nuclear decommissioning authority (nda ... the nda has additional responsibility, under contract to...

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FNM01 – v5 - October 2013

NUCLEAR DECOMMISSIONING AUTHORITY (NDA)

FRAMEWORK DOCUMENT 2013

This Framework Document has been drawn up by the Department of Energy and Climate Change (DECC) and the Scottish Government in consultation with the Nuclear Decommissioning Authority (NDA). It sets out the broad governance and management framework within which the NDA will operate and the relationship between the NDA and DECC (the Government Department with lead sponsorship responsibility for the NDA) and the Scottish Government which has responsibility in respect of the role of the Scottish Ministers.

The document does not convey any legal powers or responsibilities and complements and should be read in conjunction with The Energy Act 2004.

Copies of this document and any subsequent amendments will be placed in the Libraries of both Houses of Parliament and will be published on the NDA’s website.

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TABLE OF CONTENTS

1. Governance and Structure

2. Accountability

3. Governance and Structure

4. Strategy, Annual Plan and Monitoring of Performance

5. NDA members and staff

6. Annual Report and Accounts

7. Audit

8. Management and financial responsibilities

9. Pensions

10. Nuclear Decommissioning Funding Account (NDFA)

11. Review and arrangement should the NDA be wound up

12. Annexes

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1 Purpose of the Nuclear Decommissioning Authority

1.1 The NDA is an Executive Non-Departmental Public Body (NDPB) established under the Energy Act 2004. For national accounts purposes the NDA is classified to the central Government sector.

1.2 The main duty of the NDA is to clean up the UK’s public sector nuclear legacy safely, securely, cost effectively and in ways that safeguard the environment for this and future generations.

1.3 The NDA has responsibility for designated sites across the UK that represent that legacy including sites and facilities which were developed in the 1940s, 1950’s, and 1960s to support HMG’s defence and 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.

1.4 Additional responsibility was given to the NDA by The Secretary of State for DEFRA in October 2006 for securing geological disposal of higher activity waste, in order to create one organisation able to take a strategic view through all stages of the waste management chain and which is accountable in a clear and transparent way to independent regulators and Government. The NDA will also continue to work with the Scottish Government to implement its policy for the long term management of higher activity waste in near-surface facilities.

1.5 The NDA has additional responsibility for developing UK-wide nuclear Low Level Waste (LLW) strategy and plans.

1.6 The NDA has additional responsibility for Assurance to the Secretary of State that the proposals of EDF Energy in relation to those items where the costs are borne by the Nuclear Liabilities Fund are those that would be made by a reasonable prudent operator.

1.7 The NDA has additional responsibility, under contract to the Secretary of State, to provide specific advice in relation to nuclear new build – specifically, the decommissioning plans of operators.

1.8 The Energy Act 2004, and the directions made under section 3 of that Act, establishes the functions, duties and powers of the NDA. 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 document refers to those provisions, it is by way of guidance only and does not alter the effect of those provisions and to the extent that this document appears to contradict any provision of the Energy Act 2004 then the relevant provision in the Act prevails.

NDA Mission Statement

1.9 The NDA’s mission is, “to deliver safe, sustainable and publicly acceptable solutions to the challenge of nuclear clean-up and waste management. This means never compromising on safety, or security, taking full account of our social and environmental responsibilities, always seeking value for money for the tax payer, and actively engaging with stakeholders”.

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2 Accountability

Ministerial Responsibility: Secretary of State, Department of Energy and Climate Change

2.1 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 approving the NDA’s Strategy and Annual Plan;

appointing the Chair of the NDA and other non-executive Members and approving the appointment of the CEO by the non-executive members, after consultation with Scottish Ministers for each appointment;

setting the pay and incentive structure for the Chair and other non-executive Members;

issuing Directions, and issuing and removing Designations and making Transfer Schemes in accordance with the provisions of the Energy Act 2004;

determining the terms on which the NDA will have access to Grant in Aid in order to discharge its duties and responsibilities,

maintenance of appropriate funding mechanisms;

providing information to Parliament about the NDA as required, and seeking Parliamentary approval for expenditure;

issuing Accounts Directions on the basis for preparation of the NDA’s annual accounts; and

laying the NDA’s Annual Report and Accounts before Parliament.

