Agenda Document Pack - Audit and Risk Committee - 02/12/2024
Perth and Kinross Council · 2 December 2024
Back to Audit and Risk Committee — 2 December 2024 and its agenda
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Securing the future… • Improving services • Enhancing quality of life • Making the best use of public resources Council Building 2 High Street Perth PH1 5PH 26/11/2024 A hybrid meeting of the Audit and Risk Committee will be held in the Council Chamber on Monday, 02 December 2024 at 13:00. If you have any queries please contact Committee Services on (01738) 475000 or email Committee@pkc.gov.uk. THOMAS GLEN Chief Executive Those attending the meeting are requested to ensure that all notifications are silent on their device and other devices are in silent mode. Please note that the meeting will be broadcast online and recorded. The recording will be publicly available on the Council’s website following the meeting. Members: Councillor David Illingworth (Convener) Councillor Andy Chan (Vice-Convener) Councillor Liz Barrett Councillor Ken Harvey Councillor Iain MacPherson Councillor Colin Stewart Councillor Grant Stewart Page 1 of 214
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Audit and Risk Committee Monday, 02 December 2024 AGENDA MEMBERS ARE REMINDED OF THEIR OBLIGATION TO DECLARE ANY FINANCIAL OR NON-FINANCIAL INTEREST WHICH THEY MAY HAVE IN ANY ITEM ON THIS AGENDA IN ACCORDANCE WITH THE COUNCILLORS’ CODE OF CONDUCT. 1 WELCOME AND APOLOGIES 2 DECLARATIONS OF INTEREST 3 MINUTE OF MEETING OF AUDIT AND RISK COMMITTEE OF 30 SEPTEMBER 2024 FOR APPROVAL (copy herewith) 5 - 8 4 DRAFT AUDITED 2023/24 ANNUAL ACCOUNTS AND DRAFT 2022/24 ANNUAL AUDIT REPORT Report by Strategic Lead - Finance and Business Support (copy herewith 24/340) 9 - 186 5 INTERNAL AUDIT UPDATE Report by Chief Internal Auditor (copy herewith 24/341) 187 - 190 6 INTERNAL AUDIT REPORT - 24-07 CREDIT CARD USAGE (copy herewith 24/342) 191 - 206 7 INTERNAL AUDIT FOLLOW UP Report by Chief Internal Auditor (copy herewith 24/343) 207 - 214 IT IS RECOMMENDED THAT THE PUBLIC AND PRESS SHOULD BE EXCLUDED DURING CONSIDERATION OF THE FOLLOWING ITEM(S) IN ORDER TO AVOID THE DISCLOSURE OF INFORMATION WHICH IS EXEMPT IN TERMS OF SCHEDULE 7A TO THE LOCAL GOVERNMENT (SCOTLAND) ACT 1973 INTERNAL AUDIT FOLLOW UP - APPENDIX 2 - ACTIONS WITH A COMPLETION DATE UP TO OCTOBER 2024 WHICH HAVE YET TO BE COMPLETED • Exempt Reason 6 - Information relating to the financial or business affairs of any particular person (other than the authority). • Exempt Reason 14 - Any action taken or to be taken in connection with the prevention, investigation or prosecution of crime. Page 3 of 214
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AUDIT AND RISK COMMITTEE Minute of Meeting of the Audit and Risk Committee held hybrid on Monday 30 September 2024 at 13.00pm. Present: Councillors D Illingworth, L Barrett, A Chan, K Harvey, I MacPherson, G Stewart, and C Stewart. In Attendance: G Boland, Strategic Lead – Strategic Planning, People and Performance; P Johnstone and P Smith (Strategic Planning, People and Resources), L Harris (Customer and Digital Services), J Clark, K Molley, A Brown and M Pasternak (Legal and Governance). Also in Attendance: R Browne and M Bruce (Audit Scotland) Councillor D Illingworth, Convener, Presiding. 1. WELCOME AND APOLOGIES/SUBSTITUTIONS The Convener welcomed everyone to the meeting. 2. DECLARATIONS OF INTEREST There were no declarations of interest made in terms of the Councillors’ Code of Conduct. 3. MINUTE OF SPECIAL MEETING OF THE AUDIT AND RISK COMMITTEE OF 24 JUNE 2024 FOR APPROVAL The minute of meeting of the Audit and Risk Committee of 24 June 2024 was submitted and approved as a correct record subject to the following amendment: Item 10. Annual Update Report – Strategic Risk Management Recommendation corrected: (i) The contents of the report be considered and appropriate and constructive challenge and comment, be provided. 4. OUTSTANDING BUSINESS STATEMENT Resolved: The contents of the Outstanding Business Statement, be noted. 3 Page 5 of 214
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5. BEST VALUE THEMATIC REVIEW There was submitted a report by Strategic Lead –Strategic Planning, People and Performance (24/269) (1) setting out the findings and six recommendations for improvement contained in the Perth and Kinross Council’s Best Value Thematic Review Report 2023/24, and also (2) providing a response and details actions that will be progressed in respect of the recommendations. Councillor L Barrett queried the target date of September 2025 of the recommendation to develop measures to assess the impact of its flexible working framework on staff productivity, wellbeing, and service performance to ensure these are being maintained or improved. P Johnstone advised that the Council did introduce a minimum of working two days a week in a Council workplace from April 2024, but the guidance had not been fully implemented due to capacity issues across the buildings. P Johnstone added that the target date of September 2025 had been set to allow the policy to be embedded fully and to undertake a survey to capture information from employees who are working hybrid. The Convener queried the action being undertaken to tackle the levels of absenteeism in the Council. P Johnstone confirmed that sickness levels had increased nationally. P Johnstone advised that a team are dedicated as part of the People and Culture Review to look at employee relations and wellbeing. P Johnstone added that work had also been underway with Strategic Leads to see what other support mechanisms could be put in place to assist them to manage their absence levels throughout the organisation. Councillor G Stewart queried how the Council had built and maintained resilience in terms of technology and ways of working. L Harris confirmed that continuous training would be vital for all employees to learn about new technology within the organisation. L Harris added that in the event of system failure or a problem with technology, business continuity plans are in place to continue service delivery. Regarding digital services and access to online services for customers, L Harris advised that the Customer Contact Centre offer help to the public with accessibility issues. Resolved: The contents of Audit Scotland’s Best Value Thematic Review Report (24/269), be noted. 6. INTERNAL AUDIT FOLLOW UP There was submitted a report by Chief Internal Auditor (24/270) presenting a current summary of Internal Audit’s ‘follow up’ work relating to actions due for completion up to July 2024. Resolved: The contents of the Internal Audit Follow Up, be noted. Page 6 of 214
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7. INTERNAL AUDIT UPDATE There was submitted a report by Chief Internal Auditor (24/271) presenting a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2022/23 and 2023/24. In response to a question from the Convener regarding staffing resources within Internal Audit, J Clark confirmed that two new employees would be joining the team in October. J Clark advised that the Senior Auditor was due to go on maternity leave but confirmed that the new members of staff would assist the team in delivering the internal audit plans. The Convener thanked J Clark and her team for all their work. Resolved: The contents of the Internal Audit Update, be noted. 8. NATIONAL FRAUD INITIATIVE OUTCOMES 2022/23 AND PREPARATIONS 2024/25 There was submitted a report by Chief Internal Auditor (24/272) (1) presenting the reported findings of the 2022/23 National Fraud Initiative (NFI) exercise, and also (2) outlining the preparations currently underway in respect of the 2024/25 exercise. In response to a question from Councillor L Barrett, J Clark confirmed that the position to not share the full electoral register for national fraud initiative had been adopted by two local authorities in the United Kingdom including Perth and Kinross Council. J Clark advised that advice received from our legal advisers had been that the Council are not permitted to share. J Clark added that legal had contacted various agencies to see if it would be a position the Council could reconsider but unfortunately to date it had not been the case. In response to a supplementary question from Councillor L Barrett regarding the cost to the Council for additional checks due to not using the electoral register, J Clark advised that the cost had been undertaken periodically in line with the NFI Timetable. Councillor C Stewart queried why the last question on the self-appraisal checklist which asked, ‘do we publish, as a deterrent, internally and externally the achievements of our fraud investigators?’ had been marked as not applicable. J Clark advised that fraud had not been uncovered from the NFI exercise so there had not been anything to report. Resolved: (i) The outcomes as reported within the national Audit Scotland report of the National Fraud Initiative 2022/23, be noted. (ii) The work undertaken within the Council in preparation for the 2024/25 exercise, be noted. (iii) The section of Audit Scotland’s self-appraisal checklist relating to those charged with governance at Appendix A of Report 24/272, be approved. Page 7 of 214
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9. INTERNAL AUDIT REPORT – 23-04 CHILD POVERTY There was a report by Chief Internal Auditor (24/273) providing update on the progress being made with the Child Poverty Strategy. In response to a question from Councillor G Stewart, P Smith advised that in terms of protected characteristics, the Scottish Government identify several priority groups that they feel are particularly affected by poverty. P smith added there had been a difficulty in measuring data as people are not obliged to provide information. P Smith added that an action outlined in the report would be for further work to be undertaken with the Equalities Officer to try capture more data to get a better understanding of the people who are affected by poverty and how we are helping them. In response to a question from Councillor C Stewart regarding the frequency of meetings of the Child Poverty Working Group, P Smith advised that the Group had met three times so far in 2024 and the schedule of dates for the Group had been set for the following year. P Smith added that there also would be extra assurance from the Poverty Theme Board which provide governance to the working group. In response to a follow-up question from Councillor L Barrett regarding how many times the Anti-Poverty Task Force had met this year, P Smith confirmed that the Task Force had met 3 times so far and another meeting had been arranged before the end of the year. P Smith added that a steering group for the Anti-Poverty Task Force meets monthly which would involve senior members of the Task Force. The Convener queried if there are any specific actions undertaken in the areas of Perth and Kinross that have a Scottish Index of Multiple Deprivation of 1. P Smith confirmed that as part of the Locality Working Programme, pilot work had been undertaken in Letham and Highland Perthshire and there are plans to roll the pilot out further across Perth and Kinross. P Smith added that a one size fits all approach would not work to meet the needs of all areas across central and rural Perthshire. Members thanked officers for their work in preparing the audit. Resolved: The contents of the Internal Audit Report – 23-04 Child Poverty (24/273), be noted. ~~~~~~ Page 8 of 214
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Perth And Kinross Council Audit And Risk Committee 2 December 2024 DRAFT AUDITED 2023/24 ANNUAL ACCOUNTS DRAFT 2023/24 ANNUAL AUDIT REPORT Report by Chief Finance Officer (Report No. 24/340) 1. PURPOSE 1.1 This report presents the Council’s draft Audited 2023/24 Annual Accounts in accordance with the Local Authority Accounts (Scotland) Regulations 2014 and draft 2023/24 Annual Audit Report. 2. RECOMMENDATIONS 2.1 It is recommended that the Committee: • approves the Audited 2023/24 Annual Accounts – see Appendix 1. • authorises the Leader of the Council, the Chief Executive and the Chief Finance Officer to sign the Audited 2023/24 Annual Accounts and the Chief Finance Officer to sign the Letter of Representation – see paragraph 5.7. • Notes the contents of Audit Scotland’s Draft 2023/24 Annual Audit Report – see paragraph 6.3. 3. STRUCTURE OF THE REPORT 3.1 This report includes the following sections: • Section 4 Background • Section 5 Draft Audited 2023/24 Annual Accounts • Section 6 Draft 2023/24 Annual Audit Report • Section 7 Conclusions 4. BACKGROUND 4.1 In line with legislative requirements, the Audit and Risk Committee considered the Unaudited 2023/24 Annual Accounts on 24 June 2024 (Report No. 24/194 refers). 4.2 The Unaudited 2023/24 Annual Accounts were then submitted to Audit Scotland, the Council’s external auditors on the same day (24 June 2024). 4 Page 9 of 214
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4.3 The Annual Accounts are prepared in accordance with the 2023/24 CIPFA Code of Practice on Local Authority Accounting (“the Code”). 4.4 These accounts also comply with the Local Authority Accounts (Scotland) Regulations 2014 which revoked the Local Authority Accounts (Scotland) Regulations 1985. 4.5 The Unaudited 2023/24 Annual Accounts were available for public inspection between 28 June and 18 July 2024 (inclusive). During this period, Audit Scotland received no objections to the Unaudited 2023/24 Annual Accounts. 5. DRAFT AUDITED 2023/24 ANNUAL ACCOUNTS 5.1 The audit of the 2023/24 Annual Accounts took place between July and November 2024. The audit considered not only the financial statements but also areas such as financial performance and corporate governance. 5.2 Significant findings and key audit matters are set out in detail in Exhibit 3 within the draft 2023/24 Annual Report which is included in Appendix 3. These findings are summarised as follows: • Error in accounting for depreciation of Council dwellings • Omission of additional pension contributions for senior staff • Classification of error within non-current assets • Reporting of performance within the management commentary • Errors in group accounts • Statutory basis for reserves • Application of financial flexibility for service concession arrangements 5.3 None of the misstatements identified above and within Exhibit 3 have an impact on the level of resources available to the Council. 5.4 In addition, there were a few minor presentational adjustments. 5.5 Approval of the Accounts at today’s meeting will provide authorisation for the Leader of the Council, the Chief Executive and the Chief Finance Officer to sign them. The Draft Audited 2023/24 Accounts (unsigned) are attached to this report at Appendix 1. 5.6 The Chief Finance Officer will also sign the Letter of Representation included at Appendix 2. Once signed, the Draft Audited 2023/24 Annual Accounts and Letter of Representation will be passed to Audit Scotland so that they may issue their opinion in the form of an audit certificate. 5.7 ACTION: The Committee is asked to approve the Draft Audited 2023/24 Annual Accounts and authorises the Leader of the Council, the Chief Executive and the Chief Finance Officer to sign them and also to authorise the Chief Finance Officer to sign the Letter of Representation. Page 10 of 214
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5.8 All signatures will be provided electronically using a system recognised by Audit Scotland that ensures the signings comply with the legislative requirements. 6. DRAFT 2023/24 ANNUAL AUDIT REPORT 6.1 The Draft 2023/24 Annual Audit Report is set out at Appendix 3. The Draft 2023/24 Annual Audit Report sets out Audit Scotland’s opinions and conclusions on the overall audit and their findings to be reported under ISA260: Report to those Charged with Governance. The Draft 2023/24 Annual Audit Report also includes the findings in relation to Perth and Kinross Charitable Trusts. 6.2 The key messages from the 2023/24 audit are set out in the Audit Conclusions on page 3 of Appendix 3 and are summarised as follows: 2023/24 annual accounts 1. Audit opinions on the annual accounts of the Council, its Group, connected charities administered are unmodified. Financial management 2. The council’s budget setting and financial management arrangements operated effectively during 2023/24. 3. Excluding the one-off impact of service concession flexibility, the Council reported a £15.1 million (3.2%) deficit on General Fund services for 2023/24 which was £20.2 million less than planned. The Housing Revenue Account balance reduced by £0.4 million during 2023/24 due to the planned use of reserves (£0.3 million) and additional one-off costs identified during the year (£0.1 million). 4. The Council delivered 76 percent of its capital programme in 2023/24. External debt levels remained relatively static during the year as the council had taken advantage of low borrowing rates in previous years and these loans have been used to fund capital expenditure. 5. Key financial controls operated effectively during 2023/24. Financial sustainability 6. The Council’s General Fund balance increased in the year due to the application of the service concession financial flexibility accounting arrangements. The council has used this to support its 2023/24 outturn and plans to use the remainder to support its budgets though to 2027/28. 7. The 2024/25 budget included a planned use of reserves of £13.8 million, but subsequent amendments increased this to £28.1 million. 8. The medium-term financial plan was last presented in October 2023 and will be reviewed following publication of the Scottish Government’s Medium-Term Financial Strategy. Page 11 of 214
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The council has yet to develop its revenue financial planning beyond six years as recommended in the 2019 Best Value Assurance Report. 9. The council’s capital investment programme totals £674 million over the next five years and a Corporate Asset Management Framework has been approved to inform investment decision-making. Following an updated options appraisal, the PH2O project, which was paused last year due to inflationary pressures, is going ahead on an alternative site. 10. The Transformation and Change Programme is progressing in line with the planned timetable. Best Value 11. Our Best Value thematic review of workforce innovation confirmed that the Council has a workforce plan to support the delivery of its strategic objectives but has yet to set targets against which to measure and report on progress. 12. Two of the 2019 Best Value Assurance Report recommendations remain outstanding and there has been limited reporting of progress to members or the Executive Leadership Team. Vision, leadership, governance, and use of resources 13. The Council revised its service and senior leadership structure during the year as part of its Transformation and Change Programme. 14. The Council has appropriate governance arrangements in place for delivery of its plans. 15. In line with national trends, there has been an overall decline in LGBF performance indicators over the last 5 years, although performance relative to other councils is largely unchanged. KPI trend analysis suggests improvement in performance compared to last year. 16. The Council is compliant with the Accounts Commission’s SPI direction with comprehensive performance information available via ‘PK Performs.’ 6.3 ACTION: The Committee is asked to note the contents of Audit Scotland’s Draft 2023/24 Annual Audit Report. 6.4 It is anticipated that the final 2023/24 Annual Audit Report will be issued by Audit Scotland following completion of the final accounts process. 7. CONCLUSIONS 7.1 Audit Scotland’s findings on the 2023/24 audit are set out in the Draft 2023/24 Annual Audit Report which is attached at Appendix 3 to this report. Page 12 of 214
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Author(s) Name Designation Contact Details Scott Walker Chief Finance Officer chxfinance@pkc.gov.uk Alison O’Brien Corporate Accounting Manager Page 13 of 214
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ANNEX 1. IMPLICATIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan Yes Resource Implications Financial Yes Workforce Yes Asset Management (land, property, IST) Yes Assessments Equality Impact Assessment Yes Strategic Environmental Assessment Yes Sustainability (community, economic, environmental) Yes Legal and Governance None Risk None Consultation Internal Yes External None Communication Communications Plan None 1. Strategic Implications Corporate Plan 1.1 The Council’s Corporate Plan 2022 – 2027 lays out seven outcome focussed strategic objectives which provide clear strategic direction, inform decisions at a corporate and service level and shape resources allocation. They are as follows: • Tackling poverty • Tackling climate change and supporting sustainable places • Growing a sustainable and inclusive local economy • Enabling our children and young people to achieve their full potential • Protecting and caring for our most vulnerable people • Supporting and promoting physical and mental wellbeing • Placing communities at the heart of how we work 1.2 This report relates to all these objectives. 2. Resource Implications Financial 2.1 There are no direct financial implications arising from this report other than those reported within the body of the main report. Page 14 of 214
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Workforce 2.2 There are no direct workforce implications arising from this report other than those reported within the body of the main report. Asset Management (land, property, IT) 2.3 There are no direct asset management implications arising from this report other than those reported within the body of the main report. 3. Assessments Equality Impact Assessment 3.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. 3.2 The information contained within this report has been considered under the Corporate Equalities Impact Assessment process (EqIA) and has been assessed as not relevant for the purposes of EqIA. Strategic Environmental Assessment 3.3 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.4 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Sustainability 3.5 Under the provisions of the Local Government in Scotland Act 2003 the Council has to discharge its duties in a way which contributes to the achievement of sustainable development. In terms of the Climate Change Act, the Council has a general duty to demonstrate its commitment to sustainability and the community, environmental and economic impacts of its actions. 3.6 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Page 15 of 214
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4. Consultation Internal 4.1. The Executive Leadership Team have been consulted in the preparation of this report. 2. BACKGROUND PAPERS 2.1 No background papers, as defined by Section 50D of the Local Government (Scotland) Act 1973 (other than any containing confidential or exempt information) were relied on to any material extent in preparing the above report. 3. APPENDICES Appendix 1 – Draft Audited 2023/24 Annual Accounts Appendix 2 – Letter of Representation Appendix 3 – Draft 2023/24 Annual Audit Report Page 16 of 214
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Corporate & Democratic Services PERTH AND KINROSS COUNCIL ANNUAL ACCOUNTS 2023/24 AUDITED 4 Page 17 of 214
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Contents Management Commentary ........................................................................................................................................................... 1 Annual Governance Statement .................................................................................................................................................. 16 Independent Auditor’s Report to the Members of Perth and Kinross Council and the Accounts Commission................. 21 The Financial Statements ........................................................................................................................................................... 24 Movement in Reserves Statement ........................................................................................................................................... 24 Comprehensive Income and Expenditure Statement ............................................................................................................... 25 Balance Sheet .......................................................................................................................................................................... 26 Cash Flow Statement ............................................................................................................................................................... 27 Statement of Responsibilities for the Annual Accounts ......................................................................................................... 28 Notes to the Financial Statements ............................................................................................................................................ 29 1. Accounting Policies .............................................................................................................................................................. 29 2. Accounting Standards that have been issued but have not been adopted ........................................................................... 39 3. Critical Judgements in Applying Accounting Policies ........................................................................................................... 40 4. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty .................................................. 40 5. Adjustments between Accounting Basis and Funding Basis under Regulations .................................................................. 42 6. Expenditure and Funding Analysis ....................................................................................................................................... 43 7. Transfer (to)/from Earmarked Reserves ............................................................................................................................... 46 8. Other Operating Expenditure / Income ................................................................................................................................. 47 9. Financing and Investment Income and Expenditure ............................................................................................................. 47 10. Taxation and Non Specific Grant Income ........................................................................................................................... 48 11. Material Items of Income and Expense .............................................................................................................................. 48 12. Premiums and Discounts on Debt Rescheduling Written Down ......................................................................................... 48 13. General Grants, Bequests and Donations .......................................................................................................................... 49 14. Expenditure and Income Analysed by Nature .................................................................................................................... 49 15. Agency Services ................................................................................................................................................................. 50 16. External Audit Costs ........................................................................................................................................................... 50 17. Termination Benefits........................................................................................................................................................... 50 18. Post-Employment Benefits ................................................................................................................................................. 51 19. Related Parties ................................................................................................................................................................... 56 20. Leases ................................................................................................................................................................................ 58 21. Property, Plant and Equipment ........................................................................................................................................... 59 22. Heritage Assets .................................................................................................................................................................. 64 23. Investment Properties......................................................................................................................................................... 65 24. Intangible Assets ................................................................................................................................................................ 66 25. Assets Held for Sale ........................................................................................................................................................... 66 26. Long Term Debtors............................................................................................................................................................. 66 27. Inventories .......................................................................................................................................................................... 67 28. Debtors ............................................................................................................................................................................... 67 29. Creditors ............................................................................................................................................................................. 67 30. Provisions Other than Bad and Doubtful Debts .................................................................................................................. 68 31. Usable Reserves ................................................................................................................................................................ 68 32. Unusable Reserves ............................................................................................................................................................ 68 33. Impairment Losses ............................................................................................................................................................. 71 34. Grants ................................................................................................................................................................................. 71 35. Capital Expenditure and Capital Financing ......................................................................................................................... 72 36. Public Finance Initiatives and Similar Contracts ................................................................................................................. 72 37. Authorisation of Annual Accounts ....................................................................................................................................... 74 38. Contingent Liabilities .......................................................................................................................................................... 74 39. Financial Instruments ......................................................................................................................................................... 75 Page 18 of 214
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40. Devolved School Management (DSM) Schools .................................................................................................................. 80 41. Operating Activities............................................................................................................................................................. 80 42. Investing Activities .............................................................................................................................................................. 80 43. Financing Activities ............................................................................................................................................................. 81 44. Cash and Cash Equivalents ............................................................................................................................................... 81 45. Trust Funds ........................................................................................................................................................................ 81 46. The Statutory Loans Fund .................................................................................................................................................. 82 Housing Revenue Account Income and Expenditure Statement ............................................................................................ 84 Statement of Movements on the Housing Revenue Account Balance ..................................................................................... 85 The Accompanying Notes to the Housing Revenue Account Income and Expenditure Statement .......................................... 86 Council Tax Income Account ..................................................................................................................................................... 87 The Accompanying Notes to the Council Tax Income Account ................................................................................................ 88 Non-Domestic Rate Income Account ........................................................................................................................................ 89 The Accompanying Notes to the Non-Domestic Rate Income Account .................................................................................... 90 Charitable Trusts ........................................................................................................................................................................ 91 Common Good ............................................................................................................................................................................ 92 The Accompanying Notes to the Common Good Accounts...................................................................................................... 93 Group Accounts .......................................................................................................................................................................... 94 Group Movement in Reserves Statement................................................................................................................................. 94 Group Comprehensive Income and Expenditure Statement .................................................................................................... 95 Group Balance Sheet ............................................................................................................................................................... 96 Group Cash Flow Statement .................................................................................................................................................... 97 Reconciliation of the Single Entity Deficit for the Year to the Group Deficit .............................................................................. 98 Notes to the Group Accounts .................................................................................................................................................... 99 1. Combining Entities ............................................................................................................................................................... 99 2. Nature of Combination........................................................................................................................................................ 100 3. Financial Impact of Consolidation and Going Concern ....................................................................................................... 100 4. Group Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure .......... 100 5. Group Balance Sheet – Investments .................................................................................................................................. 100 6. Group Balance Sheet – Short Term Debtors (net of provisions) ........................................................................................ 100 7. Group Balance Sheet – Short Term Creditors .................................................................................................................... 101 8. Group Balance Sheet – Pension Liability ........................................................................................................................... 101 9. Group Cash Flow Statement .............................................................................................................................................. 101 10. Group Cash Flow – Investment Activities ......................................................................................................................... 101 11. Group Cash Flow – Financing Activities ........................................................................................................................... 101 Remuneration Report ............................................................................................................................................................... 102 Glossary .................................................................................................................................................................................... 111 Page 19 of 214
