VMD Framework Document

Question 1

Introduction and background

Accepted Answer

Purpose of document

1.1. This framework document (the ‘framework document’) has been agreed between the Department for Environment Food and Rural Affairs (Defra) and the Veterinary Medicines Directorate (VMD) in accordance with HM Treasury’s handbook Managing Public Money (‘MPM’) (as updated from time to time) and has been approved by HM Treasury.

1.2. The framework document sets out the broad governance framework within which the VMD and Defra operate. It sets out the VMD’s core responsibilities; describes the governance and accountability framework that applies between the roles of Defra and VMD and sets out how the day-to-day relationship works in practice, including in relation to governance and financial matters. The VMD and Defra, as the sponsor department, will ensure that they understand each other’s strategic priorities and those of other relevant parties, agree plans that reflect these appropriately, and keep each other informed, in good time, of risks and issues with the potential to affect delivery or performance.

1.3. The document does not convey any legal powers or responsibilities but both parties agree to operate within its terms.

1.4. References to the VMD include all its subsidiaries and joint ventures that are classified to the public sector and central government for national accounts purposes. If the VMD establishes a subsidiary or joint venture, there shall be a document setting out the arrangements between it and the VMD agreed with Defra.

1.5. Copies of the document and any subsequent amendments have been placed in the libraries of both Houses of Parliament and made available to members of the public on Veterinary Medicines Directorate.

1.6. This framework document should be reviewed and updated at least every 3 years unless there are exceptional reasons that render this inappropriate that have been agreed with HM Treasury and the Principal Accounting Officer of the sponsor department. The latest date for review and updating of this document is March 2025.

Objectives – working as Defra Group

2.1. The Defra Group Outcome Delivery Plan shows how the diverse range of outcomes and activities across the group contribute to Defra’s priority outcomes and strategic enablers. All of Defra’s public bodies, regardless of their role and positioning, act together on a shared agenda in contributing to the single vision of improving and protecting our environment by making our air purer, our water cleaner, our land greener and our food more sustainable.

2.2. Defra and the VMD share the common objective of delivering an increase in the sustainability, productivity and resilience of the agriculture, fishing, food and drink sectors, enhance biosecurity at the border and raise animal welfare standards. To achieve this the VMD and Defra will work together in recognition of each other’s roles and areas of expertise, providing an effective environment for the VMD to achieve the outcomes through the promotion of partnership and trust and ensuring that the VMD also supports the strategic aims and objectives of Defra and the wider government as a whole. Both partners will also commit to keeping each other informed of any significant issues and concerns. The terms of engagement are included in this document including a description of the meetings that will take place and how any disputes between the department and the VMD will be resolved.

2.3. As an executive agency within Defra, our primary outcome is Priority Outcome 4: agriculture, food, fisheries, animal welfare and biosecurity - increase the sustainability, productivity and resilience of the agriculture, fishing, food and drink sectors, enhance biosecurity at the border and raise animal welfare standards.

The VMD also plays an important role in delivering functions and activities to meet Ministerial needs under Defra’s remaining priority outcomes, particularly:

Priority Outcome 1: Environment – improve the environment through cleaner air and water, minimised waste, and thriving plants and terrestrial and marine wildlife
Priority Outcome 2: Net zero – reduce greenhouse gas emissions and increase carbon storage in the agricultural, waste, peat and tree planting sectors to help deliver net zero
DO5: Strengthening the union and international

Classification

3.1. The VMD has been classified as a central government organisation by the ONS/HM Treasury Classifications team.

3.2. It has been administratively classified by the Cabinet Office as an Executive Agency of Defra.

Question 2

Purposes, aims and duties

Accepted Answer

Purposes

4.1. The VMD was set up in order to support the strategic aims and business plan of Defra and contribute to Defra’s objectives to protect public health and meet high standards of animal welfare. Its work also helps the Food Standards Agency to protect and improve the safety of food people eat. The VMD’s main aim is to protect animal health, public health and the environment and to promote animal health and welfare by assuring the safety, quality and efficacy of veterinary medicines.

4.2. Where permitted by statute, the Government may ask the VMD to take on additional functions or new work, on a permanent or temporary basis. The decision to take on the additional work will be made jointly by the Secretary of State and the VMD CEO.

Powers and duties

5.1. The VMD fulfils the functions of the Secretary of State for Defra in relation to veterinary medicines and medicated feedingstuffs as set out in secondary legislation (the Veterinary Medicines Regulations 2013). This secondary legislation was previously made under the European Communities Act 1972 and now can be amended and supplemented using powers in the Medicines and Medical Devices Act 2021.

The Veterinary Medicines Directorate also fulfils those functions in relation to residues of veterinary medicines or illegal substances in meat and animal products under the Food Safety Act 1990.

These statutory functions may additionally be supplemented by the Secretary of State’s common law powers.

5.2. The VMD’s statutory duties and functions are to:

undertake statutory functions relating to veterinary medicines and medicated feedingstuffs under the Veterinary Medicines Regulations 2013 and other relevant UK legislation
undertake statutory functions in relation to residues in meat and animal products under the Food Safety Act 1990 and other relevant UK legislation. These statutory functions may additionally be supplemented by the Secretary of State’s common law powers

Aims

6.1. The VMD’s strategic aims are to:

to be recognised worldwide as a centre of excellence for the provision of regulatory services and expertise for availability of safe and effective veterinary medicine
ensure maximum availability of safe and effective medicines for prevention and treatment of diseases and improved welfare in all animal species in the UK
ensure that the medicines pose minimal possible risk to human health and the environment in the UK
ensure UK authorised veterinary medicines are manufactured and supplied in accordance with the Veterinary Medicines Regulations and take appropriate enforcement action for breaches of the legislation
international activities supporting low and middle-income countries to improve their regulation of veterinary medicines

