Here is the illustrated parts list for your engine:
http://bsintek.basco.com/BriggsDocumentDisplay/Z6mlsFVJ1DajI.pdf

As Joe said, you have the idle speed screw set as high as possible, so the engine will probably be running above its maximum allowable speed when there is no load on it, regardless of where you set the speed control. Just back out that screw and at least one cause of over-revving will be cured. If the engine still over-revs when it is run with the handlebar speed control set to maximum, there will be a second problem, with the governor itself, but we will need some more pictures to try to diagnose that. Usually problems are caused by just one fault though, and the idle speed setting will be causing the problem you have described when there is no load on the engine.

I hope you have not damaged the engine running it with the idle speed set at maximum.