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1 | Perth and Kinross Council Annual Accounts 2023/24 Management Commentary 1. Introduction These Annual Accounts contain the financial statements of Perth and Kinross Council and its group for the year ended 31 March 2024. This management commentary outlines the key messages in relation to financial planning and performance for financial year 2023/24 and how this has supported delivery of the Council’s strategic objectives. This commentary also looks forward, outlining the future financial plans for the organisation and the challenges and risks which it will face as it strives to meet the needs of the people of Perth and Kinross. A glossary of terms is set out from page 111. 2. Who are we, our vision and priorities The Council is situated in a central location in Scotland. It covers a geographical area of around 5,286 km² and has an estimated population of 151,120 (2022 mid-year estimate). Between 2011 and 2021, the population of Perth and Kinross increased by 4.7% (Scotland 3.4%). This is the 8th highest percentage change out of the 32 council areas in Scotland. The latest population projections over the next 10 years estimate a 0.6% reduction in the population on Perth and Kinross compared to 1.1% increase across Scotland. Like all councils, the pandemic and inflationary pressures facing households in recent years has only added to the increasingly complex challenges we face, against a backdrop of the most testing financial circumstances local government has ever experienced. This means that it will be impossible to continue doing the same things we have done in the past and we are rethinking how we work with, and within, our communities and with all of our partners to achieve the best outcomes for the people of Perth and Kinross. The Corporate Plan 2022 – 28, that was approved in December 2022, sets out a vision for “a Perth and Kinross where everyone can live life well, free from poverty and inequality”. It sets out the Council’s corporate outcomes which are aligned with its organisational values and designed to address or mitigate the impact of the many challenges the Council and its communities are facing both now and in the future. We have committed to working in partnership and better engaging with people and communities to ensure that they are involved and can have their say on where the Council must focus time and resources. The strategic outcomes are underpinned by seven key priorities, aimed to address or mitigate the challenges, focus our work where it is needed most, and support the delivery of our vision: • Tackling poverty • Tackling climate change and supporting sustainable places • Developing a resilient, stronger and greener local economy • Enabling our children and young people to achieve their full potential • Protecting and caring for our most vulnerable people • Supporting and promoting physical and mental wellbeing • Working in partnership with our communities – which is woven through all of the key priorities above. The priorities incorporate the careful consideration of the feedback received from our communities, elected members, partners and staff about what is important for Perth and Kinross. They are also evidence-based and reflect the areas of greatest need and those that we can most directly influence in our work. Importantly, the Corporate Plan sets the strategic direction for the Council and will act as a guide when making difficult decisions around where to invest funding and resources to support their achievement and ensure we have the greatest impact. The Plan is not designed to stand alone but is supported and strengthened by a wider strategic framework which overarches several areas of work all designed to contribute to our vision and outcomes. It connects the vision of the Council and its partners to the detailed plans that guide the delivery of our services. This framework ensures that all Council plans and strategies are driven by, and focused towards, the delivery of a single shared vision for the area and our services, connecting everything we do. 1 | Perth and Kinross Council Annual Accounts 2023/24 Page 20 of 214
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2 | Perth and Kinross Council Annual Accounts 2023/24 The main components of our Corporate Plan’s wider strategic framework are as follows: • The Local Outcome Improvement Plan which details new priorities with a focus on poverty in several key areas, setting out the actions that the Community Planning Partnership will take in the coming years to focus on inequalities which are stubborn and require continued collaborative approaches. • The Transformation and Change Strategy is a five-year strategy which sets out our extensive transformation programme acting as enabler to deliver on our corporate priorities. Delivery of the Transformation and Change programme will be underpinned by our “one council”, no wrong door approach including our organisational-wide cultural and behavioural change programme. This also sets out our clear commitment to fully embed our values of Ambition, Compassion, and Integrity and work in partnership with communities to improve outcomes for all. • The Financial Strategy which details the financial challenges we face, the extent of the structural deficit and measures we must take now and over the next five years to identify savings, reduce our budgets and support the Council to become financially sustainable. • The Corporate Workforce Plan has been reviewed to build on our existing focus on workplace culture, recruitment and staff retention. This new People and Culture Strategy will support the organisation through transformation and change so that we are enabled to deliver the best public services focussed on need and within available resources. The Corporate Plan demonstrates our commitment to improving services, enhancing the quality of life for people in Perth and Kinross and making best use of our resources and funding. We will continue to deliver effective and efficient services, delivering best value by working collaboratively with our partners. To achieve our vision, we have outlined clear outcomes, priorities, actions, and measurements of performance which will ensure we are held accountable, can report consistently, and remain focussed on the areas that matter to people in our communities. While this is a five-year plan, we know that there will be things outwith our control that will change. We will regularly review and monitor our performance against each of the key priorities to ensure that they are still relevant and effectively contribute to our vision. 3. The Annual Accounts 2023/24 The Annual Accounts report the financial performance of the Council. Their main purpose is to demonstrate the stewardship of public funds which have been entrusted to it for the delivery of the Council’s vision and strategic objectives. The requirements governing the format and content of the Council’s Annual Accounts are contained in the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 (the 2023 Code). The 2023/24 Annual Accounts have been prepared in accordance with this Code. 4. The Financial Plan In response to the COVID-19 pandemic and the financial challenges being faced by Local Government, in 2022, the Scottish Government introduced a range of financial flexibilities, one of which centred around the profiling of debt repayments charged to the General Fund for Public Private Partnership (PPP) contracts Finance Circular 10-2022: Finance Leases and Service Concession Arrangements. The revised accounting guidance allows the Council to account for the cost of the repayment element over the life of the assets rather than the life of the contract. What this means for the Council is that the cost can be accounted for over 50 years as opposed to the contract period of 25 or 30 years. This approach is deemed to be prudent as it matches the expenditure profile to the consumption of the assets over time, and by doing so, reduces the cost per annum as the debt is accounted for over a longer period of time. The total amount paid remains the same over the new repayment life. This is an accounting entry which has the effect of releasing a cumulative benefit which reflects the reduced charges to the accounts for the earlier years of the arrangements. The cumulative benefit to 31 March 2023 is in the region of £31 million, and there are also annual recurring benefits of approximately £3 million for 19 years and then the statutory charges will continue until the end of the reprofiled debt repayment period (see note 36)The application of the accounting guidance was approved by Council on 8 February 2023 (Report No. 23/43), and the accounting entries are actioned from financial year 2023/24. This has resulted in a significant favourable variance in this financial year, allowing the benefit to be used to support the Revenue Budget, as agreed by Council when setting the 2023/24 Revenue Budget and provisional 2024/25 and 2025/26 Revenue Budgets on 1 March 2023 (Report No. 23/72). To support the delivery of the strategic objectives during 2023/24, Perth and Kinross Council approved a balanced gross revenue budget of £552.134 million for the General Fund (March 2023). In addition, the Housing and Social Wellbeing Committee approved a gross revenue budget of £33.755 million for the Housing Revenue Account (January 2023). As part of its consistent approach to longer term financial planning, the Council has in place a Medium Term Financial Plan through to 2029/30 that was approved by Council in October 2023, and a final Revenue Budget for 2024/25 and provisional Revenue Budgets for 2025/26 and 2026/27 approved in February 2024. The HRA Budget was also updated in January 2024. The Financial Strategy approved in June 2022 remains in place. Councils need to account for their spending and income in a way which complies with the legislative requirements. Most day to day spending and income is recorded within the General Fund and the costs and income in relation to the management of our housing stock are recorded within the Housing Revenue Account. 2 | Perth and Kinross Council Annual Accounts 2023/24 Page 21 of 214
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3 | Perth and Kinross Council Annual Accounts 2023/24 Key to the delivery of Council functions is investment in the assets which are used to deliver these services (including schools, houses, and transport infrastructure) and the utilisation of capital funding to stimulate development and regeneration in local areas. At the start of 2023/24 the Council budgeted for gross capital investment of £158.1 million on General Fund activities and £19.2 million in respect of the Housing Revenue Account. This expenditure is funded from borrowing, government grants, other external contributions, capital receipts, revenue contributions and earmarked reserves. The Council approved a new six- year delivery programme for 2024/25 to 2029/30 at its meeting on 28 February 2024. 5. Performance Management Our new Corporate Plan for 2022-28 sets out our strategic outcomes, which are aligned with our organisational values, and underpinned by seven key priorities. It contains clear outcomes, priorities, and actions and well-defined measurements of performance which we can be held accountable for and consistently report progress against. Performance against priorities and actions within the Corporate Plan were detailed within the Corporate Annual Performance Report.The Council also considered and approved the new Corporate Delivery Improvement Plan on 15 May 2024 detailing actions and improvements for 2024/25. Previously, performance and improvement was routinely managed and reported within individual teams, Service Management Teams, the Extended Executive Leadership Team, and the Executive Leadership Team as well as to elected members and the wider public. Over the next year, we will be introducing revised arrangements following the implementation of phase 1 of the Leadership Review and the transformation and change programme projects, as well as the continued roll out of the Strategic Planning and Performance and Risk system, PK Performs. This will demonstrate our commitment to continuous improvement by strengthening alignment between Corporate Plan performance, improvement and risk activity, budget and resource allocation and the involvement of communities in decision making and influencing Council priorities. The Council has a statutory duty to publish performance information for comparison and benchmarking purposes to its citizens and communities. In meeting this duty, we actively participate in the Local Government Benchmarking Framework (LGBF), providing an Elected Member briefing in March 2024 and linking to the LGBF from the performance website. Just over half of the performance indicators listed in the new Corporate Plan, which will be reported through our Annual Performance Report, have data collected nationally and therefore provide a mechanism for benchmarking. 2023/24 Performance Summary The Corporate Annual Performance Report was considered by Scrutiny and Performance Committee on 18 September 2024 and then by Council on 30 October 2024. This report provides comprehensive information on the Council’s performance for 2023/24. The full range of performance information for 2023/24 is available online at PK Performs. This includes the Council’s Annual Performance Report, Best Value Themes Updates, case studies and links to further relevant information, such as the Local Government Benchmarking Framework. In terms of the Annual Performance Report this includes information on the Key Performance Indicators. The KPI performance against 2023/24 target includes 15 areas where the target has been met or exceeded and 15 areas where the target has not been met. Further information is available at PK Performs. For 2023/24 a selection of performance outcomes are set out in the following table: Tackling Poverty • The Anti-Poverty Task force is developing a tackling poverty strategy to shift the focus from reactive to preventative work. • We have developed a programme of six interconnected projects that together have attracted over £1 million of funding from Scottish Government and external funders. • These are being taken forward in partnership with Citizens Advice Bureau, and various Council teams and comprise of: social needs screening, support and connect, building resilient families and communities, Cash First Partnership, Money Talk plus and the Universal Whole Family Wellbeing service. • We generated £8.5 million in additional income for Perth and Kinross residents through the benefits system; this is a 31% increase on last financial year when we generated £6.5m in benefit gains. We received 8,022 referrals, an increase of 7% compared to the previous year. Clients are surveyed on an ongoing basis, 95% people surveyed had no problems accessing the service and 96% felt the service was delivered in a way that suited their needs. Further details can be accessed via the Welfare Rights Annual Report 2023/24 www.pkc.gov.uk/wrannualreport. • We supported 566 tenants with assistance from our Tenancy Sustainment Fund (TSF) to either clear arrears balances or match their arrears payments to reduce financial hardship and sustain their tenancy. • Futures For Families is joint funded by Perth and Kinross Council and the Scottish Government in the effort to tackle child poverty. Due to delays in the Scottish Government awarding funds, the project only achieved full scale delivery from quarter 3 in 2023/24. Despite the late implementation the following outcomes were achieved: o 181 families were supported, 53 of these families have been issued/approved for digital devices in 2023/24. 3 | Perth and Kinross Council Annual Accounts 2023/24 Page 22 of 214
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4 | Perth and Kinross Council Annual Accounts 2023/24 o We provided £178,000 of Elev8 Training Grants to support clients into new/better employment. o We issued £11,000 worth of payments to private childcare providers on behalf of clients entering employment to support the transition period into work. o Issued 48 payments for client travel to training and 36 clothing vouchers to clients for essential workwear and interview attire. • To support employers and promote the Real Living Wage our Rural Employment Incentive helped to create 25 new rural jobs for rural young people in 2023/24. These roles create vital new positions in smaller communities and enhance the chances of sustained jobs remaining after the funding period. A re-design and securing of further funding led to an enhanced offer to businesses in 2024/25 with up to 70 newly created jobs for clients with employment barriers. Tackling climate change and supporting sustainable places • The Broxden – Low Carbon Transport Hub project opened and provides sustainable Electric Vehicle charging hubs that will reduce carbon emissions and energy costs for the council. • Perth and Kinross Local Heat and Energy Efficiency Strategy 2024-2045 and Delivery Plan and Perth and Kinross Local Area Energy Plan were developed and approved. Both provide the direction of travel towards Net Zero by 2045. • We secured £150,000 of Innovate UK Pathfinder Places funding. The Pathfinder project focus is on reducing non- technical barriers for rural and deprived communities to engage in climate change action particularly energy efficiency and transport. • At the Climate Change and Sustainability Committee (February 2024) Elected Members agreed to trial the use of Hydrotreated Vegetable Oil (HVO) in 6 of our refuse collection vehicles (RCVs) aimed at reducing the amount of Co2 emitted by up to 90%. The trial started on 6 May 2024 and was concluded in August, it is anticipated that the entire RCV fleet will be switched to using HVO permanently. The aim is to save approximately 700 tonnes of Co2 for the Council each financial year. • Following the securing of £2.72 million of capital investment from the Recycling Improvement Fund the new Scottish Charter for Household Recycling compliant ‘4th’ (grey) bin service was rolled out in 2023/24. 73,000 households now have a more equitable service and can dispose of additional waste streams at the kerbside. For the first five months of the roll out, the contamination rate for both bins (grey and blue) was 13.1% compared to 18.7% in the previous year. The ‘twin stream’ roll out secured an Association Public Service Excellence Bronze award in the Waste and Recycling category. • One of the key challenges during 2023/24 was the severe weather which struck Perth and Kinross in October 2023. A full review of the Perth Flood Scheme Gate Closure Procedure was carried out in partnership with the Scottish Environmental Protection Agency including feedback from residents. Findings and improvement actions were reported to the Scrutiny and Performance Committee in November 2023 and January 2024, with a further update on progress in April this year. • We continue to progress the development of flood schemes (at Comrie, South Kinross, and Milnathort) to improve the resilience of flood sensitive communities. At the Climate Change Sustainability Committee (November 2023) Elected Members agreed on the design for a £15.3 million flood scheme for Kinross. The project aims to protect approximately 194 homes and businesses in the area. • We planted 2,512 trees on Council owned or managed open spaces and supported 118 volunteer groups to undertake over 40,000 hours actively managing, developing and maintaining community greenspaces. Developing a resilient, stronger and greener local economy • We supported Binn Group to create a £100 million Energy from Waste (EfW) Plant at Binn Eco-Park joining forces with Paprec, the French-based leader in recycling and green energies. 60% of the civil works are being managed by locally based companies or branches and along with the 200 jobs created for its construction phase, the new EfW will also generate 30 long-term skilled posts once the facility is operational in early 2026. • We have attracted £100,000 from the Scottish Government to develop heat networks at scale and explore options for the development of a Strategic Energy Partnership. The Heat Networks (Scotland) Act 2021 places a duty on local authorities to carry out a review of potential areas for heat networks as part of their Local Heat and Energy Efficiency Strategy. • 231 business start-ups were supported by Business Gateway; this is a reduction compared to 2022/23 figure of 250 but remains at the same level of other Tayside local authorities. Additionally, we provide funding to Growbiz to support start-up micro enterprises/self-employed individuals and social enterprises in rural Perth and Kinross. Support is also provided for enterprising culture in young people and in rural communities. 4 | Perth and Kinross Council Annual Accounts 2023/24 Page 23 of 214
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5 | Perth and Kinross Council Annual Accounts 2023/24 • Phase 2 of the Cross Tay Link Road (Destiny Bridge) project is continuing to progress well and is on programme for completion in Spring 2025. A key part of the project has been the delivery of a number of benefits relating to local spend and employment during construction. Design work has started on Phase 3 (Bertha Park Link) with completion of specimen design in October 2024. • We invested £80,000 in improvements at Broxden Park + Ride site for the increasing intercity network which includes electric bus services. This included bus/coach and passenger accessibility improvements along with provision of two additional bus/coach bays. • Perth Museum opened its doors on 30 March 2024, the £27 million redevelopment project included £10 million funding through the Tay Cities Region deal. The museum is managed in a partnership between Perth and Kinross Council and Culture Perth and Kinross and created just under 30 new jobs. Since opening, the museum has already welcomed more than 50,000 visitors and was recently awarded five stars by Visit Scotland. • 40 clients were supported through our Skills Passport project (funded by the UK Shared Prosperity Fund), 32 unemployed individuals were supported and received funding for training, and 8 individuals were supported into self- employment. 9 people are now in employment; however, several applicants are still in the training phase who will hopefully gain employment thereafter. Enabling our children and young people to achieve their full potential • Educational attainment across all sectors is strong with a steady upward trend in attainment of Curriculum for Excellence levels across P1-S3, with increases of between 5% and 7% in Literacy and Numeracy in the last 5 years. Senior phase attainment is also showing positive trends, with increases of 4% to 5% in school leavers attaining at Scottish Credit and Qualifications Framework Levels 5 and 6, and also increases in the proportion of young people participating in education, employment or training over the last 5 years (COVID years excepted). • Inspection results for services across the day care, early learning childcare and primary sectors remain strong, consistently above national results and comparator authorities. Inspection outcomes in secondary schools have not met the local expectations of good or better. The focus for improvement in this sector is around Leadership of Change and improving Learning and Teaching. Effective use of Scottish Attainment Challenge funding, including the Pupil Equity Fund, is helping to close the poverty-related attainment gap with notable progress being made in reducing the gap in senior phase attainment. Secondary attendance remains challenging and an area of particular focus. • Outcomes for our care-experienced children and young people are improving with increased levels of attainment in literacy and numeracy as well as a significant increase in the percentage of young people entering a positive destination on leaving school. However, outcomes for care-experienced young people remain lower than their peers. • Our Corporate Parenting Plan supports Looked After Children to achieve their full potential. The Plan notes progress in all areas in respect to health, wellbeing and education. It is monitored by the Corporate Parenting sub- group that reports to the Children, Young People and Families Partnership. We recognise the importance of keeping children in family placements and work hard to support children in residential placements to return to their communities when it is safe to do so. Protecting and caring for our most vulnerable people • The number of referrals to the Child Protection Duty Team have been increasing each year, however all referrals that are received are triaged immediately or within 24 hours. Situations flagged as being a significant child protection concern receive an immediate response to safeguarding the child or young person’s wellbeing. • The Council’s Lets and Ukraine Landlord Offer project was the winner in the ‘Excellence in the Private Rented Sector’ category at the Chartered Institute of Housing Scotland Awards (October 2023). The award recognised the work by the Housing service for their work in resettling people fleeing the war in Ukraine. • We have seen a further increase in homelessness presentations of around 15% in 2023/24 as the gap between housing supply and demand continues to grow. This has required an adjustment to our approach to allocations with 56% of vacancies being allocated to homeless applicants in 2023/24 compared to 45% in 2022/23. • The replacement of 20 chalets on Double Dykes Gypsy Traveller site progressed with the appointment of a contractor to carry out the work. £4 million of funding secured by the Council will be used to replace all of the chalets with brand new energy-efficient accommodation. The project is being carried out with full consultation and engagement with all residents to discuss individual requirements for the chalets. • A number of tests of change commenced/continued during 2023/24 including Complex Need Co-ordination (making support available to people following arrest, on remand); and Co-ordination of the voluntary throughcare offer for people being released from short-term prison sentences (including improving GP registration process and access to sustainable housing on release). 5 | Perth and Kinross Council Annual Accounts 2023/24 Page 24 of 214
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6 | Perth and Kinross Council Annual Accounts 2023/24 • The Perth and Kinross Community Justice and Safety Partnership launched a new Community Justice Outcome Improvement Plan in June 2023 and provides the Partnership with a direction of travel in line with The Vision for Justice 2022 and National Strategy for Community Justice. Supporting and promoting physical and mental wellbeing • In 2023/24 over £1.1 million was spent on projects to improve the infrastructure for walking and cycling in Perth and Kinross. The projects provided improvements and new infrastructure including shared-use footpaths, cycle parking provision and shared use links to assist and encourage pedestrians and cyclists in local communities to use more active forms of travel. • In the latest Sustrans Walking and Cycling Index (March 2024), for Perth it noted that everyday walking, cycling and wheeling takes up to 13,000 cars off the road, making an annual saving of 2,100 tonnes of greenhouse gas emissions in the city. The number of journeys cycled has grown since 2021. As well as positive detail within the Index, it also highlighted areas for improvement that we are looking to address such as increasing numbers of School Exclusion Zones. • A new outdoor early learning childcare project opened its gates in Perth to local nursery children. The Westbank Outdoor project supports children from nursery settings to access nature without barriers and allow for outdoor play experiences that are known to have a direct and positive impact on children’s mental and physical health. • We improved 10 parks and play areas in Auchterarder, Blair Atholl, Perth, Crieff, Dunning, Milnathort and Stanley to encourage healthy outdoor physical activity for all abilities. • We established a Cycle Hub at Balhousie School from where it runs many cycle training events for a wide variety of users – including adults and children’s bike loan, e-bike testers and loans, all-accessibility bikes, e-cargo bike loans, women only led rides etc. Working in partnership with communities • Pilot locality working projects are well underway in Highland Perthshire, Letham and Coupar Angus, with further rollout to Perth City and Crieff planned. In Highland Perthshire the multi-disciplinary team has been developed and a steering group formed, community engagement is taking place all supported by the Improvement Service. • The new Letham Hub is central to the work in Letham where a multi-disciplinary operating model is being developed between Council services and partners. In Coupar Angus work continues to address the issues raised in the community action plan commissioned by the Community Planning Partnership. • 104 groups received Community Investment Funding to deliver projects towards local priorities in their communities; this was an increase of 24 compared to the previous year. The increase was due to a greater awareness of the fund amongst community groups and increased engagement with groups interested in applying. • 258 groups were supported to improve their capacity to work within their local communities to deliver a variety of projects and interventions. For example, we supported small community groups within Strathearn and Strathallan to expand their offer to a wider area and create new provision for community members to access; recent examples include the Safeart Group and the Neurodiversity Group both originally started in Crieff and are now starting to offer groups in Auchterarder. • The recently adopted Local Housing Strategy 2022-27 (March 2023) target is to deliver 1,050 affordable homes with an Urban (53%) / Rural (47%) split to ensure representative distribution. In financial year 2023/24, there were 173 new affordable homes completed by the Council and our Registered Social Landlord partnerships with an urban/rural split of 62 new urban affordable homes (36%) and 111 new rural affordable homes (64%). • We completed a number of flood studies in local communities (including Craigie Burn, South Kinross, Dunkeld and Perth) to understand the risk of flooding, engage the community to disseminate the study findings, and raise awareness of other actions such as community flood resilience. • We formed a Public Social Partnership with Glenfarg Community Transport Group (GCTG). As from 3 April 2023 GCTG have been delivering a local bus service and school transport contract with funding and support from the Council. For information about the Health and Social Care Partnership, please see the Perth and Kinross Integration Joint Board Annual Accounts 2023/24 which are available at Perth and Kinross Integration Joint Board. 6. Financial Performance Financial performance is part of the Council’s performance management culture with regular reporting during 2023/24 to elected members at the Finance and Resources Committee as well as regular briefings. This section summarises the main elements for 2023/24. The Expenditure and Funding Analysis brings local authority performance reporting based on expenditure measured under proper accounting practices together with statutorily defined charges to the General Fund and Housing Revenue Account. Both the Comprehensive Income and Expenditure Statement and the Expenditure and Funding Analysis include a segmental 6 | Perth and Kinross Council Annual Accounts 2023/24 Page 25 of 214
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7 | Perth and Kinross Council Annual Accounts 2023/24 analysis which requires Councils to report performance based on how they are structured and how they operate, monitor and manage financial performance. The 2023 Code requires that Councils present the segmental analysis based on the organisational structure under which they operate. Additionally, the Code requires that if a local authority changes the presentation or classification of items in its financial statements, the authority shall reclassify comparative amounts unless reclassification is impracticable. There are no prior year adjustments to report. Although the Expenditure and Funding Analysis reflects the main variances, for operational reporting the Council’s Comprehensive Income and Expenditure reflects proper accounting practice. The Comprehensive Income and Expenditure Statement movements are not directly comparable with the movements in the Expenditure and Funding analysis. a) General Fund Revenue Expenditure for 2023/24 In 2023/24 the Council incurred actual net expenditure on Services of £491.476 million (which is the Cost of Services disclosed in the Comprehensive Income and Expenditure Statement on page 25). When Taxation and Non-Specific Grant Income, Financing and Investment Income and Expenditure and Other Operating Income and Expenditure are included there was a net Deficit on the Provision of Services of £51.293 million. The Expenditure and Funding Analysis information on pages 43 and 44 sets out adjustments between the net Deficit on the Provision of Services of £51.293 million, included in the Comprehensive Income and Expenditure Statement, and the net expenditure charged to the General Fund and HRA in the table below of £15.492million. The adjustments of £35.801 million represent the difference between the net expenditure of the Council that is chargeable to taxation and rents and the figures reported in the Comprehensive Income and Expenditure Account. The deficit in the Expenditure and Funding Analysis is set out in the way in which the Council organises itself and manages and reports on financial performance. The following table sets out adjustments to the most recently approved Revenue Budget to ensure that budget and actual figures are comparable. These include the Public Finance Initiative, external income and capital accounting adjustments. On a comparable basis the table shows a net variance (under spend/additional income) of £19.079 million which is explained in further detail. Updated Budget Per Revenue Monitoring Report No.4 Virements Capital Accounting Adjustments Revised Budget Net Expend. Charged to the General Fund and HRA Balances per Expend. and Funding Analysis Variance £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 COUNCIL SERVICES Education and Children's Services 240,539 (16,807) (14,851) 208,881 200,653 (8,228) Health and Social Care 87,975 124 0 88,099 87,613 (486) Communities 81,323 143 (4,093) 77,373 66,825 (10,548) Chief Executive’s Service 4,810 (67) 0 4,743 4,569 (174) Corporate and Democratic Services 40,978 (1,952) (2,232) 36,794 36,229 (565) Housing Revenue Account 0 (6,985) 0 (6,985) (6,985) 0 Valuation Joint Board 1,309 0 0 1,309 1,436 127 Non Distributed Costs 1,655 0 0 1,655 1,757 102 NET COST OF SERVICES 458,589 (25,544) (21,176) 411,869 392,097 (19,772) Taxation and Non-Specific Grant (431,567) 19,217 (412,350) (411,619) 731 Finance / Investment / Other 7,270 7,316 21,176 35,762 35,014 (748) Use of (Increase) of General Fund per CIES 34,292 989 0 35,281 15,492 (19,789) Contributions to/(from) other Reserves 5,365 (989) 0 4,376 5,086 710 Use of (Increase) of General Fund Balances 39,657 0 0 39,657 20,578 (19,079) The actual contribution from the General Fund was £20.578 million. This is £19.079 million less than planned and is made up of additional income and service under spends and is comparable with the revenue monitoring positions that have been presented regularly to the Finance and Resources Committee throughout the financial year. The following section provides a summary of the significant variances. 7 | Perth and Kinross Council Annual Accounts 2023/24 Page 26 of 214
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8 | Perth and Kinross Council Annual Accounts 2023/24 Education and Children’s Services delivered net under spends / additional income of £8.2 million. The main reasons for this are:- • In respect of the Devolved School Management (DSM) Scheme there was a net under spend / additional income (£501,000) reflecting savings on staff costs and additional income which was partially offset by additional expenditure on supplies and services (educational materials) and property costs. These resources will be carried forward by schools into 2024/25. • In terms of non-DSM budgets there were further budget variances / additional income as follows: o Across non-devolved Education Services there was a net under spend / additional income of £3.1 million which was generated within the following sectors. • Across the Nursery sector there was a net under spend of £1.6 million due in the main to staff slippage in excess of budgeted levels. • In the Primary sector, there was a net over spend of £300,000 due, in the main, to staff slippage in targets not being achieved. • Within the Secondary sector there was a net under spend of £600,000 due to savings within staff costs and other operational budgets. • Across the Special sector there was a net under spend / additional income of £1.2 million. Staff slippage in excess of budgeted levels, third party payments and additional income were the main factors contributing to the final outturn. o Within Services for Children, Young People and Families there was a net under spend of £400,000. The main reasons for this was staff slippage in excess of budget and additional grant income. o Across the Grants sector, the Council received £2.1 million which will be carried forward in earmarked Reserves to support activity in future years. o In Catering Services there was a net under spend / increased income of £1.6 million due to reduced costs and higher uptake of school meals. o Across the remainder of the Service there were net under spends / additional income of £500,000. Communities delivered a net under spend / additional income of £10.5 million, which is made up of variances across the Service as follows: • The main reason for this variance was the receipt of grant funding during 2023/24 across the Service. The terms of individual grants mean that £8 million of funding was received to take forward initiatives in future financial years. This income will be carried forward in earmarked Reserves. • Across the Service, the budgeted staff slippage target was exceeded by £1.4 million. • In relation to income, the Service generated £1 million more than budgeted targets. This included planning and building warrant fees, commercial rent and income from the sale of recyclates. • Across the remainder of the Service there was a net under spend of £100,000. This net position included the Council’s contribution towards the costs of severe weather throughout 2023/24 and the receipt of funding from the Scottish Government in relation to the Bellwin Scheme. General Fund and Housing Revenue Account Balances increased by £13.683 million to £86.053 million in line with the budget adjustments approved throughout the year by Council and the Finance and Resources Committee as well as recognising the implications of final outturns and the implementation of the Service Concession Scheme. When the Housing Revenue Account Balance of £2.260 million and the earmarked Reserves of £65.083 million that are set out on page 46 are excluded this leaves an uncommitted General Fund Balance of £18.711 million or 4% of the net 2024/25 Revenue Budget. b) Composite Capital Budget and Housing Revenue Account Investment Programme 2023/24 A summary of the Council’s capital expenditure in 2023/24 is reflected within Note 35 to the Core Financial Statements on page 72. Total gross capital expenditure was £167.690 million, comprising £23.110 million on the Council’s Housing Revenue Account (HRA) and £144.580 million on the Council’s Composite (General Fund) Programme. Several significant projects are currently on-site and have made good progress during 2023/24. The Council’s gross expenditure includes: • £47.381 million on various school upgrade projects, including the replacement of Perth High School and North Muirton/Balhousie Primary Schools (Riverside Primary School), Blairgowrie Recreation Centre, Perth Academy refurbishments and the Early Learning and Childcare programme. • £72.759 million on roads and transport projects, primarily the construction of the Perth Transport Futures project which accounts for £54.3 million of this total. The balance includes structural maintenance, road safety measures, and bridges. 8 | Perth and Kinross Council Annual Accounts 2023/24 Page 27 of 214