Scottish Ministers

2.2 The Scottish Ministers are accountable to the Scottish Parliament for the activities and performance of the NDA in respect of which Scottish Ministers have statutory duties and responsibilities under the Energy Act 2004. Responsibilities include, 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;

providing information to the Scottish Parliament about the NDA; and

laying the NDA’s Annual Accounts before the Scottish Parliament.

The Scottish Ministers are not responsible for:

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setting the pay and incentive structure for the Chair and other non-executive Members

determining the terms on which the NDA will have access to Grant in Aid in order to discharge its duties and responsibilities;

maintenance of appropriate funding mechanisms; and

seeking approval for expenditure;

Responsibilities and accountabilities of the NDA’s Sponsoring Department’s Accounting Officer

2.3 The Permanent Secretary of DECC, as the Department’s Accounting Officer:

designates the NDA Accounting Officer (who may also be the NDA Chief Executive) and ensures that he/she is suitably trained and fully aware of his/her responsibilities;

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;

ensures that the NDA complies with central HMT and Cabinet Office expenditure controls, as outlined in Managing Public Money and Cabinet Office guidance,

must be satisfied that the internal controls applied by the NDA, and any subsidiary companies, 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;

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.

2.4 The responsibilities of a Departmental Accounting Officer are set out in more detail in Managing Public Money.

Responsibilities and accountabilities of the Accounting Officer

2.5 The Accounting Officer is personally responsible for:

safeguarding the public funds for which he or she has charge;

ensuring propriety, regularity, value for money and feasibility in the handling of those public funds;

the day-to-day operations and management of the NDA; and

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ensuring that the NDA as a whole is run on the basis of the standards, in terms of governance, decision-making and financial management that are set out in Box 3.1 of Managing Public Money.

2.6 The NDA Accounting Officer’s responsibilities for accounting to Parliament include:

signing the accounts and ensuring that proper records are kept relating to the accounts and that the accounts are properly prepared and presented in accordance with any directions issued by the DECC Secretary of State;

signing a Statement of Accounting Officer’s responsibilities for inclusion in the annual report and accounts; signing a Governance Statement regarding the system of internal control for inclusion in the annual report and accounts and

giving 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.

2.7 The NDA’s Accounting Officer is responsible to the DECC Secretary of State for:

ensuring that management information systems are in place and that any information required or requested by the Department is provided on a timely basis;

ensuring that effective systems of corporate governance are in place including adequate systems for internal and financial control and effective measures against fraud and theft; and

ensuring that any significant problems whether financial or otherwise are notified to the Secretary of State in a timely fashion.

2.8 The NDA’s Accounting Officer is responsible to the NDA Board for:

advising 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, and any other relevant instructions and guidance that may be issued by HM Treasury from time to time;

advising on the NDA’s performance compared with its aims and objectives as set out in its strategy and Annual Plans;

establishing the NDA’s corporate and business plans in light of the NDA’s statutory duties; and

Ensuring that value for money 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.

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2.9 The NDA Accounting Officer may also take action as set out in 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, efficiency or effectiveness, is of questionable feasibility, or is unethical.

Delegation of duties

2.10 The Chief Executive may delegate the day-to-day administration of his Accounting Officer responsibilities to other members or employees of the NDA. However, he/she shall not assign those responsibilities absolutely to any other person.

2.11 The Chief Executive will, 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.

The Chief Executive’s role in ombudsman cases

2.12 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 Government of the NDA's proposed response and also any recommendation made by the Parliamentary Commissioner.

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3 Governance and Structure

DECC and Scottish Government Corporate Governance

3.1 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, in accordance with the Energy Act 2004, and as the NDA operates along similar lines as a cross border public authority, it is also accountable to Scottish Ministers and the Scottish Parliament for the activities and performance of the NDA in, or as regards, Scotland. Therefore the Scottish Government 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 Government) are met. NDA should comply with the principles of good corporate governance as set out in the joint HM Treasury and Cabinet Office publication Corporate Governance in Central Government Departments: Code of Good Practice.

Shareholder Executive (ShEx)

3.2 The ShEx Corporate Governance team is responsible for liaising with the NDA on all aspects of its work and is the main point of day-to-day contact between Government and the NDA. This dedicated 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. They also support DECC’s Accounting Officer on his or her responsibilities toward the NDA.