6.2. The VMD will deliver its strategic aims in the context of the Defra Group Outcome Delivery Plan outcomes through:

as policy lead, provide advice on antimicrobial resistance issues to Defra and others, particularly the implementation of animal health specific aspects of the cross-government 5-year AMR strategy
delivery of core business of the authorisation of veterinary medicines, surveillance programmes and compliance activities to the satisfaction of customers and in accordance with published standards
lead the development of revised legislation for veterinary medicines, medicated feeds, and residues surveillance
continue to strengthen regulation of veterinary medicines around the globe through collaboration with other national competent authorities and through the provision of accessible tailored expertise and tools

Question 3

Role of the department

Accepted Answer

The Responsible Minister

7.1. The Secretary of State is accountable for the VMD on all matters concerning the VMD in Parliament. This function can be delegated to the relevant minister based on current ministerial portfolios, which may alter over time.

7.2. The Secretary of State or delegated Ministers’ statutory powers in respect of the VMD are set out in the Medicines and Medical Devices Act 2021.

7.3 These are:

the power to, by regulations, make provision specified in sections 11 and 12 of the MMD Act, amending or supplementing the Veterinary Medicines Regulations 2013

7.4 Through the exercise of these powers the Secretary of State or delegated Minister:

is responsible for the policy framework within which the VMD operates
provides guidance and direction to ensure the strategic aims and objectives of the VMD are consistent with those of the department and government
approves the VMD corporate plan and business plan
has a power of appointment in relation to the appointment of the VMD Chair. This appointment is not regulated by the Commissioner for Public Appointments but will follow the principles set out in the Governance Code on Public Appointments
may review the performance of the Chair on a regular basis
has a power of appointment in relation to non-executives on the board. These appointments are not regulated by the Commissioner for Public Appointments but the process will follow the principles set out in the Governance Code on Public Appointments
has a power of approval in relation to the appointment of the VMD Chief Executive

The Principal Accounting Officer (PAO)

8.1. The Principal Accounting Officer is the Permanent Secretary of the department.

Sponsor department’s accounting officer’s specific accountabilities and responsibilities as PAO.

8.2. The PAO of Defra designates the Chief Executive as the VMD’s accounting officer and ensures that they are fully aware of their responsibilities. The PAO issues a letter appointing the Accounting Officer, setting out his or her responsibilities and delegated authorities.

8.3. The respective responsibilities of the PAO and accounting officers for ALBs are set out in Chapter 3 of Managing Public Money.

8.4. The PAO is accountable to Parliament for the issue of any grant-in-aid to the VMD.

8.5. The PAO is also responsible, usually via the sponsorship team, for advising the Responsible Minister on:

an appropriate framework of objectives and targets for the VMD in the light of the department’s wider strategic aims and priorities
an appropriate budget for the VMD in the light of the sponsor department’s overall public expenditure priorities
how well the VMD is achieving its strategic objectives and whether it is delivering value for money
the exercise of the Ministers’ statutory responsibilities concerning the VMD as outlined above

8.6. The PAO via the sponsorship team is also responsible for ensuring arrangements are in place to:

monitor the VMD’s activities, performance and assurance mechanisms
address significant problems in the VMD, making such interventions as are judged necessary
periodically and at such frequency as is proportionate to the level of risk carry out an assessment of the risks both to the department and the VMD’s objectives and activities in line with the wider departmental risk assessment process and management
inform the VMD of relevant government policy in a timely manner
bring ministerial or departmental concerns about the activities of the VMD to the full VMD board and, as appropriate to the departmental board requiring explanations and assurances that appropriate action has been taken

The role of the Sponsorship team

9.1. The Chief Executive of the VMD reports into the Director General for Food, Biosecurity and Trade (FBT), who is the primary contact for the VMD. They are the main source of advice to the Responsible Minister on the discharge of his or her responsibilities in respect of the VMD. They also support the PAO on his or her responsibilities toward the VMD.

9.2. The Director General will liaise regularly with the Chief Executive to review performance against plans, achievement against targets and expenditure against its Delegated Expenditure Limit and Annually Managed Expenditure allocations. The Director General will also take the opportunity to explain wider policy developments that might have an impact on the VMD.

9.3. The sponsorship team will advise the PAO when necessary on matters related to section 8.5.

9.4. Defra applies the best practice standards in the CO Sponsorship Code. In doing so the department operates a proportionate, risk-based approach whereby accountability and oversight is managed between the VMD and the Sponsor team collaboratively. This function can be separate or integral to the policy team depending on several factors, including the size of the ALB. Sponsor teams draw on the central Defra Public Bodies Partnership team and nominated functional experts for support in carrying out their role.

Resolution of disputes between the VMD and Department

10.1 Any disputes between the Department and the VMD will be resolved in as timely a manner as possible by the FBT Director General and the VMD Chief Executive Officer. They may then choose to ask the Permanent Secretary to nominate a non-executive member of the Department’s Board to review the dispute, mediate with both sides and reach an outcome, in consultation with the Secretary of State.

Freedom of Information requests

11.1 Where a request for information is received by either party under the Freedom of Information Act 2000, Environmental Information Regulations 2004 (EIR), the UK GDPR (General Data Protection Regulation) or the Data Protection Act 2018, the party receiving the request will consult with the other party prior to any disclosure of information that may affect the other party’s responsibilities.

Reporting on legal risk and litigation

12.1. The VMD shall provide a quarterly update to the Sponsor on the existence of any active litigation and any threatened or reasonably anticipated litigation. The parties acknowledge the importance of ensuring that legal risks are communicated appropriately to the Sponsor in a timely manner.