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9 | Perth and Kinross Council Annual Accounts 2023/24 • £4.017 million on cultural attractions (Perth Museum and Perth Art Gallery) and community projects (Letham Wellbeing Hub). The new Perth Museum was completed and opened to the public in March 2024. • £20.423 million on other works, including flood schemes (£1.671 million); property, infrastructure and IT upgrades (£10.196 million); and waste initiatives (£2.429 million). The balance of £6.127 million relates to expenditure on various, community greenspace, planning and place-making projects, vehicles and other miscellaneous works. • £23.110 million on the HRA including affordable housing new builds and buy backs (£10.133 million), triple glazing window upgrades (£5.218 million), kitchen and bathroom upgrades (£2.215 million) and environmental improvements (£1.022 million). Capital expenditure is funded by borrowing, asset sales, grants, other capital receipts, and Revenue Budget contributions. The Capital Financing Requirement (CFR, i.e. the underlying requirement to borrow for capital purposes) as at 31 March 2024 was £816.351 million. Actual capital debt was £743.240 million, comprising external borrowing of £628.200 million and a Public Private Partnership (PPP) liability of £115.040 million. The ratio of borrowing to the CFR for 2023/24 has reduced to 91.0% (2022/23 106.7%). During the year the CFR increased by £137.317 million, reflecting the capital expenditure above, less capital receipts, grants and contributions and principal loan repayments. The CFR increase included the £34.262 million as a result of applying the service concession flexibility scheme that was approved by Council in February 2023. The ratio to borrowing reduced as a consequence of only a small amount of new borrowing being undertaken in the year and the service concession adjustment. The Council applied the revised accounting guidance for the treatment of service concession arrangements which has the impact of spreading the cost of the principal repayments across the life of the asset, generating both a £31 million retrospective benefit and a £3 million recurring benefit over the medium term. c) General Fund Reserves As at 31 March 2024 the Council had uncommitted General Fund balances of £18.711 million which represented 4% of the Council’s 2024/25 Revenue Budget approved in April 2024. Council policy, as set out in the Reserves Strategy approved by Council on 28 February 2024, is to retain uncommitted reserves of between 2% and 4% of net revenue expenditure over the medium term. The Council’s Reserves Strategy will continue to be reviewed and updates will be considered by the Finance and Resources Committee and the Council as part of the revenue monitoring cycle. Full details of the Council’s General Fund Reserves are shown on page 24 and page 68 of the Financial Statements, along with information on future commitments. The Reserves position is summarised as follows: £m £m General Fund (83.794) Revaluation Reserve (425.931) Housing Revenue Account (2.260) Capital Adjustments Account (338.099) Capital Fund (31.026) Financial Instruments Adjustment Account 16.358 Insurance Fund (1.709) Pensions Reserve 20.748 Capital Receipts Reserve (2.102) Employee Statutory Adjustment Account 8.186 Capital Grants Unapplied (0.087) TOTAL USABLE RESERVES (120.978) TOTAL UNUSABLE RESERVES (718.738) TOTAL RESERVES (839.716) The Balance Sheet The Balance Sheet on page 26 summarises the Council’s assets and liabilities as at 31 March 2024 and explanatory notes are provided from page 29. Total net assets have decreased by £27.486 million to £839.716 million. Long Term Assets increased by £89.653 million, current assets reduced by £104.340 million, current liabilities increased by £4.164 million and long-term liabilities increased by £8.635 million. The major changes in the Council’s Balance Sheet between 31 March 2023 and 31 March 2024 are explained in more detail in the following paragraphs. Long Term Assets The value of long term assets increased by £89.653 million due to the continuation of the major capital investment being undertaken by the Council described above. Current Assets The level of Short-Term Investments reduced by £118.779 million with an increase of £13.520 million in the level of Cash or Cash Equivalents. This was the result of limited new long-term borrowing being undertaken in 2023/24 to fund the capital programme, with existing balances being utilised in the first instance. The increase in cash and cash equivalents follows an increase in short-term deposits in line with cash flow requirements. Current Liabilities Short Term Borrowing increased by £7.284 million as a result of increased PWLB borrowing falling due within 12 months of the balance sheet date compared to last year. Short Term Creditors decreased by £4.493 million primarily due to lower amounts payable to Scottish Government, Central Government, Other Local Authorities, NHS Bodies and Other Entities; this is slightly offset by a reduction in the amount payable to Trade Creditors. 9 | Perth and Kinross Council Annual Accounts 2023/24 Page 28 of 214
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10 | Perth and Kinross Council Annual Accounts 2023/24 Long Term Liabilities Long-Term Liabilities increased by £8.635 million due an increase in Long Term Borrowing of £16.979 million resulting from new PWLB borrowing throughout the year, offset by existing PWLB debt with a maturity date within the next 12 months moving into short term debt. The overall increase in Long Term Borrowing is also offset by a reduction in the liability for public private partnerships of £6.426 million in line with the remaining contract. The Council’s annual Treasury Management Strategy outlines the Council’s policy in relation to borrowing and investment. This is prepared in accordance with the Code of Practice on Treasury Management in Local Authorities. The majority of the Council’s borrowing comes from the Public Works Loan Board and market loans. Further details are provided at Note 39. Pensions Reserve International Accounting Standard 19 Revised (IAS19R) requires the disclosure of the Council’s share of Tayside Pension Fund’s assets and liabilities, both current and future. The information disclosed in the accounts is provided to the Council by the Pension Fund’s actuaries. The position at 31 March 2024 indicates a net liability of £20.748 million compared to a liability of £20.917 million on 31 March 2023 due to changes in assumptions. This liability is based on a snapshot valuation at 31 March 2024 and is a result of prevailing market conditions at that date. Triennial valuations of the Fund are carried out with the last valuation having taken place at 31 March 2023. Employer’s contributions were 17% of pensionable pay to 31 March 2024, reducing to 15.7% from 1 April 2024. For more information see Note 18. Provisions, Contingencies and Write Offs The Council made provision for a number of eventualities which may have an effect on the financial position of the Council. The reasons for the provisions are outlined in Note 30 on page 68. There were a number of write-offs of debt and stock during the year which were approved by the Finance and Resources Committee on 12 June 2024 – Authority to Write Off Debts and Obsolete Stock. d) Accounting Ratios The following financial indicators have been developed to provide an indication of the sustainability and affordability of the Council’s financial plans. FINANCIAL INDICATOR 2023/24 2022/23 PURPOSE Uncommitted General Fund Reserve as a proportion of Annual Budgeted Net Expenditure 4.0% 4.0% Reflects the level of funding available to manage financial risk / unplanned expenditure. Movement in the Uncommitted General Fund Balance £0.541m £1.592m Reflects the extent to which the Council has increased its Uncommitted General Fund Reserve. Council Tax – In Year Collection Rate 97.5% 98.4% Demonstrates the Council’s effectiveness in collecting council tax debt. Ratio of Council Tax Income to Overall Level of Funding 21.0% 21.0% This reflects the Council’s capacity to vary expenditure by raising Council Tax Income. Capital Financing Requirement £816.351m £679.034m Measurement of requirement to borrow for capital purposes. External Debt Levels £743.240m £724.527m Actual borrowing for capital investment purposes. Capital Financing Requirement Ratio 91.0% 106.7% Measurement of prudence in relation to borrowing levels – borrowing only to invest in capital. Ratio of Financing Costs to Net Revenue Stream 4.1% 4.7% Measurement of the Council’s ability to fund borrowing costs. e) Financial Statements The primary financial statements presented within the Annual Accounts are as follows: • The Movement in Reserves Statement reports movements on the different Reserves held by the Council analysed into Usable Reserves (i.e. those that can be applied to fund expenditure or reduce local taxation) and Unusable Reserves. • The Comprehensive Income and Expenditure Statement reports the accounting cost of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Councils raise taxation to cover expenditure in accordance with regulations which may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. • The Balance Sheet brings together all the assets and liabilities of the Council. It is a statement of the resources of the Council and how they have been financed. It is also a report on the Council’s financial position at a particular point in time and represents a snapshot of its financial affairs at the close of the year expressed in accounting terms. 10 | Perth and Kinross Council Annual Accounts 2023/24 Page 29 of 214
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11 | Perth and Kinross Council Annual Accounts 2023/24 • The Cash Flow Statement summarises the inflows and outflows of cash and cash equivalents arising from transactions with third parties on both day to day revenue transactions and capital activities. Cash is defined for the purpose of this statement as cash in hand and deposits repayable on demand less overdrafts repayable on demand. Cash equivalents are investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with an insignificant risk of change in value. The Code also requires the following to be included within the Annual Accounts: • The Statement of Responsibilities for the Annual Accounts explains the responsibilities of the Council and of the Chief Finance Officer as they relate to the Annual Accounts. • The Notes to the Financial Statements provide further information on the above financial statements. • The Notes include an Expenditure and Funding Analysis which compares the net expenditure that is chargeable to taxation and rents and reconciles it to the Comprehensive Income and Expenditure Account. The service analysis for both the Expenditure and Funding Analysis and the Comprehensive Income and Expenditure Statement are now both provided in the way in which the Council organises itself and manages financial performance. • The Annual Governance Statement explains how the Council has complied with the Chartered Institute of Public Finance and Accountancy (CIPFA) / Society of Local Authority Chief Executives (SOLACE) standard for good corporate governance and meets the requirements of relevant legislation and current good practice. • The Remuneration Report provides details of the Council’s remuneration of its senior councillors and senior officers with regard to salary, taxable expenses and pension benefits and states how remuneration arrangements are managed. The report also provides information on exit packages agreed by the Council during the financial year. Supplementary Financial Statements The supplementary financial statements are as follows: • The Housing Revenue Account shows the major elements of housing revenue account expenditure and how these are funded by rents and other income. • The Council Tax Income Account reports the gross and net income from Council Tax, together with details of the number of properties on which Council Tax is levied, and the charge per property. • The Non-Domestic Rates Income Account shows the gross and net income from non-domestic rates and details the amount payable to the national non-domestic pool and resulting net income for the financial year to the Council that is shown in the Comprehensive Income and Expenditure Statement. • The Charitable Trusts statement includes the summary Income and Expenditure Account and Balance Sheet of those Charitable Trusts and Endowments administered by the Council. • The Common Good statement includes the summary Income and Expenditure Account and Balance Sheet for the Common Good Funds administered by the Council. • The Group Accounts incorporate the share of the Council’s Managed Funds, Subsidiaries and Associates into the Group Movement in Reserves Statement, Group Comprehensive Income and Expenditure Statement, Group Balance Sheet, Group Cash Flow Statement and include the Reconciliation of the Single Entity (Council) Surplus or Deficit for the year to the Group Surplus or Deficit. 7. Financial Outlook, Risks and Plans for the Future The local government landscape has never been more complex or challenging. Our communities continue to experience challenges in relation to the cost of living resulting in increased levels of poverty, we continue to see rapid growth in our elderly population and the impact of poor mental health and wellbeing. Added to that we have an ambitious policy agenda to regenerate our economy, reduce the impact of climate change, raise educational attainment, and to increase and optimise the use of digital technology; all of which will come with a significant cost attached. Furthermore, the strategic risk register highlights significant challenges around failing to protect children and vulnerable adults from harm and mitigating or reducing the impact of climate change across Perth and Kinross. At the same time, the Council continues to experience unprecedented financial and other resource pressures because of real terms reductions in funding, significant cost increases due to inflation and an increasing demand for services. Like all councils, the pandemic had an impact on the needs of its citizens and the current cost of living challenges have only added to the increasingly complex challenges the Council faces. The medium to long term implications of Covid-19 remain uncertain, the continuing war in Ukraine, increases in costs and the ongoing cost of living challenge are all placing significant pressure on the workforce and the budget we have available to deliver services to communities. This means the Council is facing the most testing organisational pressures and financial circumstances it has ever experienced. To make best use of available resources, the Council will need to make decisions on what it will stop doing, do less of, do more efficiently or do differently through redesign and working as collaboratively as possible with partners and communities. 11 | Perth and Kinross Council Annual Accounts 2023/24 Page 30 of 214
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12 | Perth and Kinross Council Annual Accounts 2023/24 As the Council faces these challenges, there are several key drivers which require it to transform its services and the way it works with partners and communities to deliver improved outcomes. These include: • new and emerging priorities – social, economic and climate – that require the Council to review what, how and where it delivers services to meet these challenges. • a growing ageing population and increasing complexity of need and demand for services. Through transforming how the Council works, driving efficiencies and reviewing service delivery, it will help address these challenges and respond to these drivers. The purpose of bringing together the Council’s budget and change plans is to make greater links between how it allocates its resources and mitigates the impact of budget cuts whilst continuing to make best use of available resources to meet its priorities. The Council’s policy framework provides parameters as to how it will make difficult decisions to deliver its agreed priorities by taking an evidence-based approach and placing a focus on need, not simply demand. The new Corporate Plan 2022-28 approved in December 2022 sets out a vision for “a Perth and Kinross where everyone can live life well, free from poverty and inequality”. The seven key priorities included in the plan show how the Council will address the challenges it faces and focus its work where it is needed most to support the delivery of that vision. In recognition of the challenges the Council faces and to ensure that it continues to deliver on its priorities, a Financial Strategy was approved in June 2022. The Financial Strategy is the link between the Council’s long-term priorities and its financial capacity. Its aim is to build resilience and ensure that the Council has an affordable and sustainable Medium Term Financial Plan, which directs its resources to where they are most needed in line with Council agreed priorities and strategic outcomes. The Financial Strategy included a set of principles that assist in decision making. The budgetary strategy was further updated on October 2023 when the Council approved the Medium Term Financial Plan (MTFP) which included agreement to set Revenue Budgets for 2024/25, 2025/26 and 2026/27. The update of the MTFP considered future funding levels, increasing costs and rising need / demand over the short to medium term, insofar as they may impact on Perth and Kinross Council. The MTFP places the development of budgetary strategy in the context of delivering the Council’s key outcomes and considers the financial and process risks considered in the management of the Council’s finances. The MTFP is designed to inform the direction of travel of the Council for financial planning purposes. As detailed budget proposals are developed, the broad assumptions included within the MTFP are superseded by more detailed analysis of individual cost pressures and the identification of budget reduction options. The refinement of these assumptions is included in the final 2024/25 Revenue Budget and 2025/26 and 2026/27 Provisional Revenue Budgets. The 2024/25 Final Revenue Budget includes the continued use of the Service Concession Scheme (Local Government Finance Circular 10/2022 - Finance Leases and Service Concession Arrangements: Statutory Guidance refers) which will impact on the future financial management of the Council. The final Housing Revenue Account Revenue Budget for 2024/25 and Five Year Capital Investment Programme and Rent Strategy to 2028/29 were approved by the Housing and Social Wellbeing Committee on 24 January 2024 (Report No. 24/24 refers). The Committee approved the recommendation of an average weekly rent increase for 2024/25 of 6% or £4.51 per week in accordance with the requirements of the Council’s approved Housing Business Plan including supporting investment in new council housing. In June 2022, Council also agreed a five-year Transformation and Change Strategy. This recognised that the shape and structure of the organisation, as well as the way it operates, needs to change. Transformation alone will not address the funding issues; budget cuts and service reductions will be required. Some transformation will reduce over spends, mitigate costs, or enable a shift of expenditure to new and emerging priorities. The Transformation and Change Strategy recognises that due to the size and complexity of the organisation a range of approaches to change will be required: • transforming our customer’s experience • transforming the shape and structure of our organisation • transforming our systems and processes • transforming our spending and response to demand The need for transformation and change is not unique to Perth and Kinross. All public and private sector services and organisations are facing significant challenges and rethinking how they will operate in the future to address these challenges and meet new and emerging demands. In its Covid-19 Recovery Strategy, for a fairer future, the Scottish Government sets out its vision for recovery and the actions it will take to address systemic inequalities made worse by Covid-19, make progress towards a wellbeing economy, and accelerate inclusive person-centred public services. The Scottish Government’s strategy highlights the need to re-build public services and sets out how it will work differently with partners to deliver change. 12 | Perth and Kinross Council Annual Accounts 2023/24 Page 31 of 214
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13 | Perth and Kinross Council Annual Accounts 2023/24 [1] M_O_R® is an industry standard methodology for Management of Risk which helps an organisation identify, assess, and control risk at the strategic, programme, project and operational levels. Financial sustainability will be achieved and maintained through prudent financial management, targeted investment and dis- investment, increasing income, reducing costs and developing more efficient and effective ways of working. Capital The Council approved a revised six-year Composite Capital Budget for 2024/25 – 2029/30 on 28 February 2024. The Housing and Social Wellbeing Committee approved the Housing Revenue Account (HRA) Capital Budget for 2024/25 – 2028/29 on 24 January 2024. Both these Capital plans were subsequently updated by the Finance and Resources Committee on 24 April 2024. The Council’s Composite Capital Budget includes major transport infrastructure improvements, including the Perth Transport Futures project to create a third crossing over the River Tay, which is anticipated to be completed in Spring 2025. Significant investment in improvements to existing infrastructure is also included within the Capital Budget, including the replacement of Blairgowrie Recreation Centre, as well as ongoing works within annual rolling programmes and road network improvements. Also included is the replacement of Perth High School. There are also various school refurbishments under the Early Learning and Childcare programme. There is significant investment included in relation to new technologies such as a replacement for the existing SWIFT Social Work database and investment in the Microsoft Estate, as well as the upgrading and replacement of School Audio Visual equipment and other technology upgrades. Other expenditure is planned in relation to various flood schemes, the development of Perth City Centre cultural attractions, economic development and planning initiatives, parks and public space improvements, waste reduction and recycling and property improvements. The HRA Investment Programme 2024/25 to 2028/29 continues to focus upon increasing the affordable housing stock with the provision of new affordable housing and Council house buy-backs, as well as the enhancement of the existing housing stock, including energy efficiency and external fabric maintenance. The Capital Financing Requirement is estimated to peak at £1.274 billion in 2029/30 under current approved plans. The annual cost of servicing the borrowing and Public Private Partnership liabilities is being managed through the Capital Fund Strategy within the Medium-Term Financial Plan. This ensures the Council’s plan remains affordable, prudent and sustainable. More detailed narrative on the Council’s capital investment plans, treasury management (borrowing and investments), prudential indicators and loans fund liabilities can be found in the Council's Treasury and Investment Strategy and Prudential Indicators 2024/25 to 2029/30 report presented to Council on 6 March 2024. Risk Management Effective risk management is an essential element of good governance and integral to the Council’s ability to deliver positive outcomes for its communities. The Council undertook a wholescale review of its approach to risk and developed and approved a new Risk Management Framework in 2017. Since then, it has been reviewed and further refined to ensure that it remains fit for purpose and reflects the complex risk landscape of local government in these changing and challenging times. The risk management framework has been developed based on best practice industry standards including the International Standard in Risk Management – ISO: 31000 and the Office of Governance and Commerce (OGC) Management of Risk Guidance (MoR) and guidance from the Association of Local Authority Risk Managers (ALARM) and comprises: • Risk Management Policy – statement of the Council`s commitment to effective risk management; • Risk Management Strategy – articulates our overall approach to risk and provides a detailed risk hierarchy; • Risk Management Appetite Statement – describes the levels of risk the Council is prepared to tolerate in pursuit of our objectives; and • Risk Management Process Guide – provides a toolkit of techniques and processes to ensure that risk is managed effectively and that our approach to risk management is consistent across the organisation. Within the Council there is a cross-Service cohort of trained risk practitioners who provide technical guidance and support to ensure that a consistent approach to risk management is taken across the whole organisation. During 2023/24, there has been continued focus on developing our online risk management system, PK Performs, and supporting Strategic Leads and Officers from across the Council to understand and utilise this effectively. A range of tools have been developed and launched to support the roll out and enhance staff understanding of the M_O_R®[1] risk management process and introduce PK Performs. Risk trained officers have also worked with Risk Owners, and the Strategic Leadership Team (SLT) to review their current risks both strategically and operationally. This has taken the form of one-to-one support and an SLT workshop. The Policy and Governance Group have also carried out a critical review of the strategic risk register and have assessed the system of internal control for risk management as part of the assurance process for the Annual Governance Statement. The focus for 2024/25 will be the ongoing roll out of PK Performs at the various levels required, including the transformation programme and Health and Social Care Partnership. We will also be looking at our approach of risk champions across the organisation to support our training capacity and will implement a targeted programme of training. Further workshops are planned with Strategic Leads and the SLT to look at the overall challenges and opportunities facing the Council, and the impact of any new emerging risks. Scoring and benchmarking of all existing risks will also be challenged collectively to ensure a robust approach is taken across the organisation and is reflective of national policy. 13 | Perth and Kinross Council Annual Accounts 2023/24 Page 32 of 214
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14 | Perth and Kinross Council Annual Accounts 2023/24 Workforce Management The Council values its employees, their skills, dedication, and passion to ensure it delivers essential services to the people, businesses and communities of Perth and Kinross. Our people continue to be our most important asset and remain at the heart of everything we do. The Council is on a journey of transformation and change, reshaping our organisation to ensure that we are prepared to deliver the best public services we can for the people of Perth and Kinross, focused on need and within available resources. Our workforce is fundamental to the achievement of this goal. We recognise the importance of creating an environment which allows the people in our teams to be their best. We have a clear vision, aims and aspiration for our workforce and bringing our people on that journey is essential part of ensuring that our culture and ethos to be future-ready to deliver public services remains pivotal. The Corporate Plan 2022/23 – 2027/28 sets out the key priorities and vision for the council, including how we will approach the delivery of services. Our Transformation and Change Strategy recognises that to achieve the ambitions of the Council we need to transform our organisation including its size and shape. Our Financial Strategy recognises the unprecedented budget challenges and need for responsible decision-making given the context in which we work. We have developed a new People and Culture strategy for 2024-2028 which builds upon the foundation laid by these previous decisions to provide the enabler for our continued journey to reshape our organisation and to ensure that we can deliver the best public services we can. We continue to focus our efforts on what makes change a success – our people – and have created learning and engagement opportunities to support our ambition of growth and change. Our People and Culture Strategy is based around our values of Ambition, Compassion and Integrity to ensure that it delivers direction on not only what we need to do but also why, where and how we should be delivering now and in the future. We are committed to the delivery of a sustainable approach to workforce development, and a flexible and agile workforce with the right skills, values and attitudes to meet the needs of our communities now and into the future. A focus on workplace culture, performance, boosting productivity, encouraging innovation and creativity, embracing agility, digital technology and promoting wellbeing, reward, recognition and resilience are key. These commitments will enable the Council to match its ambition for transforming services, growing the economy, reducing inequalities, protecting vulnerable people and supporting young people to be all they can be. The Council is a diverse local authority, supporting both local rural and urban areas. We are committed to enhancing the quality of life, not just for the people we serve, but also for the people who make our achievements possible, our dedicated and driven employees. We are operating within the context of changing demands for our services, financial pressures, an ageing population and need for a range of highly specialist skills and services required for delivery. Strong workforce planning, multi- disciplinary teams, integrated working, locality-based decision-making, sound governance and effective measures to monitor our progress to deliver our ambition is in place. We have implemented our executive leadership team, leadership competency framework and our new performance framework to focus our contributions against Corporate Priorities. This new operating model will ensure that we work together to focus on positive outcomes for those we serve, implementing new ways of working, optimising existing and new technology and working collaboratively with partners, Arm’s Length External Organisations and other local authorities. We continue to demonstrate the importance of inclusion by being a role model for initiatives such as Living Wage, Carer Positive, Disability Confident, Young Person’s Guarantee and the Armed Forces Covenant. These reflect the commitment we make as an employer to support the different groups within our workforce and our communities. Development and talent management will also enable us to provide versatile people solutions to support the future strategic direction of the organisation. We also continue to invest in training and development opportunities for young people via Apprenticeship and Graduate Programmes. A focus on health and wellbeing and resilience are key to sustaining a healthy working environment and positive wellbeing culture and we continue to review and refresh the wide range of health and wellbeing initiatives and support we offer to our workforce. The Council is proud to be a Fair Work employer and continues to apply Fair Work principles, consulting and engaging with employees and their trade union representatives on improvements in our employment practices and arrangements. Equalities and fairness will continue to be core principles in its People and Culture Strategy. This will ensure we continue to have the right skills in the right place when we need them and will contribute to working together to ensure everyone can live life well. 8. Supplementary Information a) Group Accounts The Code of Practice on Local Authority Accounting in the United Kingdom requires the Council to produce group financial statements where it has an interest in entities that meet the definition of a subsidiary, associate or joint venture. The Group results are presented alongside the results for the Council in the Annual Accounts. Further details of the associated entities that have been incorporated into the financial statements can be found on page 99. Horsecross Arts Limited now operates under its new brand of Perth Theatre and Concert Hall Ltd. The Council has an interest in six organisations (detailed on page 99) that do not form part of the main Accounts. The Council includes the results of these organisations in its Group Accounts due to the significant influence it has over their financial and operating practices. The Council also includes Charitable Trusts administered and controlled by the Council and Common Good Funds as managed funds within the Group Accounts. 14 | Perth and Kinross Council Annual Accounts 2023/24 Page 33 of 214
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15 | Perth and Kinross Council Annual Accounts 2023/24 In accordance with the Code, the 2023/24 Group Accounts Statements are included on pages 94 to 98. The basis for consolidation is set out in the Notes to the Group Accounts Statements on pages 99 to 101. The effect of consolidation is to increase the Council’s net assets by £35.017 million resulting in a Group Balance Sheet showing net assets of £874.733 million at 31 March 2024 as set out on page 96. b) Common Good and Charitable Trust Funds Common Good Funds are administered by the local authority for the general benefit of the relevant communities. Overall, the Common Good Funds recorded an in-year surplus of £112,000 which, when applied to the surplus brought forward, results in an accumulated revenue surplus as at 31 March 2024 of £2.370 million. Details of income and expenditure accounts and balance sheets can be found on pages 92 and 93 of the Annual Accounts. These funds are subject to similar accounting policies and procedures to those that are applied to the Council’s main accounts. The main source of income to Common Good Funds is rent. The Council also administers several Charitable Trust Funds. Details of income and expenditure accounts and balance sheets can be found on page 91 of these Annual Accounts. Overall, the Trust Funds recorded an in-year surplus of £262,000 which, when applied to the surplus brought forward, results in an accumulated surplus as at 31 March 2024 of £3.723 million. Perth and Kinross Council’s Trust Funds, for which the Council is the sole trustee, also have to prepare their own Trustees’ Annual Report and this is separately available on the Council website. c) Public Private Partnerships / Design Build Finance Maintain In September 2000 the Council entered into a 25-year PPP contract for the construction, maintenance and operation of office accommodation and a car park. In 2023/24 the Council paid £3.027 million to the contractor under the terms of the contract. Between 2009 and 2012 six school campuses were also brought into operation at Blairgowrie, Glenearn, Loch Leven, Strathearn, North Inch and Breadalbane. The contractor’s obligation was to construct the schools and is to maintain them to a pre agreed standard. In 2023/24 the Council paid £21.6 million to the contractor under the terms of the contract. In addition, the Council paid £3.260 million in relation to Bertha Park High School in 2023/24. During 2023/24, the Council applied the revised accounting guidance for the treatment of Service Concession arrangements which has the impact of spreading the cost of the principal repayments across the life of the asset, generating both a retrospective benefit and annual benefit in the immediate term. The total unitary charge remains payable to the contractor, however, the Service Concession flexibility permits the Council to account for the cost of the repayment element of the unitary charge over the 50 year life of the asset rather than the 25 / 30 year contract life. Note 36 Public Finance Initiatives and Similar Contracts provides further detail. 9. Conclusion The Council has continued to demonstrate sound financial management in 2023/24 by delivering services during challenging times with the resources which are available to it. The pressures being experienced by Services in relation to demand are known and plans are in place to mitigate them. The Council is also facing significant inflationary pressures. These pressures have been reflected in budgets and the medium financial plan. The Council will face many challenges in the future from the combined effect of reduced resources; increasing demands and expectations for our services. It is confident that by working more creatively with all its residents and partners, it will not only embrace these challenges but will maintain its performance and service delivery. Acknowledgements As in previous years, we would like to acknowledge the significant work of the finance teams in producing the Annual Accounts and thank colleagues across the Council and the wider Group for their continuing support. Thomas Glen Councillor Grant Laing Scott Walker Chief Executive Leader of the Council Chief Finance Officer Perth and Kinross Council Perth and Kinross Council Perth and Kinross Council 15 | Perth and Kinross Council Annual Accounts 2023/24 Page 34 of 214
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16 | Perth and Kinross Council Annual Accounts 2023/24 Annual Governance Statement 1 Purpose 1.1 The purpose of the Annual Governance Statement is to give assurance to the people of Perth and Kinross, our elected members, staff, partner agencies and other stakeholders that our governance arrangements are adequate and effective and that our system of internal control is robust. 2 Scope of Responsibility 2.1 As well as providing assurance as to the effectiveness of the governance arrangements in place for the Council, this Annual Governance Statement also covers the six organisations that are included in the Council’s Group Accounts. • Live Active Leisure Limited (subsidiary) • Perth Theatre and Concert Hall Limited (subsidiary) • Culture Perth and Kinross Limited (subsidiary) • Tayside Valuation Joint Board (associate) • Tayside Contracts (associate) • Perth and Kinross Integration Joint Board (joint venture) 3 Our Governance Framework 3.1 Our governance framework comprises our culture, values, rules, resources, systems, tools and processes which we have in place to help us achieve our strategic objectives. We recognise that the following are fundamental elements of good governance within public sector organisations: - • Leadership, Culture and Values • Vision, Direction and Purpose • Stakeholder Engagement • Organisational Development • Effective Decision Making • Internal Controls • Scrutiny and Accountability 3.2 These fundamental elements of our governance framework reflect and seek to embed the principles of good governance within the 2016 CIPFA Framework for Delivering Good Governance in Local Government, namely: • Behaving with integrity, demonstrating strong commitment to ethical values and respecting the rule of law • Defining outcomes in terms of sustainable economic, social and environmental benefits • Ensuring openness and comprehensive stakeholder engagement • Developing the entity’s capacity, including the capability of its leadership and the individuals within it • Determining the interventions necessary to optimise the achievement of the intended outcomes • Managing risks and performance through robust internal control and strong public financial management • Implementing good practices in transparency, reporting and audit to deliver effective accountability. 3.3 A crucial part of the framework is the system of internal control which is designed to manage and mitigate risk in relation to the achievement of our intended outcomes. 3.4 The Council manages risk through a continuous process of identification, assessment, evaluation, prioritisation and mitigation. We evaluate risk based on likelihood and impact in both financial and non-financial terms. We do however need to mitigate and manage risk proportionately; recognising that risk can never be eliminated completely and that only reasonable assurance can ever be given. 4 Our Governance Arrangements 4.1 Our culture and values are reflected in our behaviour and our decision-making. Our policies, processes and procedures including Elected Member and Employee Codes of Conduct, Whistleblowing and Anti-fraud and Corruption policies, Elected Member Register of Interests and Gifts and Hospitality Policy ensure that, as a Council, we respect the rule of law, behave with integrity, promote a culture of good governance and demonstrate a strong commitment to ethical values. 4.2 There are appropriate and effective arrangements in place for the discharge of the following statutory functions: • Head of Paid Service • Monitoring Officer • Chief Finance Officer • Chief Social Work Officer • Data Protection Officer 16 | Perth and Kinross Council Annual Accounts 2023/24 Page 35 of 214
