NDA Management Statement and Financial Memorandum - Nuclear

NUCLEAR DECOMMISSIONING AUTHORITY (NDA) MANAGEMENT STATEMENT (pg 2) & FINANCIAL MEMORANDUM (pg 19) 1 NUCLEAR DECOMMISSIONING AUTHORITY (NDA) MANAGEMENT STATEMENT 2 MANAGEMENT STATEMENT Index Subject This document Founding legislation Classification The functions and duties of the NDA Compliance with guidance and instructions Performance Management Objectives and key targets Responsibilities and Accountability The Secretary of State The Scottish Ministers The Departmental Accounting Officer The Chair of the NDA The NDA Board NDA Accounting Officer Delegation of duties The CEO’s role as Consolidation Officer The CEO’s role as Principal Officer for Ombudsman cases The DECC corporate governance team Devolved Administrations Scotland Wales Regional Development Agencies (RDAs) Planning, Budgeting, and Control The NDA strategy The Annual Plan Approval process Budgetary approval Reporting NDA Progress to DECC Independence of Safety Director Internal audit and governance Remuneration Committee Departmental access to the NDA Openness and transparency External Accountability Annual Report Annual Accounts External Audit Value for Money (VFM) examinations Staff Management General Delegated functions Industrial relations Reviewing the NDA Paragraph 1-7 8 9 10-11 12 13-17 18 19 20-21 22-27 28-35 36-37 38 39-41 42 43-46 47 48 49 50-53 54 55-61 62-63 64-70 71 72-75 76 77 78-81 82 83-84 85-87 88 89 90 91 92 3 INTRODUCTION This document 1. This Management Statement and associated Financial Memorandum set out the terms of the relationship between the Nuclear Decommissioning Authority (NDA) and the Department of Energy and Climate Change (DECC) – the Government Department with lead sponsorship responsibility for the NDA. The Scottish Executive has responsibility in respect of the role of the Scottish Ministers and the Scottish Parliament. The documents set out the broad framework within which the NDA will: • • exercise its functions, duties and powers; manage the assets for which it is responsible and public funds paid to it in order to carry out its duties and responsibilities; be held to account for its performance. • 2. The Management Statement is a formal agreement between DECC and the NDA and relates to the statutory framework of the NDA’s functions as set out in the Energy Act 2004, and additionally as set out by the Secretary of State for DEFRA on 25.10.06. The Financial Memorandum sets out the relationship between DECC and the NDA in relation to financial monitoring and other related arrangements and/or requirements. This Management Statement and Financial Memorandum will be reviewed at least every three years, or sooner should there be a change to the NDA's functions or policy objectives. Any question regarding the interpretation of the documents shall be resolved by DECC in consultation with the NDA and/or the Scottish Executive, HM Treasury, and Cabinet Office as appropriate. Copies of this document and any subsequent amendments will be placed in the Libraries of both Houses of Parliament, the Scottish Parliament, and will be published on the NDA’s website. 3. 4. 5. 6. 7. This document complements and should be read in conjunction with: o The Energy Act 2004 (Part 1, chapters 1-2 and Schedules 1 – 9) which provides for the establishment of the NDA, sets out its constitution, and defines its statutory functions, duties and powers and establishes the means whereby it is given responsibility for operating decommissioning and cleaning up nuclear sites, as well as the powers under which it will have relevant assets transferred to it. o The directions under section 3 of the Energy Act which give the NDA its responsibilities in respect of the operation, decommissioning and cleaning up of certain designated sites and installations. o The Statement of the Secretary of State dated 1 April 2005 setting out the terms on which in accordance with section 22 (2) of the Energy Act 2004 grants will be made to the NDA under section 22(1) of the Act. • The Statement of the Secretary of State under section 31(6) of the Energy Act 2004 setting out the amounts she will credit to the Nuclear Decommissioning Funding Account under section 31(4) (c) of the Energy Act 2004. • The Memorandums of Understanding which set out the NDA’s operating relationship with each of the regulators. 4 • • Statement by Secretary of State for DEFRA (25.10.06) which gave the NDA additional responsibility for securing geological disposal of higher activity waste in order to create one organization able to take a strategic view through all stages of the waste management chain, accountable in a clear and transparent way to independent regulators and Government. The NDA’s Stakeholder Charter. Founding Legislation 8. The NDA was established under the Energy Act 2004 (enacted July 2004). Classification 9. The NDA is classified as an Executive Non-Departmental Public Body (NDPB). It is also designated under Section 88 of the Scotland Act 1998 - as amended by Schedule 1 of the Energy Act 2004 as a Cross Border Public Authority. For national accounts purposes the NDA is classified to the central government sector. The Functions and Duties of the Nuclear Decommissioning Authority (NDA). 10. The NDA is charged with cleaning up the UK’s civil public sector nuclear legacy safely, securely, cost effectively and in ways that safeguard the environment for this and future generations. The NDA has responsibility for 20 sites around the UK that represent that legacy. They include: sites and facilities which were developed in the 1940s, 1950’s, and 1960s to support HMG’s nuclear power generation research, together with wastes, and materials, and spent fuels produced by these programmes; and the fleet of Magnox nuclear power plants designed and built in the 1960s and 1970s, together with plant and facilities at Sellafield used for reprocessing Magnox fuel, and associated wastes, and materials. The Energy Act 2004, and the directions made under section 3 of that Act, establish the functions, duties and powers of the NDA (ref: para 7 above). The provisions of the Energy Act 2004 and the directions are binding on the NDA and establish the extent of its powers and duties. To the extent that this set of documents refers to those provisions it is by way of guidance only and does not alter the effect of those provisions. To the extent that the documents appear to contradict any provision of the Energy Act 2004 then the relevant provision in the Act prevails. 11. Compliance with Guidance and Instructions 12. The NDA shall comply inter alia with instructions set out in the documents listed in paragraphs 108 and 109 of the Financial Memorandum together with any policy statements relating to the governance arrangements of NDPBs as issued from time to time. PERFORMANCE MEASUREMENT Objectives and Key Targets 13. The Energy Act 2004 requires the NDA to prepare a strategy for carrying out its functions - which must cover specified matters (ref: sections 11 and 12); and to prepare in respect of each financial year an Annual Plan (ref: section 13). The Strategy and Annual Plan must be approved by the Secretary of State and to the extent appropriate with the Scottish Ministers (ref: Schedule 2 paragraph 1, and Schedule 3 paragraph 1). 5 14. The Strategy will set out inter alia the NDA’s priorities, and long term objectives for cleaning up and decommissioning the sites and installations for which it has responsibility. The Annual Plan must set out in respect of the financial year it covers the work which the NDA will arrange, the contractual arrangements in place, and estimates of the costs. It will additionally show outline details for the subsequent 2 financial years. The content of the NDA’s Strategy and Annual Plans must be consistent with the NDA’s functions and duties and will form the basis for the measurement and monitoring of the NDA’s performance by DECC and where appropriate the Scottish Executive. The NDA’s performance will be measured and evaluated against achievement of the DECC’s Departmental Strategic Objectives (DSOs) as set for, and agreed by, NDA, and against delivery of the agreed Annual Plan. 15. 16. 17. RESPONSIBILITIES AND ACCOUNTABILITY The Secretary of State, Department of Energy and Climate Change 18. The Secretary of State is accountable to Parliament for the activities and performance of the NDA. Responsibilities in this regard include: • setting the performance framework within which the NDA will operate including setting the pay and incentive structure for the Chair and other nonexecutive Members; approving the NDA’s Strategy and Annual Plan; issuing Directions, Designations and making Transfer Schemes; issuing Accounts Directions on the basis for preparation of the NDA’s annual accounts; determining the terms on which the NDA will have access to Grant in Aid in order to discharge its duties and responsibilities; maintaining the Nuclear Decommissioning Funding Account and establishing policy for its on-going operation in accordance with the terms of the Energy Act 2004; • • • • • maintenance of appropriate funding mechanisms • providing information to Parliament about the NDA as required, and seeking Parliamentary approval for expenditure; • carrying out other statutory responsibilities including appointing the Chair of the NDA and other non-executive Members and approving the appointment of the CEO by the non-executive members; and, laying the NDA’s Annual Accounts before Parliament. • Scottish Ministers 19. The Scottish Ministers are accountable to the Scottish Parliament for the activities and performance of the NDA in or as regards Scotland. Responsibilities include: 6 • in conjunction with the Secretary of State setting the performance framework within which the NDA will operate; approving the NDA’s Strategy and Annual Plan; issuing directions and designations in conjunction with the Secretary of State for DECC; providing information to the Scottish Parliament about the NDA; carrying out other statutory responsibilities including appointing the Chair of the NDA and other non-executive Members and approving the appointment of the CEO by the non-executive members • • • • • laying the NDA’s Annual Accounts before the Scottish Parliament. The Departmental Accounting Officer 20. The Permanent Secretary of DECC, as the Department’s Accounting Officer: • designates the Chief Executive of the NDA as the NDA Accounting Officer and ensures that he/she is suitably trained and fully aware of his/her responsibilities; is responsible for ensuring that an appropriate control framework for the operation of the Nuclear Decommissioning Funding Account is in place; is responsible for ensuring that the financial and other management controls applied by the Department to the NDA are appropriate and sufficient to safeguard public funds and for ensuring that the NDA’s compliance with those controls is effectively monitored (“public funds” include not only any funds granted to the NDA by Parliament but also any other funds generated by approved activities or falling within the stewardship of the NDA); must be satisfied that the internal controls applied by the NDA, and any controls applied to any subsidiaries it may establish, conform to the requirements of regularity, propriety and good financial management; and that an adequate flow of information is supplied by the NDA to the Department on matters of performance, budgeting, control, and risk management; is accountable to Parliament for any grant in aid paid to the NDA and for ensuring that monies issued to the NDA are used for the purposes intended by Parliament; may withdraw Accounting Officer designation from the NDA’s Accounting Officer if he/she believes that the Accounting Officer is no longer suitable for the role; and, may be required to give evidence to the Public Accounts Committee (PAC), or the Energy and Climate Change Select Committee (DECCSC) on the systems of financial and management control applied to the NDA. • • • • • • 21. The responsibilities of a Departmental Accounting Officer are set out in more detail in ‘Managing Public Money’ published by HM Treasury. 