12.2. In respect of each substantial piece of litigation involving the VMD, the parties will agree a litigation protocol which will include specific provisions to ensure appropriate and timely reporting on the status of the litigation and the protection of legally privileged information transmitted to the Sponsor to facilitate this. Until such time as a protocol is agreed, the parties will ensure that:

material developments in the litigation are communicated to the Sponsor in an appropriate and timely manner
legally privileged documents and information are clearly marked as such
individual employees handling the legally privileged documents are familiar with principles to which they must adhere to protect legal privilege
circulation of privileged information within government occurs only as necessary

Question 4

VMD governance and structure

Accepted Answer

Governance and Accountability

13.1 The VMD will operate corporate governance arrangements that, so far as practicable and in the light of the other provisions of this framework document or as otherwise may be mutually agreed, accord with good corporate governance practice and applicable regulatory requirements and expectations.

13.2 In particular (but without limitation), the VMD should:

comply with the principles and provisions of the Corporate Governance in Central Government Departments Code of Good Practice (as amended and updated from time to time) to the extent appropriate and in line with their statutory duties or specify and explain any non-compliance in its annual report
comply with Managing Public Money
in line Managing Public Money, have regard to the relevant Functional Standards as appropriate and in particular those concerning finance, commercial and counter fraud
consider, the codes of good practice and guidance set out in Annex A of this framework document, as they apply to Arms’ Length Bodies

13.3. In line with Managing Public Money Annex 3.1 the VMD shall provide an account of corporate governance in its annual governance statement including the Board’s assessment of its compliance with the Code with explanations of any material departures. To the extent that the Company does intend to materially depart from the Code, the Sponsor should be notified in advance and their agreement sought to this approach.

13.4. The Defra internal audit service has a right of access to all documents, including where the service is contracted out.

13.5. The Defra group operate an integrated corporate services model that provides Finance, HR, Digital, Data and Technology Services, Communications, Estates, Facilities Management, Procurement and Commercial services. This integration will reduce duplication and cost and improve the capability and performance of corporate services in order to better support the wider programme of change across the group.

13.6. Group Heads of Function roles have been established in Defra with full accountability for delivery of the integrated provision. All corporate services that the VMD takes from the Defra group will be managed by Defra, with group Heads of Function responsible for the delivery of an effective quality of service. The scope of which is to be agreed with the VMD to ensure that the service adds value to the VMD.

13.7. Partnership working arrangements are in place between the VMD and Defra group Corporate Services to ensure that the appropriate information is shared on business requirements. This will enable delivery to be appropriately planned and prioritised, thereby continuing to enable and support the delivery of wider business objectives and of statutory duties.

The Chief Executive

Appointment

14.1. The Chief Executive of VMD is appointed by the Food, Biosecurity and Trade Director General in consultation with the Minister of State.

Responsibilities of the VMD’s Chief Executive as accounting officer

14.2. The Chief Executive as Accounting Officer is personally responsible for safeguarding the public funds for which they have charge; for ensuring propriety, regularity, value for money and feasibility in the handling of those public funds; and for the day-to-day operations and management of the VMD. In addition, they should ensure that the VMD is run based on the standards, in terms of governance, decision-making and financial management, that are set out in Box 3.1 of Managing Public Money. These responsibilities include the below and those that are set in the Accounting Officer appointment letter issued by the Principal Accounting Officer of the Sponsor Department.

Responsibilities for accounting to Parliament and the Public

14.3. Responsibilities to Parliament and the public 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 Secretary of State
preparing and signing a Governance Statement covering corporate governance, risk management and oversight of any local responsibilities, for inclusion in the annual report and accounts
ensuring that effective procedures for handling complaints about the VMD in accordance with Parliamentary and Health Service Ombudsman’s Principles of Good Complaint Handling are established and made widely known within the VMD and published Complaints procedure - Veterinary Medicines Directorate
acting in accordance with the terms of Managing Public Money and other instructions and guidance issued from time to time by the Department, the Treasury and the Cabinet Office
ensuring that as part of the above compliance they are familiar with and act in accordance with:
any governing legislation
this framework document
any delegation letter issued to body as set out in paragraph 18.1
any elements of any settlement letter issued to the sponsor department that is relevant to the operation of the VMD
any separate settlement letter that is issued to the VMD from the sponsor department
ensuring they have appropriate internal mechanisms for the monitoring, governance and external reporting regarding compliance any conditions arising from the above documents
giving evidence, normally with the PAO, when summoned before the PAC on the VMD’s stewardship of public funds

Responsibilities to Defra

14.4. Responsibilities to Defra include:

establishing, in agreement with the department, the VMD’s corporate and business plans aligned with the department’s wider strategic aims and agreed priorities
informing the department of progress in helping to achieve the department’s policy objectives and in demonstrating how resources are being used to achieve those objectives
ensuring that timely forecasts and monitoring information on performance and finance are provided to the department; that the department is notified promptly if over or under spends are likely and that corrective action is taken; and that any significant problems whether financial or otherwise, and whether detected by internal audit or by other means, are notified to the department in a timely fashion

Responsibilities to the board

14.5. The Chief Executive is responsible for:

advising the board on the discharge of the VMD Board’s responsibilities as set out in this document and in any other relevant instructions and guidance that may be issued from time to time
advising the board on the VMD’s performance compared with its aims and objectives
ensuring that financial considerations are taken fully into account by the Board at all stages in reaching and executing its decisions, and that financial appraisal techniques are followed

Managing conflicts

14.6. The Chief Executive should follow the advice and guidance of the Board, except in circumstances with a clear cut and transparent rationale for not doing so.

14.7. If the Board, or its chairperson, is contemplating a course of action involving a transaction which the Chief Executive 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 the Chief Executive in their role as Accounting Officer should reject that course of action and ensure that the Board have a full opportunity to discuss the rationale for that rejection.

14.8. Such conflicts should be brought to the attention of the Principal Accounting Officer and the Responsible Minister as soon as possible.