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17 | Perth and Kinross Council Annual Accounts 2023/24 4.3 In 2022/23, officers and elected members engaged with our communities and worked together in partnership to develop a new Corporate Plan which reflects the strategic priorities of the Council. The more detailed delivery plan has been developed within 2023/24 to ensure that we deliver on those objectives and continue to provide high quality operational services. 4.4 Strategic, operational and political leadership is an integral element of effective governance. Following the extensive induction/refresher programme of training that was put in place for elected members following the Election, a long-term programme of personal development is being implemented. Similarly, an extensive leadership development programme is in place for officers, with a new leadership competency framework being implemented to enhance capacity and effectiveness, not only in senior leadership roles but across all levels of the organisation. 4.5 A review of the operational leadership structure, at the most senior level, concluded within the year, to ensure that it is fit for purpose and better aligned to deliver on the strategic objectives and key priorities of the Council. Transition arrangements were established to the new strategic leadership model. Whilst the structure has been designed to support a new way of working, an unavoidable consequence has been the loss of skilled and experienced officers at a senior level, the resultant risk requiring to be managed as part of that process. At the same time a number of key and experienced officers at service manager and team leader level have also left the organisation either through retiral or to take up other opportunities elsewhere, which exacerbates that risk. This will be managed through the ongoing programme of leadership redesign and development. 4.6 Leadership within the organisation is effective with good communication between elected members and senior management through Leaders’ meetings, Convenors meetings, Member Officer Working Groups and all-member briefings, where appropriate. There are also regular pre-agenda discussions in respect of each scheduled Council and Committee meeting. 4.7 Our Local Outcomes Improvement Plan and Corporate Plan set out our vision and purpose and have been subject to consultation and approval. The Financial Strategy and approved Medium Term Financial Plan and Revenue and Capital budgets prioritise how our financial resources are to be deployed. The Transformation and Change Strategy highlights our ambition to better support the delivery of services to the people of Perth and Kinross, particularly those in the greatest need. Key strategic documents such as the Capital Investment Blueprint and Corporate Asset Management Strategy, Housing Investment Programme, Anti-Poverty Strategy, Economic Wellbeing Plan and Climate Change Strategy provide the necessary direction to the organisation to enable it to deliver on its vision and priorities and to achieve its purpose. Furthermore, a new Sustainable Procurement Strategy has been developed and was considered by Council in June 2024. 4.8 We recognise the importance of good stakeholder engagement and will continue to engage and work in partnership with our communities, partners, and other stakeholders to ensure that we design and deliver the public services that our communities need and value. Our approach to consultations is based on the National Standards for Community Engagement and we have established a wide range of consultation processes and procedures. The Community Empowerment (Scotland) Act 2015 provides a framework for improving the quality of engagement and participation which is reflected in the Local Outcome Improvement Plan and our own Corporate Plan. 4.9 We are operating in an increasingly complex and financially challenging public sector landscape and must be able to adapt and evolve our services and workforce to continue delivering cost-efficient, high-quality services. Our people remain our most valuable assets and as an organisation we will secure the best outcomes for our communities by investing in the development of our workforce and of our leaders to ensure that they have the right skills and have sufficient capacity to deliver. Our approach is outlined in our Corporate Workforce Plan – Resourcing PKC Everyone Has Something To Offer. This approach has been reviewed in 2023/24 and a new refreshed People and Culture Strategy has been developed and approved in 2024/25. 4.10 The Council’s Scheme of Administration sets out the Council’s decision-making structure in terms of roles, remits and responsibilities to ensure transparency and accountability. This has been revised to reflect the priorities and objectives of the Council and the changes in the senior officer leadership structure. 4.11 We have a robust suite of policies, procedures and management processes to ensure that there are appropriate internal controls in place in respect of: - • Workforce Planning and Management • Financial Planning and Management • Risk and Performance Management • Transformation and Change Management • Procurement • Major Investment Project Management • Health and Safety • Information Management and Security • Civil Contingencies and Business Continuity • Anti- Fraud and Corruption • Conflicts of Interests • Gifts and Hospitality • Whistleblowing and Reporting Concerns • Complaints Handling • Officer and Elected Member Conduct 17 | Perth and Kinross Council Annual Accounts 2023/24 Page 36 of 214
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18 | Perth and Kinross Council Annual Accounts 2023/24 4.12 As a public body we must be open, transparent and accountable for our decisions, actions, and performance. Our management and democratic structures and processes are designed to facilitate effective decision making and the proper scrutiny of those decisions and their impact in terms of performance and the achievement of our intended outcomes. 4.13 The Council set a final revenue budget for the year 2024/25 in February 2024, along with provisional budgets for 2025/26 and 2026/27. These revenue budgets demonstrate clear linkages with the Transformation and Change strategy. Each budget is allocated to a named budget holder. Budgets are monitored regularly by Service Management Teams and overall financial performance is monitored regularly by the Executive Leadership Team. Council, through the Finance and Resources Committee, receives regular financial monitoring information as part of the budgetary control framework and provides the required political scrutiny of our financial management and performance. 4.14 Capital spend is monitored by Service Management Teams and the Executive Leadership Team and reported regularly to the Finance and Resources Committee as part of the budgetary control framework. 4.15 The Council publishes an Annual Performance Report on its performance against the objectives set out within the Corporate Plan and Local Outcomes Improvement Plan. In order to improve transparency and clarity of these links, a Corporate Delivery and Improvement Plan has been developed. 4.16 The Corporate Delivery and Improvement Plan, which was approved by Council in May 2024, strengthens the alignment between the Corporate Plan priorities, improvement activity and budget and resource allocations, was developed and subject to consultation in year. It sets out detailed actions and outcomes for each priority and includes appropriate performance indicators. Performance is reported to the Executive Leadership Team and publicly through the Council’s Scrutiny and Performance Committee and relevant themed committees. Financial performance is publicly reported through the Finance and Resources Committee and relevant service committees. 4.17 The Council has a published process for dealing with the following and annually reports on performance in this respect of these areas: - • Complaints from members of the public • Requests for accessing information under the Freedom of Information legislation • Accessing information under the Data Protection legislation 5 Governance Assurance Process 5.1 The Council utilises a robust process of gathering assurance information from Service Management Teams, which concludes with Certificates of Assurance being signed by the Directors for Strategy, People and Resources and Economy, Place and Learning. 5.2 Corporate assurance has also been provided as regards the adequacy of the internal controls from the following Officers: • Chief Finance Officer (S 95 Officer) • Strategic Lead for Legal and Governance Services /Monitoring Officer • Chief Internal Auditor • Data Protection Officer • Records and Information Security Manager • Corporate Procurement Manager • Corporate HR Manager 5.3 For Arm’s Length External Organisations, reliance has been placed upon: • Unaudited financial statements of the companies (audited accounts will be scrutinised when available) • Assurance self-assessment evaluations • Terms and conditions of Service Level Agreements • Contract monitoring meetings with Services • Performance information and financial monitoring reports to Services • Presentations and reports to the Scrutiny and Performance Committee 5.4 For Tayside Contracts Joint Committee, Tayside Valuation Joint Board and Perth and Kinross Integration Joint Board, reliance is placed upon each organisation’s own Annual Governance Statement. 5.5 The draft Annual Governance Statement is considered by the Strategic Leadership Team and the Council’s Scrutiny and Performance Committee prior to inclusion within the final 2023/24 Annual Accounts. 5.6 The Annual Governance Statement is considered by the Audit and Risk Committee as part of the final 2023/24 Annual Accounts. 18 | Perth and Kinross Council Annual Accounts 2023/24 Page 37 of 214
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19 | Perth and Kinross Council Annual Accounts 2023/24 6 Effectiveness of Governance Arrangements for 2023/24 6.1 Based on the assurance process outlined above, in terms of effectiveness, the Council’s governance arrangements continue to be regarded as fit for purpose in accordance with the governance framework, subject to the areas identified for review or improvement set out in section 8 below. 6.2 Our financial management arrangements conform with the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2015). 6.3 Our assurance arrangements conform with the governance requirements of the CIPFA Statement on the Role of the Head of Internal Audit (2010). 6.4 The Council has designated the Strategic Lead for Legal and Governance as the Senior Information Risk Owner, with the Strategic Lead for Customer and Digital Services as Depute. Our information security measures have been reviewed in 2023/24 to ensure continuing compliance with the Public Service Network (PSN) and other cyber security requirements. 6.5 Our counter-fraud and anti-corruption arrangements conform with CIPFA’s Code of Practice on Managing the Risks of Fraud and Corruption. 6.6 The Chief Internal Auditor is the Council’s nominated Money Laundering Reporting Officer. There has been no relevant activity in respect of Council and its group during the year. 6.7 The Council’s Audit and Risk Committee operates in line with CIPFA’s Audit Committees: Practical Guidance for Local Authorities. 6.8 We have structures in place which support constructive challenge and effective scrutiny to our system of internal control and our broader governance arrangements. In particular: - • Audit and Risk Committee • Scrutiny and Performance Committee • Finance and Resources Committee • Themed Committees • Executive Leadership Team / Strategic Leadership Team • Policy and Governance Group • Transformation Board • Internal Audit • External Audit (presently Audit Scotland) 7 Opinion of the Chief Internal Auditor 7.1 Audit activity and performance is detailed in the Annual Report by the Chief Internal Auditor for the year 2023/24, which was presented to the Council’s Audit and Risk Committee in June 2024. The report contains the Chief Internal Auditor’s opinion in respect of the effectiveness of the governance arrangements in place, as follows: - “In the Chief Internal Auditor’s opinion, reasonable reliance can be placed on the Council’s risk management and governance arrangements, and systems of internal control for 2023/24, subject to management implementation of the agreed actions detailed in Internal Audit reports.” 8 Areas for Review/Continued Improvement Action 8.1 The last three years have demonstrated our reliance on technology and the way in which technology can shape and influence how we deliver services and work as an organisation in the future. We continue to review our cyber resilience and information governance arrangements to ensure that they are fit for purpose and robust and continue to support new and innovative ways of working. 8.2 The Council’s financial management, governance and reporting arrangements have been assessed against the financial management standards set out within the CIPFA Financial Management Code (2019). The Code is based upon the standards set out elsewhere within the Annual Governance Statement and the Council is considered to be compliant with the Code. Improvement actions arising from the review include consideration of how the Council can build upon existing practice in its budget consultation with stakeholders and strengthening existing reporting arrangements. 8.3 In addition to these areas, there are some specific areas which will be held under review pending the outcome of current transformation and change activity: • Leadership culture and capacity • Capacity and resources to lead, develop and deliver ongoing and future programme of transformation and change • Strategic Procurement • Workforce planning and organisational development • Use of the Financial Strategy to address financial pressures • Our approach to community engagement and empowerment. 19 | Perth and Kinross Council Annual Accounts 2023/24 Page 38 of 214
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20 | Perth and Kinross Council Annual Accounts 2023/24 Conclusion and Opinion The Council is legally required to review the effectiveness of its governance arrangements and to publish an Annual Governance Statement, with its Annual Accounts. The governance framework and, in particular, the system of internal control, has been assessed in accordance with guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA). The review of the effectiveness of the Council’s system of internal control and overall governance framework has been informed by different sources assessing risk and providing assurance:- • Executive Leadership Team/ Service Management Teams • Chief Finance Officer • Strategic Lead for Legal and Governance Services/ Monitoring Officer • Chief Internal Auditor/ Internal Audit • Data Protection Officer • Policy and Governance Group • External Audit • External agencies and inspectorates. The Council’s Governance Framework is considered robust and effective. Given the changes in the leadership structure from 1 April 2024, certificates of assurance have been obtained from Strategic Leads, who are responsible for maintaining the system of internal control within their service area. Strategic Leads have reviewed the current governance arrangements and internal controls within their service area and provided assurance that these are effective. The Chief Finance Officer has provided assurance that the financial arrangements in place conform to the relevant CIPFA requirements and that our expenditure is lawful. The Monitoring Officer has provided assurance that our governance arrangements ensure compliance with relevant laws, regulations, internal policies, and procedures. The Chief Internal Auditor has provided assurance for the year 2023/24 and an Internal Audit plan will be developed for 2024/25 that will focus on areas which have been identified as corporate or service specific risks in relation to core business and the delivery of the Council’s agreed strategic priorities. We are satisfied that our governance arrangements and, in particular, our system of internal control, continue to be regarded as fit for purpose. Any identified improvement actions will continue to be delivered and monitored through service improvement plans, audit plans and change programmes to avoid duplication of effort. Our governance framework will continue to be reviewed and adapted where necessary to ensure that it remains robust and effective. Signed: Signed: Thomas Glen Councillor Grant Laing Chief Executive Leader of the Council 20 | Perth and Kinross Council Annual Accounts 2023/24 Page 39 of 214
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21 | Perth and Kinross Council Annual Accounts 2023/24 Independent auditor’s report to the members of Perth and Kinross Council and the Accounts Commission Reporting on the audit of the financial statements Opinion on financial statements I certify that I have audited the financial statements in the annual accounts of Perth and Kinross Council and its group for the year ended 31 March 2024 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the group and council-only Movement in Reserves Statements, Comprehensive Income and Expenditure Statements, Balance Sheets, and Cash Flow Statements, the council-only Housing Revenue Account Income and Expenditure Statement, the Statement of Movements on the Housing Revenue Account Balance, the Council Tax Income Account, the Non-Domestic Rate Income Account, the Charitable Trusts Income and Expenditure Account, the Charitable Trusts Balance Sheet, the Common Good Income and Expenditure Account, the Common Good Balance Sheet, the group-only Reconciliation of the Single Entity Deficit for the year to the Group Deficit, and notes to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 (the 2023/24 Code). In my opinion the accompanying financial statements: • give a true and fair view of the state of affairs of the council and its group as at 31 March 2024 and of the income and expenditure of the council and its group for the year then ended; • have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2023/24 Code; and • have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003. Basis for opinion I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I was appointed by the Accounts Commission on 3 April 2024. My period of appointment is four years, covering 2023/24 to 2026/27. I am independent of the council and its group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the council. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Conclusions relating to going concern basis of accounting I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the ability of the council and its group to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. These conclusions are not intended to, nor do they, provide assurance on the current or future financial sustainability of the council and its group. However, I report on the council’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. Risks of material misstatement I report in my Annual Audit Report the most significant assessed risks of material misstatement that I identified and my judgements thereon. Responsibilities of the Chief Finance Officer and Audit and Risk Committee for the financial statements As explained more fully in the Statement of Responsibilities for the Annual Accounts, the Chief Finance Officer is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Chief Finance Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 21 | Perth and Kinross Council Annual Accounts 2023/24 Page 40 of 214
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22 | Perth and Kinross Council Annual Accounts 2023/24 In preparing the financial statements, the Chief Finance Officer is responsible for assessing the ability of the council and its group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there is an intention to discontinue the operations of the council and its group. The Audit and Risk Committee is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using my understanding of the local government sector to identify that the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003 are significant in the context of the council and its group; • inquiring of the Chief Finance Officer as to other laws or regulations that may be expected to have a fundamental effect on the operations of the council and its group; • inquiring of the Chief Finance Officer concerning the policies and procedures of the council and its group regarding compliance with the applicable legal and regulatory framework; • discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and • considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the council’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report. Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report I have audited the parts of the Remuneration Report described as audited. In my opinion, the audited parts of the Remuneration Report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Chief Finance Officer is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities for the Annual Accounts and the unaudited parts of the Remuneration Report. My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. 22 | Perth and Kinross Council Annual Accounts 2023/24 Page 41 of 214
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23 | Perth and Kinross Council Annual Accounts 2023/24 My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Management Commentary and Annual Governance Statement to the extent explicitly stated in the following opinions prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Management Commentary and Annual Governance Statement In my opinion, based on the work undertaken in the course of the audit: • the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and • the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). Matters on which I am required to report by exception I am required by the Accounts Commission to report to you if, in my opinion: • adequate accounting records have not been kept; or • the financial statements and the audited parts of the Remuneration Report are not in agreement with the accounting records; or • I have not received all the information and explanations I require for my audit. I have nothing to report in respect of these matters. Conclusions on wider scope responsibilities In addition to my responsibilities for the annual accounts, my conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in my Annual Audit Report. Use of my report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Rachel Browne CPFA, Audit Director Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN 23 | Perth and Kinross Council Annual Accounts 2023/24 Page 42 of 214
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General Housing Capital Insurance Capital Capital Total Unusable Total Fund Revenue Fund Fund Receipts Grants Usable Reserves Authority Balance Account Reserve Unapplied Reserves (Note 32) Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2022 (85,900) (3,282) (24,817) (1,366) (2,556) (87) (118,008) (623,763) (741,771) Movement in reserves during 2022/23 Total Comprehensive Income and Expenditure 16,868 6,401 0 0 0 0 23,269 (148,700) (125,431) Adjustments to Usable Reserves permitted by accounting standards (4,511) (2,897) 0 0 0 0 (7,408) 7,408 0 Adjustments from income and expenditure charged under the accounting basis to the funding basis (Note 5) 1,514 (2,029) 0 0 311 0 (204) 204 0 Decrease in 2022/23 13,871 1,475 0 0 311 0 15,657 (141,088) (125,431) Transfers to/(from) Other Statutory Reserves 2,306 (840) (1,526) 60 0 0 0 0 0 Balance at 31 March 2023 carried forward (69,723) (2,647) (26,343) (1,306) (2,245) (87) (102,351) (764,851) (867,202) Movement in reserves during 2023/24 Total Comprehensive Income and Expenditure 41,392 9,901 0 0 0 0 51,293 (23,807) 27,486 Adjustments to Usable Reserves permitted by accounting standards (6,454) (2,357) 0 0 0 0 (8,811) 8,811 0 Adjustments from income and expenditure charged under the accounting basis to the funding basis (Note 5) (19,833) (7,157) 0 0 143 0 (26,847) 26,847 0 Adjustment to the statutory repayment of debt for service concession arrangements - permitted flexibility (34,262) 0 0 0 0 0 (34,262) 34,262 0 (Increase) or Decrease in 2023/24 (19,157) 387 0 0 143 0 (18,627) 46,113 27,486 Transfers to/(from) Other Statutory Reserves 5,086 0 (4,683) (403) 0 0 0 0 Balance at 31 March 2024 carried forward (83,794) (2,260) (31,026) (1,709) (2,102) (87) (120,978) (718,738) (839,716) MOVEMENT IN RESERVES STATEMENT 24 | Perth and Kinross Council Annual Accounts 2023/24 Page 43 of 214
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2022/23 Gross Income Net Notes Gross Income Net Expenditure Expenditure Expenditure Expenditure £'000 £'000 £'000 £'000 £'000 £'000 COUNCIL SERVICES 232,396 (28,053) 204,343 Education and Children's Services 267,197 (31,060) 236,137 195,655 (107,341) 88,314 Health and Social Care 199,468 (110,826) 88,642 122,906 (34,613) 88,293 Communities 146,557 (35,594) 110,963 68,812 (23,927) 44,885 Corporate and Democratic Services 64,129 (24,464) 39,665 2,896 (2) 2,894 Chief Executives Service 4,707 (56) 4,651 36,843 (31,394) 5,449 Housing Revenue Account 43,489 (33,507) 9,982 1,338 0 1,338 Valuation Joint Board 1,436 0 1,436 660,846 (225,330) 435,516 COST OF SERVICES 726,983 (235,507) 491,476 474 (331) 143 Other Operating Income and Expenditure 8 0 (944) (944) 26,585 (6,276) 20,309 Financing and Investment Income and Expenditure 9 25,811 (7,002) 18,809 0 (432,699) (432,699) Taxation and Non-Specific Grant Income 10 0 (458,048) (458,048) 687,905 (664,636) 23,269 Deficit on Provision of Services 752,794 (701,501) 51,293 (86,274) Surplus on revaluation of non current assets (24,003) (62,426) Remeasurement of the net defined benefit liability/asset 196 (148,700) Other Comprehensive Income and Expenditure (23,807) (125,431) Total Comprehensive Income and Expenditure 27,486 2023/24 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 25 | Perth and Kinross Council Annual Accounts 2023/24 Page 44 of 214
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Notes £'000 £'000 1,421,864 Property, Plant and Equipment 21 1,512,833 51,814 Heritage Assets 22 51,814 15,015 Investment Property 23 14,715 963 Intangible Assets 24 348 403 Assets Held for Sale 25 0 541 Long Term Debtors 26 543 1,490,600 Long Term Assets 1,580,253 155,339 Short Term Investments 36,560 273 Assets Held for Sale 25 676 441 Inventories 27 632 52,019 Short Term Debtors 28 52,344 17,663 Cash and Cash Equivalents 44 31,183 225,735 Current Assets 121,395 (12,114) Short Term Borrowing 39 (19,398) (96,104) Short Term Creditors 29 (91,611) (295) Provisions 30 (1,668) (108,513) Current Liabilities (112,677) (5,312) Provisions 30 (3,564) (599,351) Long Term Borrowing 39 (616,330) (135,957) Other Long Term Liabilities 18 and 36 (129,361) (740,620) Long Term Liabilities (749,255) 867,202 NET ASSETS 839,716 102,351 Usable Reserves 120,978 764,851 Unusable Reserves 32 718,738 867,202 TOTAL RESERVES 839,716 The Unaudited Annual Accounts were issued on 24 June 2024 and the Audited Annual Accounts were authorised for issue on 2 December 2024. The accompanying notes form an integral part of these financial statements. Scott Walker CPFA Chief Finance Officer Date: 31 March 202431 March 2023 BALANCE SHEET 26 | Perth and Kinross Council Annual Accounts 2023/24 Page 45 of 214
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2022/23 Notes 2023/24 £'000 £'000 (23,269) Deficit on the provision of services (51,293) 82,679 Adjustments to net deficit on the provision of services for non cash movements 86,840 (44,143) Adjustments for items included in the net deficit on the provision of services that are investing and financing activities (49,490) 15,267 Net cash flows from Operating Activities (13,943) (22,818) Investing Activities 42 8,267 (13,223) Financing Activities 43 19,196 (20,774) Net (decrease)/increase in cash and cash equivalents 13,520 38,437 Cash and cash equivalents at the beginning of the reporting period 17,663 17,663 Cash and cash equivalents at the end of the reporting period 44 31,183 CASH FLOW STATEMENT 27 | Perth and Kinross Council Annual Accounts 2023/24 Page 46 of 214
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28 | Perth and Kinross Council Annual Accounts 2023/24 Statement of Responsibilities for the Annual Accounts The Council’s Responsibilities The Council is required: - to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for those affairs under Section 95 of the Local Government (Scotland) Act 1973. In this Council that officer is the Chief Finance Officer. - to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. - ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003). - approve the Annual Accounts for signature. I confirm that these Annual Accounts were approved for signature by the Audit and Risk Committee at its meeting on 2 December 2024. Signed on behalf of Perth and Kinross Council Councillor Grant Laing Leader of the Council Date: The Responsibilities of the Chief Finance Officer The Chief Finance Officer is responsible for the preparation of the Council’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing these Annual Accounts, the Chief Finance Officer has: • selected suitable accounting policies and applied them consistently; • made judgements and estimates that were reasonable and prudent; • complied with legislation; and • complied with the Local Authority Accounting Code (in so far as it is compatible with legislation). The Chief Finance Officer has also: - kept proper accounting records which were up to date; - taken reasonable steps for the prevention and detection of fraud and other irregularities; - used the going concern basis of accounting on the assumption that the Council will continue in operational existence for the twelve months following the approval of the Annual Accounts. I certify that the Annual Accounts give a true and fair view of the financial position of the Council and its group at the reporting date and the transactions of the Council and its Group for the year ended 31 March 2024. Scott Walker CPFA Chief Finance Officer Date: 28 | Perth and Kinross Council Annual Accounts 2023/24 Page 47 of 214
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29 | Perth and Kinross Council Annual Accounts 2023/24 Notes to the Financial Statements 1. Accounting Policies General The Annual Accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) and adapted to the Code of Practice as required by the Local Authority Accounts (Scotland) Regulations 2014 and section 12 of the Local Government in Scotland Act 2003. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 and supported by International Financial Reporting Standards. The Annual Accounts are intended to present a true and fair view of the financial position and transactions of the authority and have been prepared in accordance with the fundamental accounting principles of relevance, reliability, comparability, understandability and materiality. The accounting convention adopted in the Annual Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, or when the Council is entitled to the income, not simply when cash payments are made or received. In particular: • Revenue from contracts with service recipients, whether for services or the provision of goods, is recognised when (or as) the goods and services are transferred to the service recipient in accordance with the performance obligations in the contract. • Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet. • Expenses in relation to services received (including those rendered by the Council’s officers) are recorded as expenditure when the services are received, rather than when payments are made. • Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. • Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where there is evidence that debts are unlikely to be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. • Where the Council is acting as an agent for another party (e.g. in the collection of Non-Domestic Rates and Water and Wastewater), income and expenditure are recognised only to the extent that commission is receivable by the Council for the agency services rendered or the Council incurs expenses directly on its own behalf in rendering the services. Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management. Changes in Accounting Policies and Estimates and Errors Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events or conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Changes in accounting estimates are accounted for prospectively, i.e., in the current and future years affected by the change. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. 29 | Perth and Kinross Council Annual Accounts 2023/24 Page 48 of 214
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30 | Perth and Kinross Council Annual Accounts 2023/24 Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year: • depreciation attributable to the assets used by the relevant service; • revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off; • amortisation of intangible fixed assets attributable to the service. The Council is not required to raise council tax to cover depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with the Statutory Repayment of Loans Fund Advances. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by revenue provision in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Contingent Assets and Liabilities A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent Assets and Liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts. Employee Benefits Benefits Payable During Employment Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, are recognised as an expense in the year in which employees render service to the Council. An accrual is made against services in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements and other forms of leave earned by employees but not taken before the year-end and which employees can carry forward into the next financial year. Any accrual made is required under statute to be reversed out of the General Fund Balance by a credit to the Employee Statutory Absences Adjustment Account in the Movement in Reserves Statement. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged in the Comprehensive Income and Expenditure Statement when the Council is demonstrably committed to terminate the employment of an officer. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. Post-Employment Benefits Employees of the Council are members of two separate pension schemes: The Scottish Teachers’ Superannuation Scheme and the Local Government Pension Scheme. The Scottish Teachers’ Superannuation Scheme is a statutory unfunded defined final benefit salary scheme administered nationally by the Scottish Public Pensions Agency on behalf of the Scottish Government. There are no investment assets built up under the scheme to meet pension liabilities. The contributions paid into the scheme by the Council and teaching employees are determined nationally and member’s pension benefits are prescribed under the Teachers’ Superannuation (Scotland) Regulations 2005 with the Scottish Government being responsible for meeting the scheme’s liabilities. Other employees, subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme (LGPS). The LGPS is a statutory funded defined final benefit salary scheme operated through local pension funds. Perth and Kinross Council and its employees pay contributions into the Tayside Pension Fund administered by Dundee City Council calculated at a level to balance the pension liabilities with investment assets. The contributions paid into the scheme by employees and member pension benefits are prescribed, for the period to which the accounts relate, by the Local Government Pensions Scheme (Scotland) Regulations 1998 as amended. Perth and Kinross Council’s contributions, as employer, into the Tayside Pension Fund are subject to the advice of the Fund actuary. 30 | Perth and Kinross Council Annual Accounts 2023/24 Page 49 of 214
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31 | Perth and Kinross Council Annual Accounts 2023/24 Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be attributed specifically to the Council. The scheme is therefore accounted for as if it were a defined contributions scheme – no liability for future payments of benefits is recognised in the Balance Sheet and the Education Service line in the Comprehensive Income and Expenditure Statements is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Local Government Scheme is accounted for as a defined benefits scheme. The liabilities of the Tayside Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate which is based on the indicative rate of return on the high quality corporate bond index (i Boxx AA). The assets of the Tayside Pension Fund attributable to the Council are included in the Balance Sheet at their fair value: • quoted securities – current bid price; • unquoted securities – professional estimate; • unitised securities – current bid price; • property – market value. The change in the net pension’s asset / liability is analysed into the following components: • Service cost comprising: o Current service cost – the increase in liabilities as result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked; o past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs; o net interest on the net defined liability / (asset), i.e. net interest expense for the authority – the change during the period in the net defined benefit liability / (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability / (asset) at the end of the period – taking into account any changes in the net defined benefit liability / (asset) during the period as a result of contribution and benefit payments. • Remeasurements comprising: o the return on plan assets - excluding amounts included in net interest on the net defined benefit liability / (asset) – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure; o actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure. • Contributions paid to the Tayside Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. Discretionary Benefits The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. 31 | Perth and Kinross Council Annual Accounts 2023/24 Page 50 of 214
