Guidance

Additional information on Exemptions, Thresholds, Expectations and Compliance, and Breaches of Spend Controls

Updated 23 February 2024

1. Exemptions from Spend Controls

This annex sets out factors considered when Cabinet Office and HM Treasury consider requests from central government organisations seeking exemptions from the spend controls. It also sets out the process central government organisations should take to request an exemption.

1.1 Policy

The presumption is that there should be no exemptions from Cabinet Office spend controls. By increasing Cabinet Office and HM Treasury’s oversight of spending across central government, the controls increase join-up, help highlight patterns of duplicated spend within and between organisations, and provide access to functional experts who can help improve spending proposals and increase their alignment with government priorities. Individual organisations holding exemptions from the controls cannot benefit from this join-up and collaboration with the Cabinet Office.

Principal Accounting Officers and Accounting Officers must always ensure that spending is in line with the principles in Managing Public Money. Being exempt from the Spend Controls does not absolve them of this duty.

1.2 Process

Central government organisations may request an exemption from the Spend Controls. Requests will be considered on a case-by-case basis. There are no fixed criteria, and precedent will not be a consideration. Factors that may be taken into account include:

• the organisation spends no public money.
• the organisation needs to be seen to be completely independent of government.
• Spend Controls are incompatible with the organisation achieving its objectives.
• Spend Controls are incompatible with legislation or the organisation’s constitution

If you wish to request an exemption from one or more of the Spend Controls, you should email the Cabinet Office controls team at [email protected] and copy in the relevant HM Treasury spending team. Any such requests must be supported and submitted by the parent department (where applicable). The onus is on the organisation to make the case for exemptions.

By default, all newly set up central government organisations will be subject to all of the Spend Controls in full. If you believe your organisation will require exemptions you should engage with the Cabinet Office controls team as soon as possible. It is good practice to agree any exemptions when a new body is being planned, well before it is set up.

As the presumption is that central government organisations will be subject to controls unless an exemption has been agreed by Cabinet Office and HM Treasury, any exemptions should be recorded in that body’s framework document. This should include details of the type of spending that is exempt, the justification and the date at which the exemption will be reviewed. If no exemptions are held, the organisation does not need to state explicitly in its framework document that it is subject to Cabinet Office’s Spend Controls (as this is already presumed because they are subject to Managing Public Money, which itself sets out the need for compliance to the Spend Controls).

Cabinet Office and HM Treasury’s ministers have discretion on whether or not to grant exemption requests. Any granted requests will be communicated via ministerial correspondence, which will set out the terms to the exemption. This will include regular dates at which the exemption will be reviewed, any requirements for increased transparency, the consequences of wider governance breaches on the exemption. In addition, exemptions will be reviewed if the status of the body changes (for example, where the administrative or accounting classification changes) and when the framework document is reviewed and updated.

2. Thresholds policy

This annex sets out the policy for agreeing bespoke thresholds for organisations. A bespoke threshold applies where an organisation has different financial thresholds to those set out under types of spend in scope in the central controls guidance.

The default position is that the financial thresholds set out for each control apply to all departments and central government organisations. This ensures simplicity and fairness. It may however be appropriate to set higher or lower thresholds. Examples where bespoke thresholds may be used include:

• controls compliance: Where there have been compliance issues, the financial threshold may be reduced to increase the level of central oversight and assurance. Conversely, organisations that consistently comply with controls requirements may earn greater autonomy with a higher financial threshold.
• capability issues or low functional maturity within the organisation: Where an organisation is assessed to have low capability or functional maturity, it may be appropriate to set lower thresholds. Conversely, it may be appropriate to increase thresholds for organisations with high capability or functional maturity and grant a higher level of ‘earned autonomy’.
• proportionality: For large organisations, with sizeable budgets and high levels of spending activity, it may be appropriate to set a higher threshold.
• exceptional circumstances: In some cases, default controls thresholds may be temporarily changed to reflect exceptional circumstances, for example to balance the need for rapid delivery in an uncertain environment.
• spending related to the delivery of Brexit-related policies and in response to Covid-19 warranted higher thresholds.

Threshold changes must be agreed by ministers and HM Treasury. This is because a reduction in thresholds will impose additional burdens on spending organisations (eg. departments), the controls system, and central teams which will need to be resourced. Conversely, an increase in thresholds reduces oversight and alters HMT’s scheme of financial delegations.

