The Scottish Government

Accountable Officer

A person appointed by the Principal Accountable Officer under section 15 of the Public Finance and Accountability (Scotland) Act 2000 (or on a non statutory basis) to be personally responsible for propriety, regularity and value for money issues in relation to the public funds under their stewardship.

Accounting Standards

Standards are issued or adopted by the Accounting Standards Board and/or the International Accounting Standards Board and are applicable to the financial statements of relevant organisations. They are intended to ensure that the financial statements present a true and fair view of its state of affairs and its income and expenditure.

Accounts Directions

Directions issued by Scottish Ministers setting out the accounts that must be prepared and the form and content of those accounts.

Accruals Accounting

A method of recording expenditure as it is incurred and income as it is earned during an accounting period. By contrast cash accounting records cash payments and receipts when they are made or received.

Administration Costs

Expenditure (and related income) that as a general rule is concerned with items such as staff costs and related overheads.

Aggregate External Finance (AEF)

The total of Revenue Support Grant, specific grants and local authorities' income from non-domestic rates.

Aim

An aim is a high level statement describing the policy objective of an organisation or part thereof. The aim is divided into a number of objectives which describe in more detail how the organisation will achieve its aim.

Annually Managed Expenditure (AME)

Expenditure within Total Managed Expenditure (TME) that does not fall within Scotland's Departmental Expenditure Limit (DEL). Expenditure in AME is generally less predictable and controllable than expenditure in DEL and cannot reasonably be subject to firm multi-year limits.

Arm's Length Bodies (ALBs)

Assets

Rights or other access to future economic benefits controlled by an entity as a result of past transactions or events. Fixed Assets are assets with an expected life of more than 1 year held for use on a continuous basis eg land and buildings, patents. Current Assets include cash or other assets which can reasonably be expected to be converted to cash in the normal course of business, including stocks, debtors, accrued income and payments in advance.

The part of the Departmental Expenditure Limit where the Scottish Government has full discretion to determine where to allocate expenditure.

Auditor General for Scotland (AGS)

The AGS was established under section 69 of the Scotland Act 1998 as an individual appointed by the Crown on the recommendation of the Scottish Parliament but independent of both the Scottish Ministers and the Parliament. The main functions of the AGS are set out in section 70(2) of the Scotland Act.

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Balance Sheet

A financial statement for an accounting entity which shows its financial position on a particular day (called the "balance sheet date") by stating the values of its assets and liabilities and the owner's equity.

Barnet Formula

A population-based formula that allocates a share of changes in planned expenditure on comparable services by Departments of the United Kingdom Government to the devolved administrations in Scotland, Wales and Northern Ireland.

Budget Act

The means by which the Parliament authorises details of gross expenditure and related income of the Scottish Administration and other bodies funded direct from the Scottish Consolidated Fund.

Budget Amendment / Budget Revision

A revised budget submitted to the Parliament for approval in the form of a Budget Amendment Order. The Order provides authority for the use of additional resources / income (including funds carried forward from previous financial years under EYF arrangements) and relevant transfers of planned and actual expenditure.

Accompanying explanatory documentation for the Budget Act - and for budget revisions.

Budget Section

The first level below a departmental budget as a whole as set out in Budget Documents.

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Capital Charge

An annual charge reflecting the consumption of fixed assets (depreciation) and the opportunity cost of tying up funds in such assets (cost of capital).

Clawback

The concept that where an asset financed by public money is sold, all or part of the proceeds of the sale should be returned to the Scottish Government.

Commercial Banks

Bodies other than the OPG which provide banking services, including private sector banks, building societies and the Bank of England.

Used in the application of the Barnett Formula. It is the proportion by which expenditure on services delivered by Departments of the United Kingdom Government corresponds to expenditure within the assigned budgets of the devolved administrations.

Consolidated Fund

The UK Exchequer account into which tax revenues and other relevant receipts are directed and from which payments for the bulk of UK central government expenditure is made.

Consolidation

The process of incorporating the results of linked entities into a single account which involves the elimination of inter-entity transactions and balances.

An element of the Assigned Budget (DEL plus AME) which is held back by the Scottish Government for use in the case of an emergency. In the event of a major unforeseen contingency, the Secretary of State for Scotland may also apply for additional funds from the UK Reserve.

Contingent Liabilities

Potential liabilities that are uncertain but recognise that future expenditure may arise if certain conditions are met or certain events happen.

Corporate Governance

The system by which organisations are directed and controlled.

Cost of Capital

The cost to the UK government of financing investment, ie the rate at which it borrows.