7 The Chair of the NDA 22. The Chair is appointed by the Secretary of State in conjunction with the Scottish Ministers and in line with the Code of Practice issued by the Office of the Commissioner for Public Appointments. The appointment is for a fixed term of three years with the possibility of extension subject to review of performance. The Chair is accountable to the Secretary of State, and to the Scottish Ministers where appropriate, for the NDA’s activities and performance in implementing its Strategy and Annual Plan. The Chair has a particular responsibility for providing effective leadership on the following matters: • formulating the Board’s strategy for discharging its statutory functions and duties, and that in reaching decisions the Board: o o o • complies with the Energy Act 2004; has due regard to relevant Government policy, guidance, and instructions including that of the Devolved Administrations; and, takes proper account of inputs from stakeholders. 23. 24. reviewing the balance of skills and experience on the Board against the changing emphasis of the NDA’s work in discharging its statutory duties and, as necessary, recommending changes to the Secretary of State who will consult the Scottish Ministers; providing the Secretary of State with an annual assessment of the performance and effectiveness of individual Board members; ensuring high standards of propriety, and regularity, and promoting the efficient and effective use of staff and other resources throughout the NDA; ensuring that the NDA’s affairs are conducted openly, transparently and with probity; representing the NDA to the public and stakeholders. • • • • 25. The Chair shall ensure that all members of the Board, when taking up office, are fully briefed on the terms of their appointment, duties, and responsibilities. The Chair shall also ensure that a Code of Practice for Board Members is in place based on the model Code of Practice for Board Members of Public Bodies produced by the Cabinet Office. The Code shall commit the Chair and other Board Members to the Nolan seven principles of public life, and shall include a requirement for a comprehensive and publicly available register of Board Members’ interests. Communications between the Board and the Secretary of State and the Scottish Ministers shall normally be through the Chair. 26. 27. The NDA Board 28. The Board is comprised of executive members and non-executive members (including the Chair), with the latter forming a majority (ref: section 2(1) of the Energy Act 2004). The role of the non-executive members is to challenge the executive management to deliver; to ensure that the executive team is focused and incentivised to produce positive results; and generally to hold it to account for its performance. 8 29. The Board is collectively accountable to the Secretary of State or the Scottish Ministers where appropriate, for all aspects of the NDA’s activities and performance. It follows that in response to requests from Parliamentary Select Committees, including those of the Scottish Parliament, that the NDA Chair would be expected to take the lead - but any Board member could be required to appear and give evidence. The Chief Executive is responsible for the day-to-day operations and management of the NDA and the performance of the executive management team. He/She is accountable to the Board. He/She may adapt the organisational and management structure of the NDA to meet its business needs, subject to his/her agreed delegated powers. Board members have collective responsibility for ensuring that the NDA complies with any statutory or administrative requirements for the use of public funds and shall demonstrate high standards of corporate governance at all times, including the use of an independent Audit Committee to help address key financial and other risks. Individual Board members shall act in accordance with their wider responsibilities as members of the Board, and comply at all times with the NDA’s Code of Practice for Board Members, and with the rules relating to the use of public funds, and to conflicts of interest; 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 Board’s rules on the acceptance of gifts and hospitality and of business appointments; act in good faith and in the best interests of the NDA. Non-executive members of the Board are appointed by the Secretary of State in conjunction with the Scottish Ministers following consultation with the NDA Chair. The NDA Chief Executive is appointed by the non-executive Board members following approval by the Secretary of State in conjunction with the Scottish Ministers. Executive Board members are appointed by the non-executive members after consultation with the Chief Executive. 30. 31. 32. 33. 34. 35. The Accounting Officer 36. The NDA’s Accounting Officer (AO) is personally and directly responsible for safeguarding the public funds for which he/she has charge and for ensuring propriety and regularity in the handling of those public funds. He/she shall act in accordance with the terms of this document (which includes the Financial Memorandum) and with the instructions and guidance offered in Managing Public Money , ‘Dear Accounting Officer’ (DAO) letters, and other instructions/guidance which might be issued from time to time. In particular, the NDA’s AO must: advise the Board on the discharge of its responsibilities as set out in this set of documents, the Energy Act 2004, any directions made under section 3 of the Energy Act 2004, any terms attached to grants to the NDA under Section 22 of the Act, and any other relevant instructions and guidance that may be issued by HM Treasury from time to time; 9 37. advise the Board on the NDA’s performance compared with its aims and objectives as set out in its strategy and Annual Plans; ensure that all public funding made available to the NDA and any sums it receives as a result of its activities are used for the purpose intended by Parliament, and in the case of Grant in Aid from the Secretary of State applied in accordance with any terms of grant under section 22(2) of the Energy Act 2004; ensure that such grants, together with the NDA’s assets, equipment and staff, are used economically, efficiently and effectively; ensure that financial considerations are taken fully into account by the Board at all stages in reaching and executing its decisions, and that decisions are taken on the basis of appropriate financial appraisal; ensure that a strategy and system for risk management is maintained to inform decisions on financial and operational planning and to assist in achieving objectives and targets; ensure that effective systems of corporate governance are in place including adequate systems for internal and financial control and effective measures against fraud and theft; with the approval of the Board maintain a comprehensive system of internal delegated authorities which are notified to all staff, together with a system for regularly reviewing compliance with those delegations; ensure that appropriate personnel management policies are maintained; prepare Annual Accounts including a Statement of Internal Control; on the advice of the Audit Committee, sign the NDA’s Annual Accounts; take action in accordance with Managing Public Money , if the Board, or Chair, is contemplating a course of action involving a transaction which the Accounting Officer considers would infringe the requirements of propriety or regularity or does not represent prudent or economical administration or efficiency or effectiveness; ensure that an effective system of programme and project management and contract management is maintained; ensure that effective procedures for handling complaints about the NDA are established and made widely known within the NDA; ensure that management information systems are in place and that any information required or requested by the Department is provided on a timely basis; give evidence – supported as necessary by other Board members - on the use and stewardship of public funds by the NDA if summoned before the Public Accounts Committee, or the DECC Select Committee. 10 Delegation of Duties 38. The Chief Executive may delegate the day-to-day administration of his Accounting Officer and Consolidation Officer (see paragraph 39 below) responsibilities to other members or employees of the NDA. However, he shall not assign those responsibilities absolutely to any other person. The Chief Executive’s Role as Consolidation Officer 39. For the purposes of Whole of Government Accounts the Chief Executive of the NDPB is appointed by the Treasury as the NDA’s Consolidation Officer. As the NDA’s Consolidation Officer, the Chief Executive shall be personally responsible for preparing the consolidation information that sets out the financial results and position of the NDA, for arranging for its audit, and for sending the information and the audit report to the Principal Consolidation Officer nominated by the Treasury. As Consolidation Officer the Chief Executive shall comply with the requirements of HM Treasury’s Consolidation Officer Memorandum and shall, in particular: ensure that the NDA has in place and maintains sets of accounting records that will provide the necessary information for the consolidation process; prepare the consolidation information (including the relevant accounting and disclosure requirements and all relevant consolidation adjustments) in accordance with the consolidation instructions and directions as set out in ‘Dear Consolidation Officer’ (DCO), and ‘Dear Consolidation Manager’ (DCM) letters as issued by the Treasury from time to time on the form, manner and timetable for the delivery of such information. The Chief Executive’s Role as Principal Officer for Ombudsman Cases 42. The Chief Executive is the Principal Officer for handling cases involving the Parliamentary Commissioner for Administration (Ombudsman). As Principal Officer he/she shall inform the Permanent Secretary of DECC of any complaints about the NDA accepted by the Ombudsman for investigation, and about the NDA’s proposed response to any subsequent recommendations from the Parliamentary Ombudsman. Similarly, as regards Scotland he/she shall inform the Scottish Ministers about complaints relating to Scottish matters and inform the Scottish Executive of the NDA's proposed response and also any recommendation made by the Parliamentary Commissioner. 40. 41. The DECC Corporate Governance Team 43. As the Government department with the lead sponsorship functions for the NDA, DECC is responsible for all financial aspects of the NDA’s governance. However, the NDA is a cross border public authority which means it is also accountable to the Scottish Ministers and the Scottish Parliament for the activities and performance of the NDA in or as regards Scotland. Therefore the Scottish Executive also has a role in the governance of the NDA and will work closely with DECC, to ensure that the expectations of Government (both the UK Government and the Scottish Executive) are met. The governance function transferred within the Department for Business, Enterprise and Regulatory Reform from Nuclear Unit to the Shareholder Executive (ShEx) in October 2007. Within the ShEx a dedicated team is responsible for liaising with the 11 44. NDA on all aspects of its work and is the main point of day-to-day contact between Government and the NDA. This arrangement continued after the transfer of responsibility for the policy, sponsorship and budget of the NDA to DECC. The ShEX corporate governance team is the primary source of advice to the Secretary of State on the discharge of his responsibilities in respect of the NDA. In exercising its responsibilities to the NDA, ShEx will provide advice to the DECC Secretary of State and to the DECC Accounting Officer, in consultation with DECC policy officials. Responsibility for policy is with DECC although Shex will be required to provide input on the affordability and VFM impacts of DECC nuclear policy initiatives in so far as they impact on the NDA. 45. ShEx share with the NDA the common objective of having a working relationship and governance arrangements which: promote partnership and trust are appropriate to the authority, taking into account its size, complexity and the risks and challenges it faces contribute to the achievement of the NDA’s objectives and provide an effective environment for the NDA to achieve those objectives through, interalia, appropriate delegated powers and freedoms, and provide mutual understanding of the NDA’s objectives and of the risks and challenges it faces. 