury whichever is applicable, where relevant with due regard to the senior pay guidance.

23.8 The travel expenses of Board members shall be tied to the rates allowed to senior staff of the Company or Departmental rates whichever is applicable. Reasonable actual costs shall be reimbursed.

Pensions, redundancy and compensation

23.9 Compensation scheme rules and pension scheme rules should reflect legislative and HM Treasury guidance requirements regarding exit payments.

23.10 Company staff shall normally be eligible for a pension provided by RCPS. Staff may opt out of the occupational pension scheme provided by the Company, but that employers’ contribution to any personal pension arrangement, including stakeholder pension shall normally be limited to the national insurance rebate level. [Note that there is an exception for companies covered by the PCSPS partnership arrangement, and for PCSPS by-analogy versions].

23.11 Any proposal by the Company to move from the existing pension arrangements, or to pay any redundancy or compensation for loss of office, requires the prior approval of the Department. Proposals on severance must comply with the rules in chapter 4 of Managing Public Money.

Question 7

Business plans, financial reporting and management information

Accepted Answer

24. Business Plans

24.1 The Company shall submit annually to the Sponsor department and Shareholders via the Shareholder nominated NED representatives, a draft of the business plan covering five years ahead. The plan shall reflect the Company’s statutory and/or other duties, and, within those duties, the priorities set from time to time by the responsible Minister (including decisions taken on policy and resources in the light of wider public expenditure decisions). The plan shall demonstrate how the Company contributes to the achievement of the Department’s medium-term plan and priorities and aligned performance metrics and milestones.

24.2 The business plan shall be updated to include key targets and milestones for the year immediately ahead and shall be linked to budgeting information so that resources allocated to achieve specific objectives can readily be identified by the Department. Subject to any commercial considerations, the business plan should be published by the Company on its website and separately be made available to staff.

24.3 The following key matters should be included in the plans:

key objectives and associated key performance targets for the forward years, and the strategy for achieving those objectives;
key non-financial performance targets;
a review of financial and operational performance in the preceding and current financial years, and the financial forecasts for the coming year and, as applicable, for the period of the business plan in accordance with the Partnership Services Agreement;
alternative scenarios and an assessment of the risk factors that may significantly affect the execution of the plan but that cannot be accurately forecast; and
other matters as agreed between the Department and the Company.

25. Budgeting procedures

25.1 The Company drafts its annual budget which is approved by Shareholders. Through its business plan the Company is clear about the potential impact of its financial performance on the Sponsor department (Department for Science, Innovation and Technology) and other Shareholders. In accordance with its Articles and the Shareholders’ Agreement, the Company’s Board has explicit responsibility to remain within budget for the year, to identify any forecast overspends early and to act to mitigate.

25.2 Each year, in the light of decisions by the Department, and other Shareholders, on the updated draft business plan, the Department will send to the Company:

a formal statement of the annual budgetary provision allocated by the Department in the light of competing priorities across the Department and of any forecast income approved by the Department; and
a statement of any planned change in policies affecting the Company.

25.3 The approved annual business plan will take account both of approved funding provision [where this applies] and any forecast receipts and will include a budget of estimated payments and receipts together with a profile of expected expenditure and of draw-down of any departmental funding and/or other income over the year. These elements form part of the approved business plan for the year in question.

26. Grant-in-aid and any ring-fenced grants

26.1 Any grant-in-aid provided by the Department for the year in question will be voted in the Department’s Supply Estimate and be subject to Parliamentary control.

26.2 The grant-in-aid will normally be paid in monthly instalments on the basis of written applications showing evidence of need. The Company will comply with the general principle, that there is no payment in advance of need. Cash balances accumulated during the course of the year from grant-in-aid or other Exchequer funds shall be kept to a minimum level consistent with the efficient operation of the Company. Grant-in-aid not drawn down by the end of the financial year shall lapse. Subject to approval by parliament of the relevant Estimates provision, where grant-in-aid is delayed, to avoid excess cash balances at the year-end, the Department will make available in the next financial year any such grant-in-aid that is required to meet any liabilities at the year end, such as creditors.