14.9. Furthermore, and if agreed with the responsible Minister, the Accounting Officer must write a letter of justification to the Chair of the Board setting out the rationale for not following the advice and recommendation of the Board and copy that letter to the Treasury Officer of Accounts.

14.10. If the Responsible Minister agrees with the proposed course of action of the Board it may be appropriate for the Minister to direct the Accounting Officer in the manner as set out in Managing Public Money paragraph 3.4 onwards.

The Board

Composition of the Board

15.1. The VMD will have a Board in line with good standards of Corporate Governance and in guidance as set out in Annex A. The role of the Board shall be to advise, guide and challenge the VMD. Detailed responsibilities of the Board shall be set out in the Board terms of reference. Remuneration of the Board will be disclosed in line with the guidance in the Government Financial Reporting manual (FReM).

15.2. The Board will consist of a Chairperson, together with the Chief Executive and three executive members that have a balance of skills and experience appropriate to directing the VMD’s business. For the VMD there should be members who have experience of its business, operational delivery, corporate services such as HR, technology, property asset management, estate management, communications and performance management. This will include as an executive and voting board member an appropriately qualified finance director as described in Annex A 4.1 of Managing Public Money. The board should include independent non-executive members to ensure that executive members are supported and constructively challenged in their role.

Board Committees

15.3 The Board may set up such committees as necessary for it to fulfil its functions. As is detailed below at a minimum this should include an Audit and Risk Committee chaired by an independent and appropriately qualified non-executive member of the Board.

15.4. While the Board may make use of committees to assist its consideration of audit and risk, it retains responsibility for, and endorses, final decisions in all these areas. The chair should ensure that sufficient time is allowed at the board for committees to report on the nature and content of discussion, on recommendations, and on actions to be taken.

15.5. Where there is disagreement between the relevant committee and the board, adequate time should be made available for discussion of the issue with a view to resolving the disagreement. Where any such disagreement cannot be resolved, the committee concerned should have the right to report the issue to the sponsor team, Principal Accounting Officer and Responsible Minister. They may also seek to ensure the disagreement or concern is reflected as part of the report on its activities in the annual report.

15.6. The Chair should ensure board committees are properly structured with appropriate terms of reference. The terms of each committee should set out its responsibilities and the authority delegated to it by the board. The chair should ensure that committee membership is periodically refreshed and that individual independent non-executive directors are not over-burdened when deciding the chairs and membership of committees.

Appointments to the Board

15.7. The Chairperson is appointed by the Minister of State. This appointment is not regulated by the Commissioner for Public Appointments but the process will follow the principles set out in the Governance Code on Public Appointments.

15.8. Non-executive Members are appointed by the Minister of State. These appointments are not regulated by the Commissioner for Public Appointments but the process will follow the principles set out in the Governance Code on Public Appointments.

15.9. All such appointments should have regard to the principle that appointments should reflect the diversity of the society in which we live, and appointments should be made taking account of the need to appoint boards which include a balance of skills and backgrounds.

Duties of the Board

15.11 The Board is specifically responsible for:

establishing and taking forward the strategic aims and objectives of the VMD consistent with its overall strategic direction and within the policy and resources framework determined by the Secretary of State
providing effective leadership of the VMD within a framework of prudent and effective controls which enables risk to be assessed and managed
ensuring the financial and human resources are in place for the VMD to meet its objectives
reviewing management performance
ensuring that the board receives and reviews regular financial and management information concerning the management of the VMD
ensuring that it is kept informed of any changes which are likely to impact on the strategic direction of the VMD or on the attainability of its targets, and determining the steps needed to deal with such changes and where appropriate bringing such matters to the attention of the Responsible Minister and Principal Accounting Officer via the executive team, sponsorship team or directly
ensuring that any statutory or administrative requirements for the use of public funds are complied with; that the VMD operates within the limits of its statutory authority and any delegated authority agreed with the sponsor department, and in accordance with any other conditions relating to the use of public funds; and that, in reaching decisions, the Board takes into account guidance issued by the sponsor department
ensuring that as part of the above compliance they are familiar with:
this framework document
any delegation letter issued to body as set out in paragraph 18.1
any elements of any settlement letter issued to the sponsor department that is relevant to the operation of the VMD
any separate settlement letter that is issued to the VMD from the sponsor department
that they have appropriate internal mechanisms for the monitoring, governance and external reporting regarding any conditions arising from the above documents and ensure that the Chief Executive and VMD as a whole act in accordance with their obligations under the above documents
demonstrating high standards of corporate governance at all times, including by using the independent audit committee to help the Board to address key financial and other risks
appointing, with the Responsible Minister’s approval, a Chief Executive and, in consultation with the department, set performance objectives and remuneration terms linked to these objectives for the Chief Executive which give due weight to the proper management and use and utilisation of public resources
putting in place mechanisms for independent appraisal and annual evaluation of the performance of the Chairperson by the independent non-executives, considering the views of relevant stakeholders. The outcome of that evaluation should be made available to the Responsible Minister
determining all such other things which the Board considers ancillary or conducive to the attainment or fulfilment by the VMD of its objectives

15.12. The Board should ensure that effective arrangements are in place to provide assurance on risk management, governance and internal control.

15.13. The Board should make a strategic choice about the style, shape and quality of risk management and should lead and advise on the assessment and management of opportunity and risk. The Board should ensure that effective arrangements are in place to provide assurance over the design and operation of risk management, governance and internal control in line with the Management of Risk – Principles and Concepts (The Orange Book). The Board must set up an Audit and Risk Assurance Committee chaired by an independent and appropriately qualified non-executive member to provide independent advice and ensure that the department’s Audit and Risk Assurance Committee are provided with routine assurances with escalation of any significant limitations or concerns. The board is expected to assure itself of the adequacy and effectiveness of the risk management framework and the operation of internal control

The Chair’s role and responsibilities

16.1. The Chair is responsible for leading the board in the delivery of its responsibilities in line with strategies and plans agreed with Defra and relevant OGDs. Such responsibility should be exercised in the light of their duties and responsibilities as set out in the Chairperson’s contract of employment, any appointment letter, the statutory authority governing VMD, this document and the documents and guidance referred to within this document.