3.3 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, inter-alia, appropriate delegated powers and freedoms,

promote compliance with the principles of good corporate governance as set out in Corporate Governance in Central Government Departments: Code of Good Practice; and

provide for mutual understanding of the NDA’s objectives and of the risks and challenges it faces.

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3.4 Specific responsibilities of the corporate governance team include:

advising the Secretary of State and Scottish Ministers at a strategic level on:

how well the NDA is achieving its objectives and whether it is delivering value for money;

appropriate budget and performance targets for the NDA;

novel, contentious, and/or repercussive proposals/projects proposed by the NDA or other parts of Government, where those proposals might impact on the NDA; and

public appointments matters.

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; and

ensuring proper lines of communication between the NDA and the Scottish Government.

Devolved Administrations

3.5 The NDA must act consistently with Government Policy and where, on devolved matters (which include waste and environmental management policy) the policy in Scotland or Wales may differ from that in England, the NDA must act consistently with the policy in the jurisdiction in which it operates.

Scotland

3.6 The Radioactive Waste and Decommissioning Policy Team within the Environmental Quality Division of the Scottish Government will work with ShEx and DECC on all matters relating to the devolved responsibilities including:

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 Government policy and offering advice on the same; and

issuing guidance from time to time to the NDA on specific Scottish matters.

Wales

3.7 The DECC Secretary of State will inform the Cabinet of the Welsh Government of any significant changes to the NDA’s priorities and objectives, in particular on those changes that are relevant to Wales.

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The NDA Board

3.8 The Board is comprised of executive members and non-executive members (including the Chair), with the latter forming a majority. The role of the non-executive members is to:

challenge the executive management to deliver;

ensure that the executive team is focused and incentivised to produce positive results; and

generally to hold the executive management to account for its performance.

3.9 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.

3.10 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.

3.11 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 Audit and Risk Committee to help address key financial and other risks.

3.12 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 and in line with the Code of Practice issued by the Office or the Commissioner for Public Appointments.

3.13 The NDA Chief Executive is appointed by the non-executive Board members following approval by the Secretary of State in consultation with the Scottish Ministers.

3.14 Executive Board members are appointed by the non-executive members after consultation with the Chief Executive.

The Chair of the NDA

3.15 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 will be for a fixed term, with the possibility of extension subject to review of performance.

3.16 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 the NDA Strategy and Annual Plan.

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3.17 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:

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.

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 and the Scottish Ministers with an annual assessment of the performance and effectiveness of the Board and 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; and

representing the NDA to the public and stakeholders.

3.18 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. Where necessary, the Chair will ensure that any member of the Board will receive training on financial management and reporting.

3.19 The Chair shall also ensure that a Code of Practice for Board Members is in place based on the Cabinet Office publication Code of Conduct for Board Members of Public Bodies. 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.

3.20 Communications between the Board and the Secretary of State and the Scottish Ministers shall normally be through the Chair.

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Individual board members’ responsibilities

3.21 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; and

act in good faith and in the best interests of the NDA.

Remuneration Committee

3.22 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 Section 2(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, the Treasury and the Cabinet Office in relation to staff pay.

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4 Strategy, Annual Plan and Monitoring of Performance

4.1 The Energy Act 2004 requires the NDA to prepare a Strategy for carrying out its functions and to prepare in respect of each financial year an Annual Plan, and sets out procedures for consultation on these plans. The Strategy and Annual Plan must be approved by the Secretary of State and, to the extent appropriate, with the Scottish Ministers.

4.2 The Strategy will include the NDA’s priorities, and long term objectives for cleaning up and decommissioning the sites and installations for which it has responsibility.

4.3 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.

4.4 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 Government.

4.5 The draft Annual Plan must be submitted to the Secretary of State and Scottish Ministers in sufficient time to allow for consultation and review prior to final approval.

4.6 A final decision on the Annual Plan for the year in question will be taken by the Secretary of State and the Scottish Ministers by 31 March each year.