Current Liabilities

Liabilities incurred in the normal course of business which fall due within one year and include creditors, accrued expenditure and deferred income.

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Departmental Expenditure Limit (DEL)

Expenditure within programmes which is not classified as Annually Managed Expenditure (AME). Expenditure in DEL is generally more predictable and controllable than expenditure in AME. DEL is therefore set on a multi-year basis.

Depreciation

The measure of the value of a fixed asset that has been consumed during a period whether arising from use, passage of time or obsolescence. The term amortisation is used in relation to intangible assets.

Designated Receipts

Receipts / income designated by HM Treasury after consulting with the Scottish Ministers. Scottish Ministers are required to make payments to the Secretary of State for Scotland - effectively for onward transmission to the UK Consolidated Fund - of sums equal to such designated receipts.

Discretionary Services

Services that are not required by statute but are provided often into competitive markets.

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Encryption

Ciphering or scrambling of a message sent electronically, in order to prevent unauthorised access or alteration.

End-year flexibility (EYF)

A mechanism to allow unspent provision in the Departmental Expenditure Limit in one year to be carried forward to the next.

European Commission

The Executive of the European Union. Commissioners are appointed by member states. The body has three distinct functions initiating proposals for legislation; acting as guardian of the Treaties; and managing and executing EU policies and international trade relationships.

European Court of Auditors

Responsible for checking that the European Union spends its money according to its budgetary rules and regulations and for the purposes for which it is intended.

Executive Agency

A discrete unit set up to undertake an executive function of government.

Excess Receipts / Income

Income / receipts in excess of those authorised by Budget Act to be used in support of related expenditure.

Exchequer

UK government's central financing arrangements, based on the Consolidated Fund and National Loans Fund, and managed by the Treasury and the Bank of England.

Exchequer Pyramid

A series of accounts operated by the Treasury through which the overnight sweep and funding flows.

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Financial Reporting Advisory Board (FRAB)

An independent board set up to advise HM Treasury on the application of financial principles and standards contained in the Government Financial Reporting Manual.

Financial Reporting Standard (FRS)

An accounting standard issued by the Accounting Standards Board, which forms part of generally accepted accounting practice (GAAP).

Framework Document

A document setting out the strategic aims and objectives for Executive Agencies and sponsored bodies plus the responsibilities and accountabilities of the key parties.

Fraud Policy Statement

A statement communicating the approach to fraud.

Fraud Response Plan

A written plan for timely and effective action in the event of a fraud.

The total cost of all the resources used in providing a good or service in any accounting period (usually one year). This will include all direct and indirect costs of producing the output (both cash and non-cash costs), including a full proportional share of overhead costs and any selling and distribution costs, insurance, depreciation, and the cost of capital, including any appropriate adjustment for expected cost increases.

Funding

Transferring monies to an account, so that they are available when needed for payments.

Funding Requirement

The requirement for cash and resources that the Budget Act represent.

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A review process operated under OGC rules in which people not associated with a programme, policy or project assess its progress and offer pointers to improve its delivery.

Generally Accepted Accounting Practice (GAAP)

The accounting and disclosure requirements of the Companies Acts and pronouncements by the Accounting Standards Board supplemented by accumulated professional judgement.

Government Procurement Card (GPC)

A corporate charge card used for the purchase of low-value items.

Grant

Payments made by the Scottish Government to outside bodies, normally in arrears, to cover expenditure on agreed items or functions.

Grant in Aid

Regular payments made by the Scottish Government to sponsored bodies to finance expenditure on agreed items or functions.

Green Book

The informal title for Appraisal and Evaluation in Central Government, published by HM Treasury.

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Hedging

Transaction(s) designed to reduce or eliminate financial risk, eg because of interest rate or exchange rate fluctuations.

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Resources needed to develop and implement projects, programmes or policies (e.g. funding for school education).

Investments

Any application of funds which is primarily intended to produce a return by way of interest, dividend or capital appreciation.

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Joined-up Government

Arrangements under which policy-making and service delivery are unhindered by "departmental" boundaries.

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Letter of Representation

A signed written statement made by persons responsible for the operation of an accounting entity to the auditor of that entity providing information for the purposes of an audit, especially on matters which cannot be directly verified by the auditor.

Licences to operate public goods, often set to recover associated costs such as supervision by a regulator.

Liabilities

Obligations to transfer future economic benefits as a result of past transactions or events. Current Liabilities are liabilities incurred in the normal course of business, including creditors, accrued expenditure and receipts in advance.

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Any form of administrative failing or bad practice.

Materiality

The extent to which the misstatement or omission of an item of information might reasonably be expected to influence a decision of a user of the information.