Decisions on threshold amounts should be communicated to departments and set out in delegation letters (or sub-delegation letters for arm’s length bodies). In all cases where delegations deviate from the default levels, they may be withdrawn at any time at the discretion of the Cabinet Office and should be subject to review:

• at spending reviews.
• when delegation letters are being prepared.
• if there are any significant changes relevant to the spend controls eg. if the status of the body changes, or there are compliance issues.
• as part of the regular review of arm’s length bodies
• if the senior official responsible for controls within the organisation leaves or is replaced.

3. Expectations and compliance

Expectations for spending departments and organisations are clearly set out within this policy and guidance and the following documents:

• Managing Public Money (pdf, 3.5 MB) - Includes references to spend controls and standards.
• delegation letters - Letters from HM Treasury to departments through which Treasury delegates authority to enter into commitments and to spend within predefined limits without specific prior approval from the Treasury.
• framework documents - Documents that set out the relationship between departments and their arms-length bodies and arrangements for departments to monitor and understand those bodies.
• Functional Standards - A suite of management standards to guide people working in and with the UK government.

Key expectations to note are:

• pipelines are mandatory for Commercial, Property, Facilities Management and Digital and Technology spend.
• other spend must follow the early engagement process set out on each control page.
• organisations are presumed not to be exempt from the spending controls (see Annex B)
• the Cabinet Office will decide if approvals at stages prior to the commitment to spend (e.g. outline business case) negate the requirement to also provide approval at the point of commitment of spend. If organisations are in doubt for a particular case, they should contact the relevant functional team at Cabinet Office.
• members of the SCS must comply with the principles of the Managing Public Money guidance as made clear in the SCS performance Management guidance, where failure to do so, or comply with the relevant Cabinet Office spend controls, could affect their annual performance appraisal.
• any resources committed or expenditure incurred in breach of a condition attached to Cabinet Office Spend Control approval is irregular.
• spending proposals on which organisations are seeking approval should be submitted in adequate time for the Cabinet Office to make a decision. The requesting organisation should also include all relevant information on the case to support decision making.

Behaviours that may result in additional oversight, compliance measures or sanctions include:

• failure to secure the required approvals before spending or committing to spend.
• requests submitted without the required clearance time.
• missing or withheld information or documentation when communicating with Cabinet Office controls teams.
• systematic failure to meet approval conditions or standards.
• avoidance of spend controls.
• other forms of non-compliance will be considered on a case by case basis.

4. Breaches of Spend Controls

Non-compliance with the letter or spirit of Spend Controls and / or failure to meet expected standards may result in additional approval requirements (for example a reduction in Spend Control thresholds), and / or sanctions. This annex sets out actions an organisation must take if they breach spend controls and how Cabinet Office can be expected to respond to a breach of spend controls.

4.1 Policy

Spend Controls are part of HMT’s scheme of financial delegations. Failure to gain the necessary spend approvals is a breach of the controls and any unapproved spending may be considered irregular (see MPM section A2.2).

4.2 Process

Where spending without required CO approval is undertaken:

• it must be brought to the attention of relevant controls teams and HM Treasury as soon as possible. The organisation should not ignore or try to conceal the breach, or wait until it is discovered in an audit.
• if the Cabinet Office and HM Treasury do not grant retrospective approval, the organisation’s Accounting Officer must notify the National Audit Office (NAO), who will decide on an appropriate course of action.

Breaches of Spend Controls and failure to comply with Spend Control requirements may result in the following measures being taken:

• warning letters - formal correspondence may take place at an official or ministerial level. If breaches are not addressed adequately by the spending organisation, letters may escalate the matter to more senior levels in the organisation.
• additional oversight - the Cabinet Office and HM Treasury will consider whether the spending control threshold needs to be adjusted to reflect increased risk.
• sanctions - The Cabinet Office and HM Treasury may apply financial or other sanctions.

Where the organisation is making a retrospective request for spending approval (seeking to regularise irregular spend) the default position is that this will not be considered. In exceptionally rare situations, for example where urgency prevents time-critical, unanticipated spend from being approved in the normal fashion, you should approach the relevant control team to establish how this should be managed.

Spend Control approval may be required more than once during the lifecycle of a contract. An organisation should not treat a breach of spend controls as providing cover for further non-compliance. For example, where an organisation fails to secure approval for a procurement (Outline Business Case stage), it is still required to comply with the controls process for the subsequent contract award (Full Business Case) and any extension.