46. Specific responsibilities of the corporate governance team include: advising the Secretary of State at a strategic level on: how well the NDA is achieving its objectives and whether it is delivering value for money; on appropriate budget and performance targets for the NDA; novel, contentious, and/or repercussive proposals/projects proposed by (i) the NDA or (ii) other parts of Government, where those proposals might impact on the NDA; public appointments matters; ensuring that the NDA complies with the terms of grant from the Secretary of State under section 22(2) of the Energy Act 2004 and any other constraints on its funding and operation imposed for the duration of the European Commission’s investigation into State Aid issues arising out of the establishment of the NDA; ensuring effective processes, including risk management, are in place and are used by the NDA in producing its strategy and Annual Plan; monitoring and reporting the NDA’s performance against agreed targets and against its total financial provision; ensuring the responsibilities and duties of the Departmental Accounting Officer are discharged; advising the NDA on matters arising from the Energy Act 2004; ensuring proper lines of communication between the NDA and the Scottish Executive. DEVOLVED ADMINISTRATIONS Scotland 47. The Scottish Executive will work with DECC on all matters relating to the devolved responsibilities including: 12 advising the Scottish Ministers at a strategic level of the NDA’s progress in achieving its objectives; communicating to the NDA the views of the Scottish Ministers and/or Scottish Executive policy and offering advice on the same; issuing guidance from time to time to the NDA on specific Scottish matters. Wales 48. Ministers will inform the Cabinet of the Welsh Assembly Government of any significant changes to the NDA’s priorities and objectives, in particular on those changes that are relevant to Wales. Regional Development Agencies (RDAs)/ Enterprise Networks in Scotland 49. If it should appear appropriate to the carrying out of its function to support local communities and contribute to the socio economic regeneration of areas in which it has designated sites or installations the NDA should consider if there is a need to inform relevant RDAs or Enterprise Networks. . PLANNING, BUDGETING AND CONTROL The NDA Strategy 50. The NDA is required by section 11 of the Energy Act 2004 to prepare a Strategy for carrying out its statutory functions and duties and in doing so must comply with the terms of Schedule 2 of the Energy Act 2004 and any directions under paragraph 5(7) of Schedule 2. The Strategy must be submitted to the Secretary of State and the Scottish Ministers for approval (Schedule 2 paragraph 1) but prior to preparing a Strategy the NDA must consult inter alia the Health and Safety Executive, the Environment Agency, the Scottish Environment Protection Agency, and other stakeholders (Schedule 2 paragraph 4). The NDA must when submitting the Strategy for approval report on representations made (Schedule 2 paragraph 5(2)). The approved Strategy will form the basis for the NDA’s Annual Plans and will provide a framework for monitoring progress against longer-term objectives and targets. The NDA is required by Schedule 2, paragraph 3 of the Act to complete a review of its Strategy (consulting stakeholders as indicated above) before the end of a five year period from the date by which its currently agreed Strategy was approved by the Secretary of State and the Scottish Ministers. If in light of its review the NDA decides to revise its Strategy it is required to submit a draft revision to the Secretary of State and the Scottish Ministers reporting on representations made. If the NDA considers that it is unnecessary to revise its Strategy the same consultation procedures shall apply (paragraph 4(1) of the Act) prior to its seeking Ministers’ approval to a renewal of the current Strategy. The NDA is required by paragraph 6(1) and (2) of Schedule 2 of the Act to publish its strategy and any revisions to it. Paragraph 6(3) of Schedule 2 of the Act requires the Secretary of State to lay a copy of the NDA’s strategy before Parliament. The Scottish Ministers shall lay the NDA’s Strategy before the Scottish Parliament. 51. 52. 53. The Annual Plan 54. The NDA is required by section 13 of the Energy Act 2004 to prepare an Annual Plan in accordance with the terms of the Act. The Annual Plan will set out the work which 13 the NDA intends to do in the year in question to implement its strategy. The Annual Plan shall be submitted to the Secretary of State and the Scottish Ministers for approval of the draft plan prior to public consultation. A final decision on the Annual Plan for the year in question will be taken by the Secretary of State and the Scottish Minister by 31 March each year. Approval Process 55. Schedule 3 of the Energy Act 2004 sets out the requirements which apply to the preparation of the Annual Plan, and the procedure for consultation, revision, submission to the Secretary of State and the Scottish Ministers for final approval, and eventual publication. The NDA will take account of any comments made in finalising its Annual Plan prior to putting it to the Board for consideration and approval. When Board approval has been given to the final plan, the NDA will submit it to the Secretary of State via the DECC corporate governance team and to the Scottish Ministers via the Scottish Executive team. The DECC team will be responsible for advising the Secretary of State on the contents of the Annual Plan, first in relation to the draft plan for public consultation, and later when the Board approved plan is formally submitted for approval. In relation to the final draft the team will highlight views presented to the NDA by stakeholders. If stakeholders wish to do so then it will be open to them to make representations direct to the Secretary of State. The Secretary of State will seek the views of the Scottish Ministers. It is open to the Secretary of State to discuss the Annual Plan with the Board prior to approval. Other UK Government Ministers, Ministers for the devolved administrations, nuclear regulators, and stakeholders will have the opportunity to attend the meeting if they so wish. The Secretary of State, in conjunction with the Scottish Ministers may amend the Annual Plan in the light of the meeting but the NDA and its stakeholders must be consulted about any such change before the Annual Plan is finally approved by the Secretary of State and the Scottish Ministers. It shall be the duty of the NDA to implement the Annual Plan once it has been approved by the Secretary of State and the Scottish Ministers. The Secretary of State shall lay the NDA’s Annual Plan before Parliament. The Scottish Ministers shall lay the NDA’s Annual Plan before the Scottish Parliament. The NDA will arrange for publication of its Annual Plan in accordance with the terms set out in Schedule 3 of the Energy Act 2004. 56. 57. 58. 59. 60. 61. Budgetary approval 62. The NDA’s budgets are formally approved by the Department following the submission and approval of the Annual Plan. The NDA’s budgeting procedures are set out in the Financial Memorandum. 63. Reporting NDA Performance to DECC 64. The NDA shall operate management information, and accounting systems which enable it to review in a timely and effective manner its financial and non-financial performance against the budget, objectives, and targets set out in its Annual Plan. 14 Performance will be reviewed formally at monthly and quarterly review meetings between DECC and the NDA and the Scottish Executive, as appropriate. 65. NDA performance in delivering Ministers' policies, including the achievement of key objectives, shall be reported to DECC H M Treasury and the Scottish Executive as follows: Monthly: a “shareholder” report focussing on finance, programme and commercial management, delivery of key performance indicators and progress against the business plan Quarterly: meetings between senior executives of the ShEx and the CEO and Chair of the NDA to review progress and strategy; and separately meetings between the ShEx and the NDA non-executive Board Ad Hoc meetings as and when issues arise The NDA’s annual performance towards achieving its objectives in the strategy in force at the relevant time must, in accordance with section 14(1) of the Act, be reported in its ‘Annual Report’. The NDA shall develop a system of regular in year progress reporting to its stakeholders and to the wider public reflecting the commitment to openness and transparency in the provision of information about its activities. The Secretary of State will meet the Chair formally at least once each year to discuss the NDA’s performance, its current and future activities, and any policy developments relevant to those activities. The DECC Permanent Secretary will also meet the Chair and Non-Executive Directors at least once a year and, as the Department’s Accounting Officer will also meet the CEO at least once each year. Scottish Ministers will also meet with NDA Chair and CEO as required. The NDA shall take the initiative in informing DECC and the Scottish Executive of changes in external conditions which make the achievement of objectives or targets more or less difficult, or which may require a change to the budget, or targets, and objectives set out in the Annual Plan. • 66. 67. 68. 69. 70. Independence of the Safety Director 71. The NDA Safety Director shall have an independent reporting line to the regulators. Internal Audit 72. The NDA shall establish and maintain arrangements for internal audit in accordance with the Government Internal Audit Standards (GIAS). The NDA shall set up an Audit Committee, consisting exclusively of independent nonexecutive directors, as a committee of its Board in accordance with the Cabinet Office’s Guidance in the Code of Practice for Public Bodies and the Treasury’s Audit Committee guidance. The Audit Committee’s role is to provide independent and objective advice to the Accounting Officer on risk management, control, and governance. The NDA shall make the Minutes of its Audit Committee available to DECC and the Scottish Executive. 73. 74. 15 75. The Department’s Internal Audit Service has a right of access to all documents prepared by the NDA’s internal auditor, including where the service is contracted out. Remuneration Committee 76. The NDA shall set up a Remuneration Committee consisting exclusively of independent non-executive directors of its Board with the responsibilities for considering the performance and determining the remuneration of the Chief Executive and the Executive Members. The NDA may also give this Committee responsibility for performing functions of the NDA relating to the remuneration of other staff. In determining the remuneration of Executive Members (who are staff under the provisions of Section2(7) of the Energy Act ) and carrying out functions in relation to the remuneration of other staff, the Committee shall take into account general guidance from DECC and the Treasury in relation to staff pay. Departmental Access to the NDA 77. DECC and the Scottish Executive shall have a right of access to all the NDA’s records and personnel for purposes such as audits and performance reviews. OPENNESS, TRANSPARENCY AND ENGAGEMENT WITH STAKEHOLDERS • Openness, transparency and engagement with stakeholders are key principles of the NDA. A Stakeholder Charter shall be published by the NDA. The Stakeholder Charter shall set out those areas on which information about the NDA’s operations will actively be made available through the most appropriate means - for example the NDA’s Publication Scheme or web site. 78. 79. The NDA shall make available information in line with relevant Acts - for example the Freedom of Information Act 2000. Stakeholders should be involved in the development of the NDA’s strategy and Annual Plan so that in reaching its decisions the NDA: is exposed to, and takes account of a diverse range of views; and, the rationale for major decisions and the process by which these are reached is clear to stakeholders and to the wider public. 81. The NDA shall ensure that adequate processes are in place for engagement with stakeholders, and that these processes have been determined in consultation with stakeholders and are understood by them. Such processes should reflect the scale and nature of the NDA’s duties and responsibilities. 