4.7 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, and to monitor and report on risks to successful delivery of those objectives. NDA performance in delivering Ministers' policies, including the achievement of key objectives, shall be reported to DECC, H M Treasury and the Scottish Government as follows:

Monthly: a report focussing on finance, programme and commercial management, delivery of key performance indicators and progress against the business plan;

Quarterly: a meeting between senior executives of the ShEx, DECC, H M Treasury, the Scottish Government and the NDA to review progress and strategy; and

Ad Hoc meetings as and when issues arise

The format for supplying monitoring information will be as agreed from time to time between DECC, Scottish Government and the NDA, such that SHEX are able to properly monitor the performance of the NDA and upwardly report performance to Government.

4.8 The NDA, DECC and SHEX shall continue to work together to improve the system of regular in year reporting to stakeholders and to the wider public,

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reflecting the commitment to openness and transparency in the provision of information about the NDA’s activities.

4.9 The Secretary of State and Scottish Ministers 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.

4.10 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.

4.11 The NDA shall take the initiative in informing DECC and the Scottish Government 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.

4.12 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 a statement of any planned change in budgeting or accounting policies affecting NDA

4.13 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:

DEL budget allocation split between Resource, Capital and Administration totals; gross and net;

Forecast commercial income that underpins NDA’s gross expenditure plans;

The total cash Grant-in-Aid available to the NDA; and

Annually Managed Expenditure (AME).

Budget approvals will form part of the DECC Supply Estimate and be subject to Parliamentary vote and control.

4.14 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 Nuclear Decommissioning Funding Account (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.

Transfer of Funds within Budgets

4.15 NDA may apply to transfer budgets between the individual control totals by seeking agreement from DECC and HMT, such transfers being achieved through the established Supplementary Estimate process. Once approved by Parliament, ShEx will communicate the revised control totals to the NDA in writing.

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5 NDA members and staff

NDA Staff

5.1 Within the arrangements approved by the Secretary of State the NDA will have responsibility for the recruitment, retention and motivation of its staff.

The broad responsibilities toward its staff are to ensure that:

the rules for recruitment and management of staff create an inclusive culture in which diversity is fully valued; appointment and advancement is based on merit: there is no discrimination on grounds of gender, marital status, sexual orientation, race, colour, ethnic or national origin, religion, disability, community background or age;

the level and structure of its staffing, including grading and staff numbers, are appropriate to its functions and the requirements of economy, efficiency and effectiveness;

the performance of its staff at all levels is satisfactorily appraised and the NDA performance measurement systems are reviewed from time to time;

its staff are encouraged to acquire the appropriate professional, management and other expertise necessary to achieve the NDAs objectives;

proper consultation with staff takes place on key issues affecting them; adequate grievance and disciplinary procedures are in place; whistle-blowing procedures consistent with the Public Interest

Disclosure Act are in place; and a code of conduct for staff is in place based on the Cabinet Office’s Model Code for Staff of Executive Non-departmental Public Bodies.

5.2 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.

5.3 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.

5.4 In accordance with guidance issued by the Treasury, the NDA shall submit its annual pay remit to the Department for approval. Approval of the NDA pay remit applies as a whole and not to any individual’s pay, which is a decision for the NDA once the remit is approved.

5.5 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.

5.6 The travel expenses of Board members shall be tied to the rates allowed to senior staff of NDA. Reasonable actual costs shall be reimbursed.

5.7 The NDA will provide access to the civil service pension arrangements for its own staff. NDA staff may opt out of the PCSPS. However, the employer's

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contribution to any personal pension arrangement, including a stakeholder pension, shall normally be limited to the national insurance rebate level.

5.8 Proposals on severance must comply with the rules set out in Managing Public Money.

6 Annual Report and Accounts

6.1 The NDA must publish an annual report of its activities together with its audited accounts as soon as possible after the end of the financial year and in line with deadlines agreed with DECC.

6.2 The accounts shall be prepared 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

6.3 The Report must cover performance towards achieving its objectives in respect to the strategy in force at the time and also 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.

6.4 A draft of the Report shall be submitted to the DECC corporate governance team and the Scottish Government at least three weeks before the proposed publication date

6.5 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. The Secretary of State is required to lay the Accounts before Parliament. The Scottish Ministers shall lay the NDA’s Accounts before the Scottish Parliament.

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7 Audit

Internal Audit

7.1 The NDA shall establish and maintain arrangements for internal audit in accordance with the Public Sector Internal Audit Standards (PSIAS), and as agreed with DECC Internal Audit operate in line with the Level 1 Collaborative Model in the IAS Group Framework.