16.2. Communications between the VMD’s board and the Responsible Minister should normally be through the Chair.

16.3. The Chair is bound by the Code of Conduct for Board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life.

16.4. In addition, the Chair is responsible for:

ensuring including by monitoring and engaging with appropriate governance arrangements that the VMD’s affairs are conducted with probity
ensuring that policies and actions support the Responsible Minister’s and where relevant other Ministers’ wider strategic policies and where appropriate, these policies and actions should be clearly communicated and disseminated throughout the VMD

16.5. The Chair has the following leadership responsibilities:

formulating the board’s strategy
ensuring that the board, in reaching decisions, takes proper account of guidance provided by the Responsible Minister or the department
promoting the efficient and effective use of staff and other resources
delivering high standards of regularity and propriety
representing the views of the board to the general public

16.6. The Chair also has an obligation to ensure that:

the work of the board and its members are reviewed and are working effectively including ongoing assessment of the performance of individual board members with a formal annual evaluation and more in-depth assessments of the performance of individual board members when being considered for re-appointment
that in conducting assessments that the view of relevant stakeholders including employees and the sponsorship team are sought and considered
that the board has a balance of skills appropriate to directing the VMD’s business, and that all directors including the Chair and Chief Executive continually update their skills, knowledge and familiarity with the VMD to fulfil their role both on the board and committees. This will include but not be limited to skills and training in relation to financial management and reporting requirements, risk management and the requirements of board membership within the public sector
board members are fully briefed on terms of appointment, duties, rights and responsibilities
they, together with the other board members, receives appropriate training on financial management and reporting requirements and on any differences that may exist between private and public sector practice
the Responsible Minister is advised of VMD’s needs when board vacancies arise
there is a Board Operating Framework in place setting out the role and responsibilities of the Board consistent with the Government Code of Good Practice for Corporate Governance
there is a code of practice for board members in place, consistent with the Cabinet Office Code of Conduct for Board Members of Public Bodies

Individual board members’ responsibilities

17.1 Individual board members should:

comply at all times with the Code of Conduct for Board Members of Public Bodies, which covers conduct in the role and includes the Nolan Principles of Public Life as well as rules relating to the use of public funds and to conflicts of interest
demonstrate adherence to the 12 Principles of Governance for all Public Body Non-Executive Directors as appropriate
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 VMD
ensure they are familiar with any applicable guidance on the role of Public Sector non-executive directors and Boards that may be issued from time to time by the Cabinet Office, HM Treasury or wider government

Question 5

Management and financial responsibilities and controls

Accepted Answer

Delegated authorities

18.1. The VMD’s delegated authorities are set out in the delegation letter. This delegation letter may be updated and superseded by later versions which may be issued by the sponsor department in agreement with HM Treasury.

18.2. In line with Managing Public Money Annex 2.2 these delegations will be reviewed on an annual basis.

18.3. The VMD shall obtain the department’s and where appropriate HM Treasury’s prior written approval before:

entering any undertaking to incur any expenditure that falls outside the delegations or which is not provided for in the VMD’s annual budget as approved by the department
incurring expenditure for any purpose that is or might be considered novel or contentious, or which has or could have significant future cost implications
making any significant change in the scale of operation or funding of any initiative or particular scheme previously approved by the department
making any change of policy or practice which has wider financial implications that might prove repercussive, or which might significantly affect the future level of resources required
carrying out policies that go against the principles, rules, guidance and advice in Managing Public Money

Spending authority

19.1. Once the budget has been approved by the sponsor department and subject to any restrictions imposed by statute or delegation letters, the VMD shall have authority to incur expenditure approved in the budget without further reference to the sponsor department, on the following conditions:

the VMD shall comply with the delegations set out in the delegation letter. These delegations shall not be altered without the prior agreement of the sponsor department and as agreed by HM Treasury and Cabinet Office as appropriate
the VMD shall comply with Managing Public Money regarding novel, contentious or repercussive proposals
inclusion of any planned and approved expenditure in the budget shall not remove the need to seek formal departmental approval where any proposed expenditure is outside the delegated limits or is for new schemes not previously agreed
the VMD shall provide the sponsor department with such information about its operations, performance, individual projects or other expenditure as the sponsor department may reasonably require

Banking and managing cash

20.1. The VMD must maximise the use of publicly procured banking services (accounts with central government commercial banks managed centrally by Government Banking).

20.2 The VMD should only hold money outside Government Banking Service accounts where a good business case can made for doing so and HM Treasury consent is required for each account to be established. Only commercial banks which are members of relevant UK clearing bodies may be considered for this purpose.

20.3. Commercial accounts where approved should be operated in line with the principles as set out in Managing Public Money.

20.4. The Accounting Officer is responsible for ensuring VMD has a Banking Policy as set out in Managing Public Money and ensuring that policy is complied with.

Procurement

21.1. The VMD shall ensure that its procurement policies are aligned with and comply with any relevant UK or other international procurement rules and in particular the Public Contracts Regulations 2015.

21.2. The VMD shall establish its procurement policies and document these in a Procurement Policy and Procedures Manual.

21.3. In procurement cases where the VMD is likely to exceed its delegated authority limit, procurement strategy approval for the specific planned purchase must be sought from the Department’s sponsor team.