80. EXTERNAL ACCOUNTABILITY Annual Report 82. Section 14(1) of the Energy Act 2004 requires the NDA to prepare an Annual Report of its performance towards achieving its objectives in respect of the strategy in force at the time. The Report must also cover performance in relation to health and safety and environmental matters of persons other than the NDA who have control of designated sites, installations, and facilities (section 14(3)). A draft of the Report shall be submitted to the DECC corporate governance team and the Scottish Executive at least three weeks before the proposed publication date. The Report must cover all the matters specified in section 14 of the Energy Act 2004, and separate out activities relating to the decommissioning of installations and the cleaning up of sites from the NDA’s other activities (section 14(5)). 16 Annual Accounts 83. The Energy Act 2004 requires the NDA to prepare and have audited its Annual Accounts (section 26). The Annual Accounts should be prepared as soon as reasonably practicable after the end of each financial year and no later than the end of July. The Annual Accounts shall comply with the Accounts Direction issued by the Department, and with the Treasury’s guidance. The NDA must send to the Secretary of State and the Scottish Ministers a copy of the Accounts for each accounting year, and a copy of the Comptroller and Auditor General’s report on those accounts (section 26 (8(a), and (b)). The Secretary of State is required by section 26(10) to lay the Accounts before Parliament. The Scottish Ministers shall lay the NDA’s Accounts before the Scottish Parliament. 84. External Audit 85. In accordance with section 26(7) of the Energy Act 2004, the Comptroller and Auditor General (C&AG) audits the NDA’s Annual Accounts. For the purpose of audit the C&AG has a statutory right of access to relevant documents as provided for in the Government Resources and Accounts Act 2000, including by virtue of any order made under section 25(8) of that Act. The C&AG will consult the Department and the NDA on who (the National Audit Office or a commercial auditor) will undertake the actual audit on his/her behalf. The C&AG will share with the DECC team information identified during the audit process, and the audit report, together with any other outputs. In particular, issues which impact on the Department's responsibilities in relation to financial systems within the NDA. 86. 87. Value for Money (VFM) Examinations 88. The C&AG may from time to time review the economy, efficiency, and effectiveness with which the NDA 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 the National Audit Act 1983. The NDA shall provide such access to documents held by any contractors or subsidiaries etc as may be required for these examinations and shall use its best endeavors to secure access for the C&AG to any other documents required by the C&AG which are held by other bodies. STAFF MANAGEMENT General 89. Within the arrangements approved by the Secretary of State, the NDA shall have delegated responsibility for the recruitment, retention and motivation of its staff. To this end the NDA shall ensure that: its rules for the recruitment and management of staff provide for appointment and advancement on merit and reflect equal opportunities for all applicants and staff, regardless of race, colour, ethnic or national origin, age, religion, gender, marital status, disability, or sexual orientation; the level and structure of its staffing, including gradings and numbers of staff, is appropriate to its functions and the requirements of efficiency, effectiveness and economy; the performance of its staff at all levels is satisfactorily appraised and a performance management system is in place and reviewed from time to time; 17 its staff are encouraged to acquire the appropriate professional, management and other expertise necessary to achieve the NDA’s objectives; proper consultation with staff takes place on key issues affecting them; adequate grievance and disciplinary procedures are in place; a code of conduct for staff is in place based on the Cabinet Office document Model Code for Staff of Executive Non-Departmental Public Bodies. Delegated Functions 90. Subject to public sector guidelines the NDA may propose personnel and pay policies suited to its specific requirements. Industrial relations 91. The Chief Executive is responsible for maintaining good staff and industrial relations and will consult with staff and their representatives as appropriate. The normal expectation is that all matters which affect the NDA will be resolved through the NDA’s existing framework of consultation arrangements. REVIEWING THE NDA 92. The NDA will be reviewed in line with DECC’s overall review programme for NDPBs. 18 NUCLEAR DECOMMISSIONING AUTHORITY (NDA) FINANCIAL MEMORANDUM (Covers the period of CSR 07) 19 FINANCIAL MEMORANDUM Index Subject Introduction The Departmental Expenditure Limit (DEL) Expenditure not proposed in the budget Procurement Competition Value for money Timeliness in paying bills Novel, contentious, or repercussive proposals Risk management Wider markets Fees & charges Nuclear Decommissioning Funding Account (NDFA) Grant in aid End Year Flexibility (EYF) Fines, taxes, and receipts from sale of goods or services and other receipts Interest earned Unforecast changes in in-year income Build-up and draw-down of deposits Gifts and bequests received Receipts from the EC Borrowing Reserves Staff costs Pay and conditions of service Pensions, redundancy/compensation Capital expenditure Transfer of funds within budgets Lending, guarantees, indemnities, contingent liabilities, & letters of comfort Grant or loan schemes Gifts made, write-offs, losses, and special payments Leasing Estates strategy Public / Private Partnerships Subsidiary companies and joint ventures Financial investments Unconventional financing Commercial insurance Paragraph 1–3 4 5 6–8 9 – 10 11 12 13 14 -16 17 18 19 – 20 21 – 23 24 -26 27 -29 30 31 32 – 33 34 35 36 – 37 38 39 40 – 46 47 – 50 51 – 53 54 55 56 – 57 58 – 59 60 – 61 62 – 64 65 – 66 67 – 68 69 70 71 – 75 20 Register of assets Disposal of assets; proceeds from disposal of assets Recovery of grant-financed assets Setting the annual budget General conditions for the NDA to spend Provision of monitoring Information Cash management Banking arrangements Relevant documents Review of the Financial Memorandum Financial delegations including losses and special payments Novel, contentious or repercussive proposals DECC requirements for monitoring NDA expenditure 76 77 – 80 81 – 83 84 – 85 86 – 88 89 – 90 91 92 – 93 94 95 – 96 Annex 1 Annex 2 Annex 3 21 INTRODUCTION 1. This Financial Memorandum, which combined with the Management Statement for the Nuclear Decommissioning Authority (NDA), sets out the financial framework within which NDA is required to operate by the Department of Energy and Climate Change (referred to as DECC or the Department throughout this document). The terms and conditions set out in this combined Management Statement and Financial Memorandum may be supplemented from time to time by guidelines or directions issued by the Secretary of State in respect of the exercise of any individual function, power, and duty of NDA. NDA shall satisfy the conditions and requirements set out in this document, together with such other conditions as the Secretary of State may from time to time impose. 2. 3. STATUTORY FINANCIAL REPORTING 4. The NDA shall prepare annual report and accounts in accordance with requirements of the Government Financial Reporting Manual (FReM), and other guidance provided by DECC and HM Treasury, and subject to any specific Accounts Direction as may be issued from time to time by the Secretary of State for DECC. INCOME AND EXPENDITURE – FUNDING Departmental Expenditure Limit (DEL) and Annual Managed Expenditure (AME) 5. NDA's current and capital expenditure form part of DECC’s resource DEL and capital DEL respectively. NDA’s income and expenditure will be classified, for budgeting and control total purposes, in accordance with Treasury’s Consolidated Budgeting Guidance for the appropriate year with the exception of some items of capital and resource expenditure identified in paragraph 8 below and where HM Treasury has granted a specific derogation in the Spending Review settlement. New provisions and changes to existing provisions will remain exceptionally excluded from DECC DEL and remain in DECC AME given their size and likely volatility. Charges for the cost of capital and depreciation will also exceptionally remain in DECC AME. This is subject to review at the next Spending review. Certain expenditure which would be revenue expenditure under the FReM is exceptionally defined as capital expenditure for DEL budgetary reporting purposes only, in accordance with guidance issued by the Office of National Statistics (ONS). The following decommissioning related activities have been defined by ONS as capital for budgetary reporting purposes: i) ii) Removal of nuclear fuel from reactors following cessation of generation prior to decommissioning; Removal of radioactive materials from a power station to allow for decontamination and demolition of the station; Demolition of the power station buildings as part of decommissioning. Storage of radioactive material until it can either be made safe or until a permanent means of disposal is decided. 22 6. 7. 8. iii) iv) v) vi) Remedial work to restore the former site of the reactor to an environmentally satisfactory condition. Construction of waste management facilities required to support decommissioning, clean up and disposal. Annual funding limits 9. DECC shall notify the NDA in writing of its formal budget allocation for each financial year and subsequent years covered by the appropriate Spending Review settlement, clearly identifying i) DEL budget allocation split between Resource and Capital; ii) Forecast commercial income that underpins NDA’s gross expenditure plans; iii) The total cash Grant-in-Aid available to the NDA, split between capital and resource; iv) AME, and v) exceptionally any access to built up EYF stocks that has been agreed in advance by HM Treasury can be used for that year’s budget. NDA shall not, without prior written Departmental approval, enter into any undertaking to incur any expenditure which will result in the breach of its Resource and Capital DEL control totals and aggregate gross expenditure plans set in accordance with paragraph 9. 10. End Year Flexiblity (EYF) 11. The NDA’s EYF (which will be ring fenced) will be calculated at the end of each financial year. The EYF results from the net Near Cash and Capital underspends arising from: i) DEL benefit following excess unspent commercial income in year; ii) DEL benefit following achievement of efficiency savings not offset by increased spending elsewhere in the NDA; EYF generated in a year is added to any existing stocks. Any changes to outturns notified after mid June will be adjusted the following year. Arrangements for drawdown of the NDA’s EYF over the CSR07 period were set out in the Department’s settlement letter dated 8th October 2007. This states that Treasury and DECC will provisionally agree at official level the level of EYF drawdown in January of the preceding financial year. The NDA will then need to formally request the EYF through DECC, in sufficient time for inclusion in either or both the Winter and Spring Supplementary Estimates. The actual drawdown of EYF should be limited to the amount that it considers will be needed before the end of the financial year. DECC will include NDA’s bid in the overall Departmental request for EYF made to HM Treasury but NDA should make no assumptions about whether approval will be granted for the drawdown of EYF until this has been confirmed by HM Treasury, via DECC. The NDA has the flexibility to invest the results of achieving its efficiency targets in additional clean up or other activities provided it demonstrates a value for money case. 12. 13. 