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32 | Perth and Kinross Council Annual Accounts 2023/24 Events after the Reporting Period Events after the reporting period are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified: • those that provide evidence of conditions that existed at the end of the reporting period – the Annual Accounts are adjusted to reflect such events; • those that are indicative of conditions that arose after the reporting period – the Annual Accounts are not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Annual Accounts. Fair Value Measurement The Council measures some of its non-financial assets such as surplus assets and investment properties at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: a) in the principal market for the asset or liability, or b) in the absence of a principal market, in the most advantageous market for the asset or liability. The Council measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. When measuring the fair value of a non-financial asset, the Council takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Council uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the Council’s financial statements are categorised within the fair value hierarchy, as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: unobservable inputs for the asset or liability. Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount respectively is deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain/loss over the term of the replacement loan. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. 32 | Perth and Kinross Council Annual Accounts 2023/24 Page 51 of 214
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33 | Perth and Kinross Council Annual Accounts 2023/24 Financial Assets Financial assets are classified based upon a classification and measurement approach that reflects the business model for holding the financial assets and their cashflow characteristics. There are three main classes of financial assets measured at:- • amortised cost • fair value through profit or loss (FVPL), and • fair value through other comprehensive income (FVOCI) The Council’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest (i.e. where cash flows do not take the form of a basic debt instrument). Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For deposits that the Council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the agreement. However, the Council has made loans to various organisations at less than market rates (soft loans). When a soft loan is made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. In subsequent years interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Any gains and losses that arise on the de-recognition of an asset are credited/debited to the Financing and Investment Income and Expenditure line in the year they incur in the Comprehensive Income and Expenditure Statement. Going Concern The Chief Finance Officer is responsible for making an annual assessment of whether it is appropriate to prepare the accounts on a going concern basis. In accordance with the Code of Practice on Local Authority Accounting in the United Kingdom, an authority’s financial statements shall be prepared on a going concern basis; that is, the accounts should be prepared on the assumption that the functions of the authority will continue in operational existence for at least twelve months from the date of approval of the financial statements and it can only be discontinued under statutory prescription. The Council has significant net assets, investments and cash and a track record of preparing a balanced budget which incorporates significant savings that are subsequently achieved. The Covid pandemic continues to have an impact on the finance and operations of the Council. The Council has put in place robust measures to ensure the continuing strong financial management of its activities which demonstrates its ability to continue as a going concern. Work continues to assess the impacts of the pandemic and the mitigating actions taken to return to a balanced budget. Taken together, the Chief Finance Officer has determined that it remains appropriate to prepare the financial statements on a going concern basis. Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: • the Council will comply with the conditions attached to the payments; and • the grants or contributions will be received. Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attaching to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants/contributions) or Taxation and Non-Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. 33 | Perth and Kinross Council Annual Accounts 2023/24 Page 52 of 214
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34 | Perth and Kinross Council Annual Accounts 2023/24 Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Account. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure. Heritage Assets Heritage Assets are those assets that are intended to be preserved in trust for future generations because of their cultural, environmental or historical associations. Heritage Assets include museum and gallery collections and works of art. These assets are held by the Council in pursuit of its overall objectives in relation to the maintenance of the heritage. Since 1 April 2016 Culture Perth and Kinross has responsibility for the delivery and development of museum and library services in Perth and Kinross. The Trust manages the museum and gallery collections on behalf of the Council, however the Council will continue to be custodian of the collections. Tangible Heritage Assets The Council’s Heritage Assets are held in the Perth Museum, Perth Art Gallery and Alyth Museum. The collections include Art, History and Natural History and are held in support of Council objectives i.e. to increase knowledge, understanding and appreciation of the local area and its history. Heritage Assets are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in relation to heritage assets as detailed below. The Council has embarked upon a revaluation programme for all collection items deemed to have significant value, these being mainly items within Fine and Applied Art collections. In recognition of the key qualitative characteristics of the financial statements, i.e. understandability, relevance, reliability and comparability, the Council has chosen to apply a £10,000 de- minimus level for which items will be recognised within the Balance Sheet. The exclusion of individual items having a value of less than £10,000 does not impact upon the characteristics of the financial statements and a summary of the main collections and applicable accounting treatment is as follows. Art Collection The Fine Art collection includes paintings and sketches in various mediums, and although international in scope, its greatest strength is in the holding of Scottish pictures. The collection seeks to retain a balance between the historical and the contemporary whilst continuing to develop the holdings of works of specifically local interest. The Applied Art collection has been acquired since 1785 through purchase, gift or bequest. It covers a wide variety of objects and materials, within which the collections of Perth silver and Perthshire glass are unsurpassed in terms of national importance. Subject to the de-minimus noted above, items donated or acquired are valued by the curators at point of acquisition; in addition, there is a five year rolling programme of valuation to ensure all significant items in the Art collection are valued. All valuations are undertaken by the curators having relevant knowledge and experience and with reference to appropriate commercial markets. Art collection items are held in the Council balance sheet at market value and are tested annually for impairment, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment. As the assets within the art collection are deemed to have indeterminate lives and a high residual value, the Council does not consider it appropriate to charge depreciation. History Collection The History collection includes social history, archaeology, arms and armour, costume, archives, coins, medals and stamps, photography and world cultures collections. These items cannot be readily and/or reliably valued due to their diverse nature. The cost of valuation would be disproportionate in terms of any benefit derived to the user of the financial statements and the History collection is consequently excluded from the Council Balance Sheet. Natural History Collection The Natural History collection includes zoology, botany and geology collections. No market exists for these items and collections and there is no comparable data to form the basis of valuation. The cost of obtaining valuations would be disproportionate in terms of any benefit derived to the user of the financial statements and Natural History collections are consequently excluded from the Council Balance Sheet. 34 | Perth and Kinross Council Annual Accounts 2023/24 Page 53 of 214
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35 | Perth and Kinross Council Annual Accounts 2023/24 Heritage Assets – General The Council may dispose of heritage assets which have a doubtful provenance or are unsuitable for public display. The proceeds of such items are accounted for in accordance with the Council’s general provisions relating to the disposal of property, plant and equipment. Disposal proceeds are disclosed separately in the notes to the financial statements and are accounted for in accordance with statutory accounting requirements relating to capital expenditure and capital receipts. The promotion of other cultural events and programmes during the year makes it difficult to reliably estimate the percentage of the Art Collection on display for public viewing. All items not on display are held in secure storage and access is permitted to scholars and others for research purposes. The Culture Perth and Kinross Collections Management Framework provides guidance on the collection, disposal or lending of heritage assets. Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and restricted to that incurred during the development phase (research expenditure is not capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance To comply with these restrictions, the gain or loss on the derecognition of an intangible fixed asset shall be reversed out of the General Fund or Housing Revenue Account. The General Fund or Housing Revenue Account shall be debited (in the case of the gain) or credited ( in the case of a loss) with an amount equal to the gain or loss on derecognition of the intangible asset. The gain or loss that is reversed out of the General Fund or Housing Revenue Account excludes any costs of disposal that either cannot be capitalised under regulation or statutory guidance or that the authority has chosen not to capitalise. The double entries are a credit to the capital receipts reserve or a capital grants and receipts unapplied account of an amount equal to the disposal proceeds and a debit to the capital adjustment account equal to the carrying amount of the intangible asset. Interests in Companies and Other Entities The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. Inventories Inventories are included in the Balance Sheet at the lower of cost and net realisable value. Work in progress is valued at the cost of direct materials and labour plus attributable overheads based on the normal level of activity less any attributable losses. Investment Properties Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, being the price that would be received to sell such an asset in an orderly transaction between market participants at the measurement date. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. To comply with these restrictions, the gain or loss on the derecognition of an intangible fixed asset shall be reversed out of the General Fund or Housing Revenue Account. The General Fund or Housing Revenue Account shall be debited (in the case of the gain) or credited ( in the case of a loss) with an amount equal to the gain or loss on derecognition of the intangible asset. The gain or loss that is reversed out of the General Fund or Housing Revenue Account excludes any costs of disposal that either cannot be capitalised under regulation or statutory guidance or that the authority has chosen not to capitalise. The double entries 35 | Perth and Kinross Council Annual Accounts 2023/24 Page 54 of 214
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36 | Perth and Kinross Council Annual Accounts 2023/24 are a credit to the capital receipts reserve or a capital grants and receipts unapplied account of an amount equal to the disposal proceeds and a debit to the capital adjustment account equal to the carrying amount of the intangible asset. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Council currently has no assets acquired under finance leases, nor any leased to third parties on a finance lease. Accounting policies for operating leases are set out below. The Council as Lessee Operating Leases - Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). The Council as Lessor Operating Leases - Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (e.g. repairs and maintenance) is charged as an expense when it is incurred. Measurement Assets are initially measured at cost, comprising: • the purchase price; • any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; • the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located where there is a legal or constructive obligation to do so. The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition will not increase the cash flows of the Council. In the latter case, the cost of the acquisition is the carrying amount of the asset. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases: • infrastructure and community assets – depreciated historical cost; • assets under construction – historical cost • dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH). The Council values these assets using the Beacon approach (Adjusted Vacant Possession) • other land and buildings – current value based on existing use value (EUV) for operational assets where there is an active market, or if there is no market based evidence of current value because of the specialist nature of the asset and/or the asset is rarely sold, depreciated replacement cost (DRC) using the instant build approach; 36 | Perth and Kinross Council Annual Accounts 2023/24 Page 55 of 214
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37 | Perth and Kinross Council Annual Accounts 2023/24 • surplus assets – the current value measurement base is fair value, estimated at highest and best use from a market participant’s perspective; • all other assets – current value, determined by the amount that would be paid for the asset in its existing use (existing use value – EUV). Assets included in the Balance Sheet at current value are reviewed sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year-end, and subject to formal revaluation as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the surplus or deficit on the provision of services where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, the revaluation loss is accounted for as follows: • where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); • where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for: • where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); • where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Disposals and Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously recognised losses. Depreciation is not charged on Assets Held for Sale. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts received for a disposal are categorised as capital receipts. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. 37 | Perth and Kinross Council Annual Accounts 2023/24 Page 56 of 214
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38 | Perth and Kinross Council Annual Accounts 2023/24 Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain Community Assets) and assets that are not yet available for use (i.e. assets under construction). Leasehold Properties over period of lease Roads and Bridges 15-30 years Other Infrastructure Assets 10-30 years Vehicles, Plant and Equipment 3-15 years Council Buildings up to 50 years Council Dwellings 10-30 years Intangible Fixed Assets 3-5 years Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the General Fund. Private Finance Initiative (PFI) and Similar Contracts PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes the Council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment. The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements: • fair value of the services received during the year – debited to the relevant service in the Comprehensive Income and Expenditure Statement; • finance cost – an interest charge on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement; • contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement; • payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease); • lifecycle replacement costs – debited to the relevant service in the Comprehensive Income and Expenditure Statement. Provisions The Council is required to make provisions where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. Provision has been made for bad and doubtful debts in respect of Council Tax, Housing Rents and other items of income, where appropriate. In all cases the level of provision is based on experience and an assessment of the prospects of recovering the related debt. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the council becomes aware of the obligation, and measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the council settles the obligation. Reserves Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year against the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting 38 | Perth and Kinross Council Annual Accounts 2023/24 Page 57 of 214
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39 | Perth and Kinross Council Annual Accounts 2023/24 processes for non-current assets, financial instruments and retirement benefits and that do not represent usable resources for the Council – these reserves are explained in the relevant notes. Revenue Expenditure Funded from Capital under Statute Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset is charged as expenditure to the relevant Service in the Comprehensive Income and Expenditure Statement in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. VAT VAT payable is included as an expense only to the extent that it is not recoverable from His Majesty’s Revenue and Customs. VAT receivable is excluded from income. 2. Accounting Standards that have been issued but have not been adopted At the balance sheet date, the following new standards and amendments to existing standards have been published but not yet adopted by The Code: • Classification of Liabilities as Current or Non-current (Amendments to IAS 1) issued in January 2020. The amendments: • specify that an entity’s right to defer settlement must exist at the end of the reporting period • clarify that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement, • clarify how lending conditions affect classification, and • clarify requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) issued in September 2022. The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions. • Non-current Liabilities with Covenants (Amendments to IAS 1) issued in October 2022. The amendments improved the information an entity provides when its right to defer settlement of a liability for at least 12 months is subject to compliance with covenants. (Adopted 1 April 2024) • International Tax Reform: Pillar Two Model Rules (Amendments to IAS 12) issued in May 2023. Pillar Two applies to multinational groups with a minimum level of turnover. The amendments introduced: • a temporary exception to the requirements to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes, and • targeted disclosure requirements for affected entities. (Adopted 1 April 2024) • Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) issued in May 2023. The amendments require an entity to provide additional disclosures about its supplier finance arrangements. The IASB developed the new requirements to provide users of financial statements with information to enable them to: • assess how supplier finance arrangements affect an entity’s liabilities and cash flows, and • understand the effect of supplier finance arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it. This impact is not expected to be significant. • IFRS 16 Leases will be implemented in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) for 2024/25. This will require the Council, with effect from 2024/25, to adopt this new accounting standard for Leases, which replaces IAS 17 Leases and removes the operating classification for leases where the Council acts as lessee. The Council, as lessee, will recognise previously accounted for operating leases on the Balance Sheet as Right-of-Use (ROU) assets along with the corresponding lease liabilities. Previously, the Council as lessee, had formally classified leases into either operating or finance leases, depending on whether the lease met the criteria for transferring the majority of the risks and rewards relating to ownership according to IAS 17. Under IFRS 16 the Council will recognise ROU assets and lease liabilities on the balance sheet for most leases, subject to exemptions for short-term leases and those of a ‘low value’. Leases that meet either of these exemptions will not be recognised in accordance with exemption guidelines. Leases considered to be short-term are those that have a term of 12 months or less. IFRS 16 does not provide a numerical threshold for what constitutes a low value asset; however, the Council has adopted a value of £10,000 for this exemption. IFRS 16 will be applied retrospectively to leases already in place, with the cumulative effect recognised at 1 April 2024. The ROU asset and lease liabilities will be calculated as if IFRS 16 had previously been applied, but will only be recognised from 2024/25 with no prior year adjustments. It is anticipated that the adoption of the Code’s adaptation of IFRS 16 would result in the following additions to the balance sheet as at 31 March 2024: o £591,000 Property, Plant and Equipment (Right-of-Use Assets) o £591,000 Lease Liabilities 39 | Perth and Kinross Council Annual Accounts 2023/24 Page 58 of 214
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40 | Perth and Kinross Council Annual Accounts 2023/24 3. Critical Judgements in Applying Accounting Policies In applying the accounting policies set out in Note 1, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Annual Accounts are: Group Entities The Council has an interest in a number of subsidiary and associate companies and trusts. The most significant of these companies in terms of the size of trading operations, shareholding and board representation and other factors have been assessed and where deemed material to the Council, are included in the Group Accounts. Full details of these interests are shown in Note 1 to the Group Accounts. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. The Council has determined that all leased in sites are operating leases due to the short term nature of the agreements. The Council also leases out sites which predominately relate to ground leases for land which has an indeterminable life and these agreements are classified as operating leases. Note 1 to the Financial Statements provides further detail on the accounting treatment for the lease agreements. Public Sector Funding There is a high degree of uncertainty about future levels of funding for local government. However, the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision. Public Private Partnership (PPP) The Council is deemed to control the services provided under the agreement for the provision of educational establishments. The accounting policies for PPP schemes and similar arrangements have been applied and the assets under the contract are included within Property, Plant and Equipment on the Council’s Balance Sheet. Note 36 provides further details. 4. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty The Annual Accounts contain estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The item in the Council’s Balance Sheet at 31 March 2024 for which there is a significant risk of material adjustment in the forthcoming financial year are in respect of the Council’s Net Pensions Asset / Liability and valuation of Property, Plant and Equipment. Net Pension Liability Uncertainty Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. This is further detailed in Note 18 to the Accounts which includes a table setting out the potential sensitivity of change in assumptions on the Pension Liability. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied. Effect if Actual Results Differ from Assumptions The effects on the net pension asset / liability of changes in individual assumptions can be measured. For instance, a 0.1% increase in the discount rate assumption would result in a reduction in the pension liability of £13.738 million. However, the assumptions interact in complex ways and the pension asset had increased from £250.276 million in 2022/23 to £320.913 million in 2023/24. However, by applying IAS 19 and the asset ceiling provision contained therein, the Council has actually recognised a pension liability of £20.748 million in 2023/24 (£20.917 million in 2022/23). Property, Plant and Equipment - Valuations Uncertainty Although markets are functioning and transaction volumes are at levels where there is sufficient evidence on which to base opinions on value, there remain uncertainties due to worldwide events which continue to influence pricing. The valuation reports provided by Royal Institution of Chartered Surveyors (RICS) valuers have been used to inform the measurement of non-current assets in these financial statements. 40 | Perth and Kinross Council Annual Accounts 2023/24 Page 59 of 214
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41 | Perth and Kinross Council Annual Accounts 2023/24 Specialised assets such as educational buildings are valued on the basis of depreciated replacement cost. Here the valuer bases their assessment on the cost to the Council of replacing the service potential of the assets; the uncertainty relates to the estimated costs of, rather than the extent of, service potential to be replaced. The valuer has provided estimates for the range of uncertainty attached to the valuation of Council dwellings. The valuation of Council dwellings requires the use of an Adjustment Factor which is applied to the vacant possession value of the housing stock to arrive at the reported Existing Use Value – Social Housing (EUV-SH). The Adjustment Factor is based on the ratio of private and public sector rents and yields. Rental ratios are established from data provided by the Council and from Local Housing Allowances, HM Rent Service, RICS, and using information on private sector rents from research including local letting agents. Information on yields is derived from the RICS, Building Society and Chartered Surveyor firm publications, and government publications. Effect if Actual Results Differ from Assumptions A sensitivity analysis has been undertaken in respect of all properties valued on a depreciated replacement cost basis to determine the potential movement in value due to changes in price estimates. The sensitivity analysis includes several assumptions, including that the Gross Internal Area (GIA) of each site remains unchanged, and the building use and condition remains in line with the previous valuation. The estimated movement in value at 31 March 2024 is £20.924m. However, the estimate includes two PFI Community Campuses which were revalued in 2023/24 and for which the BCIS reference rate has increased by 27% during the year. The estimated increase in value for the two sites is £17.855m. As other BCIS rates for educational properties had increased by circa 2%, it is reasonable to conclude that the BCIS reference rate for the two campuses is therefore highly variable and so no adjustment has been made to the value of the two sites. The remaining estimated movement of £3.069m for 140 sites is not material and has therefore also not been adjusted. A sensitivity analysis on the Council housing revaluation has been undertaken by the valuer to examine the potential impact if the Adjustment Factor was increased or decreased by 5%, this being the tolerance listed within the valuation guidance published by the Ministry for Housing Communities and Local Government (MHCLG). The EUV–SH for the Council housing stock at 31 March 2024 is £318.678 million. A 5% increase or decrease to the Adjustment Factor would result in an increase or decrease of £40.004 million (12.55%) to the value of the Council housing stock. 41 | Perth and Kinross Council Annual Accounts 2023/24 Page 60 of 214
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42 | Perth and Kinross Council Annual Accounts 2023/24 5. Adjustments between Accounting Basis and Funding Basis under Regulations General Housing Capital Capital Total 2022/23 Fund Revenue Receipts Grants Balance Account Reserve Unapplied £'000 £'000 £'000 £'000 £'000 £'000 Adjustments involving the Capital Adjustment Account Depreciation and impairment on non-current assets (42,520) (14,316) 0 0 (56,836) (47,835) Revaluation Losses on Property, Plant and Equipment (34,562) (2,789) 0 0 (37,351) (2,084) Reversal revaluation gains 3,729 199 0 0 3,928 13,271 Movements in Fair Value of Investment Properties (300) 0 0 0 (300) 955 Amortisation of Intangible Assets (949) 0 0 0 (949) (1,026) Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement 42,642 3,787 0 0 46,429 42,656 Amounts of non current assets written off on disposal as part of the gain/loss (1,322) 0 0 0 (1,322) (1,523) Revenue Expenditure Funded by Capital Under Statute (3,770) 0 0 0 (3,770) (838) Items not debited or credited to the Comprehensive Income and Expenditure Statement Statutory provision for repayment of debt 11,812 3,448 0 0 15,260 15,690 Capital expenditure charged to the General Fund and HRA balances 2,399 2,335 0 0 4,734 6,391 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of the gain/loss on disposal 1,837 3 (1,840) 0 0 0 Use of the Capital Receipts Reserve to finance new capital expenditure 0 0 1,983 0 1,983 1,360 Adjustments involving the Financial Instruments Adjustment Account 497 147 0 0 644 648 Adjustments involving the Pensions Reserve Employer's pensions contributions and direct payments to pensioners payable in the year 21,287 1,479 0 0 22,766 20,912 Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (20,923) (1,478) 0 0 (22,401) (48,260) Adjustments involving Short Term Accumulated Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 310 28 0 0 338 (521) Total Adjustments (19,833) (7,157) 143 0 (26,847) (204) Usable Reserves 42 | Perth and Kinross Council Annual Accounts 2023/24 Page 61 of 214
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6. Expenditure and Funding Analysis - 2023/24 Net Net Expenditure Expenditure Adjustments in the charged to between the Comprehensive the General Funding and Income and Fund and HRA Accounting Expenditure Balances Basis Statement £000 £000 £000 Education and Children's Services 200,653 35,484 236,137 Health and Social Care 87,613 1,029 88,642 Communities 66,825 44,138 110,963 Corporate and Democratic Services 36,229 3,436 39,665 Chief Executives Service 4,569 82 4,651 Housing Revenue Account (6,985) 16,967 9,982 Valuation Joint Board 1,436 0 1,436 Non Distributed Costs 1,757 (1,757) 0 Cost of Services 392,097 99,379 491,476 Other Income and Expenditure (376,605) (63,578) (440,183) Deficit on Provision of Services 15,492 35,801 51,293 Opening General Fund and HRA Balance (72,370) Surplus on General Fund and HRA Balance in Year 15,492 Transfers from other Statutory Reserves 5,086 Service concession flexibility (34,262) Closing General Fund and HRA Balance at 31 March 2024 (86,054) This note provides a reconciliation of the main adjustments to Net Expenditure Chargeable to the General Fund and HRA Balances to arrive at the amounts in the Comprehensive Income and Expenditure Statement. The relevant transfers between Reserves are explained in the Movement in Reserves Statement. Notes to the Expenditure and Funding Analysis - adjustments between funding and accounting basis Note A Note B Note C £ '000 £ '000 £ '000 £ '000 COUNCIL SERVICES Education and Children's Services 34,851 773 (140) 35,484 Health and Social Care 589 500 (60) 1,029 Communities 43,571 624 (57) 44,138 Corporate and Democratic Services 3,118 415 (97) 3,436 Chief Executives Service 0 40 42 82 Housing Revenue Account 16,928 67 (28) 16,967 Non Distributed Costs 0 (1,757) 0 (1,757) Cost of Services 99,057 662 (340) 99,379 Other Operating Expenditure and Income (518) 0 0 (518) Financing and Investment Income and Expenditure (14,960) (1,027) (644) (16,631) Taxation and Non-Specific Grant Income (46,429) 0 0 (46,429) Other income and expenditure from the Expenditure and Funding Analysis (61,907) (1,027) (644) (63,578) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 37,150 (365) (984) 35,801 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement amounts Adjustments for Capital Purposes Net change for the Pensions Adjustments Other Differences Total Adjustments 43 | Perth and Kinross Council Annual Accounts 2023/24 Page 62 of 214
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Net Net Expenditure Expenditure Adjustments in the charged to between the Comprehensive the General Funding and Income and Fund and HRA Accounting Expenditure Balances Basis Statement £000 £000 £000 Education and Children's Services 191,577 12,766 204,343 Health and Social Care 82,433 5,881 88,314 Communities 61,769 26,524 88,293 Corporate and Democratic Services 35,469 9,416 44,885 Chief Executives Service 2,498 396 2,894 Housing Revenue Account (7,064) 12,513 5,449 Valuation Joint Board 1,338 0 1,338 Non Distributed Costs 1,540 (1,540) 0 Cost of Services 369,560 65,956 435,516 Other Income and Expenditure (354,214) (58,033) (412,247) Deficit on Provision of Services 15,346 7,923 23,269 Opening General Fund and HRA Balance (89,182) Surplus on General Fund and HRA Balance in Year 15,346 Transfers to other Statutory Reserves 1,466 Closing General Fund and HRA Balance at 31 March 2023 (72,370) This note provides a reconciliation of the main adjustments to Net Expenditure Chargeable to the General Fund and HRA Balances to arrive at the amounts in the Comprehensive Income and Expenditure Statement. The relevant transfers between Reserves are explained in the Movement in Reserves Statement. Notes to the Expenditure and Funding Analysis - adjustments between funding and accounting basis Note A Note B Note C £ '000 £ '000 £ '000 £ '000 COUNCIL SERVICES Education and Children's Services 2,560 9,701 505 12,766 Health and Social Care 1,011 4,779 91 5,881 Communities 19,901 6,716 (93) 26,524 Corporate and Democratic Services 5,182 4,256 (22) 9,416 Chief Executives Service (2) 375 23 396 Housing Revenue Account 10,878 1,619 16 12,513 Non Distributed Costs 0 (1,540) 0 (1,540) Cost of Services 39,530 25,906 520 65,956 Other Operating Expenditure and Income 474 0 0 474 Financing and Investment Income and Expenditure (16,645) 1,442 (648) (15,851) Taxation and Non-Specific Grant Income (42,656) 0 0 (42,656) Other income and expenditure from the Expenditure and Funding Analysis (58,827) 1,442 (648) (58,033) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services (19,297) 27,348 (128) 7,923 Total Adjustments Expenditure and Funding Analysis - 2022/23 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement amounts Adjustments for Capital Purposes Net change for the Pensions Adjustments Other Differences 44 | Perth and Kinross Council Annual Accounts 2023/24 Page 63 of 214
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45 | Perth and Kinross Council Annual Accounts 2023/24 Note 6 cont’d Explanation to the Expenditure and Funding Analysis Adjustments for Capital Purposes Note A Adjustments for Capital Purposes adds in depreciation and impairment and revaluation gains and losses in the services line, and for: • Other operating expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets. • Financing and investment income and expenditure – the statutory charges for capital financing and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices. • Taxation and non-specific grant income and expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from that receivable in the year to that receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non Specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for conditions which were satisfied in the year. Net Change for the Pensions Adjustments Note B Net change for the removal of pension contributions and the addition of IAS 19 Employee Benefits pension related expenditure and income: • For services – this represents the removal of the employer pension contributions made by the authority as allowed by statute and the replacement with current service costs and past service costs. • For Financing and investment income and expenditure – the net interest on the defined benefit liability is charged to the Comprehensive Income and Expenditure Statement. Other Differences Note C Other differences between the amounts debited/credited to the Comprehensive Income and Expenditure Statement and amounts payable/receivable to be recognised under statute: • For services – this represents the removal of the increase or decrease in the employee statutory adjustment account. • For Financing and investment income and expenditure – the other differences column recognises adjustments to the General Fund for the timing differences for premiums and discounts and stepped interest rate loans. 45 | Perth and Kinross Council Annual Accounts 2023/24 Page 64 of 214
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46 | Perth and Kinross Council Annual Accounts 2023/24 7. Transfer (to)/from Earmarked Reserves The Reserves Strategy that the Council approved in February 2024 earmarked funding towards specific or known future commitments. The following table sets out the updated balances as at 31 March 2024 for these Earmarked Reserves taking cognisance of the final year-end position. Balance as at Transfers Balance as at 1 April 2023 (In)/Out) 31 March 2024 £'000 £'000 £'000 Revenue Grants (15,947) (1,390) (17,337) Service concession flexibility 0 (17,262) (17,262) Transformation and Workforce Management (9,530) 1,924 (7,606) Developer Contributions: Commuted Sums and Infrastructure and Affordable Housing (5,540) (915) (6,455) Affordable Housing (Resources accrued from reduced Council Tax Discounts) (4,353) (1,256) (5,609) School Estate (2,063) (101) (2,164) Anti-Poverty Measures (2,666) 806 (1,860) Non-Recurring Pressures c/f from 2023/24 0 (1,635) (1,635) Car Parking (1,512) (20) (1,532) Culture (1,172) 315 (857) Devolved School Management (DSM) (722) 221 (501) Modern Apprentices/Graduate Trainees (340) (27) (367) School Counsellors (556) 227 (329) Children and Young People's Residential Care (2,139) 1,858 (281) Property Maintenance (271) 9 (262) Climate Change (153) (52) (205) Works Maintenance (400) 200 (200) Community Resilience 0 (175) (175) Salix Fund (113) 11 (102) Community Investment Fund (89) 2 (87) Ventilation Measures (114) 38 (76) Perth Leisure Vision (212) 150 (62) Local Government Elections 0 (53) (53) Local Action Partnerships (90) 44 (46) Financial Assistance 0 (20) (20) Non-Recurring Pressures c/f from 2022/23 (1,699) 1,699 0 Decant schools (700) 700 0 Financial Insecurity (680) 680 0 Perth and Kinross Offer (252) 252 0 World Cycling Championships (180) 180 0 Grounds Maintenance (60) 60 0 Earmarked Balances (51,553) (13,530) (65,083) Purpose of Earmarked General Fund Balances The application and monitoring of the following reserves is part of the remit of the Finance and Resources Committee. Revenue Grants – these grants are being carried forward in reserves as the grant conditions have been met but the expenditure has not been fully incurred. Service Concession flexibility – these resources are earmarked to be phased over a number of years to contribute to the funding of the Revenue Budget. Transformation and Workforce Management – the Council has resources earmarked to enable the Transformation and Change Strategy and workforce management in future years. Developer Contributions: Commuted Sums and Infrastructure and Affordable Housing – the Environment, Infrastructure and Economic Development Committee approved supplementary guidance on 20 September 2023 for developer contributions covering community greenspace, primary education, Auchterarder A9 junction improvements, affordable housing and transport infrastructure. These sums are held in the Council’s Reserves until they are applied to relevant schemes. Affordable Housing (Resources accrued from reduced Council Tax Discounts) – these reserves have been generated as a result of the Council’s policy on varying the level of council tax charged for long term empty properties and second homes. These resources can only be used for the provision of affordable housing. School Estate – These resources include amounts previously approved by the Council for the primary and secondary school estate including maintenance works and resources for new schools. 46 | Perth and Kinross Council Annual Accounts 2023/24 Page 65 of 214