21.4. Goods, services, and works should be acquired by competition. Proposals to let single-tender or restricted contracts shall be limited and exceptional, and a quarterly report explaining those exceptions should be sent to the Department.

21.5. Procurement by the VMD of works, equipment, goods, and services shall be based on a full option appraisal and value for money (VfM), such as the optimum combination and whole life costs and quality (fitness for purpose).

21.6. The VMD shall a) engage fully with Department and Government wide procurement initiatives that seek to achieve VfM from collaborative projects, b) comply with all relevant Procurement Policy Notes issued by Cabinet Office and c) co-operate fully with initiatives to improve the availability of procurement data to facilitate the achievement of VfM.

21.7. The VMD will comply with the Commercial Standards and Grants Standards. These standards apply to the planning, delivery, and management of government commercial activity, including management of grants in all departments and VMD regardless of commercial approach used and form part of a suite of functional standards that set expectations for management within government.

Risk and issue management

22.1. The VMD shall ensure that the risks that it faces are dealt with in an appropriate manner, in accordance with relevant aspects of best practice in corporate governance and develop a risk management strategy consistent with the Defra group risk strategy, in accordance with the Treasury guidance Management of Risk: Principles and Concepts.

22.2. The VMD chief executive is responsible for managing the VMD’s risks and issues with oversight from the VMD’s board and within its governance structure. On a quarterly basis, the VMD should share its strategic risk register with the Defra sponsor team. The VMD should inform the sponsor team at an early stage of any risk or issue that may require engagement, or have impact, beyond their own organisation. These risks may be escalated to the relevant Director General or to the Defra Executive Committee. When a risk is escalated, ownership of that risk will usually be retained by the VMD. Changing or emerging risks and issues should form part of the regular discussions between sponsor teams and the VMD, as part of a shared ‘no surprises’ culture.

22.3. The VMD’s board has a responsibility to ensure that proper internal audit arrangements are established and maintained, and for that purpose should establish an Audit and Risk Committee (ARAC). The committee should be chaired by a non-executive member of the VMD and provide regular reports to the chief executive and the board on its programme, recommendations, and their implementation.

Counter fraud and theft

23.1. The VMD should adopt and implement policies and practices to safeguard itself against fraud, bribery, corruption, and theft.

23.2. The VMD should ensure it complies with requirements set out in the Counter Fraud Functional Standard GovS013. The VMD Board should champion a fraud aware culture which encourages staff to raise concerns and provide appropriate routes to do so. It should operate in line with the procedures and considerations set out in Managing Public Money Annex 4.9 and the Counter Fraud Functional Standard. It should also take all reasonable steps to appraise the financial standing of any firm or other body with which it intends to enter a contract or to provide grant or grant-in-aid.

23.3. The VMD should record and report all instances of fraud, bribery and theft annually to Defra and notify the sponsor department of any unusual or major incidents as soon as possible, in line with Defra guidance. The VMD should also report detected loss from fraud, bribery, corruption and error, alongside associated recoveries and prevented losses, to the Counter Fraud Hub in Defra (fraudanderror@defra.gov.uk) in line with the agreed government definitions as set out in Counter Fraud Functional Standard

VMD staff

Broad responsibilities for staff

24.1. Within the arrangements approved by the Responsible Minister and the Treasury the VMD 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 VMD 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 VMD’s 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

Staff costs

24.2. Subject to its delegated authorities, the VMD shall ensure that the creation of any additional posts does not incur forward commitments that will exceed its ability to pay for them.

Pay and conditions of service

24.3. The VMD’s staff are subject to levels of remuneration and terms and conditions of service (including pensions) within the general pay structure approved by the sponsor department and the Treasury. The VMD has no delegated power to amend these terms and conditions.

24.4. If civil service terms and conditions of service apply to the rates of pay and non-pay allowances paid to the staff and to any other party entitled to payment in respect of travel expenses or other allowances, payment shall be made in accordance with the Civil Service Management Code and the annual Civil Service Pay Remit Guidance, except where prior approval has been given by the department to vary such rates.

24.5. Staff terms and conditions should be set out in an Employee Handbook, which should be provided to the department together with subsequent amendments.

24.6. The VMD shall abide by public sector pay controls, including the relevant approvals process dependent on the organisations classification as detailed in the Senior Pay Guidance and the public sector pay and terms guidance.

24.7. The travel expenses of board members shall be tied to the rates allowed to senior staff of the VMD. Reasonable actual costs shall be reimbursed.

Pensions, redundancy and compensation

24.9. Compensation scheme rules and pension scheme rules should reflect legislative and HM Treasury guidance requirements regarding exit payments.

24.10. VMD staff will normally be eligible for a pension provided by PCSPS. Staff may opt out of the occupational pension scheme provided by the VMD, but that employers’ contribution to any personal pension arrangement, including stakeholder pension shall normally be limited to the national insurance rebate level. (Note that there is an exception for ALBs covered by the PCSPS partnership arrangement, and for PCSPS by-analogy versions).

24.11. Any proposal by the VMD to move from the existing pension arrangements, or to pay any redundancy or compensation for loss of office, requires the prior approval of the department. Proposals on severance must comply with the rules in chapter 4 of Managing Public Money.

Question 6

Business plans financial reporting and management information

Accepted Answer

Corporate and business plans

25.1. Each April annual plans and objectives will be agreed between the Senior Sponsor, Director General of FBT and the CEO of VMD. These will reflect the (Executive Agency) statutory and/or other duties and, within those duties, the priorities set from time to time by the Responsible Minister (including decisions taken on policy and resources in the light of wider public expenditure decisions). These are reflected in the Outcome Delivery Plan which shall demonstrate how the FBT DG Group contributes to the department’s medium- term plan and priorities and aligned performance metrics and milestones.