7.2 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. The NDA’s annual audit report (including the Head of Internal Audit opinion on risk management, control and governance) will be sent to the Department as soon as possible.

Audit Committee

7.3 The NDA shall set up an Audit Committee, consisting exclusively of independent non-executive directors, as a committee of its Board in accordance with the Corporate Governance in Central Government Departments: Code of Good Practice and the Treasury’s Audit and Risk Assurance Committee guidance. The Audit Committee’s role is to provide independent and objective advice to the Accounting Officer and the Board on risk management, control, and governance.

7.4 The NDA shall make the Minutes of its Audit Committee available to DECC and the Scottish Government.

External Audit

7.5 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.

7.6 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

7.7 The NDA will agree with the NAO arrangements for audit of any subsidiary companies

Value for Money (VFM) Examinations

7.8 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 endeavours to secure access for the C&AG to any other documents required by the C&AG which are held by other bodies.

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Right of access

7.9 DECC and the Scottish Government shall have a right of access to all the NDA’s records and personnel for purposes such as audits and performance reviews.

8 Management and financial responsibilities

8.1 The NDA shall follow the principles, rules, guidance and advice in Managing Public Money, referring any difficulties or potential bids for exceptions to the ShEx Governance team in the first instance. The NDA should also comply with the Cabinet Office controls. A list of guidance and instructions with which the NDA should comply is in Annex 2.

Risk Management

8.2 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 “Management of Risk - Principles and Concepts”. It shall adopt and implement policies and practices to safeguard itself against fraud and theft, and take all reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter into a contract.

Classification of NDA income and expenditure

8.3 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 8.5 below and where HM Treasury has granted a specific derogation in the Spending Review settlement.

8.4 New provisions and changes to existing provisions and depreciation will remain exceptionally in AME given their size and likely volatility.

8.5 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: 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; Remedial work to restore the former site of the reactor to an

environmentally satisfactory condition; and Construction of waste management facilities required to support

decommissioning, clean up and disposal.

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General Conditions for the NDA to Spend

8.6 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, subject to: compliance with the delegations set out in Annex 1 of this document;

and compliance with the conditions set out below with regard to novel,

contentious or repercussive proposals.

8.7 NDA shall obtain the approval of the Department before: 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

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

making any change of policy or practice which has wider financial implications which might significantly affect the future level of resources required.

8.8 NDA shall not, without prior written Departmental approval, enter into any undertaking to incur any expenditure which will result in the breach of its individual control totals for Resource DEL, Capital DEL or Administration Expenditure, or cash grant in aid.

8.9 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.

Grant-in-aid and any ring-fenced grants

8.10 Payments of grant in aid by DECC to the NDA will be made promptly on the submission of a claim 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 shall provide the Department with information on a monthly basis which will enable the satisfactory monitoring by DECC.

8.11 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. Grant-in-Aid not drawn down by the end of the financial year shall lapse. Subject to approval by Parliament of the relevant Estimates provision, where grant-in-aid is delayed to avoid excess cash balances at the year end, DECC will make available in the next financial year any such grant-in-aid that is required to meet any liabilities at the year-end, such as creditors.

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Receipts from Sale of Goods or Services

8.12 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 8.13 below).

8.13 Income received by the NDA shall be surrendered to DECC, and subsequently from DECC to the Consolidated Fund. DECC will then seek Treasury approval for the CFER to be treated as Grant-in-Aid by DECC with a corresponding increase in the NDA’s gross funding.

8.14 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.

Cash Management

8.15 The NDA shall supply a forecast of its cash income and expenditure to DECC on a monthly basis and manage their Government Banking Service (GBS) account in line with cash management requirements. The NDA shall ensure that it has procedures in place, which provide accurate forecasts.

Procurement

8.16 NDA policy shall be to seek value for money by procuring the goods and services it needs through a free and open competition process, with due regard to regularity and propriety and guarding against corruption. It will follow Government policies and standards on public procurement including the use of central Government Procurement Frameworks for common goods where appropriate.

8.17 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.

8.18 Proposals to let single-tender or restricted contracts will be by exception with the requirement to demonstrate compelling reasons for this course of action.

8.19 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.