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47 | Perth and Kinross Council Annual Accounts 2023/24 Anti-Poverty measures – The Council approved the creation of a COVID-19 Reserve on 27 January 2021 (Report 21/8 refers) to assist with addressing the ongoing impact of Covid-19 in future years. This has now been redirected towards Anti- Poverty measures. Non-Recurring Pressures c/f from 2023/24 – the 2024/25 Revenue Budget includes non-recurring expenditure proposals which have been approved during the year at Finance and Resources Committee and as part of the year end process. Car Parking – this balance is the accumulated surplus at 31 March 2024 which is restricted in its application under the Road Traffic Regulation Act 1984. Any proposals to utilise these resources will require approval by the Finance and Resources Committee. Culture – there was £363,000 approved for developing the cultural offer from the final under spend in the 2018/19 Revenue Budget and reported to Strategic Policy and Resources Committee during the year. This has been further increased by in- year underspends. Devolved School Management (DSM) – the amount shown is the accumulated sum available to be carried forward at 31 March 2024 under the approved scheme for managing these budgets. The purposes for which the earmarked amount can be used and the procedures for its management and control are detailed in the Council’s approved DSM scheme. Modern Apprentices/Graduate Trainees – the Strategic Policy and Resources Committee approved the transfer of any final under spend on modern apprentices and graduate trainees. The remaining resources will be utilised in future years. School Counsellors – Revenue Budget 2020/21 Update No 2 to the Strategic Policy and Resources Committee approved the earmarking of resources received from the Scottish Government in respect of counselling in schools which are anticipated to be spent during 2024/25 and 2025/26 (Report 20/225). Children and Young People’s Residential Care – These resources were earmarked to be utilised in the provision of children’s social work services over 2 financial years in managing the impact of Covid-19 on higher levels of needs and reduce the number of residential placements. The balance of these resources will be utilised in 2024/25. Property Maintenance – Revenue Budget Report No 3 to the Strategic Policy and Resources Committee on 21 November 2021 approved the earmarking of £250,000 resources in respect of property maintenance to be utilised in future years. This was increased by a further £55,000 in 2021/22. Climate Change – the Finance and Resources Committee in April 2023 approved the earmarking of resources for climate change activities due to a rephasing between years. Works Maintenance – The Council continues to earmark resources for future works maintenance. Community Resilience – These resources were earmarked during 2023/24 at the Finance and Resources Committee for future weather events. Salix Fund – Salix Finance Ltd is a Government owned non-departmental public body which provides interest free loan funding for energy efficiency works. The loan is re-paid to the fund over a number of years and re-invested in future energy efficiency works. Community Investment Fund – The Council continues to earmark the resources remaining from the fund for future investment. Ventilation Measures – these resources are earmarked for ventilation measures to be finalised in 2024/25. Perth Leisure Vision – these resources are earmarked to fund the future design and business operating model of the PH2O project. Local Government Elections – these resources are earmarked in reserves as a contribution to local elections. Local Action Partnership – these resources are earmarked and utilised by an application process for payment to groups in one of the seven local action partnerships. Financial Assistance – There is a recurring annual contribution from reserves to fund any future Mods and other events across Perth and Kinross. The remaining earmarked reserves detailed in the table were fully utilised or un-earmarked during 2023/24. 8. Other Operating Expenditure / Income 2023/24 2022/23 £'000 £'000 Losses and (Gains) on the Disposal of Non Current Assets (518) 474 Share of Tayside Contracts Surplus (426) (331) Total (944) 143 9. Financing and Investment Income and Expenditure 2023/24 2022/23 £'000 £'000 Interest payable and similar charges 25,450 25,040 Pensions interest cost and expected return on pensions assets (1,027) 1,442 Interest receivable and similar income (5,065) (4,418) Income in relation to investment properties and changes in their fair value (549) (1,755) Total 18,809 20,309 47 | Perth and Kinross Council Annual Accounts 2023/24 Page 66 of 214
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48 | Perth and Kinross Council Annual Accounts 2023/24 10. Taxation and Non Specific Grant Income 2023/24 2022/23 £'000 £'000 Council Tax Income (97,348) (92,860) Non Domestic Rates (59,290) (45,917) Non Ring-fenced Government Grants (254,981) (251,266) Capital Grants and Contributions (46,429) (42,656) Total (458,048) (432,699) 11. Material Items of Income and Expense In 2023/24 the Council did not receive any material items of income not otherwise disclosed in the financial statements and notes. In 2022/23 the Council received additional grant funding of £8.669 million from the Scottish and UK Governments in relation to the Covid-19 pandemic and Cost of Living Crisis which was treated as agency income and expenditure and does not impact upon the figures in the Comprehensive Income and Expenditure Statement (see Note 15 for further details). 12. Premiums and Discounts on Debt Rescheduling Written Down The Code requires that any premiums or discounts arising from debt rescheduling should be written off in the year they were incurred, except in limited circumstances where they would qualify as a ‘modification’ of debt. During 2023/24, there were no such debt modifications. The net amount of premium and discount debited to the General Fund and HRA, including for transactions prior to 1 April 2007 (as permitted by statutory guidance), from the Financial Instruments Adjustment Account was £623,000 (2022/23 £628,000). 48 | Perth and Kinross Council Annual Accounts 2023/24 Page 67 of 214
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49 | Perth and Kinross Council Annual Accounts 2023/24 13. General Grants, Bequests and Donations Perth and Kinross Council is represented on, exercises influence over and provides grants to a large number of outside bodies which provide services to the public, consistent with the Council’s statutory responsibilities. During 2023/24 a total of £21.435 million (2022/23 £19.381 million) was paid out in support of these organisations ranging from remission of hall rents of a few pounds to the contribution towards the operational and other costs of Live Active Leisure Limited of £4.931 million (2022/23 £4.815 million). Details of grants are shown below. 2023/24 2022/23 £'000 £'000 Service Level Agreements with Outside Organisations 7,827 4,762 Live Active Leisure Limited 4,931 4,815 Culture Perth and Kinross 3,392 3,219 Perth Theatre and Concert Hall Ltd 1,142 1,062 Green Capital Recovery Fund 456 465 Perth Money Advice Service 413 413 Community Investment Fund 402 355 Commercial Property Regeneration Grants 275 644 Churches Action for the Homeless 267 317 Warm Spaces Grant 248 420 Local Action Partnerships 244 16 Pitlochry Festival Theatre 220 220 Perthshire Women's Aid 108 108 Perth and Kinross Heritage Trust 100 100 Perth and Kinross Countryside Trust 100 30 Other Miscellaneous Grants 1,310 2,435 Total 21,435 19,381 14. Expenditure and Income Analysed by Nature The Council’s expenditure and income is analysed as follows: 2023/24 2022/23 Expenditure / Income £'000 £'000 Expenditure Employee benefits expenses 261,470 266,859 Other services expenses 279,137 268,070 Contribution to Integrated Joint Board 83,241 79,034 Support service recharges 3,477 3,346 Depreciation, amortisation, impairment 100,019 45,082 Interest payments 25,450 25,040 Loss on the disposal of assets 0 474 Total Expenditure 752,794 687,905 Income Fees, charges and other service income 177,441 165,913 Interest and investment income 7,002 6,276 Taxation and Non-Specific Grant income 458,048 432,699 Government grants and contributions 58,492 59,748 Gain on the disposal of assets 518 0 Total Income 701,501 664,636 Deficit on the Provision of Services 51,293 23,269 49 | Perth and Kinross Council Annual Accounts 2023/24 Page 68 of 214
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50 | Perth and Kinross Council Annual Accounts 2023/24 15. Agency Services Agency arrangements operate in some Services where the Council undertakes work on behalf of other local authorities; Scottish Water; government; and other public bodies. The main items of income and related expenditure are shown below. 2023/24 2023/24 2022/23 2022/23 Income Expenditure Income Expenditure £'000 £'000 £'000 £'000 Education and Children's Services Provision of Pupil Support Assistants to other Local Authorities 273 273 183 183 Communities Receipts from other Local Authorities for cross boundary bus services 25 25 18 18 Total 298 298 201 201 2023/24 2023/24 2022/23 2022/23 Income Expenditure Income Expenditure £'000 £'000 £'000 £'000 Corporate and Democratic Services Covid-related and Cost of Living-related Grants to Individuals on behalf of Scottish and UK Governments 159 159 8,654 8,654 Communities Hospitality and Leisure Top-up Funding 0 0 15 15 Total 159 159 8,669 8,669 The Council issued Covid-related and Cost of Living-related grants on behalf of both the Scottish and UK Governments during 2023/24 to the value of £159,000 (£8.669 million in 2022/23) as detailed below. The Council also received £534,000 (£445,000 in 2022/23) in relation to the administration of collecting Scottish Water income on their behalf. This has been recognised in the Comprehensive Income and Expenditure Statement. 16. External Audit Costs 2023/24 2022/23 £'000 £'000 External Audit Fees 350 330 17. Termination Benefits The Council terminated the contracts of twenty-five employees in 2023/24, incurring costs of £1.511 million (eight employees in 2022/23, incurring costs of £68,000). 50 | Perth and Kinross Council Annual Accounts 2023/24 Page 69 of 214
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51 | Perth and Kinross Council Annual Accounts 2023/24 18. Post-Employment Benefits International Accounting Standard 19 ‘Employee Benefits’ (IAS 19) prescribes how pension costs and liabilities are to be disclosed in the financial statements. The standard requires employing organisations to account for post-employment benefits in the period in which they are committed to give them, even if the actual payment of these benefits will be many years in the future. The following notes are prepared in accordance with the code guidance on disclosure requirements in respect of IAS 19. Perth and Kinross Council participates in two different pension schemes, one for teaching staff and a separate scheme for all other employees. Pensions Schemes Accounted for as Defined Contribution Schemes Teachers Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Scottish Government. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Scottish Government uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. For the purposes of the Annual Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2023/24, the Council paid £16.725 million to the Teachers’ Pensions scheme in respect of teachers’ retirement benefits, representing 23% of pensionable pay. The figures for 2022/23 were £15.666 million and 23%. There were no contributions remaining payable at the year-end. Additional payments relating to added year’s benefits, which the Council has inherited from predecessor authorities or awarded itself, together with related increases, amounted to £189,391 (2022/23 £173,836). Pension Schemes Accounted for as Defined Benefit Pension Schemes Local Government Pension Scheme The post-employment scheme for other employees, subject to certain qualifying criteria, is the Local Government Pension Scheme (LGPS) which is administered in this area by Dundee City Council in respect of all local authorities and admitted bodies in the former Tayside area. This is a multi-employer scheme in which it is possible for an employer to identify its share of the assets and liabilities on a consistent and reasonable basis. Employer’s liabilities can be evaluated directly by the Actuary at any time on membership data. Benefits • It is a Career Average Revalued Earnings scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level to balance the pension’s liability with investment assets. • The pension’s accrual rate guarantees a pension based on 1/49th of career average revalued earnings and years of pensionable service. There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. Pensions are increased annually in line with changes to the Pensions (Increases) Act 1971 and Section 59 of the Social Security Pensions Act 1975. Governance • The Tayside Pension Fund is operated under the regulatory framework for the LGPS in Scotland and the governance of the scheme is the responsibility of the Tayside Pension Fund Committee. This Committee is comprised solely of elected members of Dundee City Council. Employing authorities (including Perth and Kinross Council) are represented at the Tayside Pension Board. • Policy is determined in accordance with the Local Government Pension Scheme (Scotland) Regulations. Management of the Fund’s investments is carried out by the Fund’s Investment Advisory Panel which selects and appoints a number of external investment managers/partners and monitors their investment performance. • Under the Regulations, employers fall into three categories, scheme employers (also known as scheduled bodies) such as Perth and Kinross Council, community admission bodies and transferee admission bodies. Admission agreements are generally assumed to be open-ended. However, either party can voluntarily terminate the admission agreement by giving an appropriate period of notice to the other parties. Any deficit arising from the cessation valuation will usually be levied on the departing admission body as a capital payment. Principal Risks • The principal risks to the scheme are the longevity assumptions, statutory changes to the scheme, changes to inflation, bond yields and the performance of the investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge the General Fund the amount due by statute as described in the accounting policy note. 51 | Perth and Kinross Council Annual Accounts 2023/24 Page 70 of 214
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52 | Perth and Kinross Council Annual Accounts 2023/24 Discretionary Post-employment Benefits • Discretionary post-retirement benefits on early retirements are an unfunded defined benefit arrangement, under which liabilities are recognised when an award is made. There are no plan assets built up to meet these pension liabilities. The contributions paid into the scheme by employees and member pension benefits are prescribed, for the period to which the accounts relate, by the Local Government Pensions Scheme (Scotland) Regulations 1998 as amended. Perth and Kinross Council’s contributions, as an employer, into the Tayside Pension Fund are subject to the advice of the Fund actuary. The Local Government Pension Scheme allows for the award of discretionary post-employment benefits upon early retirement. This is an unfunded defined benefit final arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet the pension’s liabilities, and cash has to be generated to meet actual pension’s payments as they eventually fall due. Guaranteed Minimum Pension (GMP) Equalisation As a result of the High Court’s Lloyds ruling on the equalisation of GMPs between genders, a number of pension schemes have made adjustments to accounting disclosures to reflect the effect this ruling has on the value of pension liabilities. It is our understanding that HM Treasury has confirmed that the judgement "does not impact on the current method used to achieve equalisation and indexation in public service pension schemes". On 23 March 2021, the Government published the outcome to its Guaranteed Minimum Pension Indexation consultation, concluding that all public service pension schemes, including the LGPS, will be directed to provide full indexation to members with a GMP reaching State Pension Age (SPA) beyond 5 April 2021. This is a permanent extension of the existing ‘interim solution’ that has applied to members with a GMP reaching SPA on or after 6 April 2016. The Council’s valuation assumption for GMP is that the Fund will pay limited increases for members that have reached SPA by 6 April 2016, with the Government providing the remainder of the inflationary increase. For members that reach SPA after this date, the Council has assumed that the Fund will be required to pay the entire inflationary increase. This assumption is consistent with the consultation outcome and the actuaries do not believe that it is necessary to make any adjustments to the value placed on the liabilities as a result of the above outcome. Career Average Revalued Earnings Scheme (CARE) The Local Government Pension Scheme changed from Final Salary to Career Average Revalued Earnings (CARE) on 1 April 2015, with a change of accrual rate from 1/60th to 1/49th. Employees who were previously paying into the Final Salary scheme were automatically transferred into the new CARE scheme on 1 April 2015. Transactions Relating to Post-Employment Benefits The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Council is required to make against Council Tax is based on the cash payable in the year, so the real cost of post-employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year. 52 | Perth and Kinross Council Annual Accounts 2023/24 Page 71 of 214
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53 | Perth and Kinross Council Annual Accounts 2023/24 Local Government Pension Scheme 2023/24 2022/23 £'000 £'000 Comprehensive Income and Expenditure Statement Cost of Services - Service Cost 23,428 46,818 Financing and Investment Income and Expenditure - Net Interest on the Defined Liability (1,326) 1,186 Administration Expenses 299 256 Total Post Employment Benefit Charged to the Deficit on the Provision of Services 22,401 48,260 Remeasurement of the net defined benefit liability comprising: Expected return on pension fund assets in excess of interest (90,442) 81,040 Other acturial gains on assets (526) 0 Changes in demographic assumptions (16,097) 0 Changes in financial assumptions (5,135) (474,314) Experience Loss on defined benefit obligation 54,302 80,572 Changes in effect of asset ceiling 58,094 250,276 Total Post Employment Benefit Credited to the Comprehensive Income and Expenditure Statement 196 (62,426) Movement in Reserves Statement Reversal of Net Charges made to the surplus or deficit on the provision of Services for post- employment benefits in accordance with the Code (22,401) (48,260) IAS 19 limits the measurement of a net defined benefit asset to the lower of the surplus in the defined benefit plan and the asset ceiling. IAS 19 defines the asset ceiling as the present value of any economic benefits available in the form of reductions in future contributions to the plan. In accordance with International Financial Reporting Interpretations Committee - Interpretation 14 (IFRIC 14), the actuary has calculated the impact of the asset ceiling as £320.913 million (2022/23 £250.276 million). Therefore, a corresponding reduction has been applied to the defined benefit plan asset which results in a pension net liability of £20.748 million (2022/23 £20.917 million). Pensions Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit scheme is as follows: 31 March 31 March 2024 2023 £'000 £'000 Present Value of the Defined Benefit Obligation 854,468 781,379 Present Value of Unfunded Obligation 20,748 20,917 Closing Defined Benefit Obligation 875,216 802,296 Impact of Asset Ceiling 320,913 250,276 Fair Value of Pension Fund Assets (Bid Value) (1,175,381) (1,031,655) Net Liability in Balance Sheet 20,748 20,917 53 | Perth and Kinross Council Annual Accounts 2023/24 Page 72 of 214
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54 | Perth and Kinross Council Annual Accounts 2023/24 A reconciliation of Perth and Kinross Council’s share of the present value of Tayside Pension Fund’s defined benefit obligation (liabilities) is as follows: 31 March 31 March 2024 2023 £'000 £'000 Opening Defined Benefit Obligation 802,296 1,140,223 Current Service Cost 22,976 46,818 Interest Cost 37,869 29,383 Change in Financial Assumptions (5,135) (474,314) Change in demographic assumptions (16,097) 0 Experience Gain on Defined Benefit Obligation 54,302 80,572 Estimated Benefits Paid Net of Transfers In (27,657) (25,805) Past Service Costs (including Curtailments) 452 0 Contributions by Scheme Participants 7,856 6,972 Unfunded Pensions Payments (1,646) (1,553) Closing Defined Benefit Obligation 875,216 802,296 A reconciliation of the movements in Perth and Kinross Council’s share of the fair value of Tayside Pension Fund’s assets is as follows: 31 March 31 March 2024 2023 £'000 £'000 Opening Fair Value of Scheme Assets 1,031,655 1,084,228 Interest on Assets 51,738 28,197 Return on Assets Less Interest 90,442 (81,040) Other actuarial gains 526 0 Administration Expenses (299) (256) Contributions by Employer Including Unfunded 22,766 20,912 Contributions by Scheme Participants 7,856 6,972 Estimated Benefits Paid Plus Unfunded Net of Transfers (Out)/In (29,303) (27,358) Closing Fair Value of Scheme Assets 1,175,381 1,031,655 31 March 31 March 2024 2023 £'000 £'000 Opening Impact of Asset Ceiling 250,276 0 Interest on impact of Asset Ceiling 12,543 0 Actuarial Losses 58,094 250,276 Closing Impact of Asset Ceiling 320,913 250,276 Perth and Kinross Council’s share of Tayside Pension Fund’s assets at 31 March 2024 comprised: £'000 % £'000 % Equities 847,604 72% 745,175 72% Gilts 74,161 6% 24,947 2% Other Bonds 77,223 7% 130,394 13% Property 104,188 9% 100,927 10% Cash 71,920 6% 28,419 3% Alternatives 285 0% 1,793 0% Total 1,175,381 100% 1,031,655 100% 31 March 2024 31 March 2023 54 | Perth and Kinross Council Annual Accounts 2023/24 Page 73 of 214
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55 | Perth and Kinross Council Annual Accounts 2023/24 A further breakdown of the assets is as follows: Equities Consumer 8% 7% Manufacturing 8% 2% Energy and Utilities 2% 3% Financial Institutions 8% 9% Health and Care 6% 7% Information Technology 8% 6% Others 3% 9% 43% 43% Debt Securities Corporate Bonds 4% 12% UK Government Bonds 0% 0% Others 1% 2% 5% 14% Private Equity 2% 0% Property UK Property 9% 10% 9% 10% Investment Fund Unit Trusts Equities 37% 28% Bonds 2% 2% 39% 30% Cash and Cash Equivalents 2% 3% Total 100% 100% 28 February 2024 28 February 2023 Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Barnett Waddingham Public Sector Consulting, an independent firm of actuaries. Estimates for the Tayside Pension Fund are based on the latest full valuation of the scheme as at 31 March 2023. The principal assumptions used by the actuary have been: 2023/24 2022/23 Mortality Assumptions Longevity at 65 for Current Pensioners: - Men 18.9 19.0 - Women 21.6 22.4 Longevity at 65 for Future Pensioners: - Men 20.2 20.4 - Women 23.1 23.9 Rate of Increase in Salaries 4.0% 3.9% Rate of Increase in Pensions 3.0% 2.9% Rate for Discounting Scheme Liabilities 4.9% 4.8% The liabilities show the underlying commitments that the Council has in the long run to pay post-employment (retirement) benefits. The net liability of £20.748 million has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains sound: - Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid. 55 | Perth and Kinross Council Annual Accounts 2023/24 Page 74 of 214
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56 | Perth and Kinross Council Annual Accounts 2023/24 The total contribution expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2025 is £19.318 million. Sensitivity Analysis The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the tables above. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period. £m £m £m £m £m Adjustment to discount rate +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £809.859 £861.478 £875.216 £889.309 £949.478 - Projected Service cost £20.719 £23.513 £24.270 £25.051 £28.450 Adjustment to long term salary increase +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £882.464 £876.645 £875.216 £873.797 £868.220 - Projected Service cost £24.346 £24.285 £24.270 £24.254 £24.193 Adjustment to pension increases and deferred revaluation +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £943.341 £888.136 £875.216 £862.627 £815.390 - Projected Service cost £28.568 £25.062 £24.270 £23.503 £20.607 £m £m £m Adjustment to mortality age rating assumption + 1 year None -1 year Present value of total obligation £911.067 £875.216 £840.954 Projected Service cost £25.169 £24.270 £23.395 19. Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. Scottish Government The Scottish Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. Council Tax bills). Grants received from government departments are set out in the subjective analysis in Note 14 on expenditure and income analysed by nature. Tayside Valuation Joint Board The Tayside Valuation Joint Board provides services on behalf of Perth and Kinross, Angus and Dundee Councils. The Council does not have any direct control or influence over the board and the amount payable to this body for valuation services and electoral registration services was £1.733 million (2022/23 £1.619 million). £1.436 million is disclosed in the Comprehensive Income and Expenditure Statement under Valuation Joint Board and £297,000 under Corporate and Democratic Services for electoral and registration services. Members Members of the Council have direct control over the Council’s financial and operating policies. The total of members’ allowances paid in 2023/24 is shown in the Remuneration Report. During 2023/24, two councillors had an interest in businesses from which the Council commissioned works and services to the value of £3,262 and £200 respectively. Contracts were entered into in full compliance with the Council’s standing orders and the Councillors’ Code of Conduct. 56 | Perth and Kinross Council Annual Accounts 2023/24 Page 75 of 214
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57 | Perth and Kinross Council Annual Accounts 2023/24 In addition, the Council makes revenue and capital payments to a large number of organisations on which Council members are represented. Chief Officers Chief Officers of the Council have control over the Council’s financial and operating policies. The total of Chief Officers’ remuneration is shown in the Remuneration Report. Officers have a responsibility to adhere to a Code of Conduct which requires them to declare any interests in matters that directly or indirectly influence, or be thought to influence, their judgement or decisions taken during their work. There are no significant related party transactions with Chief Officers of the Council. Live Active Leisure Ltd This organisation provides leisure services within the area served by the Council. A grant was provided in 2023/24 amounting to £4.931 million (2022/23 £4.815 million). It is a sole member Company with the Council as that member. Perth Theatre and Concert Hall Ltd This organisation operates Perth Concert Hall and Perth Theatre. A grant was provided in 2023/24 amounting to £1.142 million (2023/24 £1.0620 million). It is a sole member Company with the Council as that member. Culture Perth and Kinross Ltd This organisation has operated libraries, museums and arts galleries in Perth and Kinross since 1 April 2016. A grant was provided in 2023/24 amounting to £3.392 million (2022/23 £3.219 million). It is a sole member Company with the Council as that member. Tayside Contracts Joint Committee This organisation provides roads maintenance, catering and cleaning services to the Council. Payments to Tayside Contracts in 2023/24 amounted to £36.562 million (2022/23 £33.443 million. The Joint Committee is administered and controlled by Dundee City, Angus and Perth and Kinross Councils. Health and Social Care Partnership This organisation is a joint venture between Perth and Kinross Council and Tayside Health Board and has since 1 April 2016 provided an integrated Health and Social Care service. Contributions to the Health and Social Care Partnership in 2023/24 amounted to £83.241 million (2022/23 £79.034 million) and income received from the Partnership for commissioned services was £105.639 million (2022/23 £94.310 million). The Council has a Creditor of £4.794 million due to the Health and Social Care Partnership as at 31 March 2024 (2022/23 £9.009 million). 57 | Perth and Kinross Council Annual Accounts 2023/24 Page 76 of 214
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58 | Perth and Kinross Council Annual Accounts 2023/24 20. Leases Council as Lessee The Council operates a Lease Car Scheme which is available to eligible employees and lease rental payments are recovered from employees. The car leasing agreements are due to expire during the financial years 2024/25 to 2026/27. The Council has also acquired the use of a number of properties by entering into leasing arrangements. The majority of such properties are used for office accommodation and any capital works undertaken within these premises are written down over the shorter of the lease term or the useful life of the property. The future minimum lease payments due under non-cancellable leases in future years are: 2023/24 2022/23 £'000 £'000 Not later than one year 166 124 Later than one year and not later than five years 272 250 Later than five years 536 539 974 913 The expenditure charged to the Services lines in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was: 2023/24 2022/23 £'000 £'000 Minimum lease payments 170 156 Sublease payments receivable (21) (18) 149 138 Council as Lessor The Council leases out property under operating leases at normal market rents with the following purpose: Land for the generation of rental income arising from its use; land and buildings, which include offices and shops, for the supply of suitable business accommodation to promote economic development or satisfy social needs, or to solely generate rental income for the Council. The total future minimum lease payments receivable under non-cancellable leases in future years are: 2023/24 2022/23 £'000 £'000 Not later than one year 1,289 1,358 Later than one year and not later than five years 4,063 4,309 Later than five years 49,536 47,835 54,888 53,502 The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. There were no material adjustments in respect of contingent rents during the years 2022/23 and 2023/24. 58 | Perth and Kinross Council Annual Accounts 2023/24 Page 77 of 214
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21. Property, Plant and Equipment Movements on Fixed Assets 2023/24 in respect of Property, Plant and Equipment are shown below: Movements in 2023/24 Other Vehicles Assets PFI and DBFM Council Land and Plant and Community Surplus Under Total Assets Dwellings Buildings Equipment Assets Assets Construction PPE included in PPE £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2023 359,761 750,076 67,420 25,569 1,783 56,047 1,260,656 220,689 Additions 19,974 32,667 13,153 895 0 25,307 91,996 31 Revaluation increases recognised in the Revaluation Reserve 0 44,764 0 0 0 0 44,764 26,020 Revaluation decreases recognised in the Revaluation Reserve (60,412) (25,962) 0 0 (5) 0 (86,379) (19,369) Revaluation increases recognised in the Surplus / Deficit on the Provision of Services 0 2,395 0 0 70 0 2,465 0 Revaluation decreases recognised in the Surplus / Deficit on the Provision of Services (2,207) (35,943) 0 0 (41) 0 (38,191) (5,595) Derecognition - Disposals (4,663) (1,004) (4,020) 0 (223) 0 (9,910) 0 Asset reclassifications 7,229 38,568 0 0 (891) (44,906) 0 0 Other movements 0 0 1 1 (2) (1) (1) 0 As at 31 March 2024 319,682 805,561 76,554 26,465 691 36,447 1,265,400 221,776 Depreciation As at 1 April 2023 (40,221) (30,506) (43,195) (15,195) 0 0 (129,117) (5,818) Depreciation charge for 2023/24 (16,413) (21,112) (9,011) (1,188) 0 0 (47,724) (5,949) Depreciation written out to the Revaluation Reserve - Revaluation Gain 0 10,108 0 0 0 0 10,108 1,771 Depreciation written out to the Revaluation Reserve - Revaluation Loss 51,864 3,647 0 0 0 0 55,511 1,348 Depreciation written out to the Surplus / Deficit on the Provision of Services - Revaluation Gain 0 1,463 0 0 0 0 1,463 0 Depreciation written out to the Surplus / Deficit on the Provision of Services - Revaluation Loss 107 733 0 0 0 0 840 181 Derecognition - Dispoals 4,663 78 3,847 0 0 0 8,588 0 Other movements 0 (6) 5 0 0 0 (1) 0 As at 31 March 2024 0 (35,595) (48,354) (16,383) 0 0 (100,332) (8,467) Net Book Value at 31 March 2024 319,682 769,966 28,200 10,082 691 36,447 1,165,068 213,309 59 | Perth and Kinross Council Annual Accounts 2023/24 Page 78 of 214
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The reporting of book values for Infrastructure Assets is amended following the issue of the Local Government Finance Circular 09/2022. The Finance Circular outlines historic issues for the consistent accounting treatment of derecognised infrastructure components and the reporting of book values by local authorities. A CIPFA task group is progressing a remedy and the CIPFA Code will be updated in due course. To satisfy the audit of the 2023/24 accounts, the following statutory overrides are provided in the Circular: - Statutory Override 1: For accounting periods commencing from 1 April 2021 until 31 March 2024 a local authority is not required to report the gross cost and accumulated depreciation for infrastructure assets. Statutory Override 2: For accounting periods commencing from 1 April 2010 until 31 March 2024 the carrying amount to be derecognised in respect of a replaced part of an infrastructure asset is to be taken to be and accounted for as a nil amount. No subsequent adjustment shall be made to the carrying amount of the asset with respect to that part. The Council has elected to adopt both statutory overrides. The Net Book Value above excludes Infrastructure Assets, when these assets are included the NBV is as follows: Infrastructure Assets £'000 Net Book Value at 1 April 2023 290,325 Additions 75,361 Depreciation (17,921) Net Book Value at 31 March 2024 347,765 The total for all PPE, when Infrastructure Assets are included, is set out below: Total PPE £'000 Total PPE (above) 1,165,068 Net Book Value of Infrastructure Assets 347,765 Total PPE Net Book Value at 31 March 2024 (including Infrastructure Assets) 1,512,833 60 | Perth and Kinross Council Annual Accounts 2023/24 Page 79 of 214
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Property, Plant and Equipment cont’d Comparative Movements in 2022/23 (restated) *Other Vehicles Assets *PFI and DBFM Council Land and Plant and Community Surplus Under Total Assets Dwellings Buildings Equipment Assets Assets Construction PPE included in PPE £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2022 345,995 661,742 61,969 24,740 1,873 25,343 1,121,662 173,563 Additions 13,053 11,418 8,551 829 20 33,623 67,494 89 Revaluation increases recognised in the Revaluation Reserve 0 70,579 0 0 10 0 70,589 47,037 Revaluation decreases recognised in the Revaluation Reserve 0 (1,305) 0 0 (65) 0 (1,370) 0 Revaluation increases recognised in the Surplus / Deficit on the Provision of Services 0 9,939 0 0 0 0 9,939 0 Revaluation decreases recognised in the Surplus / Deficit on the Provision of Services 0 (2,287) 0 0 (55) 0 (2,342) 0 Derecognition - Disposals (1,003) (10) (3,100) 0 0 (1,203) (5,316) 0 Asset reclassifications 1,716 0 0 0 0 (1,716) 0 0 Other movements 0 0 0 0 0 0 0 0 As at 31 March 2023 359,761 750,076 67,420 25,569 1,783 56,047 1,260,656 220,689 Depreciation As at 1 April 2022 (27,829) (33,820) (38,142) (13,976) 0 0 (113,767) (9,509) Depreciation charge for 2022/23 (13,112) (17,336) (8,122) (1,219) 0 0 (39,789) (4,753) Depreciation written out to the Revaluation Reserve - Revaluation Gain 0 16,924 0 0 0 0 16,924 8,444 Depreciation written out to the Revaluation Reserve - Revaluation Loss 0 131 0 0 0 0 131 0 Depreciation written out to the Surplus / Deficit on the Provision of Services - Revaluation Gain 0 3,333 0 0 0 0 3,333 0 Depreciation written out to the Surplus / Deficit on the Provision of Services - Revaluation Loss 0 258 0 0 0 0 258 0 Derecognition - Dispoals 720 4 3,069 0 0 0 3,793 0 Other movements 0 0 0 0 0 0 0 0 As at 31 March 2023 (40,221) (30,506) (43,195) (15,195) 0 0 (129,117) (5,818) Net Book Value at 31 March 2023 319,540 719,570 24,225 10,374 1,783 56,047 1,131,539 214,871 * Other Land and Buildings – The opening Gross Book Value and Depreciation for Other Land and Buildings have been restated to reflect an update to 2021/22 following the transfer between categories of an asset where the revaluation transactions of that asset remained in Other Land and Buildings. This has not impacted Net Book Value. * PFI and DBFM Assets – In 2022/23 a revaluation exercise was undertaken of all schools valued on a depreciated replacement cost basis. This revaluation was adjusted for in Other Land and Buildings. The separate disclosure relating to PFI and DBFM amounts included within PPE was omitted and the restatement in the note updates for this. 61 | Perth and Kinross Council Annual Accounts 2023/24 Page 80 of 214
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The reporting of book values for Infrastructure Assets is amended following the issue of the Local Government Finance Circular 09/2022. The Net Book Value above excludes Infrastructure Assets, when these assets are included the NBV is as follows: Infrastructure Assets £'000 Net Book Value at 1 April 2022 247,686 Additions 58,093 Depreciation (15,454) Net Book Value at 31 March 2023 290,325 The total for all PPE, when Infrastructure Assets are included, is set out below: Total PPE £'000 Total PPE (above) 1,131,539 Net Book Value of Infrastructure Assets 290,325 Total PPE Net Book Value at 31 March 2023 (including Infrastructure Assets) 1,421,864 62 | Perth and Kinross Council Annual Accounts 2023/24 Page 81 of 214