An informal working document, prepared before the start of the financial year in the form of a forecast to determine the appropriate level of fees and charges for a repayment service, and after the end of the year in the form of an outturn statement to provide a record of performance.

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National Audit Office (NAO)

Office of the Comptroller and Auditor General, which audits the accounts of UK Departments.

National Debt

The gross liabilities of the National Loans Fund.

National Insurance Fund (NIF)

A UK government fund used to meet the cost of contribution-based benefits, financed mainly by contributions paid by employers and individuals.

National Loans Fund (NLF)

The fund through which passes most of the UK government's borrowing transactions and some domestic lending transactions.

Resource expenditure that has a related cash implication, even though the timing of the cash payment may be slightly different. For example, expenditure on gas or electricity supply is incurred as the fuel is used, though the cash payment might be made in arrears on a quarterly basis. Other examples of near-cash expenditure are: pay, rental.

Net Cash Requirement (NCR)

The amount of cash required to carry out the functions specified in the Budget Act. It represents the sum of net resources and net capital, from which non-cash items, capital charges, depreciation etc. are removed and in which working capital, increases/decreases in stocks, debtors and creditors and provisions are taken into account.

Net Resources Requirement (NRR)

The total amount of resources required to carry out the functions specified in the Budget Act. Resources comprise cash and non-cash elements.

Costs where there is no cash transaction but which are included in a body's accounts (or taken into account in charging for a service) to establish the true cost of all the resources used.

A cost which is taken into account in setting fees and charges to improve comparability with private sector service providers. The charge takes account of the fact that public bodies do not generally pay an insurance premium to a commercial insurer.

Notional Expenditure

Expenditure which does not involve an actual cash transaction but which must be reflected in the accounts to show the full costs of a body's activities.

Notional Cost of Capital

The notional cost of borrowing, usually set at 3.5 per cent.

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Objectives

Specific planned achievements. Objectives contribute towards an organisation's aim and are expressed in a way that enables determination of their achievement.

An office of the UK Treasury, with a status similar to that of an agency, which aims to maximise the UK government's purchasing power for routine items and combine professional expertise to bear on capital projects.

Office of the Paymaster General (OPG)

The UK government Department responsible for discharging the Paymaster General's statutory responsibilities to hold accounts and make payments for government Departments and other public bodies.

OPG transfers

Transfers between OPG accounts.

Benefits resulting from outputs. They should correspond to ultimate objectives - the impact of a policy intervention on the welfare of producers or consumers (e.g. better educated school students).

Products resulting from inputs (e.g. number of teachers). Outputs should facilitate the meeting of outcomes.

An account with a negative balance.

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Parliamentary Authority

Payable Instruments

Cheques, payable orders and other items of paper which give the intended recipient an entitlement to money.

Payable Orders

Equivalent to cheques, but drawn on government office holders, such as the OPG, rather than a bank.

Payment Cards

Cards which can be used for payment purposes, there being several types including charge cards (such as the Government Procurement Card), credit cards and debit cards.

Payment Clearing System

Arrangements for transferring funds between a paying account and a receiving account.

Prerogative Powers

Powers exercisable under the Royal Prerogative, i.e. powers which are unique to the Crown, as contrasted with common-law powers which may be available to the Crown on the same basis as to natural persons.

Preventive Controls

Controls designed to prevent error, fraud, irregularity or inefficiency.

Principal Accountable Officer

Under section 14 of the Public Finance and Accountability (Scotland) Act 2000 (PFA Act) the Permanent Secretary is appointed Principal Accountable Officer (PAO) for the Scottish Administration. Under section 15 of the PFA Act he or she may designate Accountable Officers for the Scottish Administration (as well as for certain other bodies and office-holders whose accounts are subject to audit by or under the control of the Auditor General for Scotland).

Programme Expenditure

Propriety

Linked to regularity, it is the further requirement that expenditure and receipts should be dealt with in accordance with the Parliament's intentions and the principles of parliamentary control.

A trading body controlled by central government, local authority or other public corporation that has substantial day to day operating independence.

Public Dividend Capital (PDC)

Public/Private Partnership (PPP)

A structured arrangement between a public sector and a private sector organisation to secure an outcome delivering good value for money for the public sector. It is classified to the public or private sector according to which has more control.

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The financial remuneration delivered by a particular project or enterprise, expressed as a percentage of the net assets employed.

Amounts adjusted for the effect of general price inflation as measured by the GDP market price deflator. Enables comparisons of spending across years without the distortion caused by price changes.