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Public/Private Partnerships

8.20 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 from DECC. As the approach can be expected to be novel or contentious it is also likely that Treasury approval will be required.

8.21 Any PPP partnership controlled by NDA shall be treated as part of NDA in accordance with IAS as adapted in the FReM. 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).

Prompt payment

8.22 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.

Borrowing and leasing

8.23 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:

the Secretary of State (who has discretion as to whether to lend and on what terms), or

from other persons temporarily but subject to the Secretary of State’s prior consent.

8.24 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.

8.25 In addition, the NDA shall observe the rules set out in paragraphs 5.9 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.

8.26 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.

8.27 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 paragraph 8.26 above).

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8.28 Before entering into any lease (including an operating lease and property leases), the NDA shall demonstrate that the lease offers better value for money than purchase.

Lending, Guarantees, Indemnities; Contingent Liabilities; Letters of Comfort

8.29 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 whether or not in a legally binding form other than those taken on in accordance with the normal course of business as defined in Chapter 5 and Annex 5.5 of Managing Public Money.

Gifts and Other Special Payments

8.30 Proposals for making special payments outside the delegated limits set out in Annex 1 must have the prior approval of the Department.

8.31 Gifts by management to staff are subject to the associated Cabinet Office guidance on non-pay rewards.

Estates Strategy

8.32 The NDA shall publish an Estates Strategy which should follow the Government Property Unit controls and 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.

8.33 All property disposals, rent reviews, lease renewals, exercising of break-clauses and acquisitions must be supported by a business case and are subject to specific Delegations of Authority. Property transactions should follow guidance set out by the Government Property Unit.

Subsidiary Companies and Joint Ventures

8.34 NDA shall not establish subsidiary companies or joint ventures, or take equity shares in ventures which further the objectives of the NDA without the express approval of the Department, HMT and the Cabinet Office (Commercial Models control).

8.35 For statutory reporting purposes, any subsidiary company or joint venture controlled or owned by the NDA shall be consolidated with it in accordance with IAS as adapted for Government in the FReM. This will specifically exclude Site Licence Companies.

8.36 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).

8.37 Unless specifically agreed with the Department, Cabinet Office 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

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8.38 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.

8.39 The NDA’s captive insurance company shall be able to invest in traded financial instruments to support its operational purposes in providing insurance to the NDA estate.

Unconventional financing

8.40 Unless otherwise agreed with the Department, NDA shall not enter into any unconventional financing arrangement.

Insurance

8.41 The NDA shall in accordance with arrangements agreed with DECC and Treasury be responsible for procuring insurance. It will do so either through its captive insurance company (Rutherford Indemnity Limited – RIL) or through placement in the commercial insurance market. The risks covered will include property, liability, motor and employee benefits.

8.42 RIL will be operated in accordance with the relevant financial regulations.

8.43 Any substantial change to insurance arrangements must be discussed with the Department and Treasury before implementation.

9 Pensions

9.1 The NDA will be the lead organisation for the Combined Nuclear Pension Plan (CNPP), a nuclear industry wide scheme created under the auspices of section 8 of the Energy Act. The scheme provides pensions for former members of the UKAEA Combined Pension Scheme. The Nirex Pension Scheme and the GPS Pension Scheme, for which the NDA is also the lead organisation, have not been merged into the CNPP and are contained within individual sections of that overall scheme.

9.2 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.

9.3 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 must comply with Managing Public Money.

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10 Nuclear Decommissioning Funding Account (NDFA)

10.1 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.

10.2 The Secretary of State for DECC is responsible for maintaining the Nuclear Decommissioning Funding Account and establishing policy for its on-going operation in accordance with the terms of the Energy Act 2004

10.3 The Permanent Secretary of DECC is responsible for ensuring that an appropriate control framework for the operation of the Nuclear Decommissioning Funding Account is in place;

10.4 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 each year.

11 Review and arrangement should the NDA be wound up

11.1 The NDA is established by the Energy Act 2004. Any change to its core functions or duties, including mergers, significant restructuring or abolition would therefore require further primary legislation.

11.2 If this were to happen, the Department would then be responsible for putting in place arrangements to ensure a smooth and orderly transition. In particular, the Department is to ensure that procedures are in place in the ALB so the Department can obtain independent assurance on key transactions, financial commitments, cash flows and other information needed to handle the transition effectively and to maintain the momentum of any ongoing and / or transferred work.