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63 | Perth and Kinross Council Annual Accounts 2023/24 Property, Plant and Equipment cont’d Capital Commitments At 31 March 2024, the Council has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2023/24 and future years budgeted to cost £120.622 million. Similar commitments at 31 March 2023 were £249.781 million. The total commitment is made up of the following: 2023/24 2022/23 £'000 £'000 Cultural Attractions 0 13,010 Education Projects 71,412 96,730 Roads and Bridges Improvement Schemes 44,745 133,703 Fleet Vehicles 1,142 0 Council Dwellings 1,172 821 Community Assets 133 3,869 Other Capital Projects 2,018 1,648 120,622 249,781 Education projects include Perth High School and Blairgowrie Recreation Centre. Roads and Bridges Improvement Schemes includes the Cross Tay Link Road (Destiny Bridge). Valuation of Assets Revaluations The Council carries out a rolling programme that ensures all Property, Plant and Equipment required to be measured at its current value is revalued at least every five years. The Council commissioned a valuation for Council Dwellings and for a further selection of assets which was performed during the last quarter of financial year 2023/24. In addition, the Council’s internal valuers performed valuations for a number of assets, including investment properties, art galleries and museums, community centres, day care centres, town halls, libraries, residential homes, PFI community campuses and properties requiring revaluation due to redevelopment or a change of use, during the last quarter of financial year 2023/24. In applying the Royal Institution of Chartered Surveyors (RICS) Valuation Global Standards (‘Red Book’), the valuation reports include an explanatory note which provides an update on market conditions and confirms that markets are functioning again and there is adequate evidence on which to base an opinion of value. However, uncertainties do remain and there is the potential for markets to move rapidly in response to the effects of conflict in Eastern Europe and the Middle East. The valuation reports have been used to inform the measurement of non-current assets in these financial statements. The valuers have continued to exercise professional judgment in preparing the valuations and, therefore, this is the best information available to the Council as at 31 March 2024 and can be relied upon. Note 4 – Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty provides additional information. Surplus Assets are valued annually on a fair value basis. In terms of the fair value hierarchy, all Surplus Assets are valued at Level 2 and there were no transfers between Levels during the year. The table below sets out the Gross Book Value of asset categories carried at historic cost and current value at 31 March 2024, and shows the progress of the Council’s five-year rolling revaluation programme for property, plant and equipment. Other Council Land and Surplus Dwellings Buildings Assets Total £'000 £'000 £'000 £'000 Carried at historical cost 0 40,373 2 40,375 Values at current value as at: 31 March 2024 319,682 323,257 409 643,348 31 March 2023 0 416,041 40 416,081 31 March 2022 0 4,389 0 4,389 31 March 2021 0 17,460 240 17,700 31 March 2020 0 4,041 0 4,041 Total Cost or Valuation 319,682 805,561 691 1,125,934 Changes in Estimates The Council has made no material changes to accounting estimates for Property, Plant and Equipment in 2023/24. 63 | Perth and Kinross Council Annual Accounts 2023/24 Page 82 of 214
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64 | Perth and Kinross Council Annual Accounts 2023/24 22. Heritage Assets Reconciliation of the carrying value of Heritage Assets held by the Council Art War Other Total Collection Memorials £'000 £'000 £'000 £'000 Cost or Valuation Balance at 1 April 2022 51,740 48 26 51,814 Balance at 31 March 2023 51,740 48 26 51,814 Cost or Valuation Balance at 1 April 2023 51,740 48 26 51,814 Balance at 31 March 2024 51,740 48 26 51,814 Art Collection The collection of Fine Art maintained and preserved by Culture Perth and Kinross, on behalf of Perth and Kinross Council is varied and includes oil paintings (approximately 1,225 items), watercolours (900), drawings (4,000), prints (1,500), and sculptures (150). The Fine Art collection also includes J D Fergusson and Margaret Morris archives which number approximately 30,000 items and include a number of significant works. The Art Collection also includes silver, glass, ceramics, furniture, Oriental materials, horology and metalwork; these are collectively identified as Applied Art. Curators within Culture Perth and Kinross carry out a five year rolling programme of valuation for items and collections having significant value. The last valuation took place in 2020/21 with the next revaluation scheduled for 2025/26. There were no significant additions to Heritage Assets in 2022/23 or 2023/24. Additions and Disposals of Heritage Assets There has been no significant addition, either by purchase or donation, to the Fine and Applied Art collection during the current and previous five financial years. The majority of the collections are held in perpetuity, or have disposal conditions attached, and consequently no Fine and Applied Art disposals have occurred during the current and previous five financial years. Fine and Applied Art The Fine Art collection owes its existence largely to the 1,926 bequests of local patrons Robert Hay Robertson and Robert Brough, although the first painting entered the collection as early as 1785. The collection is international in its scope and numbers over 4,000 items. It includes an interesting group of Italian ‘Old Masters’, a small but important group of 19th Century French works, a good group of 17th century Dutch and Flemish paintings and work by English artists including a small but highly important collection of natural history watercolours by Beatrix Potter. Its greatest strength however lies in its holding of Scottish pictures. These span the 16th to the 21st century and include such important works as Loch Katrine by Horatio McCulloch and D Y Cameron’s The Wilds of Assynt, as well as pictures with strong local connections. Amongst these are pictures by local artists, local topographical views and portraits of local individuals. The collection seeks to retain a balance between the historical and the contemporary aspects whilst continuing to develop the holdings of works of specifically local interest. In 1991 the collection was effectively doubled in size with the gifting of the J D Fergusson Art Foundation’s collection of artworks by the Scottish ‘Colourist’ John Duncan Fergusson (1874-1961) and its associated archive. This collection is housed at the Fergusson Gallery in Perth. The Applied Art collection has been acquired since 1785 through purchase, gift or bequest. It covers a wide variety of objects and materials, within which the collections of Perth silver and Perthshire glass are unsurpassed in terms of national importance. The ceramics collection contains significant collections of Staffordshire flat-back figures and Martinware studio pottery as well as a collection of studio pottery produced by potters native to or resident in the Perth and Kinross area. Other smaller collections include furniture, timepieces, oriental and other items. The promotion of other cultural events and programmes during the year makes it difficult to reliably estimate the percentage of the Art Collection on display for public viewing. However, all items are held in secure storage and access is permitted to scholars and others for research purposes. The museum collection also includes History and Natural History collections for which an amount of insurance cover has been obtained. These objects and collections, in most instances, are rare and irreplaceable and there is insufficient 64 | Perth and Kinross Council Annual Accounts 2023/24 Page 83 of 214
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65 | Perth and Kinross Council Annual Accounts 2023/24 evidence on which to place a reliable estimate of value. There are in excess of 289,000 items within the History and Natural History collections and the cost of obtaining valuations would be disproportionate in terms of any benefit derived to the user of the financial statements. On this basis, the History and Natural History collections are, therefore, excluded from the carrying value of Heritage Assets held by the Council. The Culture Perth and Kinross Limited Collections Management Framework provides guidance on the collection, disposal or lending of heritage assets. 23. Investment Properties 2023/24 2022/23 £'000 £'000 Rental income from investment property (910) (903) Direct operating expenses arising from investment property 61 103 Balance at end of year (849) (800) The following table summarises the movement in the fair value of investment properties over the year: 2023/24 2022/23 £'000 £'000 Balance at start of year 15,015 14,060 Net (loss) / gain from fair value adjustments (300) 955 Balance at end of year 14,715 15,015 All of the Authority's investment properties are valued at Level 2 on the fair value hierarchy. Values as at 31 March 2024 and 31 March 2023 are as follows: 2023/24 2022/23 £'000 £'000 Recurring fair value measurements using: Industrial and Commercial Land 13,455 13,935 Shops and Offices 695 750 Other Investment Properties 565 330 Total Fair Value 14,715 15,015 Valuation Techniques used to Determine Level 2 and 3 Fair Values for Investment Properties Significant Observable Inputs – Level 2 The majority of the value of Industrial and Commercial Land relates to sites leased out on ground leases. Market data is available at national and local levels from sector specialists to provide the valuers with information, such as trends and rent yields, for the commercial and industrial markets. Local market activity for ground leases tends to follow national trends and valuations are undertaken using a discounted income approach. Ground leases are longer term arrangements and sites of this nature enjoy 100% occupancy levels; the rental income stream is known and market data for rent yields is available, all of which are observable input. As a result of the conditions of the ground lease agreement, there is no unobservable input. The valuation of investment land leased out on a ground lease therefore requires the use of observable market data and minimal, if any, unobservable data and is regarded as Level 2. Market data providing information on trends and rent yield is available from sector specialists for leased Shops and Offices. Local market data is used to assist the valuation process, and valuations are undertaken using the income approach, discounted using market rates to arrive at a net present value for the income stream. The valuer will also consider other factors, such as the age and condition of the property, when arriving at the final valuation. This requires judgement; however any unobservable input is not considered to be significant in terms of any adjustment to the fair value of the property. The valuation of the shops and offices is mainly representative of the available market data, and the valuation input is primarily based on observable data. Therefore, the properties are categorised as Level 2. Other Investment Properties primarily relate to land held for development by the private sector, which will generate a receipt to the Council on disposal. Sites held for redevelopment are valued on the basis of the highest and best use of the site, taking into account adjacent and surrounding property, recent market activity, and development plan restrictions. The valuation of these sites is therefore based upon observable input, i.e. local market data, and as such will be regarded as Level 2. 65 | Perth and Kinross Council Annual Accounts 2023/24 Page 84 of 214
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66 | Perth and Kinross Council Annual Accounts 2023/24 Highest and Best Use of Investment Properties In estimating the fair value of the authority’s investment properties, the highest and best use of the properties is their current use. Valuation Techniques There has been no change in the valuation techniques used during the year for investment properties. Valuation Process for Investment Properties The fair value of the Council’s investment property is measured annually at each reporting date. All valuations are carried out internally, in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with finance officers reporting directly to the Chief Finance Officer on a regular basis regarding all valuation matters. The valuation reports have been used to inform the measurement of Investment properties in these financial statements. The valuers have continued to exercise professional judgement in preparing the valuation and, therefore, this is the best information available to Council as at 31 March 2024 and can be relied upon. 24. Intangible Assets The movement on Intangible Asset balances during the year is as follows: 2023/24 2022/23 Assets Assets £'000 £'000 Balance at start of year Gross carrying amount 3,958 3,643 Accumulated amortisation (2,995) (1,969) Net carrying amount at start of year 963 1,674 Additions: Purchases 334 315 Amortisation for the period (949) (1,026) Net carrying amount at end of year 348 963 Comprising: Gross carrying amounts 4,292 3,958 Accumulated amortisation (3,944) (2,995) 348 963 Intangible Assets include the cost of software licences and bespoke software solutions deemed to provide future benefit to the Council. These items have been included and amortised over their perceived useful life. 25. Assets Held for Sale 2023/24 2022/23 2023/24 2022/23 £'000 £'000 £'000 £'000 Balance outstanding at start of year 273 273 403 403 Other movements 403 0 (403) 0 Balance outstanding at year end 676 273 0 403 Current Non Current 26. Long Term Debtors 2023/24 2022/23 £'000 £'000 Other Entities and Individuals 543 541 Total 543 541 66 | Perth and Kinross Council Annual Accounts 2023/24 Page 85 of 214
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67 | Perth and Kinross Council Annual Accounts 2023/24 27. Inventories 2023/24 2022/23 £'000 £'000 Balance outstanding at start of year 441 578 Purchases 3,521 3,617 Recognised as an expense in the year (3,330) (3,754) Balance outstanding at end of year 632 441 Consumables and Maintenance Materials 28. Debtors 2023/24 2023/24 2022/23 2022/23 £'000 £'000 £'000 £'000 Gross Net Gross Net Scottish Government 18,429 19,193 Central Government 12,290 10,448 Other Local Authorities 485 774 NHS Bodies 670 3,421 Other Entities and Individuals: Housing Rent 2,185 2,297 less: Impairment (1,845) (1,842) 340 455 Statutory Additions 6,066 5,735 less: Impairment (6,066) (5,735) 0 0 Other 8,489 10,048 less: Impairment (1,853) (1,906) 6,636 8,142 Trade 10,282 7,063 less: Impairment (1,306) (1,192) 8,976 5,871 Council Tax 21,350 19,458 less: Impairment (16,832) (15,743) 4,518 3,715 Total 52,344 52,019 29. Creditors 2023/24 2023/24 2022/23 2022/23 £'000 £'000 £'000 £'000 Gross Net Gross Net Scottish Government (793) (3,905) Central Government (7,021) (7,702) Other Local Authorities (6,420) (7,937) NHS Bodies (909) (1,450) Public Corporations and Trading Funds 0 (9) Other Entities and Individuals: Employee Statutory Adjustment Account (8,186) (8,524) Prepaid Council Tax (2,261) (2,379) Other (23,199) (23,451) (33,646) (34,354) Trade Creditors (42,822) (40,747) Total (91,611) (96,104) 67 | Perth and Kinross Council Annual Accounts 2023/24 Page 86 of 214
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68 | Perth and Kinross Council Annual Accounts 2023/24 30. Provisions Other than Bad and Doubtful Debts Self-Insured/Uninsured Losses The Insurance Fund makes provision for losses arising from Property, Employers’ Liability, Public Liability, Motor, Fidelity Guarantee, Computer, Engineering and Travel/Personal Accident claims. The provision provides for an estimate of all liabilities likely to be incurred by the Council in respect of self-insured and uninsured losses in respect of incidents that have arisen prior to 1 April 2024. Payments to 3rd parties The Council has made provision for a number of potential compensation claims arising from significant capital projects within the Council’s capital programme. Commercial Rent The Council manages the rental leases for a number of commercial properties. The Council had previously made provision for rent refunds due to the downturn in the economic climate affecting retail trading performance. The provision at 31 March 2024 is to meet any potential liability for the years 2022/23 and 2023/24. Self Insured/ Payments Commercial Total Uninsured to 3rd parties Rent Losses £'000 £'000 £'000 £'000 Balance as at 1 April 2023 2,607 2,960 40 5,607 Additional provisions made in 2023/24 1,548 1,136 20 2,704 Amounts used in 2023/24 (2,255) (804) (20) (3,079) Balance as at 31 March 2024 1,900 3,292 40 5,232 Balance Sheet Disclosure: Less than 12 months 523 1,125 20 1,668 Over 12 months 1,377 2,167 20 3,564 1,900 3,292 40 5,232 31. Usable Reserves Movements in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement and notes 5 and 6. 32. Unusable Reserves 2023/24 2022/23 £'000 £'000 Revaluation Reserve (425,931) (411,175) Capital Adjustments Account (338,099) (400,119) Financial Instruments Adjustment Account 16,358 17,002 Pensions Reserve 20,748 20,917 Employee Statutory Adjustment Account 8,186 8,524 Total Unusable Reserves (718,738) (764,851) Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are: - re-valued downwards or impaired and the gains are lost; - used in the provision of services and the gains are consumed through depreciation; or - disposed of and the gains are realised. The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. 68 | Perth and Kinross Council Annual Accounts 2023/24 Page 87 of 214
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69 | Perth and Kinross Council Annual Accounts 2023/24 2023/24 2022/23 £'000 £'000 Balance at 1 April (411,175) (332,433) Upward revaluation of assets (54,872) (87,513) Downward revaluation of assets and impairment losses not charged to the (Surplus)/ Deficit on the Provision of Services 30,869 1,239 Sub-Total (435,178) (418,707) Difference between fair value depreciation and historical cost depreciation 8,811 7,408 Accumulated gains on assets sold or scrapped written out to the Capital Adjustment Account 436 124 Total Unusable Reserves (425,931) (411,175) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement. The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve. 2023/24 2022/23 £'000 £'000 Balance at 1 April (400,119) (372,978) Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement Charges for depreciation and impairment of non current assets 56,836 47,835 Revaluation (gains)/losses on Property, Plant and Equipment 33,423 (11,187) Amortisation of intangible assets 949 1,026 Revenue expenditure funded from capital under statute 3,770 838 Amounts of non current assets written off on disposal as part of the gain/loss 1,322 1,523 (303,819) (332,943) Adjusting amounts written out of the Revaluation Reserve (436) (124) (304,255) (333,067) Capital financing applied in the year: Use of the Capital Receipts Reserve to finance new capital expenditure (1,983) (1,360) Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement (46,429) (42,656) Application of grants to capital financing from the Capital Grants Unapplied Account 0 0 Statutory provision for the financing of capital investment charged against the General Fund and HRA balances (15,260) (15,690) Statutory adjustment for Financial Flexibilities applied to Service Concession Arrangements (see note 36) 34,262 0 Capital expenditure charged against the general fund and HRA balances (4,734) (6,391) (338,399) (399,164) Movements in the fair value of the Investment Properties 300 (955) Balance at 31 March (338,099) (400,119) 69 | Perth and Kinross Council Annual Accounts 2023/24 Page 88 of 214
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70 | Perth and Kinross Council Annual Accounts 2023/24 Financial Instruments Adjustment Account The Financial Instruments Adjustment Account (FIAA) is used to hold the losses or gains arising on the early redemption of loans per statutory provisions, as well as the historic timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments. These statutory provisions allow for annual charges to be made in accordance with the original amortisation schedules which existed at the time the provisions were introduced. The Council uses the Account to manage the balance of premiums and discounts which existed at 31 March 2007 which arose on the early redemption of loans. Any premiums or discounts incurred or received after this date are also held in this Account. These are subsequently charged to the General Fund and Housing Revenue Account (HRA) in accordance with statutory provisions, and so spreading the burden on Council Tax and Housing Rents. The Council also uses the FIAA to hold the difference in interest charges which arose on stepped interest rate loans. These had low interest rates in the early years before “stepping up” to a higher interest rate. Interest on such loans is now required to be charged consistently over the life of the loan using the Effective Interest Rate Method. The difference in the cumulative charges to 31 March 2007 under this new method was debited to the FIAA and will be charged to the General Fund and the HRA over the life of the loans under the statutory provisions. Accordingly, the balance on the FIAA as at 31 March 2024 in respect of the above provisions will be charged to the General Fund and HRA over the next 44 years. The movements on the FIAA during the year are shown below: 2023/24 2022/23 £'000 £'000 Balance at 1 April 17,002 17,650 Proportion of discounts incurred in previous financial years credited against the General Fund and HRA Balance in accordance with statutory requirements in the year 4 4 Proportion of premiums incurred in previous financial years charged against the General Fund and HRA Balance in accordance with statutory requirements in the year (627) (632) Difference on restatement of Stepped Interest Rate Loans (21) (20) Balance at 31 March 16,358 17,002 Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post- employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post- employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pensions funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall between the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid. 2023/24 2022/23 £'000 £'000 Balance at 1 April 20,917 55,995 Actuarial Loss/(Gain) on Pensions Assets and Liabilities 196 (62,426) Reversal of Items Relating to Retirement Benefits Debited or Credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement 22,401 48,260 Employer's Pensions Contributions and Direct Payments to Pensioners Payable in the Year (22,766) (20,912) Balance at 31 March 20,748 20,917 70 | Perth and Kinross Council Annual Accounts 2023/24 Page 89 of 214
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71 | Perth and Kinross Council Annual Accounts 2023/24 Employee Statutory Adjustment Account The Employee Statutory Adjustment Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account. 2023/24 2022/23 £'000 £'000 Balance at 1 April 8,524 8,003 Cancellation of accrual made at the end of the preceding year (8,524) (8,003) Amounts accrued at the end of the current year 8,186 8,524 Balance at 31 March 8,186 8,524 33. Impairment Losses Movements in the value of properties during the year were mainly due to the revaluation of art galleries and museums, community centres, day care centres, town halls, libraries, residential homes, PFI community campuses, and various individual operational buildings such as industrial units and shops. Investment properties were also revalued during 2023/24. All losses arising have been assessed as a revaluation loss rather than a loss attributed to deterioration in the anticipated level of the performance of the properties. 34. Grants The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2023/24. 2023/24 2022/23 £'000 £'000 Credited to Taxation and Non Specific Grant Income Scottish Government 27,796 19,855 Scottish Government Bodies and Directorates 15,000 20,000 Developer Contributions 1,440 811 Other Third Party Contributions 2,193 1,990 46,429 42,656 Credited to Services Scottish Government 32,386 32,676 Scottish Government Bodies and Directorates 246 178 Sport Scotland 414 399 Other Third Party Contributions 7,072 9,110 40,118 42,363 The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned. The balance at the year-end is as follows: 2023/24 2022/23 £'000 £'000 Revenue Grants - Received in Advance Scottish Government 566 1,583 Scottish Government - Covid-19 funding for businesses 0 294 Other grants and contributions 6 982 Balance at 31 March 572 2,859 71 | Perth and Kinross Council Annual Accounts 2023/24 Page 90 of 214
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72 | Perth and Kinross Council Annual Accounts 2023/24 35. Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under PFI/PPP/DBFM contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed below. 2023/24 2022/23 £'000 £'000 Capital Financing Requirements b/fwd 679,034 618,390 Capital Expenditure Property, Plant and Equipment 167,356 125,585 Intangible Assets 334 315 Revenue Expenditure funded from Capital 3,770 2,625 171,460 128,525 850,494 746,915 Sources of Finance Capital Receipts (1,983) (1,363) Government Grants and Contributions (46,429) (44,437) Revenue Contributions (4,733) (6,391) Service concession flexibility 34,262 0 Loans Fund Principal Repayments (15,260) (15,690) (34,143) (67,881) Closing Capital Financing Requirement c/fwd 816,351 679,034 Movement 137,317 60,644 Analysed as: Increase in need to borrow 109,342 66,508 Net assets acquired under PPP contract 27,975 (5,864) 137,317 60,644 36. Public Finance Initiatives and Similar Contracts The Council has an obligation for 25 years commencing September 2000 in respect of a unitary charge payment to be made for office accommodation and a car park. The unitary charge for 2023/24 for the office accommodation was £2.622 million (2022/23 £2.499 million). The unitary charge for 2023/24 for the car park was £405,000 (2022/23 £325,000). Future agreed payments will increase in line with inflation. The unitary charge payments for 2024/25 for the office accommodation will be £2.657 million and for the car park is £380,000. The project agreement for provision of the facilities included the transfer of four Council properties to the operator in exchange for reduced annual payments over the life of the agreement. At the end of this project these assets do not revert back to the Council. The Council has an obligation for six school campuses in a Public Private Partnership with Axiom Education (Perth and Kinross) Ltd. North Inch Primary was brought into operation in 2011/12. Breadalbane Campus at Aberfeldy was completed in 2010/11 and the campuses at Blairgowrie, Perth South, Kinross, Crieff and the Roman Catholic School Campus were brought into operation during 2009/10. The Council will make unitary charge payments until the contract ends in 2042, at which time the campuses will be handed back to the Council at no cost. The estimated capital value of the scheme is £127.687 million. The unitary charge for 2023/24 for the campuses operating in the year was £21.646 million (2022/23 £18.910 million). Future agreed payments will increase in line with inflation. The unitary charge payments for 2024/25 for all school campuses will be £22.618 million. During 2019/20 the Council incurred an obligation for Bertha Park High School with the asset and liability recognised in the Annual Accounts. The unitary charge for 2023/24 was £3.260 million (2022/23 £3.139 million). Future agreed payments will increase in line with inflation. The unitary charge for 2024/25 for Bertha Park will be £3.277 million. 72 | Perth and Kinross Council Annual Accounts 2023/24 Page 91 of 214
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73 | Perth and Kinross Council Annual Accounts 2023/24 Movements in Fixed Assets under Public Private Partnerships during the year were: Restated* 2023/24 2022/23 £'000 £'000 Net Book Value at 1 April 214,871 164,965 Additions 31 89 Revaluations 1,056 54,570 Depreciation (5,949) (4,753) Depreciation write back 3,300 0 Net Book Value at 31 March 213,309 214,871 *The presentation of the 2022/23 figures have been restated due to an omission in the revaluations figure (see note 21). Movements in Public Private Partnership Liabilities during the year were: 2023/24 2022/23 £'000 £'000 Liabilities at 1 April 2023 121,327 127,191 Amounts repaid in year (6,287) (5,864) Liabilities at 31 March 2024 115,040 121,327 Disclosed in the Balance Sheet as: Long Term Liabilities 108,613 115,040 Creditors 6,427 6,287 Liabilities at 31 March 115,040 121,327 Future Public Private Partnership liabilities due to be met: Repayment Interest Service Lifecycle Contingent TOTAL of Liability Charges Maintenance Rentals £'000 £'000 £'000 £'000 £'000 £'000 Due within one year 6,426 5,527 9,004 3,123 4,868 28,948 Due in 2 to 5 years 17,667 18,877 34,521 18,045 19,929 109,039 Due in 6 to 10 years 27,004 18,632 47,823 22,045 33,308 148,812 Due in 11 to 5 years 36,799 11,356 54,554 18,732 45,458 166,899 Due in 16 to 20 years 26,372 2,875 31,901 14,189 26,212 101,549 Due in 21 to 25 years 772 21 176 0 169 1,138 Total 115,040 57,288 177,979 76,134 129,944 556,385 These figures are based on the actual cash amount estimated to be payable and not on prices at 31 March 2023. In September 2022, the Scottish Government issued statutory guidance (Local Government Finance Circular 10-2022) which allowed Councils temporary flexibility in accounting for Service Concession Arrangements entered into prior to April 2022. The guidance sets out the accounting requirements and options for recognising the capital repayment element of these arrangements and permits Councils to undertake internal accounting changes to reprofile the repayment charged to General Fund over an extended period of time. The Service Concession Arrangements for which the revised accounting treatment has been adopted include the Council's PPP arrangement for the six school campuses, and the Design, Build, Finance, Maintain (DBFM) scheme for the Bertha Park Secondary School. The Council has applied the permitted flexibility in financial year 2023/24 on a retrospective annuity basis over 50 years. This approach is consistent with current Council Loans Fund policy and is considered prudent, sustainable, and affordable over the useful life of the asset. The 50 year annuity period replicates the useful asset life of other similar type assets held on the Council’s balance sheet i.e. schools. The current unitary charge repayments to contractors will continue until the end of the PPP and DBFM contracts, however, the use of this flexibility results in a one-off credit to the General Fund and ongoing annual savings for a period of time. At the end of the PPP and DBFM contracts, the unitary charge is no longer paid but reprofiled debt repayments continue to be charged to the General Fund until the debt liability has been extinguished. The calculation of the repayment charges, using the asset life annuity basis, is compared to the current charges which are made over the contract period. By applying the flexibility, a one-off combined pre 2023/24 retrospective saving of £31.186m (as detailed in the table below) will be achieved. 73 | Perth and Kinross Council Annual Accounts 2023/24 Page 92 of 214
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74 | Perth and Kinross Council Annual Accounts 2023/24 Comparison of current and revised debt repayments Current Repayment Revised Repayment (Reduction) / Cost £m £m £m Pre 2023/24 44,135 12,949 (31,186) Paid in 2023/24 4,515 1,439 (3,076) Payable in 2024/25 4,419 1,505 (2,914) Payable within 2 to 5 years 16,719 6,745 (9,975) Payable within 6 to 10 years 27,004 10,327 (16,677) Payable within 11 to 15 years 36,799 12,932 (23,867) Payable within 16 to 20 years 26,371 16,198 (10,173) Payable within 21 to 25 years 771 20,294 19,523 Payable within 26 to 30 years 0 25,435 25,435 Payable within 31 to 35 years 0 31,888 31,888 Payable within 36 to 40 years 0 12,229 12,229 Payable within 41 to 45 years 0 8,247 8,247 Payable within 46 to 50 years 0 545 545 160,734 160,734 0 In addition to the one-off retrospective element, an in-year saving occurs in scheduled debt repayments in 2023/24, of £3.076m. This will be followed by a reduction in the annual charges for a further 18 years and then the statutory charges will continue until the end of the reprofiled debt repayment period. Over the full asset lives the total repayment for the debt liability remains the same. The reprofiling of the debt liability repayments increases the Capital Financing Requirement (CFR) by £31.186m as at 1 April 2023. The increase in the CFR (Note 35) will reduce by the revised repayments after the PPP and DBFM contracts have expired until the end of the revised period. As this is a cumulative statutory adjustment there is no prior year restatement of statutory adjustments in the Annual Accounts. The statutory adjustment up to 31 March 2024 has the following impact on the 2023/24 Balance sheet (Capital Adjustment Account) and Movement in Reserves statement: Impact on Balance Sheet and Movement in Reserves Statement Pre 2023/24 2023/24 Total £m £m £m Capital Adjustment Account 31,186 3,076 34,262 Movement in Reserves Statement (31,186) (3,076) (34,262) 37. Authorisation of Annual Accounts The unaudited Annual Accounts were authorised for issue by the Chief Finance Officer on 24 June 2024 and the Audited Accounts were authorised for issue on 2 December 2024. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2024, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. 38. Contingent Liabilities The Council has made provision for insurance claims where appropriate and has an Insurance Fund to manage insurable risks. There is also a contingent liability in respect of potential insurance claims incurred but not reported which cannot be forecast with any certainty. There is a contingent liability relating to Municipal Mutual Insurance (MMI), who were the insurers for Tayside Regional Council (TRC). Following a Supreme Court judgement in November 2012 a scheme of arrangement has been put in place where MMI will seek to recover, from the scheme members or successors, 25% (and increase from 15% applied after April 2016) of all claims paid out since 1993 on policies taken out by TRC (less an overall total reduction of £50,000). Perth and Kinross Council is one of the successor bodies of TRC. There is now a risk that the remaining assets of the TRC Insurance Fund will not be sufficient to meet all future liabilities due to the long time horizon for certain types of claims. 74 | Perth and Kinross Council Annual Accounts 2023/24 Page 93 of 214
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75 | Perth and Kinross Council Annual Accounts 2023/24 The Limitation (Childhood Abuse) (Scotland) Act 2017 came into force on 4 October 2017 and removed the time limit on raising civil court actions relating to childhood abuse. The Council has received a small number of claims, however, it is not possible to determine with any certainty whether there is any liability at this time until the claims are fully investigated. In addition, it is not possible to estimate the potential financial effect in respect of future claims the Council may receive due to a number of uncertainties. This includes the number of claims which may arise and the extent of compensation which could arise. Additionally, the extent of re-imbursement which might arise from historic or current insurance policies cannot currently be assessed. The Council may also receive claims in respect of Educational provision. The national historic abuse redress scheme launched in 2022. The Council has a number of contracts for the upgrade and redevelopment of buildings and infrastructure. Claims relating to compensation for works and land purchases for projects are currently being negotiated or refuted. The Council operates services from a number of properties that it does not own. In the future there may be a liability in respect of property costs to reinstate buildings to their original specification and design. The Council has a potential liability in respect of financial guarantees for the Tayside Pension Fund in respect of Scheduled Bodies and Admitted Bodies should they cease to exist, withdraw from the Pension Scheme or otherwise become unable to continue covering any unfunded liabilities. These bodies include Tayside and Central Scotland Transport Partnership, Live Active Leisure Ltd, Perth Theatre and Concert Hall Limited, Perth and Kinross Countryside Trust, Perth and Kinross Society for the Blind, Perth Citizens’ Advice Bureau and Culture Perth and Kinross. In addition the Council has a potential liability in respect of pensions for the Convention of Scottish Local Authorities (COSLA) should the organisation cease to exist. The Council may also have a liability pertaining to a recent court decision for both itself and a Joint Committee. The UK Government is undertaking a consultation on amendments following this along with other legal cases which will impact on both the liability and the period that it may cover. Following the issue of the Reinforced Autoclaved Aerated Concrete (RAAC) safety alert in 2019, the Council previously carried out a review of existing building condition information which was followed up with non-invasive visual inspections where required. A subsequent inspection identified two sites with RAAC, one of which has been remediated. The Council has a robust Building Condition Survey programme in place which comprises a 5-year rolling survey programme and also includes an annual review of survey data to monitor any changes in asset condition. Remedial works may be required if RAAC is found in any Council property, the financial impact of this is unknown at this time. 39. Financial Instruments Accounting regulations require the ‘financial instruments’ (investment, lending and borrowing of the Council) shown on the balance sheet to be further analysed into various defined categories. The investments, lending and borrowing disclosed in the balance sheet are made up of the following categories of ‘financial instruments’. 31 March 31 March 31 March 31 March 31 March 31 March 2024 2023 2024 2023 2024 2023 £'000 £'000 £'000 £'000 £'000 £'000 Financial Liabilities Financial Liabilities at amortised cost Public works Loan Board (PWLB) 572,000 555,000 15,775 7,576 587,775 562,576 Market Loans 44,330 44,351 0 136 44,330 44,487 Short Term Borrowing 0 0 3,623 4,402 3,623 4,402 Creditors 0 0 91,611 96,104 91,611 96,104 Total borrowings 616,330 599,351 111,009 108,218 727,339 707,569 Financial Assets Cash and Equivalents 0 0 31,183 17,663 31,183 17,663 Investment Deposits 0 0 36,560 155,339 36,560 155,339 Other 485 481 239 449 724 930 Debtors 58 60 52,105 51,570 52,163 51,630 Total investments 543 541 120,087 225,021 120,630 225,562 Long-Term Current Total Lender Option Borrower Option (LOBO) borrowings of £44.330 million have been included in long term borrowing as at 31 March 2024 but have a call date in the next 12 months. The above long term figures are based on the 2016 Code which requires that in undertaking Effective Interest Rate (EIR) calculations, the maturity period for a LOBO is taken as being the contractual period to maturity. 75 | Perth and Kinross Council Annual Accounts 2023/24 Page 94 of 214
