Annex F: the role of the arm's length body board

Published 23 May 2022

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An ALB board provides leadership, strategic direction, advocacy and independent scrutiny to both the ALB and the Department. Boards will have varying degrees of legal obligations depending on their legal structure. They (and their sponsors) should understand their responsibilities under these duties. Boards should seek to both meet and adhere to all legal obligations and secondly to act in accordance with the requirements of Managing Public Money. This is key to promoting an effective relationship between the sponsoring department and the ALB.

The role of the board, its Chair and board members must be clear and understood by the sponsors, the Principal Accounting Officer (“PAO”) and the Minister. Further information on the role of the board can be found within the ALB’s governing documents (legislation, memorandum and articles of association, royal charter) and any administrative documents (framework document (“FWD”), memoranda of understanding) which may set out the responsibilities and obligations of its board members.

The important role of public body non-executives[1]

Non-executives (‘NEDs’) are appointed to the boards of public bodies to bring independence, impartiality, wide experience, special knowledge and personal qualities. NEDs are expected to act in an independent manner bringing expertise, scrutiny, challenge and support to the public body. NEDs must play their part in delivering effective and efficient outcomes for the public. In return the Cabinet Office supports public body NEDs through interventions such as induction events.

Improving Governance

The PAO and Accounting Officer (“AO”) are accountable to Parliament regardless of any delegation[2], but the board of an ALB (whether fiduciary or advisory duty) plays a key role in both advising and holding the ALB executive to account on behalf of ministers and the department.

Under the leadership of the Chair, the board should look to engage with sponsors in agreeing strategy, business plans as well as overseeing and communicating performance targets and the finances of the ALB and managed in accordance with Managing Public Money (pdf, 3.5 MB).

The annual appraisal process for board members, including the Chair, will be held in line with Cabinet Office Board Effectiveness Guidance[3].

Relationship Management

The Chair of the board will be expected to have a trusting, transparent and effective relationship with the Senior Sponsor, PAO and the Minister. They will meet regularly throughout the year.

The board will engage in any Ministerial or departmental concerns about the ALB brought to them by the PAO.

Sponsors should seek to understand and promote the good governance of the ALB including its board structure, how its members are appointed, and how the relationship between the board and Department should work.

The Chair, in conjunction with the board and the PAO, will support the resolution of a dispute between a Department and ALB. This process will be outlined within the FWD between the ALB and the Department.

Fiduciary and Advisory boards in a public body context

The ALB board will have varying degrees of legal obligations. The sponsor team will be able to consider the governing and administrative documents which set out the relationship between the Minister, the board and the AO.

A fiduciary board will set culture, the strategy and operating plan in line with applicable legal and regulatory requirements, and its responsibilities as set out in Managing Public Money
An advisory board provides non-binding strategic advice to the executive/management of the ALB in a manner akin to that of a fiduciary board. However, members of an advisory board are not bound by fiduciary duties

Managing conflicts [4]: For fiduciary boards it will be appropriate to replicate the arrangements for managing conflicts as set out in the Central Government Companies specimen framework document[5]. For advisory boards, the AO should seek to follow the advice and direction of the board, except in very exceptional circumstances with a clear cut and transparent rationale for not doing so. It will be appropriate to replicate the arrangements set out in the Executive Agencies specimen framework document[6] and section 3.6 of Managing Public Money. When a conflict emerges, regardless of the legal status of the board, such conflicts should be brought to the attention of the senior sponsor and/or PAO as soon as possible.

Regardless of whether the board is ‘fiduciary’ or ‘advisory’ an effective board is an effective board. It should be respected by Ministers and the public body alike. Boards should have clarity on matters reserved for the board. The board will be both an advocate and constructively challenge the executive. It will set a culture that helps the body deliver better outcomes for the public and will understand its users. It will be confident in demanding, using and being transparent with data.

[1] See the 12 Principles of Governance for Public Body NEDs

[2] See chapter 4 of Managing Public Money, 2021 (pdf, 3.5 MB)

[3] Arm’s Length Body Boards: Guidance on Reviews and Appraisals - GOV.UK

[4] Non-Departmental Public Body Specimen Framework Document - GOV.UK (pdf, 576 KB)

[5] Central Government Specimen Framework Document - GOV.UK (pdf, 585 KB)

[6] Executive Agencies Specimen Framework Document - GOV.UK (pdf, 575 KB)