14. Unforecast Changes in In-Year Income 23 15. If the NDA’s negative DEL income (including commercial income) realised or expected to be realised in-year is: i) less than estimated, then the NDA shall agree with DECC the strategy for dealing with the situation. In the first instance, this will include re-prioritising expenditure so that the net control totals for Resource and Capital are still met, or ii) more than estimated, then, the NDA shall apply to the Department to retain the excess income to cover additional expenditure within the current financial year without an offsetting reduction in its net DEL cover or to its Government funding or to carry it forward as an addition to its EYF stocks. The change to the income (and expenditure) level will need to be made formally through either the Winter or Spring Supplementary Estimate. Transfer of Funds within Budgets 16. The NDA is required to manage its expenditure within the Resource and Capital DEL control totals as set out in the funding letter issued by DECC at the start of each financial year, subject to the conditions that it is not permissible to transfer from capital to resource expenditure. In addition NDA must remain within the gross expenditure plan agreed with DECC. NDA may, by seeking agreement from DECC and HMT, for the transfer of resource to capital budget at an aggregate level, change the control totals within the same total expenditure limit. Requests to do this need to be prepared in sufficient time for inclusion in either or both the Winter or Spring Supplementary Estimates. Novel, Contentious or Repercussive Proposals 18. NDA shall obtain the approval of the Department before: i) incurring any expenditure for any purpose which is or might be considered novel, contentious, or repercussive, or which has or could have significant future cost implications, including on staff benefits; or ii) making any significant change in the scale of operation or funding of any initiative or particular scheme or project or proposal previously approved by the Department; or iii) making any change of policy or practice which has wider financial implications which might significantly affect the future level of resources required. Details of the type of proposal which might be classed as novel, contentious, or repercussive are at Annex 2. 17. 19. Expenditure Outside NDA’s financial delegations 20. NDA shall not, without prior written Departmental approval, enter into any undertaking to incur any expenditure which falls outside the NDA's financial delegations (Annex 1.) or the Departmental delegations at Annex 1a Procurement 24 21. NDA's procurement policies shall comply with guidance from the Office of Government Commerce (OGC) and in particular the requirement to undertake regular ‘Gateway’ reviews. NDA shall also ensure that both it and its contractors comply with any relevant EU or other international procurement rules. The NDA before entering into a contract in relation to a designated site, installation or facility shall require proposed contractors to produce their procurement strategy, which shall include the likely effect on the economic life of the local community in implementing the contract. The foregoing is to be subject to reasonable thresholds in respect of small scale contracts. Periodically and wherever practicable, the NDA's procurement policies shall be benchmarked against best practice elsewhere and will also include contracting out where this would achieve better value for money. The NDA shall also ensure that effective systems for programme, project, and contract management are maintained in respect of all contracts. 22. 23. Competition 24. The NDA's policy will be to place contracts via free and open competition unless there are compelling reasons not do so. The NDA shall promote the development of a competitive market for Nuclear Decommissioning and clean up to ensure best value for the taxpayer. Contracts shall be placed with suppliers who provide best value for money overall. Proposals to let single-tender or restricted contracts will be infrequent and subject to NDA controls. The NDA shall provide information relating to any contracts above £50k in which competitive tendering was not employed as part of its routine reporting requirements (ref: paragraph 65 of the Management Statement). 25. Value for Money 26. Procurement by NDA of works, goods and services shall be based on value for money. Where appropriate, a full option appraisal shall be carried out before procurement decisions are taken. Timeliness in Paying Bills 27. NDA shall collect receipts and pay all matured and properly authorised invoices in accordance with the terms of contracts or within 30 days, in accordance with Managing Public Money. NDA shall comply with the British Standard for Achieving Good Payment Performance in Commercial Transactions (BS 7890), and with the Late Payment of Commercial Debts (Interest) Act 1988 as amended. Risk Management 28. NDA shall ensure that the risks which it faces are dealt with in an appropriate manner, in accordance with relevant aspects of best practice in corporate governance, and shall develop a risk management strategy, in accordance with the Treasury guidance in the Orange Book “Management of Risk - Principles and Concepts “ NDA shall adopt and implement policies and practices to safeguard itself against fraud and theft, in line with the Orange Book NDA shall take all reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter into a contract. 25 29. 30. Wider Markets 31. In accordance with the wider markets policy NDA shall seek to maximise receipts from non-Exchequer sources provided that this is consistent with: a. the NDA's main functions; b. the NDA Annual Plan, for the year in question, as agreed with the Department; c. the NDA’s agreed risk profile; and d. strictures regarding novel, contentious, and repercussive items (ref: paragraph 19 above). Fees and Charges 32. Fees or charges for any services supplied by NDA other than on a commercial armslength basis shall be determined in accordance with ‘Managing Public Money’. Nuclear Decommissioning Funding Account (NDFA) 33. The Nuclear Decommissioning Funding Account (NDFA) is the account specified in the Energy Act 2004 for the purpose of ensuring transparency as respects the funding of the carrying out of the NDA’s functions. The NDA agrees that it will supply such information as is necessary to enable the Secretary of State to prepare the NDFA accounts and submit them to the National Audit Office (NAO) for audit by 30 September. Grant in Aid 35. The terms on which grant in aid is provided by the Secretary of State to the NDA under section 22 of the Energy Act 2004 are set out in the statement of 1 April 2005. Payments of grant in aid by DECC to the NDA will be made promptly on the submission of a claim [Annex 3] from NDA. The claim shall be accompanied by a verification document which reconciles the resource budget to the cash requirement and made on or about the third week of each month, showing evidence of need. Claims shall be submitted in such a manner that DECC does not incur any penalty from Treasury. The claim shall certify that the conditions applying to the use of the NDA’s funding have been observed to date and that further funding is now required for purposes appropriate to NDA's functions. NDA should have regard to the guidance in Managing Public Money that it should seek funds according to need. Cash balances accumulated by the NDA during the course of the year from Exchequer funds or non-Exchequer sources shall be kept at the minimum level consistent with the efficient operation of NDA. Fines, Taxes, and Receipts from Sale of Goods or Services. 39. NDA receipts from the sale of goods and services including for example through the rent of land, dividends, and intellectual property rights (IPR) will be treated as negative public expenditure (negative DEL) in national accounts and will, therefore, be offset against the Department’s DEL (and so provide additional DEL spending power to the NDA in accordance with the provisions of paragraph 15(ii)). Fines and taxes paid to the NDA will not be treated as negative DEL, and shall be surrendered to DECC as a Consolidated Fund Extra Receipt (CFER). DECC will then 26 34. 36. 37. 38. 40. seek Treasury approval for the CFER to be treated as Appropriations-in-Aid by DECC with a corresponding increase in the NDA’s funding. This is subject to the constraints set out in Annexes 1, and 2 and the Budgetary controls in Annex 3: para 1.2. 41. If there is any doubt about the correct classification of a receipt the NDA shall consult DECC who will consult HM Treasury as necessary. Build-up and Drawdown of Deposits 42. NDA shall comply with the principle that any DEL expenditure financed by the drawdown of deposits counts within DEL, and that the build-up of deposits represents a saving to DEL (that is if the related receipts are negative DEL in the relevant budgets). 43. NDA shall ensure that it has the necessary DEL provision for any expenditure financed by drawdown of deposits. Gifts and Bequests Received 44. NDA is free to retain any gifts, bequests or similar donations - subject to the provisions in Annex 1. These shall be treated as receipts. Before accepting any gift, bequest, or donation the NDA shall consider if there are any associated costs in doing so or if any conflict of interest might arise. NDA shall keep a written record of any such gifts, bequests and donations and of their estimated value and whether they are disposed of or retained. Receipts from the European Community (EC) 45. Receipts from the European Community do not provide additional DEL spending power to the NDA. Borrowing 46. The NDA’s powers to borrow are set out in the Energy Act 2004 at Sections 23, 24, and 25. Section 23 provides that the NDA has no power to borrow except from i) the Secretary of State (who has discretion as to whether to lend and on what terms), or ii) from other persons temporarily but subject to the Secretary of State’s prior consent. 47. The NDA shall observe the framework and limits on its borrowing set out in Section 24 of the Energy Act which limits the NDA’s borrowing limit to £2,000 million. The NDA shall seek the approval of the Department to ensure that it has any necessary authority and budgetary cover for any borrowing or the expenditure financed by such borrowing. 48. In addition, the NDA shall observe the rules set out in paragraphs 5.6 and 5.7 of Managing Public Money when undertaking borrowing of any kind. Any medium, or long-term private sector, or foreign borrowing is subject to the value-for-money test in Managing Public Money. 49. Any expenditure by the NDA financed by borrowing will count in DEL. Where the NDA borrows, or takes on leases, or undertakes transactions that are in effect borrowing it must ensure that it has DEL provision. Reserves 50. No funding shall be paid into any reserve held by NDA. Funds in any reserve may be a factor for consideration when funding is determined. 27 Expenditure on Staff Staff Costs 51. Subject to its delegated levels of authority, NDA shall ensure that the creation of any additional posts does not incur forward commitments which will exceed its ability to pay for them. Pay and Conditions of Service 52. The NDA is responsible for the pay, terms and conditions of its staff, whether on permanent or temporary contract. The statutory requirements are set out in the Energy Act 2004, Schedule 1, 5 (1) to (4). 53. The staff of the NDA, whether on permanent or temporary contract, shall be subject to levels of remuneration and terms and conditions of service (including superannuation) within the general pay structure approved by DECC, and the Treasury. Amendment of these terms and conditions is subject to a negotiating mandate agreed with Treasury. 54. NDA shall submit their annual pay remit to the Department for approval. 55. NDA shall operate a performance-related pay scheme which shall form part of the general pay structure approved by the Department. 56. Current terms and conditions for staff of NDA are those set out in its Employee Handbook. NDA shall provide the Department with a copy of the Handbook and subsequent amendments. 57. The travel expenses of Board members shall be tied to the rates allowed to senior staff of NDA. Reasonable actual costs shall be reimbursed. 58. NDA shall comply with the EU Directive on contract workers (Fixed Term Employees Regulations (Prevention of Less Favourable Treatment)). Pensions, Redundancy/Compensation 59. The NDA will provide access to the Principal Civil Service Pension Scheme (PCSPS) for its own staff. NDA staff may opt out of the PCSPS. However, the employer's contribution to any personal pension arrangement, including a stakeholder pension, shall normally be limited to the national insurance rebate level. 