Regularity

Linked to propriety, it is the requirement for all expenditure and receipts to be dealt with in accordance with the legislation authorising them, delegated authority and any relevant guidance issued by Scottish Ministers.

Requisition for Credit

The means by which Scottish Ministers seek the approval of the Auditor General for Scotland to issue money from the Scottish Consolidated Fund.

Resource Accounts

Accruals accounts prepared in accordance with the Financial Reporting Manual.

Resource Accounting and Budgeting (RAB)

Introduces generally accepted accounting practice (GAAP) into government accounting. The main changes are the adoption of accruals accounting for expenditure and the inclusion of depreciation and cost-of-capital charges in budgets.

Resource Accounting Manual (RAM)

The authoritative statement of resource accounting principles against which resource accounts are prepared and audited. The manual is based on UK GAAP adapted where appropriate to take account of the public sector context.

Resource Budget

The means by which the Scottish Government plans and controls the expenditure of resources to meet its objectives.

Resource Budgeting

Involves using resource accounting information and principles as the basis for planning and controlling public expenditure.

A legal concept which allows money and property to be returned to its rightful owner. It typically operates where another person can be said to have been unjustly enriched by receiving such monies.

The ratio of profit to capital employed of an accounting entity during an identified period. Various measures of profit and of capital employed may be used in calculating the ratio.

The ratio of profit to capital employed of an accounting entity during an identified period. Various measures of profit and of capital employed may be used in calculating the ratio.

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Scottish Administration

The Scottish Administration comprises the Scottish Ministers (including the Lord Advocate and the Solicitor General for Scotland) and their staff ie the core Scottish Government and Executive Agencies - plus junior Scottish Ministers and non-ministerial office holders (ie the Registrar General of Births, Deaths and Marriages for Scotland, the Keeper of the Registers of Scotland, the Keeper of the Records of Scotland and the other office holders specified in statute.

Scottish Consolidated Fund (SCF)

The account in which draw-down of the Assigned Budget and other relevant receipts is held. Payments out of the SCF are subject to statutory authority while all receipts of the Scottish Administration (but not other direct funded bodies) must be paid into the SCF unless otherwise authorised by the Parliament.

Sensitivity Analysis

A technique used in appraisal and analysis to attempt to measure the potential effect of items that cannot be forecast with certainty.

Service Level Agreement (SLA)

An agreement between parties, setting out in detail the level of service to be performed. Where agreements are between central government bodies, they are not legally a contract but have a similar function.

Spending Review

Sets DELs and plans AME for the following three years. Normally held at 2 year intervals.

Sponsored Body

Essentially those bodies commonly referred to as non-departmental public bodies (NDPBs). NDPBs include Executive NDPBs, Public Corporations and NHS Bodies. Other organisations which do not meet the NDPB criteria may also be regarded as sponsored bodies where the activities of the organisation and the nature of the relationship between the Scottish Government and the organisation makes it appropriate to do so.

Standing Orders

Instructions to pay set amounts on set dates to set recipients.

State support for a domestic body or company which could distort EU competition and so is not usually allowed.

Statement on Internal Control (SIC)

Surrendered Receipts / Income

Receipts / income not authorised by the Parliament to be used in support of related expenditure and which must therefore be surrendered to the SCF.

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The rate of return required of a project or enterprise over a given period, usually at least a year.

Private sector bodies which do not act commercially, including charities, social and voluntary organisations and other not-for-profit collectives.

Total Managed Expenditure (TME)

A budgeting term which covers all current and capital spending carried out by the public sector (i.e. not just by central government).

Transferable Instruments

Crossed or uncrossed payable instruments where the issuer does not restrict payment to the intended payee's bank account.

Turnover

Value of sales of goods or services included in the accounts for an accounting period.

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Ultra Vires

A legal term for activity which is outside the scope of the relevant legal powers and therefore illegal.

Uncrossed (or "open") Instruments

Payable instruments which have not been crossed with two parallel lines and which give the intended recipient the entitlement to be paid in cash.

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The process under which organisation's procurement, projects and processes are systematically evaluated and assessed to provide confidence about suitability, effectiveness, prudence, quality, value and avoidance of error and other waste, judged for the public sector as a whole.

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Whole of Government Accounts (WGA)

WGA are commercial-style accounts covering the whole of the UK public sector. WGA are produced on an accruals basis and use generally accepted accounting principles, adapted where necessary for government. Government is treated as if it were a single entity by eliminating all significant transactions between public sector entities.

Activities undertaken by central government organisations outside their statutory duties, using spare capacity and aimed at generating a commercial profit.

Working Capital

Current assets less current liabilities.

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