26.3 In the event that the Department provides the Company separate grants for specific (ring-fenced) purposes, it would issue the grant as and when the Company needed it on the basis of a written request. The Company would provide evidence that the grant was used for the purposes authorised by the Department. The Company shall not have uncommitted grant funds in hand, nor carry grant funds over to another financial year.

27. Annual report and accounts

27.1 The Company Board must publish an annual report of its activities together with its audited accounts after the end of its financial year. The Company shall provide the Shareholders with a copy of its finalised (audited) accounts once they have been filed with Companies House which usually takes place by the end of each calendar year. The accounts should be prepared in accordance with the relevant statutes in particular the Companies Act 2006 and specific accounts direction issued by the Department as well as HM Treasury’s Financial Reporting Manual (FReM).

27.2 The annual report must:

cover any corporate, subsidiary, or joint ventures under its control;
comply with the FreM and in particular have regard to the illustrative statements for an NDPB; and
outline main activities and performance during the previous financial year and set out in summary form forward plans.

27.3 Information on performance against key financial targets is included within the annual report and subject to the auditor’s consistency opinion. The report and accounts are consolidated within the Department for Science, Innovation and Technology’s accounts that are laid before Parliament. The report and accounts will be made available on the Company’s website, in accordance with the guidance in the FReM.

27.4 A company that wishes to publish a document additional to its annual report and accounts that contains supplementary material including summary financial statements should comply with the requirements of sections 426 and 426A of the Companies Act 2006. The summary data must not be published in advance of the full annual report and accounts being laid before parliament as to do so would be a breach of Parliamentary privilege.

27.5 If, due to exceptional circumstances, there is a conflict between the requirements of the Companies Act and the FReM, the Companies Act takes precedence. Companies should discuss the situation in the first instance with their sponsoring department and HM Treasury.

27.6 Sections 381 to 384 of the Companies Act 2006 define the qualifying criteria for the small companies’ regime. Entities meeting these criteria can apply the small companies’ regime only if approved by their shareholders.

28. Reporting Performance to the Department

28.1 The Company shall operate management, information and accounting systems that enable it to review in a timely and effective manner its financial and non-financial performance against the budgets and targets set out in the corporate and business plans.

28.2 The Company shall inform the Sponsor department of any changes that make achievement of objectives more or less difficult. It shall report financial and non-financial performance, including performance in helping to deliver Ministers’ policies, and the achievement of key objectives bi-monthly during Board meetings.

28.3 The Company’s performance and progress against the business plan will be reviewed by Shareholders alongside the UKSBS Chair and CEO at least twice a year.

28.4 The Board Chair and Chief Executive will meet with the Department for Science, Innovation and Technology’s COO as and when required, at least once a year.

28.5 The Principal Accounting Officer will meet the Chief Executive at least once a year or as otherwise agreed.

29.1 The Department has the right of access to all Company records and personnel for any purpose including, for example, sponsorship audits and operational investigations.

29.2 The Company shall provide the Sponsor department with such information about its operations, performance, individual projects or other expenditure as the Sponsor department may reasonably require.

29.3 The Department and HM Treasury may request the sharing of data held by the Company in such a manner as set out in central guidance except insofar as it is prohibited by law. This may include requiring the appointment of a senior official to be responsible for the data sharing relationship.

29.4 As a minimum, the Company shall provide the Department with information monthly that will enable the Department satisfactorily to monitor:

the Company’s cash management;
its draw-down of grant-in-aid;
forecast outturn by resource headings;
other data required for the Online System for Central Accounting and Reporting (OSCAR); and
data as required in respect of its compliance with any Cabinet Office Controls pipelines or required in order to meet any condition as set out in any settlement letter.

Question 8

Audit

Accepted Answer

30. Internal Audit

30.1 The Company shall:

establish and maintain arrangements for internal audit to have complete access to all relevant records;
ensure that any arrangements for internal audit are in accordance with the Public Sector Internal Audit Standards (PSIAS) as adopted by HM Treasury
establish an audit committee of the Board in accordance with the Code of Good Practice for Corporate Governance and the Audit and Risk Assurance Committee Handbook;
forward the audit strategy, periodic audit plans and annual audit report, including the Company Head of Internal Audit opinion on risk management, control and governance as soon as possible to the Sponsor department;
keep records of and prepare and forward to the Department an annual report on fraud and theft suffered by the Company and notify the Sponsor department of any unusual or major incidents as soon as possible; and
share with the Sponsor department information identified during the audit process and the audit report (together with any other outputs) at the end of the audit, in particular on issues impacting on the Department’s responsibilities in relation to financial systems within the Company.