25.2. The Outcome Delivery Plan, which also serves as the Defra group business plan, sets out the priorities, success measures and resource allocations to deliver the strategic objectives. It includes more detailed sections for priority outcomes where delivery bodies and director areas must include their priorities, indicators, risks and outcomes. DGs, Directors and CEOs report on delivery of their plans through the performance reporting framework, and report on maintaining forecasted financial positions within budget limits. The plans should be developed as appropriate through joint working between sponsorship teams, policy and delivery teams to ensure coherence. They should reflect allocations and priorities which have been agreed by ExCo, the board and approval by ministers.

25.3 The first year of agreed plans will form a business plan. The business plan shall be updated to include key targets and milestones for the year immediately ahead and shall be linked to budgeting information so that resources allocated to achieve specific objectives can readily be identified by the department. Subject to any commercial considerations, a digest of the corporate and business plans should be published by the VMD on its website and separately be made available to staff.

25.4. Matters which should be included in the plans are:

key outcomes and sub-outcomes associated key performance indicators (with targets where appropriate) for the forward years, and the strategy for achieving those objectives
a review of performance in the preceding financial year, together with comparable outturns for the previous 2 to 5 years, and an estimate of performance in the current year
alternative scenarios and an assessment of the risk factors that may significantly affect the execution of the plan but that cannot be accurately forecast
other matters as agreed between the department and the VMD

Budgeting procedures

26.1. Each year, considering decisions by the department on the updated draft corporate plan, the department will send to the VMD by 1 April:

a formal statement of the annual budgetary provision allocated by the department in the light of competing priorities across the department and of any forecast income approved by the department
a statement of any planned change in policies affecting the VMD

26.2. The approved annual business plan will take account both of approved funding provision and any forecast receipts and will include a budget of estimated payments and receipts together with a profile of expected expenditure and of draw-down of any departmental funding and/or other income over the year. These elements form part of the approved business plan for the year in question.

26.3. During the financial year the VMD will provide financial reporting data to the department in accordance with agreed processes. This will include monthly out-turn data, contributions to periodic reviews on budget risks and opportunities, and other commissions as appropriate.

Grant-in-aid and any ring-fenced grants

27.1. Any grant-in-aid provided by the department for the year in question will be voted in the department’s Supply Estimate and be subject to parliamentary control.

27.2. The grant-in-aid will normally be paid in monthly instalments on the basis of written applications showing evidence of need. The VMD will comply with the general principle, that there is no payment in advance of need. Cash balances accumulated during the year from grant-in-aid or other Exchequer funds shall be kept to a minimum level consistent with the efficient operation of the VMD. 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 avoiding excess cash balances at the year-end, the department 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.

27.3. If the department provides the VMD separate grants for specific (ring-fenced) purposes, it would issue the grant as and when the VMD needed it based on a written request. The VMD will provide evidence that the grant was used for the purposes authorised by the department. The VMD shall not have uncommitted grant funds in hand, nor carry grant funds over to another financial year.

Annual report and accounts

28.1 The VMD must publish an annual report of its activities together with its audited accounts after the end of each financial year. The VMD shall provide the department with its finalised (audited) accounts by 31 July each year for the accounts to be consolidated within Defra’s. A draft of the report should be submitted to the department two weeks before the proposed publication date. The accounts should be prepared in accordance with the relevant statutes and specific accounts direction issued by the department as well as the Treasury’s Financial Reporting Manual (FReM).

28.2. The annual report must:

cover any corporate, subsidiary or joint ventures under its control
comply with the FreM
outline main activities and performance during the previous financial year and set out in summary form forward plans

28.3 Information on performance against key financial targets is within the scope of the audit and should be included in the notes to the accounts. The report and accounts shall be laid in Parliament and made available on the VMD’s website, in accordance with the guidance in the FReM.

Reporting performance to the department

29.1. The VMD shall operate management, information and accounting systems that enable it to review in a timely and effective manner its financial and non-financial performance against the budgets and targets set out in the corporate and business plans.

29.2. The VMD shall inform the sponsor department of any changes that make achievement of objectives difficult. It will report financial and non-financial performance, including performance in helping to deliver Ministers’ policies, and the achievement of key objectives regularly.

29.3. While responsibility for management of performance lies with the relevant delivery organisation and the sponsor team, the VMD performance will be formally reviewed by the department periodically, at a frequency dependent on the extent of the VMD scope of responsibilities and its contributions to the Defra Outcome Delivery Plan. VMD will be expected to share their corporate performance reports with the department on a quarterly basis.

29.4. The Responsible Minister will meet the Chief Executive at least once a year and the schedule of meetings will be agreed on an annual basis between the VMD and the sponsor team.

29.5. The Principal Accounting officer will meet the chief executive at least once a year.

30.1. The department has the right of access to all VMD records and personnel for any purpose including, for example, sponsorship audits and operational investigations.

30.2. The VMD shall provide the sponsor department with information about its operations, performance, individual projects or other expenditure as the sponsor department may reasonably require.

30.3. The department and HM Treasury may request the sharing of data held by the VMD in such a manner as set out in central guidance except insofar as it is prohibited by law. This may include requiring the appointment of a senior official to be responsible for the data sharing relationship.