60. The NDA will be the lead organisation for the Combined Nuclear Pension Plan, a nuclear industry wide scheme created under the auspices of section 8 of the Energy Act. This scheme provides pensions for employees of the site licence companies who were formerly member of the UKAEA Combined Pension Scheme, as those entities are subject to competition and leave the public sector, and has terms no less favourable than those available to the employee prior to competition. The NDA shall seek the Department's approval if it proposes to make modifications to that scheme to ensure that the scheme provides the statutory protections required under Part 4 of the Act. 61. The NDA will be the lead organisation for the Nirex Pension Scheme, a scheme originally created for employees of Nirex and for which the NDA assumed responsibility in 2007. This Scheme provides pensions to former employees of the Nirex entity, where those employees have not transferred into the Principal Civil Service Pension Scheme. The NDA shall seek the Department's approval if it 28 proposes to make modifications to that scheme to ensure that the scheme provides the statutory protections required under Part 4 of the Act. 62. The NDA will be the lead organisation for the GPS Pension Scheme, a scheme originally created for employees of the BNFL group of companies. The NDA took over the lead organisation role from BNFL in 2008. This scheme provides pensions to some groups of employees within site license companies and certain other former BNFL bodies doing work for NDA purposes. The NDA shall seek the Department's approval if it proposes to make modifications to that scheme to ensure that the scheme provides the statutory protections required under Part 4 of the Act. 63. Any proposal by NDA to move from the existing pension arrangements, or to pay any redundancy or compensation for loss of office, requires the approval of the Department. Proposals on severance payments and must comply with DAO (GEN) 11/05. Non-Staff Expenditure Capital Expenditure 64. Subject to being above an agreed capitalisation threshold, all expenditure on the acquisition or creation of fixed assets shall be capitalised on an accruals basis. Expenditure to be capitalised shall include: i) the acquisition, reclamation or laying out of land; ii) the acquisition, construction, preparation or replacement of buildings, infrastructure, and other structures and/or associated fixtures and fittings; and, iii) the acquisition, installation or replacement of movable or fixed plant, machinery, vehicles and vessels. 65. In addition, NDA should also apply the ONS definition of capital expenditure (see paragraph 8) for budgetary purposes. 66. Proposals for large-scale individual capital projects or acquisitions will normally be considered within NDA's corporate planning process and will be set out in its Annual Plan. Applications for approval of proposals not falling within the normal planning process and/or which are considered to be novel, contentious or repercussive (as defined in Annex 2) shall be made to the Department and shall be supported by formal notification that the proposed project or purchase has been examined and duly authorised by the Board. The NDA shall submit regular reports on the progress of such projects to DECC (see paragraph 65 of the Management Statement above). 67. Within its approved overall resources limit, the NDA shall have delegated authority to undertake any individual capital project or acquisition which the NDA is committed to fund. Annex 1 sets out delegated authorities and limits. Lending, Guarantees, Indemnities; Contingent Liabilities; Letters of Comfort 68. NDA shall not, without the Department's prior written consent, lend money, charge any asset or security, give any guarantee or indemnities or letters of comfort, or incur any other contingent liability (as defined in Chapter 5 and Annex 5.5 of Managing Public Money) whether or not in a legally binding form. Grant or Loan Schemes 29 69. Unless covered by a specific delegated authority, all proposals to make a grant or loan to a third party, whether one-off or under a scheme, shall be subject to prior approval by the Department, together with the terms and conditions under which such grant or loan is made. If grants or loans are to be made under a continuing scheme, statutory authority is likely to be required. 70. The terms and conditions shall include a requirement on the recipient to maintain records in relation to the grant or loan and to ensure that these are readily available for inspection by the NDA, and DECC. Gifts Made, Write-offs, Losses and Other Special Payments 71. Proposals for making special payments (including write-offs) outside the delegated limits set out in Annex 1 must have the prior approval of the Department. 72. Gifts by management to staff are subject to the requirements of DAO (GEN) 13/01 and the associated Cabinet Office guidance on non-pay rewards. Leasing 73. Prior Departmental approval must be secured for all property and finance leases. NDA must have capital DEL provision for finance leases and other transactions which are in substance borrowing (see also paragraph 49 above). 74. Before entering into any lease (including an operating lease), the NDA shall demonstrate that the lease offers better value for money than purchase. Estates Strategy 75. The NDA shall publish an Estates Strategy which should follow the Office of Government Commerce’s guidance and include a section justifying value for money derived from either those properties retained for occupational purposes, or properties held for investment, or any other purpose with a description of the management process. The Estates Strategy should be reviewed annually. 76. Prior Departmental approval must be secured for all property and proposals exceeding the lower of: • £50m in total • 1,000sqm or • 5% of the NDA’s total estate. Proposals must be supported by a business case and in relevant circumstances a Gateway Review. This delegation (see Annex 1 and 1A) applies to new properties; lease renewals/extensions, and the exercising of break clauses. Before entering into any new lease the NDA shall demonstrate that the lease offers better value for money than purchase. 77. All property disposals, rent reviews, lease renewals, and acquisitions must be carried out in consultation with the Office of Government Commerce. The NDA estate should be managed in accordance with Government best practice. Public/Private Partnerships 78. NDA shall seek opportunities to enter into Public/Private Partnerships (PPP) only where this would be more affordable and offer better value for money than conventional procurement. Where cash flow projections indicate that the whole of life discounted cost would exceed £5,000,000 the NDA must first obtain approval 30 from DECC. As the approach can be expected to be novel or contentious it is also likely that Treasury approval will be required. 79. Any PPP partnership controlled by NDA shall be treated as part of NDA in accordance with UK GAAP definitions and consolidated with it subject to any particular treatment required by UK GAAP. Where the judgment over the level of control is a close one, the Department shall consult the Treasury (who might need to consult with the Office of National Statistics over national accounts treatment). Subsidiary Companies and Joint Ventures 80. NDA shall not establish subsidiary companies or joint ventures without the express approval of the Department. In judging such proposals, the Department will have regard to its own wider strategic aims, and objectives as set out in its Departmental Strategic Objectives (DSOs). 81. Any subsidiary company or joint venture controlled or owned by the NDA shall be consolidated with it in accordance with UK GAAP. For the purposes of budgetary control and monitoring subsidiaries shall be classified in accordance with ONS definitions. Where the judgment over the level of control is a close one, the Department will consult the Treasury (who may need to consult with the Office of National Statistics over national accounts treatment). Unless specifically agreed with the Department and the Treasury, such subsidiary companies or joint ventures shall be subject to the same controls and requirements set out in this document. Financial Investments 82. The NDA shall not make any investments in traded financial instruments without the prior written approval of the Department, nor shall it aim to build up cash balances, or net assets in excess of that which is required for operational purposes. Equity shares in ventures which further the objectives of NDA shall equally be subject to Departmental approval. (See also Annex 2: Novel, Contentious or Repercussive Proposals). Unconventional Financing 83. Unless otherwise agreed with the Department, NDA shall not enter into any unconventional financing arrangement. Commercial Insurance 84. The NDA shall in accordance with arrangements agreed with DECC and Treasury be responsible through its captive insurance company for a number of defined nonnuclear risks. These might include, inter-alia, a multi-risks policy providing cover for conventional risks such as property and employer’s liability, and a miscellaneous risks policy providing cover for additional risks not insurable on the open market e.g. latent defects in buildings. The NDA is also able to take out commercial insurance to cover the transport of nuclear substances where necessary. 85. The captive insurance companies will also provide cover of up to £140m against third party nuclear damage within the existing overall premium. Other nuclear risk cover is to be provided as follows: i) Years 0-10 i. Responsibility for £0-140m – the operator; ii. Responsibility for £140m-260m - the group of signatories to the convention; 31 ii) iii. Over and above £260m - UK Parliament may vote additional funds to compensate victims as required. Years 10-30 i. Responsibility for £0-140m – UK Government; ii. Responsibility for £140m-£260m - the group of signatories to the convention; iii. Over and above £260m - UK parliament may vote additional funds to compensate victims as required. 86. NDA may take out other insurance only within the circumstances set out in Managing Public Money. 87. Any substantial change to insurance arrangements must be discussed with the Department before implementation. 88. The NDA will be expected to cover any third party losses from its own budget. In exceptional circumstances DECC will consider providing additional budget to cover the losses. Each incidence will be considered on its own merits. Management and Disposal of Fixed Assets Register of Assets 89. NDA shall maintain an accurate and up-to-date register of its fixed assets. Disposal of Assets Disposal of Surplus Assets & Proceeds from Disposal of Assets 90. Subject to the provisions of the Energy Act 2004, and to proposals set out in the NDA’s agreed Strategy and its Annual Plan for the year in question, the NDA shall dispose of assets which are surplus to its requirements. Assets will usually be sold by auction or competitive tender and in accordance with Managing Public Money unless otherwise agreed by DECC. If it is appropriate to do so, then, assets will be sold for best price taking into account any costs of sale. 91. For the avoidance of doubt para 76 refers to assets disposals. 92. The NDA shall retain the receipts derived from the sale of assets provided that DECC receives prior notification of individual sales. Proceeds can be retained without limit and applies to both NDA negative capital DEL and NDA negative resource DEL income. However, any decisions on spending materially higher than forecast capital or resource negative DEL need to be agreed by DECC before funds are committed by the NDA. 93. If, notwithstanding the above, the NDA disposes of assets which have been purchased, improved or developed with Exchequer funds and the receipts amount to more than £1 million, or where the disposal has unusual features of which Parliament should be aware, Parliamentary approval shall be secured for the receipts to be reinvested. The receipts shall then be surrendered to DECC which shall submit an Estimate to Treasury seeking approval for the receipts to be treated as appropriations in aid by DECC and for a corresponding increase in the NDA’s funding. This increased funding should be ring-fenced and made available in line with the EYF mechanism, with the use of the funding clearly referenced in annual 32 budget submissions and in the preparation of Comprehensive Spending Review submissions. 