31. External Audit

31.1 The NAO (for and on behalf of the Comptroller & Auditor General (C&AG)) audits the Company annual accounts. As the Company falls within the Department for Science, Innovation and Technology’s’ departmental accounting boundary, the Company shall provide its draft accounts, other financial data, and any account adjustments, to the Department for consolidation within its accounts in line with Department timescales for preparing its group accounts.

31.2 In the that the Company has set up and controls subsidiary companies, the Company will [in the light of the provisions in the Companies Act 2006] ensure that the C&AG has the option to be appointed auditor of those Company subsidiaries that it controls and/or whose accounts are consolidated within its own accounts. The Company shall discuss with the Sponsor department the procedures for appointing the C&AG as auditor of the companies.

31.3 The C&AG:

will consult the Department and the Company on whom – the NAO or a commercial auditor – shall undertake the audit(s) on their behalf, though the final decision rests with the C&AG;
has a statutory right of access to relevant documents, including by virtue of section 25(8) of the Government Resources and Accounts Act 2000, held by another party in receipt of payments or grants from the Company;
will share with the Sponsor department information identified during the audit process and the audit report (together with any other outputs) at the end of the audit, in particular on issues impacting on the Department’s responsibilities in relation to financial systems within the Company;
will consider requests from Departments and other relevant bodies to provide Regulatory Compliance Reports and other similar reports at the commencement of the audit. Consistent with the C&AG’s independent status, the provision of such reports is entirely at the C&AG’s discretion.

31.4 The C&AG may carry out examinations into the economy, efficiency, and effectiveness with which the Company has used its resources in discharging its functions. For the purpose of these examinations the C&AG has statutory access to documents as provided for under section 8 of the National Audit Act 1983. In addition, the Company shall provide, in conditions to grants and contracts, for the C&AG to exercise such access to documents held by grant recipients and contractors and sub-contractors as may be required for these examinations; and shall use its best endeavours to secure access for the C&AG to any other documents required by the C&AG which are held by other bodies.

Question 9

Reviews and winding up arrangements

Accepted Answer

32. Review of Company’s status

32.1 A review of the Company’s status will be considered over the timeframe of this framework document.

33. Arrangements in the event that the Company is wound up

33.1 Provision for any sale or winding up of the Company are laid out in the Articles of Association and the Shareholder’s Agreement. Any such decision requires a unanimous resolution of all the Shareholders. Should the Shareholders agree to sell or wind up the Company, arrangements are set out within the Shareholders’ Agreement as to the parties’ responsibilities. To this end, the Department shall:

have regard to Cabinet Office guidance on winding up of ALBs;
ensure that procedures are in place in the Company to gain independent assurance on key transactions, financial commitments, cash flows and other information needed to handle the wind-up effectively and to maintain the momentum of work inherited by any residuary body; specify the basis for the valuation and accounting treatment of the Company’s assets and liabilities;
ensure that arrangements are in place to prepare closing accounts and pass to the C&AG for external audit, and that, for non-Crown bodies funds are in place to pay for such audits;
arrange for the most appropriate person to sign the closing accounts. In the event that another entity takes on the role, responsibilities, assets and liabilities, the succeeding entity AO should sign the closing accounts. In the event that the Department inherits the role, responsibilities, assets and liabilities, the Sponsor Department’s Accounting Officer should sign.

33.2 The Company shall provide the Department with full details of all agreements where the Company or its successors have a right to share in the financial gains of developers. It should also pass to the Department details of any other forms of claw-back due to the Company.

Annex A: guidance

UKSBS shall comply with the following guidance, documents and instructions:

Corporate governance

Financial management and reporting

Management of risk

Commercial management

Procurement Policy Notes
Cabinet Office spending controls
Transparency in supply chains - a practical guide

Public appointments

The following are relevant where public bodies participate in public appointments processes.

Guidance from the Commissioner for Public Appointments
Governance Code on Public Appointments
Procurement Policy Note 08/15 – Tax Arrangements of Public Appointees

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