11.3 The NDA will be reviewed in line with DECC’s overall review programme for NDPBs.

12 List of annexes

Annex 1 Delegated Authorities

Annex 2 Governance documents with which the NDA must comply

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Annex 1 Delegated Authorities provided to the NDA

NDA’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 Department for approval. These are:

Proposals which could: 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.

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.

In addition: NDA will act at all times within the rules of Managing Public Money; NDA 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;

if a project falls under more than one category of delegation, the lower delegated limit will apply.

Subject to the detailed provisions in the body of the Financial Memorandum and to the availability of the budget funding, the delegated financial authorities for the NDA are as set out in the following table:

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FINANCIAL DELEGATION Projects and capital commitments within

the agreed Strategy and Annual Plans

£100m lifetime costs and £50m annual costs

Disposal of assets £50m Strategic Supplier Management (incl

disputes) £5m for new expenditure

Any contract extension with a value over £5m

Any material changes to services resulting in a major contract variation with a value over

£5m

Any dispute with a strategic supplier

Commercial Models £5m for outsourcing transactions, otherwise there is no lower limit

ICT/Telecoms £5m full lifetime costs £1m on current or new back office / administrative systems including ERP

systems, HR systems, Finance / Accounting systems, procurement

systems. The control includes implementation, licensing and support

costs, as well as any extension to those services

£100k on common infrastructure solutions for PSN (policy limit agreed

by CIO Delivery Board) Digital service delivery, including ID

assurance No lower limit

All digital services subject to approval

Advertising, Marketing and Communications

£100k

Acquisition and sales of property Rental expenditure below £100k during the life of the lease commitment.

Approval must be sought for all new and extended FM contracts regardless

of financial commitment. Consultancy Cabinet Office approval required for all

consultancy expenditure above £20k in cases where:

New contracts are expected to exceed 9 months

Existing contracts are to be extended beyond 9 months

Expenditure on procurement related consultancy

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Redundancy and Compensation All schemes must be approved by Cabinet Office. Any scheme that offers more than 100% of the standard tariff

will need to show clear business reasons for doing so. Access to any

ring-fenced expenditure will not normally be agreed by HM Treasury

without Cabinet Office approval for the scheme.

External Recruitment A quarterly forecast with accompanying narrative to be submitted as part of the Department’s return (to Cabinet Office).

Administrative expenditure (excluding IT and telecoms)

No limit

Gifts, compensations and special payments

£1k

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

No limit

Guarantees and indemnities

13

£1m where it is not in the ordinary course of business

Note: Annex 2.3 of Managing Public Money provides detailed guidance.

Allocations to delivery bodies

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).

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ANNEX 2: List of government wide corporate guidance instructions

The NDA shall comply with the following general guidance documents and instructions:

this document;

Appropriate adaptations of sections of Corporate Governance in Central Government Departments: Code of Good Practice available on the Treasury website;

Managing Public Money; Cabinet Office Controls Guidance Code of Conduct for Board Members of Public Bodies Guidance on Reviews of Non-Departmental Public Bodies Government Internal Audit Standards, issued by the Treasury; Management of Risk: Principles and Concepts: issued by the Treasury; Managing the Risk of Fraud, issued by the Treasury; Government Financial Reporting Manual (FReM), issued by the Treasury; relevant Dear Accounting Officer letters; Public Bodies: A Guide for Departments (excepting chapters which have

been superseded) Regularity, Propriety and Value for Money, issued by the Treasury; The Parliamentary Ombudsman’s Principles of Good Administration; relevant guidance and instructions issued by the Department of

Constitutional Affairs on the Freedom of Information Act; Model Code for Staff of Executive Non-departmental Public Bodies:

issued by the Cabinet Office (see Chapter 5 of Public Bodies: A Guide for Departments)

Rules on Lobbying for Non-Departmental Public Bodies; other relevant guidance and instructions issued by the Treasury in respect

of Whole of Government Accounts; other relevant instructions and guidance issued by the central

Departments; specific instructions and guidance issued by the sponsor Department; recommendations made by the Public Accounts Committee, or by other

Parliamentary authority, that have been accepted by the Government and relevant to the NDPB.

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