94. If these criteria are not met, any receipts shall be dealt with in line with the rules on surplus in-year receipts. Recovery of Grant Financed Assets 95. Where NDA has financed expenditure on capital assets by a third party, it shall make appropriate arrangements to ensure that any such assets are not disposed of by the third party without its prior consent. 96. NDA shall, therefore, ensure that where appropriate such arrangements are sufficient to secure the repayment of the Exchequer's due share of the proceeds of the sale, in order that funds may be surrendered to the Department. 97. NDA shall ensure that if the assets created by any grants made by the NDA cease to be used by the recipient of the grant for the intended purpose, a proper proportion of the value of the asset shall be repaid to NDA where appropriate for surrender to DECC. The amounts recoverable under the procedures in paragraphs 91 – 92 above shall be calculated by reference to the best possible value of the asset and in proportion to the Exchequer's original investment(s) in the asset. Budgeting Procedures Setting the Annual Budget 98. Each year, in the light of decisions by the Department on the NDA's Strategy and its Annual Plan for the year in question DECC will send to NDA: i) a statement of any planned change in budgeting or accounting policies affecting NDA, and ii) a formal statement of the annual budgetary provision allocated to the NDA by the Department. 99. The NDA's Annual Plan will not involve expenditure which would result in any need to request Grant in Aid from the Secretary of State that would result in the NDFA having a balance below that determined by the Secretary of State (section 31 (7)) of the Act. It will take into account forecast receipts, and will include a budget of estimated payments and receipts together with a profile of expected expenditure, and draw downs of any DEL allocation and/or any other income over the year. These elements will form part of the approved Annual Plan for the year in question. General Conditions for the NDA to Spend 100. Once the NDA's annual funding has been approved by the Department, the NDA shall have authority to incur expenditure approved in the budget without further reference to the Department on the following conditions • NDA shall comply with any terms of grant imposed under section 22(2) of the Energy Act 2004; • NDA shall comply with the delegations set out in Annex 1 and 1A of this document. • These delegations shall not be altered without the prior agreement of the Department. In exceptional circumstances it may be necessary for NDA to enter into urgent commitments in order to discharge its responsibilities. In such 33 circumstances the Department should be informed, and its approval sought, as soon as possible thereafter; • NDA shall comply with the conditions set out in Annex 2 regarding novel, contentious or repercussive proposals. • complies with legislation (para 108) and guidance as set out in para 109 101. The inclusion of any planned and approved expenditure in NDA's budget shall not remove the need to seek formal Departmental approval where new proposed expenditure is either outside the delegations set out in Annex 1 or 1A, or fits the definitions of novel, contentious or repercussive as illustrated in Annex 2, or is for schemes not previously agreed. In exceptional and urgent circumstances it may be necessary for NDA to commit such expenditure in order to discharge its responsibilities. In such circumstances the Department should be informed, and its approval sought, as soon as possible thereafter. 102. NDA shall provide DECC with such information about its operations, performance, individual projects, or other expenditure as DECC might reasonably require. Provision of Monitoring Information 103. NDA shall provide the Department with information on a monthly basis which will enable the satisfactory monitoring by DECC of the NDA’s: i) claim for grant in aid; ii) forecast outturn by budgetary control total; iii) actual Near Cash and Capital expenditure and income; and iv) will supply other data as required for HM Treasury’s COINS (Combined Online Information System) The format for supplying monitoring information is set out in Annex 3. Cash Management 105. The NDA shall supply a forecast of its cash income and expenditure to DECC on a daily basis and manage their OPG account in line with cash management requirements. The NDA shall ensure that it has procedures in place, which provide accurate forecasts. Banking Banking Arrangements 106. NDA's Accounting Officer is responsible for ensuring that NDA's banking arrangements are in accordance with the requirements of Managing Public Money. In particular, the Accounting Officer shall ensure that the arrangements to safeguard public funds are carried out efficiently, economically and effectively. The Accounting Officer shall therefore, ensure that: i) these arrangements are suitably structured and represent value for money, and are reviewed at least every two years, with a comprehensive review, usually leading to competitive tendering, at least every three to five years; ii) sufficient information about banking arrangements is supplied to the Department's Accounting Officer to enable the latter to satisfy his own responsibilities; 34 104. 107. iii) iv) NDA's banking arrangements shall be kept separate and distinct from those of any other person, NDPB, or organisation; adequate records are maintained of payments and receipts and adequate facilities are available for the secure storage of cash. Compliance with Instructions and Guidance Relevant Documents 108. NDA shall comply with: i) ii) iii) the Energy Act 2004 the Scotland Act 1998 all other relevant legislation. 109. In addition to this Financial memorandum the NDA shall acquire and comply with the following guidance documents: i) the NDA/DECC Management Statement; ii) Managing Public Money (HMT October 2007) iii) Financial Reporting Manual (FReM); iv) “Dear Accounting Officer” (DAO) and “Dear Consolidation Officer” letters – HM Treasury; v) the Consolidation Officer memorandums – HM Treasury; vi) other relevant guidance and instructions issued by HM Treasury in respect of Whole of Government Accounts; vii) Government Internal Audit Standards; viii) Managing the Risk of Fraud (HM Treasury); ix) Consolidated Budgeting Guidance (HM Treasury); x) other relevant instructions and guidance as issued from time to time by Government Departments; xi) specific instructions and guidance issued by DECC as sponsor Department; and, xii) recommendations made by the Public Accounts Committee, or by other Parliamentary authority, which have been accepted by the Government and which are relevant to NDA. Review of Financial Memorandum 110. This Financial Memorandum will be reviewed at least every three years; or if there should be a review of the NDA's functions or policy objectives. The Treasury will be consulted on any significant variation proposed to this Financial Memorandum and the associated Management Statement. 111. 35 ANNEX 1 FINANCIAL DELEGATIONS Introduction NDA and DECC recognise that for an effective working relationship DECC needs to be aware in advance of any course of action which the NDA proposes taking where, notwithstanding the delegated authorities set out in this Annex, there is likely to be an affect on the level of resources required by the NDA. The NDA should seek the Department’s prior agreement in respect of the following matters in particular: • matters as set out in the Energy Act 2004, or any Protocol, or Memorandum of Agreement/Understanding, or other document and which are reserved for DECC; • making any change to NDA’s agreed policies, strategy, or programmes which could significantly increase the overall level of resource agreed with the Department, or required in future years; • entering into novel or contentious commitments that could result in exceeding agreed level of resources; • entering into specific commitments and obligations outside of the delegations set out in this Annex; • matters which formally commit a Minister or the Government to action; • matters in which Ministers have declared an interest; • matters which will involve Ministers or the Department in their presentation and/or on which Ministers are likely to be questioned in Parliament; • proposals to be implemented through Public/Private Partnership or Private Finance Initiative (PPP/PFI); • matters where action is being taken against the NDA in the civil or criminal courts. Nature of Delegated Authorities provided to the NDA *Subject to the detailed provisions in the body of the Financial Memorandum the delegated financial authorities for the NDA are as set out in the following table: ITEM FINANCIAL * DELEGATION £100m lifetime costs and £50m annual costs Projects and capital commitments within the agreed Strategy and Annual Plans (delegation applies where the costs fall below all the limits opposite) IT/Telecoms Disposal of assets Acquisition and sales of property £10m £50m Prior approval must be obtained for all acquisitions or sales of property exceeding the lower of 1,000sqm or 5% of the NDA’s total estate or exceed £50m in total 36 Administrative expenditure (excluding IT and telecoms) Gifts, compensations and special payments Special payments where compensation: arises from a nuclear incident or ionizing radiation; and is paid in consequence of legal proceedings or is pursuant to a collective agreement that provides for the payment of such compensation without recourse to legal proceedings Guarantees and indemnities No limit £1k No limit £5m where it is in the ordinary course of business £5m where the third party is insolvent; £1m where they are solvent Losses waived, abandoned claims and write offs Note: Annex 2.3 of Managing Public Money provides detailed guidance. 37 ANNEX 1A: DETAIL OF DRAFT DECC DELEGATED AUTHORITIES DECC’s delegated authorities are set out below. Notwithstanding these delegations, certain categories of spending override any delegated authority and must always be submitted to the Treasury for approval. These are proposals which: • • • • • • • • • could create pressures leading to a breach in Departmental Expenditure Limits, administration costs limits, or Estimates provision; would entail contractual commitments to significant levels of spending in future years for which plans have not been set; could set a potentially expensive precedent; could cause significant repercussions for others; or are novel or contentious. In addition: DECC will act at all times within the rules of Managing public money; DECC will abide by the terms of any specific agreements reached with Treasury Ministers or officials during Spending Review discussions or otherwise; the normal conventions about adequacy of provision for foreseeable expenditure and virement between expenditure categories will apply; new policy proposals involving expenditure or affecting general financial policy should be discussed with the Treasury before being submitted to the Cabinet or a Ministerial committee, and cost estimates provided, with identification of how the costs will be met (including costs on other Departments); and if a project falls under more than one category of delegation, the lower delegated limit will apply. • 38 The delegated spending authorities provided to DECC are as follows: Nature of delegation Major projects Whole-life costs NDA annual costs Other annual costs IT projects Other limits to delegated authority Gifts of stores or property Gifts to visiting dignitaries Asset disposals £100m £100m £50m £20m £100k p.a. £1k p.a. £100m Limit Note that: • project limits include all new projects and commitments, including where they are part of a larger programme or payment that was provided for through a Spending Review or other Treasury approval; all costs are on an accruals basis, and should reflect the net present value in current prices; costs must not be “unbundled” to fall below the delegated limit; • • Allocations to delivery bodies The delegated authorities to DECC’s agencies, NDPBs or other sponsored bodies should be set out in financial memoranda. DECC may approve without reference to the Treasury any expenditure proposal from the body which exceeds the body’s own delegated authority, provided it does not exceed DECC’s delegated authority. The Treasury should be informed of allocations to delivery bodies where these exceed £50m per year. International subscriptions Treasury approval is required for any new international subscriptions or any new contributions by DECC or its delivery bodies which carry international obligations (e.g. by committing the UK to a particular policy or implying a commitment to incur expenditure in future years). 