30.4. As a minimum, the VMD shall provide the department with information monthly that will enable the department satisfactorily to monitor:

the VMD’s cash management
its draw-down of grant-in-aid
forecast outturn by resource headings
other data required for the Online System for Central Accounting and Reporting (OSCAR)
data as required in respect of its compliance with any Cabinet Office Controls pipelines or required to meet any condition as set out in any settlement letter

Question 7

Audit

Accepted Answer

Internal audit

31.1 The VMD will:

establish and maintain arrangements for internal audit
ensure that any arrangements for internal audit are in accordance with the Public Sector Internal Audit Standards (PSIAS) as adopted by HM Treasury
set up an audit committee of its board in accordance with the Code of Good Practice for Corporate Governance and the Audit and Risk Assurance Committee Handbook
forward the audit strategy, periodic audit plans and annual audit report, including the VMD Head of Internal Audit opinion on risk management, control and governance as soon as possible to the sponsor department
keep records of and prepare and forward to the department an annual report on fraud and theft suffered by the VMD and notify the sponsor department of any unusual or major incidents as soon as possible
will share with the sponsor department information identified during the audit process and the Annual Audit Opinion Report (together with any other outputs) at the end of the audit, in particular on issues impacting on the Department’s responsibilities in relation to financial systems within the VMD

External audit

32.1. The C&AG passes the audited accounts to the Secretary of State who will lay the accounts together with the C&AG’s report before parliament.

32.2. In the event that the VMD has set up and controls subsidiary companies, the VMD will in the light of the provisions in the Companies Act 2006 ensure that the C&AG has the option to be appointed auditor of those company subsidiaries that it controls and/or whose accounts are consolidated within its own accounts. The VMD will discuss with the sponsor department the procedures for appointing the C&AG as auditor of the companies.

32.3 The C&AG:

will consult the department and the VMD on whom (the NAO or a commercial auditor) shall undertake the audit(s) on his behalf, though the final decision rests with the C&AG
has a statutory right of access to relevant documents, including by virtue of section 25(8) of the Government Resources and Accounts Act 2000, held by another party in receipt of payments or grants from the VMD
will share with the sponsor department information identified during the audit process and the audit report (together with any other outputs) at the end of the audit, on issues impacting on the Department’s responsibilities in relation to financial systems within the VMD
will consider requests from departments and other relevant bodies to provide Regulatory Compliance Reports and other similar reports at the commencement of the audit. Consistent with the C&AG’s independent status, the provision of such reports is entirely at the C&AG’s discretion

32.4. The C&AG may carry out examinations into the economy, efficiency and effectiveness with which the VMD has used its resources in discharging its functions. For these examinations the C&AG has statutory access to documents as provided for under section 8 of the National Audit Act 1983. In addition, the VMD shall provide, in conditions to grants and contracts, for the C&AG to exercise such access to documents held by grant recipients and contractors and sub-contractors 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.

Question 8

Reviews and winding up arrangements

Accepted Answer

Review of VMD’s status

33.1. The VMD’s Framework Document will be reviewed every 3 years. The date of the next review will be in 2025.

Arrangements in the event that the VMD is wound up

34.1. The sponsor department shall put in place arrangements to ensure the orderly winding up of the VMD. It should ensure that the assets and liabilities of the VMD are passed to any successor organisation and accounted for properly. (In the event that there is no successor organisation, the assets and liabilities should revert to the sponsor department.) To this end, the department will:

have regard to Cabinet Office guidance on winding up of ALBs
ensure that procedures are in place in the VMD to gain independent assurance on key transactions, financial commitments, cash flows and other information needed to handle the wind-up effectively and to maintain the momentum of work inherited by any residuary body; specify the basis for the valuation and accounting treatment of the VMD’s assets and liabilities
ensure that arrangements are in place to prepare closing accounts and pass to the C&AG for external audit, and that, for non-Crown bodies funds are in place to pay for such audits. It shall be for the C&AG to lay the final accounts in Parliament, together with his report on the accounts
arrange for the most appropriate person to sign the closing accounts. If another ALB takes on the role, responsibilities, assets and liabilities, the succeeding ALB AO should sign the closing accounts. If the department inherits the role, responsibilities, assets and liabilities, the sponsor department’s AO should sign

34.2. The VMD will provide the department with full details of all agreements where the VMD or its successors have a right to share in the financial gains of developers. It should also pass to the department details of any other forms of claw-back due to the VMD.

Question 9

Signatures

Accepted Answer

Signed: Sally Randall (On behalf of Defra)

Signed: Abi Seager (On behalf of the VMD)

Question 10

Annex A

Accepted Answer

The VMD will comply with the following general guidance documents and instructions:

Corporate governance

this framework document
Corporate Governance Code for Central Government Departments (relevant to Arm’s Length Bodies) and supporting guidance
Code of conduct for Board members of Public Bodies
Code of practice for partnerships between Departments and Arm’s Length Bodies

Financial management and reporting

Management of risk

Commercial management

Public appointments

The following are relevant where public bodies participate in public appointments processes.

guidance from the Commissioner for Public Appointments
Governance Code on Public Appointments
Procurement Policy Note 08/15 – Tax Arrangements of Public Appointees

Staff and remuneration

General

Question 11

Annex B

Accepted Answer

Veterinary Medicines Directorate – 2014 Framework Document

No specific references to Corporate Services, however the framework document stated that “the VMD CEO will be line managed within the department by DGCOO as ‘Corporate Owner’ of VMD.”

Access to Defra Network Corporate Services

3.40. The Defra group operate an integrated corporate services model that provides Finance, HR, Digital, Data and Technology Services, Communications, Estates, Facilities Management, Procurement and Commercial services.

The VMD receives Defra services from HR, Communications (external), Estates and Facilities Management. This provision will be reviewed and any changes to services provided or taken will be mutually agreed.

3.41. Group Heads of Function roles have been established in Defra with full accountability for delivery of the integrated provision. All corporate services that the VMD takes from the Defra group will be managed by Defra, with group Heads of Function responsible for the delivery of an effective quality of service. The scope of which is to be agreed with the VMD to ensure that the service adds value to the VMD.

Management Board and the VMD Accounting Officer

3.42. Partnership working arrangements are in place between the VMD and Defra group Corporate Services to ensure that the appropriate information is shared on business requirements. This will enable delivery to be appropriately planned and prioritised, thereby continuing to enable and support the delivery of wider business objectives and of statutory duties.

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