39 ANNEX 2 NOVEL, CONTENTIOUS, or REPERCUSSIVE PROPOSALS Novel, contentious, or repercussive proposals are difficult to define precisely. For the purposes of this document the term should be taken as meaning expenditure which is of a new kind or nature, or is likely to cause dispute or argument. A proposal which is novel or repercussive could involve: • • • a type of activity which the NDA has not been involved in at all before i.e. it is wholly new and/or inconsistent with the NDA’s aims and objectives; an activity that has a significant impact on individuals, local communities, and the environment and which has potential for significant media interest; a type of activity which the NDA has been involved in but where the proposal being put forward is a variant in some way e.g. the funding mechanism proposed may be significantly different to that which is normally employed, or the NDA could pay costs that it would not normally expect to pay; or an activity involving an issue which is not adequately covered by Managing Public Money or other relevant guidance and which is not covered by delegated powers. An activity that could impact on wider public sector policy by potentially setting a precedent • • And a proposal which is contentious could involve a degree of novelty, but the focus will be: • whether it is a proposal or project which the NDA ought legitimately to be doing and whether support of the proposal either by direct funding or in some other way could be justified from a regularity, propriety, and value for money standpoint; whether the mechanisms put in place to achieve the necessary outcomes are in conflict with existing rules or guidelines etc; where the expenditure is difficult to forecast or cap; where there is a high degree of financial risk, for whatever reason; or where there might be contention of a political or policy nature for the Government as a whole. funding an activity normally met by another part of the public sector • • • • • Novel, contentious or repercussive issues may arise, for example in the context of: • • • • • • • The NDA’s strategy; programmes of work set out in the agreed Annual Plan; commercial operations of THORP/SMP; movement of radioactive waste both nationally and internationally; storage of radioactive waste nationally; the purchase of land at a higher price than its value; or the disposal of land at less than open market value as part of a development agreement; projects requiring the use of innovative or untried technology. 40 ANNEX 3 DECC REQUIREMENTS FOR MONITORING NDA EXPENDITURE: Background 1.1 Non-Departmental Public Bodies (NDPBs) The NDA is a non-Departmental Public Body (NDPB) with its relationship to Government set out in Managing Public Money. 1.2 Budgetary Control – Departmental Expenditure Limits (DELs) DECC’s budgets are defined on a three-year basis as part of the Spending Review process. Firm departmental budgets are called Departmental Expenditure Limits (DELs) and these are the Department’s primary means of budgetary control. There are separate DELs for Resource and Capital expenditure. Expenditure is classified for budgeting purposes, in accordance with Treasury’s Consolidated Budgeting Guidance which is revised and issued each year. However, for the NDA, the Office of National Statistics (ONS) have clarified that certain expenditure be classified as capital for budgeting purposes. The NDA should therefore apply the ONS classification. 1.3 Treasury Monitoring DECC is required to provide information to Treasury on the NDA’s budget, and its forecast and actual transactions through input to the COINS. The information so gathered allows DECC to meet all Treasury reporting requirements. 2. The Importance of Monitoring NDA Expenditure 2.1 NDA and DECC DELs DECC Resource and Capital DEL includes the Resource and Capital Expenditure of the NDA as described in 1.2 above. It is essential to DECC’s budgetary management process that this expenditure is included in all monitoring of financial performance. 41 2.3 Monitoring Budgets on a Gross Basis In general NDPB budgets are allocated gross and take account of income which means they need to be monitored on a gross basis. Through agreement with the Treasury, commercial income is to be treated as Appropriations in Aid and represents Negative DEL. Any variance against anticipated levels has an impact on DECC. 2.4 Grant in Aid and Cash Monitoring Grant in aid funding of NDPBs is not included within DECC or NDA’s budget. However, it is the Grant in Aid (which in NDA’s case includes all income) that is voted by Parliament. It is included in the Department’s Supply Estimates, to ensure that Parliament grants sufficient cash to fund NDPBs. Any increase in income needs to be notified in time for inclusion in the Winter or Spring Supplementary Estimate or DECC will have excess Appropriations in Aid which have to be paid over to Treasury. The control of cash within the NDA is also important to ensure unnecessary cash balances are not being built up, as these will attract cost of capital charges. The ability to reconcile NDA cash claims against resource expenditure and forecasts is therefore of great significance. 3. MENTOR [NEED TPO CONFIRM WHETHER DECC WILL USE MENTOR OR ANOTHER SYSTEM] The Department’s accounting and budgeting system (MENTOR) is the primary source of financial information for monitoring and reporting within DECC and to Treasury. Reports from the financial system form the basis of monthly reports to DECC’s Departmental Board and Treasury. MENTOR is also designed to produce reports in the format required by the Treasury for the COINS database. Information on the NDA’s resource and capital expenditure must be entered in MENTOR on a monthly basis to ensure the accuracy, relevance and reliability of the reporting 42 4. Monitoring Procedures 4.1 General DECC’s FRM has devised a set of procedures to enable DECC’s public bodies’ resource information to be included in MENTOR together with a series of forms (ref: Appendices) to assist with the loading of budgets and forecasts, input of actual expenditure, and the reconciliation of grant claims against resource outturns. 4.2 Setting the Budget The NDA’s 3 year ring-fenced DEL budget allocations will be set in the context of Government’s Spending Review process. The last such process was CSR07 which set NDA’s budgets for 2008/09, 2009/10 and 2010/2011. The annual allocation will need to be profiled across the 12 months of the financial year, and income and expenditure elements need to be separately identified. Templates need to be returned to DECC by the beginning of the financial year. The Budget Forecasting Profile template in Appendix I breaks the budget a down between Resource income and expenditure and Capital income and expenditure, and profiles it across the months of the year. Updated forecasts should then be returned to the NDA corporate governance team before the 5th working day of the month. 4.3 Monitoring Actual Expenditure against Budgets A completed template shown in Appendix II giving Information on actual expenditure against budgets will be returned to the NDA corporate governance team on a monthly basis at the same time as the NDA Board report is presented. This will mean that information is received by DECC a month later than would normally be the case but will ensure consistency between reported figures. This information must be with DECC before the end of the relevant month to ensure that DECC’s Management Board share the view given to the NDA Board. 4.4 Verifying Grant in Aid (GIA) Claims Budget and the actual expenditure are expressed and reported in resource terms (i.e. including cash and non-cash items). So there needs to be a clear link between the NDA resource based outturns and the cash requirements that drive its grant in aid claims. DECC needs visibility of this relationship to verify the grant in aid requirement and to be assured that there is no unnecessary accumulation of unspent cash. Appendix III includes a grant in aid verification document, which summarises the net Resource and Capital outturns in the Budget versus Actuals Monitoring sheet and adjusts these to exclude the non-cash items. It also incorporates any surplus cash balances from previous claims. This is how the cash requirement for the current period is derived. 4.5 Grant in Aid Claims Grant in aid claims will be processed by DECC using MENTOR programme codes. A standardised claim form is included in the Appendix IV. 43 Appendix I and II Appendix I – Budget Forecasting Template Co st Ce ntr e Tot al M for a the r Ye ar DEL Budget (in £000s) Progr amm e Code NA C A M J p a u r y n J u l A u g S e p O N c o t v D e c J a n F e b DEL Bud get Resourc e DEL Gross 341 Expendit 290 ure Commerc 123 ial 380 Income Resource DEL Budget Allocation Capital DEL Gross 524 Expendit 120 ure Commerc 123 ial 230 Income Capital DEL Budget Allocation Co st Ce ntr e 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 AME Expendit ure (in £000s) Progr amm e Code NA C A M J p a u r y n J u l A u g S e p O N c o t v D e c J a n F e b Tot al M for a the r Ye ar AME Proj ectio n Depreciat ion Cost of Capital Movemen t in Provision s - for Nuclear Liabilities Movemen t in Provision s - for Other Liabilities AME Expenditure 397 110 395 110 394 220 394 320 44 Appendix II – Budget versus Actual and Forecast Monitoring Template Budget In £000s Resource DEL Gross Expenditure Commercial Income Net Resource DEL Expenditure Capital DEL Gross Expenditure Commercial Income Net Capital DEL Expenditure Forecast In £000s Resource DEL Gross Expenditure Commercial Income Net Resource DEL Expenditure Capital DEL Apr Budget May Budget Jun Budget Jul Budget Aug Budget Sep Budget Oct Budget Nov Budget Dec Budget Jan Budget Feb Budget Mar Budget Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Total 0 0 0 45 Gross Expenditure Commercial Income Net Capital DEL Expenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 46 Actual In £000s Resource DEL Gross Expenditure Commercial Income Net Resource DEL Expenditure Capital DEL Gross Expenditure Commercial Income Net Capital DEL Expenditure Apr Actual May Actual Jun Actual Jul Actual Aug Actual Sep Actual Oct Actual Nov Actual Dec Actual Jan Actual Feb Actual Mar Actual Total 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Variance Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar (Budget minus Total Actual/Forecast In £000s Variance Variance Variance Variance Variance Variance Variance Variance Variance Variance Variance Variance Resource DEL Gross Expenditure 0 Commercial Income 0 Net Resource DEL Expenditure 0 Capital DEL Gross Expenditure 0 Commercial 0 47 Income Net Capital DEL Expenditure 0 0 0 0 0 0 0 0 0 0 0 0 0 48 AME Actual/Forecasts versus Projection AME Expenditure (in £000s) Depreciation Cost of Capital Movement in Provisions for Nuclear Liabilities Movement in Provisions for Other Liabilities AME Expenditure Total for the Year Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AME Projection variance Appendix III - Grant in Aid Verification Form Apr Opening cash balance Resource Net Resource DEL Total Resource Capital Net Capital DEL Total Capital Working capital movements Total working capital movements Grand Total (NCR) Grant in Aid claimed Closing cash balance Cumulative Grant in Aid 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Adj01 Totals 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cumulative Net Cash Requirement DEL Income Expenditure - resource Expenditure - capital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Adj01 0 0 0 0 0 0 0 0 0 0 0 0 Totals 0 0 0 0 0 Appendix IV - Grant in Aid Claim Form Body Date of Claim Period Covered by Claim Amount of Grant Claim NDA Grant In Aid claimed to date Prepared by (Status) Treasury Accountant Approved by (Status) Reporting & Consolidation Manager For DECC Use only: Certified by Approved by Date Mentor details Entity Cost Centre Resource NAC Programme Amount Entity Cost Centre Capital NAC Programme Amount