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76 | Perth and Kinross Council Annual Accounts 2023/24 Financial Instruments Gains / Losses The gains and losses recognised in the Comprehensive Income and Expenditure Account in relation to financial instruments are as follows: Financial Financial Liabilities Assets Liabilities measured at Loans and Total Total amortised cost receivables 2023/24 2022/23 £'000 £'000 £'000 £'000 Interest expense 22,774 0 22,774 18,366 Interest payable and similar charges 22,774 0 22,774 18,366 Interest income 0 (6,449) (6,449) (4,866) Interest and investment income 0 (6,449) (6,449) (4,866) Gain on revaluation (20) (1) (21) (27) Surplus arising on revaluation of financial assets (20) (1) (21) (27) Net loss/(gain) for the year 22,754 (6,450) 16,304 13,473 Fair Value of Liabilities Carried at Amortised Cost The fair value of each class of financial assets and liabilities which are carried in the balance sheet as at 31 March 2024 at amortised cost is disclosed below. Methods and Assumptions in valuation technique: The fair value of an instrument is determined by calculating the Net Present Value (NPV) of future cash flows, which provides an estimate of the value of payments in the future in today’s terms. The discount rate used in the NPV calculation is the rate applicable in the market on the date of valuation for an instrument with the same structure, terms and remaining duration. For debt, this will be the new borrowing rate since premature repayment rates include a margin which represents the lender's profit as a result of rescheduling the loan; this is not included in the fair value calculation since any motivation other than securing a fair price should be ignored. In addition, lenders do not have the ability to force the Council to repay debt early. The rates quoted in this valuation were obtained by the Council’s treasury management consultants from the market on 31 March 2024, using bid prices where applicable. The calculations are made with the following assumptions: • For Public Works Loans Board (PWLB) debt, the discount rates used are the rates for new borrowing as per rate sheet number 126/24 on 28 March 2024 (pm). • For other market debt and investments the discount rates used are the rates available for an instrument with the same terms from a comparable lender. • Interpolation techniques have been used between available rates where the exact maturity period was not available. • No early repayment or impairment is recognised. • Fair values have been calculated for all instruments in the portfolio. 76 | Perth and Kinross Council Annual Accounts 2023/24 Page 95 of 214
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77 | Perth and Kinross Council Annual Accounts 2023/24 The fair values are calculated as follows: Carrying Amount Fair Value Carrying amount Fair value £'000 £'000 £'000 £'000 Public Works Loans Board (PWLB) 587,775 345,369 562,576 354,921 Lender Option Borrower Option (LOBO) 44,330 39,037 44,351 42,427 Short-term Borrowing 1,197 1,197 2,099 2,099 Other (Special Loans) 2,426 2,426 2,303 2,303 Other Market Loans 0 0 136 136 Creditors 91,611 91,611 96,104 96,104 Financial Liabilties 727,339 479,640 707,569 497,990 31 March 2024 31 March 2023 The Fair value is significantly less than the carrying amount because the majority of the Council’s long-term portfolio of loans are fixed rate loans where the interest rate payable is lower than the rates available for similar loans at the balance sheet date. The difference between the carrying amount and the fair value therefore represents the discount the Council would receive from the lender in the event these loans were to be repaid at that date. For comparison, if the Council were to have repaid all the loans to the PWLB on the balance sheet date, a total of £405 million would have been payable after applying the PWLB’s premature redemption rates applicable on that date. This is higher than the Fair Value shown in the table above, as the PWLB premature redemption rates include an additional profit margin over their comparative new borrowing rates. Fair Value of Assets Carried at Amortised Cost Carrying Amount Fair Value Carrying amount Fair value £'000 £'000 £'000 £'000 Cash (including petty cash) 31,183 31,183 17,663 17,663 Deposits with Banks and Building Societies 36,560 36,560 155,339 155,339 Mortgages 192 192 236 236 Loans to Others 532 532 694 694 Debtors (Long and short term) 52,163 52,163 51,630 51,630 Financial Assets 120,630 120,630 225,562 225,562 31 March 2024 31 March 2023 Where the fair value is higher than the carrying amount its because the Council’s portfolio of investments includes fixed rate deposits where the interest rate receivable is higher than rates available for similar deposits at the balance sheet date. Where the fair value is the same or lower than the carrying value, it’s because the interest receivable is the same or lower than the rates on the balance sheet date, or there is only a very short time left to maturity. For 2023/24, the fair value has been taken as the principal amount outstanding together with accrued interest, given the short-term nature of the instruments. Nature and Extent of Risks Arising from Financial Instruments The Council’s management of treasury risks is intended to minimise the Council’s exposure to the unpredictability of financial markets and to protect the financial resources available to fund services. The Council has fully adopted CIPFA’s Code of Treasury Management Practices and has written principles for overall risk management as well as written policies and procedures covering specific areas such as credit risk, liquidity risk and market risk. (i) Credit Risk Credit risk arises from the short-term lending of surplus funds to banks, building societies, Money Market Funds and other local authorities as well as credit exposures to the Council’s customers. It is the policy of the Council to place deposits only with a limited number of high quality banks, building societies and Money Market Funds whose credit rating, together with other market information, is independently assessed as sufficiently secure by the Council’s treasury advisers and to restrict lending to a prudent maximum amount and duration for each institution. The Council’s policy also includes lending to other local authorities in the UK. Under the terms of the Council’s approved Treasury policy, only the highest rated banks and financial institutions are used. Accordingly, the expected credit loss on such deposits is deemed negligible, and no expected credit loss provision has been provided in the Income and Expenditure account for 2023/24 (2022/23 nil) on the grounds of immateriality. Applying historic default rates for the counterparties used by the Council as at 31 March 2024 shows the expected credit loss to be less than 0.02% to 0.04% of the principal sums deposited, whilst the actual historic default experienced by the Council is nil. Further, there is no information to indicate that this position has changed since the balance sheet date. 77 | Perth and Kinross Council Annual Accounts 2023/24 Page 96 of 214
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78 | Perth and Kinross Council Annual Accounts 2023/24 The following analysis summarises the Council’s potential maximum exposure to credit risk, based on past experience and current market conditions. Historical Historical experience Estimated Amounts at 31 experience adjusted for maximum exposure March 2024 of default market conditions to default and as at 31 March 2024 uncollectability £'000 % % £'000 Deposits with banks and other financial institutions 67,155 0 0 0 Loans to Others 724 0 0 0 Customers 15,242 9.2 9.2 1,402 Total 83,121 - - 1,402 The Council’s overall exposure to credit risk in relation to its deposits in banks and other financial institutions of £67.2m above cannot be assessed generally, as the risk of non-payment of the principal sums or interest is specific to each individual institution. Experience indicates that any such non-payment is rare, and there is no evidence that any risk of default existed at 31 March 2024. The repayment profile of these deposits, including loans to others, is shown below: 31 March 31 March 2024 2023 £'000 £'000 Less than three months 56,752 71,598 Three to six months 10,403 64,280 Six months to one year 0 40,136 Total 67,155 176,014 Loans to Others The Council initiates a legal charge on property where, for example, clients require assistance with payment of care fees, but cannot pay immediately until such time as their property is sold. The carrying value of the total amount outstanding as at 31 March 2024 in this category is £532,000 and experience of default is minimal. The Council has granted mortgages for essential property repairs in shared ownership properties as well as secured loans to property owners to bring their properties back into use for affordable rent under the Empty Home Loans Fund (EHLF) scheme. The total amount outstanding as at 31 March 2024 is £192,000 with no experience of default. The total amount of Loans to Others of £724,000 can be analysed as follows: 31 March 31 March 2024 2023 £'000 £'000 Less than three months 58 70 Three to six months 58 70 Six months to one year 123 141 More than one year 485 649 Total 724 930 Debtors The Council does not generally allow credit for customers, such that £12.081m of the £15.242m balance is past its due date for payment. 31 March 31 March 2024 2023 £'000 £'000 Less than three months 8,492 12,299 Three to six months 421 427 Six months to one year 1,302 1,213 More than one year 1,866 1,924 Total 12,081 15,863 78 | Perth and Kinross Council Annual Accounts 2023/24 Page 97 of 214
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79 | Perth and Kinross Council Annual Accounts 2023/24 (ii) Liquidity Risk The Council has access to borrowings from the money markets to cover day to day cashflow needs, as well as borrowing from the Public Works Loans Board or money markets for longer term funding requirements. As a result there is no significant risk that the Council will be unable to raise finance to meet its commitments under financial instruments. The Council manages its portfolio in conjunction with interest rate forecasts to reduce the risk of a large proportion of its borrowing maturing at a time of higher interest rates, and so reduce the financial impact of re-financing at an unfavourable time. In addition, the monitoring of interest rate movements for the identification of debt rescheduling opportunities to amend the maturity profile, as well as achieving savings in interest charges, is undertaken on a continuous basis to further mitigate any refinancing risks. The maturity structure of financial liabilities is as follows (at nominal value): Loans outstanding 31 March 31 March 2024 2023 £'000 £'000 Public Works Loans Board 585,000 560,000 Market debt 43,200 43,340 Temporary borrowing 1,152 2,060 Local bonds 2,415 2,294 Bank overdraft 0 3,067 Total 631,767 610,761 Less than 1 year 16,567 12,561 Between 1 and 2 years 5,000 13,000 Between 2 and 5 years 25,000 20,000 Between 5 and 10 years 37,500 17,500 Between 10 to 15 years 5,000 5,000 More than 15 years 542,700 542,700 Total 631,767 610,761 In the more than 15 years category there are £43.2 million of LOBO borrowings which have a call date in the next 12 months. (iii) Market Risk Interest rate risk The Council is exposed to interest rate risk in two different ways: the first being the uncertainty of interest paid/received on variable rate instruments and the second being the effect of fluctuations in interest rates on the fair value of an instrument. The current interest rate risk for the council is summarised below: • Reductions in interest rates will affect interest earned on variable rate investments, and reduces income credited to the Comprehensive Income and Expenditure Statement. There would only be a small reduction in the interest payable on variable rate borrowing. • Increases in interest rates will affect interest paid on variable rate borrowings, and increases the interest expense charged to the Comprehensive Income and Expenditure Statement, but is offset by increased investment returns. • The fair value of fixed rate financial assets will fall if interest rates rise. This will not impact the balance sheet for assets held at amortised cost, but will impact the disclosure note for fair value. It would have a negative effect on the balance sheet for any assets held at fair value in the balance sheet, which would also be reflected in the Comprehensive Income and Expenditure Statement. However, no such assets at fair value were held by the Council as at 31 March 2024. • The fair value of fixed rate financial liabilities will rise if interest rates fall. This will not impact the balance sheet for liabilities held at amortised cost, but will impact the disclosure note for fair value. The Council has a number of strategies for managing interest rate risk. The policy is to keep a maximum of 35% of its borrowings in variable rate loans. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rate loans may be repaid early to limit exposure to higher costs, whilst fixed deposits may be undertaken for longer periods (within policy and counterparty limits). The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget throughout the year. This allows any favourable or adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable. 79 | Perth and Kinross Council Annual Accounts 2023/24 Page 98 of 214
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80 | Perth and Kinross Council Annual Accounts 2023/24 According to this assessment strategy, at 31 March 2024, if interest rates had been 1% higher with all other variables held constant, the financial effect would be: £'000 Increase in interest payable on variable rate borrowings 468 Increase in interest rate receivable on variable rate investments (1,071) Impact on Comprehensive Income and Expenditure Statement (603) Share of overall impact credited to the HRA (139) The impact of a 1% fall in interest rates would have been an estimated cost of £1.071 million to the Council as a result of a reduction in investment income, whilst it would be unlikely that the lenders of the market loans borrowed would pass on the reduction in rates payable. However, there would be a reduction of £36,000 payable on other loans. Therefore, the net cost of a 1% fall in interest rates would be £1.035 million of which £238,000 would be debited to the HRA. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates. Price Risk The Council does not invest in equities, however, does invest in other tradable instruments but with the intention of holding them until their maturity date. Therefore, the Council does not actively trade in such instruments, and is therefore not exposed to gains or losses on movements in their price. 40. Devolved School Management (DSM) Schools The accumulated balance on the General Fund at 31 March 2024 includes net surplus funds of £501,000 (31 March 2023 £722,000) in respect of schools participating in the Devolved School Management scheme. There are no schools carrying forward deficits. These surpluses are earmarked in 2023/24 for the individual schools concerned. There is Pupil Equity Funding from the Scottish Government of £116,000 which is being carried forward to 2024/25 for schools within the Council’s earmarked general fund balances. 41. Operating Activities The cash flows for operating activities include the following items: 2023/24 2022/23 £'000 £'000 Interest received (7,191) (2,831) Interest paid 28,154 26,434 20,963 23,603 42. Investing Activities 2023/24 2022/23 £'000 £'000 Purchase of property, plant and equipment, investment property and intangible assets (158,781) (120,483) Purchase of short-term and long-term investments (69,560) (205,839) Proceeds from the sale of property, plant and equipment, investment property and intangible assets 1,840 1,047 Proceeds of short-term and long-term investments 188,339 259,801 Other receipts for investing activities 46,429 42,656 8,267 (22,818) 80 | Perth and Kinross Council Annual Accounts 2023/24 Page 99 of 214
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81 | Perth and Kinross Council Annual Accounts 2023/24 43. Financing Activities 2023/24 2022/23 £'000 £'000 Cash receipts of short and long-term borrowing 66,065 29,697 Cash payments for the reduction of the outstanding liabilities relating to fiannce leases and on balance sheet PFI contracts (6,287) (5,864) Repayments of short and long-term borrowing (40,582) (37,056) 19,196 (13,223) 44. Cash and Cash Equivalents The balance of cash and cash equivalents is made up of the following elements: 2023/24 2022/23 £'000 £'000 Cash held 47 55 Bank current accounts 542 (3,067) Short-term deposits with banks and building societies 9 3,651 Short-term deposits with Local Authorities 29,529 14,017 Short-term deposits with other organisations 1,056 3,007 Total cash and cash equivalents 31,183 17,663 45. Trust Funds Perth and Kinross Council administers a number of Charitable Funds of varying sizes. The Income and Expenditure Account and Balance Sheet are detailed on page 91. These funds include Educational Trusts and other trusts which are primarily for the residents of Perth and Kinross. An exercise is currently being undertaken to amalgamate many of the non-educational trusts in order for the funds to be more readily accessible. The Perth and Kinross Educational Trust gives financial assistance towards scholarships, second or subsequent degrees, mature students and further education. Assistance is also provided to schools for sports facilities and special equipment, promoting visual arts and education in music and drama. There are also preferences for certain beneficiaries usually named schools for prizes etc. Also, within the Perth and Kinross Educational Trust there are eight individual endowments for maintaining, furnishing and equipping school buildings. The other charitable trusts purposes include providing financial assistance in different areas of Perth and Kinross. 31 March 31 March 2024 2023 £'000 £'000 Educational Trust - Financial Assistance Net Assets 1,058 983 Net Incoming/(Outgoing) Resources before other recognised gains and losses 11 10 Educational Trust - Endowments Net Assets 48 49 Other Charitable Trusts Net Assets 2,617 2,429 Net Incoming Resources before other recognised gains and losses 48 3 Total Net Assets 3,723 3,461 Total Net Incoming Resources before other recognised gains and losses 59 13 Detailed Accounts for the Charities are available from the Chief Finance Officer, 2 High Street, Perth, PH1 5PH by contacting chxfinance@pkc.gov.uk or phoning 01738 475000. 81 | Perth and Kinross Council Annual Accounts 2023/24 Page 100 of 214
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82 | Perth and Kinross Council Annual Accounts 2023/24 46. The Statutory Loans Fund Loans Fund accounting is governed by The Local Authority (Capital Financing and Accounting) (Scotland) Regulations 2016, which came into force on 1 April 2016. These regulations outline the way the Loans Fund is operated in relation to the repayment period and method that capital advances (expenditure) are repaid (charged) on an annual basis. The Loans Fund is an internal fund operated by the Council to manage the amortisation of capital expenditure (capital advances) over the life of the various assets being funded by borrowing, and also to manage the external borrowing raised to finance the capital expenditure. Whilst both elements of the Loans Fund operate independently of each other, because they are based on the same capital plans, they will broadly be consistent to each other over the long term. However, significant differences may arise over the short-term. This may include, for example, delaying external borrowing due to unfavourable prevailing interest rates, where the Council’s daily cashflow remains positive, or where the Council has significant levels of Reserves. The annuity repayment method is used for all internal capital advances through the Loans Fund. The Council also defers the repayment of Loans Fund advances until the asset being funded is completed and operational. The Council repays/amortises the capital advances over the life of the asset being funded, up to a maximum of 50 years. Therefore, the total number of years may exceed 50 years from the year the capital expenditure was incurred where the total expenditure on an asset is spread over two or more years before the asset becomes operational. The value of Loans Fund advances outstanding at 31 March 2024 is £667.120 million. This is made up as follows: Advances Debt Repaid Net Advances Advances 1 April 2023 Transferred 2023/24 2023/24 31 March 2024 £'000 £'000 £'000 £'000 £'000 General Fund 379,820 0 (2,671) 97,205 474,354 Prudential Borrowing 45,331 0 (2,853) 4,123 46,601 Sub Total 425,151 0 (5,524) 101,328 520,955 HRA 132,627 0 (3,448) 16,986 146,165 Total 557,778 0 (8,972) 118,314 667,120 The estimated future repayments of these advances is summarised in the table below: General Fund Prudential Sub Total: HRA Total Borrowing General Fund 31 March 2024 £'000 £'000 £'000 £'000 £'000 Within 1 year 2,844 2,800 5,644 1,768 7,412 Between 1 and 2 years 2,293 2,792 5,085 1,977 7,062 Between 2 and 5 years 6,902 6,305 13,207 7,169 20,376 Between 5 and 10 years 14,592 5,838 20,430 25,171 45,601 Between 10 and 15 years 22,536 4,600 27,136 20,990 48,126 between 15 and 20 years 32,756 3,721 36,477 12,452 48,929 Between 20 and 25 years 43,987 4,000 47,987 7,128 55,115 More than 25 years 348,444 16,545 364,989 69,510 434,499 Total 474,354 46,601 520,955 146,165 667,120 Comparison of the outstanding capital advances above with the Council’s long-term external debt demonstrates that actual capital expenditure funded by borrowing is higher than the actual borrowing undertaken to date by around £38.9 milllion. This reflects the strategy adopted in recent years of deferring new borrowing whilst rates were at high levels, and applying maturing investment balances to meet immediate cashflow requirements. New borrowing would only be undertaken when there were insufficient available balances. The Council started the year in an “over-borrowed” position of around £45 million, whilst the position at the end of the year reflects an “under-borrowed” position of £38.9 million, highlighting the strategy of deferring borrowing where possible. It should also be noted that the Council has approved a significant borrowing requirement over the next 6 years on its Capital programmes. The Council approved its new Composite Capital Budget to 2029/30 on 28 February 2024 (Report No. 24/64 refers), whilst the Housing and Social Wellbeing Committee approved the HRA Capital Investment Programme to 2028/29 on 24 January 2024 (Report No. 24/24 refers). The last report to the Finance and Resources Committee on 24 April 2024 (Report No. 24/131 refers) approved adjustments to these Programmes. 82 | Perth and Kinross Council Annual Accounts 2023/24 Page 101 of 214
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83 | Perth and Kinross Council Annual Accounts 2023/24 The latest approved General Fund (Composite) Capital Budget and Housing Investment Programme includes the amount of capital expenditure to be funded by borrowing (i.e. new Loans Fund advances) in each of the next 6 years as follows: General Housing Total Fund Investment Programme £'000 £'000 £'000 2024/25 169,923 19,703 189,626 2025/26 74,024 17,864 91,888 2026/27 81,816 13,629 95,445 2027/28 100,221 17,720 117,941 2028/29 19,739 17,704 37,443 2029/30 16,222 0 16,222 Total 461,945 86,620 548,565 All the above Loans Fund repayments have been included in the Loan Charge estimates within the approved Medium-Term Financial Plans, and therefore remain affordable under the current Loan Charge Budget strategy. This also includes estimates of new borrowing for the years beyond 2029/30. 83 | Perth and Kinross Council Annual Accounts 2023/24 Page 102 of 214
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2022/23 £'000 £'000 £'000 £'000 Income (30,334) Dwelling Rents (31,128) 587 less Voids 574 (30,554) (578) Non-Dwelling Rents (596) 41 less Voids 42 (554) (1,110) Other Income (2,399) (31,394) Total Income (33,507) Expenditure 7,638 Repairs and Maintenance 7,640 15,229 Supervision and Management 16,135 13,427 Depreciation, impairment and revaluation losses on non current assets 19,263 (118) Movement in the Impairment of Debtors 3 667 Other expenditure 448 36,843 Total Expenditure 43,489 5,449 Net Expenditure for HRA Services as included in the Comprehensive Income and Expenditure Statement 9,982 318 HRA services' share of Corporate and Democratic Core 305 5,767 Net Expenditure for HRA Services 10,287 HRA share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement: 534 (Gain) / Loss on sale of HRA Non-Current Assets (3) 3,356 Interest payable and similar charges 3,756 (136) Interest and investment income (284) 94 Net Interest on the net defined benefit liability (68) (3,214) Capital Grants and Contributions Receivable (3,787) 6,401 Deficit for the year on HRA services 9,901 HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT 2023/24 The Housing Revenue Account (HRA) Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Councils charge rents to cover expenditure in accordance with the legislative framework which may be different from the accounting cost. The increase or decrease in the year, on the basis on which rents are raised, is shown in the Statement of Movements on the Housing Revenue Account 84 | Perth and Kinross Council Annual Accounts 2023/24 Page 103 of 214
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2022/23 £'000 £'000 £'000 (3,282) Balance on the HRA at the end of the Previous Year (2,647) 6,401 Deficit for the year on the HRA Income and Expenditure Account 9,901 (2,897) Adjustments to Usable reserves permitted by Statute (7,157) (2,029) (2,357) 1,475 Net Decrease before Transfers to or from Reserves 387 (840) Transfer from Reserves 0 635 Movement in Year on the HRA 387 (2,647) Balance on the HRA at the end of the Current Year (2,260) Note to the Statement of Movement on the HRA Balance 2022/23 £'000 £'000 £'000 (534) Gain/(Loss) on sale of HRA Non-current assets 3 (10,530) Depreciation and impairment of non current assets (14,316) 0 Revaluation Loss (2,590) Capital Grants and Contributions credited to the Comprehensive Income and Expenditure 3,214 Statement 3,787 (16) Adjustments involving Short Term Accumulated Absences Account 28 Reversal of items relating to retirement benefits credited to the Comprehensive Income (3,149) and Expenditure Statement (1,478) (11,015) (14,566) 1,436 1,479 year 163 Adjustments involving the Financial Instruments Adjustment Account 147 3,999 Statutory provision for the repayment of debt 3,448 3,388 Capital expenditure charged to the HRA balances 2,335 8,986 7,409 (2,029) (7,157) STATEMENT OF MOVEMENTS ON THE HOUSING REVENUE ACCOUNT BALANCE Net additional amount required by statute to be (credited) to the HRA Balance for the year Employer's pension contributions and direct payments to pensioners payable in the Adjustments between Accounting Basis and Funding Basis Under Statute Items included in the HRA Income and Expenditure Account but excluded from the movement on HRA Balance for the year Items not included in the HRA Income and Expenditure Account but included in the movement on HRA Balance for the year 2023/24 2023/24 The Statement of Movement on the Housing Revenue Account balance reconciles the Housing Revenue Account to the HRA balance, an earmarked element of the Council’s General Fund Balance. 85 | Perth and Kinross Council Annual Accounts 2023/24 Page 104 of 214
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THE ACCOMPANYING NOTES TO THE HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT Restated 1. Housing Stock at 31 March 2024 No. of Dwellings No. of Dwellings 31 March 2024 31 March 2023 Sheltered accommodation 285 285 Detached/Semi-Detached/Terraced 3,865 3,827 High Rise Flats 146 143 Tenement Flats/Other Flats/Maisonettes 3,757 3,705 Total 8,053 7,960 2. Rent Arrears at 31 March 2024 Gross Arrears Gross Arrears 31 March 2024 31 March 2023 £'000 % of Income £'000 % of Income Houses 2,994 9.6 3,217 10.6 Other Subjects 56 9.4 52 9.0 Totals 3,050 9.6 3,269 10.6 3. Impairment of Debtors impairment in 2022/23. In 2023/24 an impairment of £1.845 million has been provided in the Balance Sheet, an increase of £3,340 from the 86 | Perth and Kinross Council Annual Accounts 2023/24 Page 105 of 214
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2022/23 2023/24 £'000 £'000 £'000 113,489 Gross Charge 119,476 (3,688) Deduct - Exemptions (3,903) (182) Disabled Relief (195) (8,350) Discounts and Reductions (8,788) (6,966) Council Tax Reduction Scheme (7,431) 94,303 Net Council Tax 99,159 Deduct - (7) Ministry of Defence Properties (7) 7 Contribution Received 7 0 (1,045) Provision for Bad and Doubtful Debts (1,607) 93,258 Total Council Tax Income 97,552 (398) Adjustments for prior years for Council Tax (204) 92,860 Total Council Tax Income to Comprehensive I and E Statement 97,348 COUNCIL TAX INCOME ACCOUNT The Council Tax Income Account shows the gross income raised from Council Taxes levied and deductions made under statute. The resultant net income is transferred to the Comprehensive Income and Expenditure Statement of the Council. 87 | Perth and Kinross Council Annual Accounts 2023/24 Page 106 of 214
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THE ACCOMPANYING NOTES TO THE COUNCIL TAX INCOME ACCOUNT 1. CALCULATION OF THE COUNCIL TAX BASE AT 31 MARCH 2024 2023/24 2022/23 A B C D E F G H TOTAL TOTAL No. of Properties 8,744 15,047 13,024 11,824 12,235 8,334 6,701 709 76,618 75,884 Exemptions (766) (707) (519) (342) (268) (132) (107) (20) (2,861) (2,791) Disabled Relief 72 19 15 30 (42) (9) (81) (4) 0 0 Discounts (1,408) (2,027) (1,494) (1,185) (961) (503) (314) (62) (7,954) (7,870) Effective No. of Properties 6,642 12,332 11,026 10,327 10,964 7,690 6,199 623 65,803 65,223 Ratio 240/360 280/360 320/360 360/360 473/360 585/360 705/360 882/360 Band D Equivalents 4,425 9,592 9,801 10,327 14,405 12,496 12,140 1,526 74,712 73,982 Contributions in lieu 7 7 TOTAL 74,719 73,989 Provision for non-payment at 2.0% (1,494) (1,480) COUNCIL TAX BASE 73,225 72,509 2. THE COUNCIL TAX CHARGE Fraction 2023/24 2022/23 Valuation of Actual Actual Band band D Charge Charge A 240/360 £935.79 £900.67 B 280/360 £1,091.75 £1,050.78 C 320/360 £1,247.72 £1,200.89 D 360/360 £1,403.69 £1,351.00 E 473/360 £1,844.29 £1,775.06 F 585/360 £2,280.99 £2,195.38 G 705/360 £2,748.89 £2,645.71 H 882/360 £3,439.04 £3,309.95 Range The valuation bands, the fractions used in calculating the Council Tax payable for each valuation band and the actual charges determined for 2023/24 are set out below: Each property is placed in one of eight valuation bands (A-H) in accordance with their value as at 1 April 1991. The Council Tax charge levied for each property is calculated in proportion to the Council Tax charge for a band D property by applying fractions. A discount of 25% is given where there are fewer than two residents of a property. Discounts of 10% are awarded for second homes and long term empty dwellings. Some unoccupied dwellings may receive discount of 50%. Persons in detention, students, mentally handicapped people and certain others are disregarded for Council Tax purposes. Reductions in Council Tax are also granted for disabled people. The Council Tax is based on the value of a domestic property together with a personal element which takes into account the number and circumstances of that property's occupants. Property Valuation Over £212,000 £0 - £27,000 £27,001 - £35,000 £45,001 - £58,000 £35,001 - £45,000 £106,001 - £212,000 £80,001 - £106,000 £58,001 - £80,000 88 | Perth and Kinross Council Annual Accounts 2023/24 Page 107 of 214
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2022/23 £'000 £'000 £'000 81,902 Gross Rate Levied 87,269 0 Transitional Relief (2,735) 84,534 Deduct: (2,682) Rate Rebates (2,889) (21,664) Reliefs, Charities etc. (18,936) (256) Provision for Bad and Doubtful Debts (436) (22,261) Adjustments to Previous Years: (1,202) Gross Rate Levied (594) 0 Transitional Surcharge/Relief 10 (291) Reliefs, Charities etc. (204) (154) Impairment for Bad and Doubtful Debts and Abatements (571) (1,359) 55,653 Net Non-Domestic Rate Income- 60,914 (55,877) Contribution to National Non-Domestic Rate Pool (62,378) 46,141 Contribution from National Non-Domestic Rate Pool 60,754 (9,736) Net contribution to National Non-Domestic Rate Pool (1,624) 45,917 Total Non-Domestic Rate Income to Comprehensive Income 59,290 and Expenditure Statement 224 Discretionary Relief funded by the Council 1,464 2023/24 NON-DOMESTIC RATE INCOME ACCOUNT The Non-Domestic Rate Account is an agent's statement that reflects the statutory obligation for billing authorities to maintain a separate Non-Domestic Rate Account. The statement shows the gross income from the rates and deductions made under statute. The net income is paid to the Scottish Government as a contribution to the national Non-Domestic Rate pool. 89 | Perth and Kinross Council Annual Accounts 2023/24 Page 108 of 214
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THE ACCOMPANYNG NOTES TO THE NON-DOMESTIC RATE INCOME ACCOUNT 1. NON-DOMESTIC RATES 2. RATEABLE SUBJECTS AND VALUES Rateable Rateable No. of Value No. of Value Subjects £'000 Subjects £'000 at 1 April 2022 at 1 April 2022 at 1 April 2023 at 1 April 2023 1,699 36,564 Shops 1,695 34,527 85 1,741 Public Houses 79 1,656 1,096 13,843 Offices (including banks) 1,056 13,487 227 12,708 Hotels etc. 212 14,744 1,781 24,353 Industrial Subjects etc. 1,769 26,017 1,950 11,842 Leisure, Entertainment, Caravans etc. 1,934 14,189 151 4,822 Garages and Petrol Stations 151 5,147 59 1,352 Cultural 59 1,471 1,362 2,663 Sporting Subjects 1,401 3,373 118 15,273 Education and Training 120 16,452 420 7,795 Public Service Subjects 420 8,811 1 0 Communications 1 0 22 331 Quarries, Mines etc. 23 536 2 3,412 Petrochemical 2 4,165 240 1,654 Religious 237 1,906 117 6,390 Health, Medical 117 6,343 728 1,988 Other 745 2,309 64 3,347 Care Facilities 62 3,580 30 98 Advertising 29 95 92 10,568 Undertaking 94 12,677 10,244 160,744 Total 10,206 171,485 Non-Domestic Rates Income is set and pooled nationally but generated and collected locally by Scottish Local Authorities. It is distributed back to those local authorities through a distribution formula agreed with COSLA as part of the local government finance settlement, therefore it bears no direct relationship to the amounts collected by those authorities. The rate poundage set by the Scottish Government for 2023/24 was 49.8p (unchanged from 2022/23). The Small Business Bonus Scheme, introduced from 1 April 2008, provides relief to businesses based on their combined rateable value. Significant changes were made from 1 April 23; the combined rateable value threshold remained at £35,000 with relief now available on all individual properties with a rateable value of £20,000 or less. Subject to eligibility, this provides 100% relief where the rateable value is £12,000 or less and a tapered award where the rateable value is greater than £12,000. Awards totalling almost £9.2 million were provided to businesses within the Perth and Kinross area in 2023/24. A supplement of 1.3p was charged on properties with a rateable value of between £51,001 and £100,000 and a supplement of 2.6p was charged on properties with a rateable value exceeding £100,000 to contribute towards the additional cost of the Small Business Bonus scheme. (The upper level having increased from £95,000 in 2022/23). 90 | Perth and Kinross Council Annual Accounts 2023/24 Page 109 of 214
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91 | Perth and Kinross Council Annual Accounts 2023/24 Charitable Trusts The Council administers Perth and Kinross Educational Trust and various other Charitable Trusts and Endowments. The figures below summarise the aggregate income and expenditure for the year and the assets and liabilities at 31 March 2024. 2023/24 2023/24 2022/23 £'000 £'000 £'000 Incoming Resources Income resources from generated funds: Investment income 163 146 Total Incoming Resources 163 146 Resources Expended Costs of generating funds: Investment management costs 16 16 Charitable activities 75 103 Governance costs 13 14 Total Resources Expended 104 133 59 13 Other Recognised Gains: Gain/(losses) on Investment Assets 203 (162) Net Movement in Funds for the Year 262 (149) Reconciliation of Funds 3,461 3,610 Total Funds Brought Forward Total Funds Carried Forward 3,723 3,461 INCOME AND EXPENDITURE ACCOUNT FOR YEAR TO 31 MARCH 2024 Net Incoming Resources before other Recognised Gains and Losses 2023/24 2023/24 2022/23 £'000 £'000 £'000 Fixed Assets Tangible Assets 80 80 Investments 3,271 3,083 3,351 3,163 Current Assets Debtors 7 28 Investments - Amounts due by Perth and Kinross Council Loans Fund 374 288 381 316 Liabilities Creditors: amounts falling due within one year (9) (18) Net Current Assets 372 298 Net Assets 3,723 3,461 Total Funds 3,723 3,461 BALANCE SHEET AS AT 31 MARCH 2024 Notes to Charitable Trusts 1. The market value of Investments at 31 March 2024 was £3.271 million (31 March 2023 £3.083 million). 2. The unaudited accounts were issued on 24 June 2024 and the audited accounts were authorised for issue on 2 December 2024. Scott Walker CPFA Chief Finance Officer Date: 91 | Perth and Kinross Council Annual Accounts 2023/24 Page 110 of 214
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92 | Perth and Kinross Council Annual Accounts 2023/24 Common Good The Council administers the Common Good Accounts for ten former burghs within Perth and Kinross. The figures below summarise the aggregate income and expenditure for the year and detail the Assets and Liabilities at 31 March 2024. 2023/24 2023/24 2022/23 £'000 £'000 £'000 Expenditure Grants to Voluntary Organisations 167 110 Christmas Lighting 100 73 Property Costs 5 0 Supplies and Services 17 21 289 204 Income Rents, Fees, Charges etc. 279 311 Interest on Loans 114 39 Other 8 3 401 353 Operating Surplus for the Year 112 149 Surplus Brought Forward 2,258 2,109 Accumulated Surplus at 31 March 2,370 2,258 INCOME AND EXPENDITURE STATEMENT FOR YEAR TO 31 MARCH 2024 2023/24 2023/24 2022/23 £'000 £'000 £'000 Fixed Assets Property, Plant and Equipment 5,315 5,383 Current Assets Debtors 16 9 Investments 2,340 2,219 Cash and Cash Equivalents 410 453 2,766 2,681 Current Liabilities Creditors and Accruals (106) (134) Total Net Assets 7,975 7,930 Reserves Revenue 2,370 2,258 Capital 477 477 Revaluation Reserve 5,128 5,195 7,975 7,930 BALANCE SHEET AS AT 31 MARCH 2024 The unaudited accounts were issued on 24 June 2024 and the audited accounts were authorised for issue on 2 December 2024. Scott Walker CPFA Chief Finance Officer Date: 92 | Perth and Kinross Council Annual Accounts 2023/24 Page 111 of 214
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93 | Perth and Kinross Council Annual Accounts 2023/24 The Accompanying Notes to the Common Good Accounts 1. The use of common good assets is accounted for on a risk and rewards based approach. The Council General Fund or Housing Revenue Account will meet the day-to-day operating costs of the property, and any repairs or improvement works required to the property, in return for the use of the common good asset for the delivery of Council services. No rent for the use of the property is payable to the Common Good Fund on the basis that the Fund benefits from the Council expenditure incurred in maintaining and upgrading the sites. No expenditure is charged to the Common Good Fund for the Council expertise in managing the assets. In respect of common good sites that are leased out to a party external to the Council, the tenant will bear the responsibility for the upkeep of the property. The Common Good Fund is, therefore, credited with the annual rental income arising from the lease agreement. 2. Depreciation Depreciation on Common Good Funds is charged on buildings, based on current value less residual value over the remaining useful life of the property. The buildings have a life expectancy of over 50 years and depreciation has been charged on a straight line basis over that period. 3. Common Good Reserve Funds Surplus / Balance at (Deficit) Balance at 1 April 2023 2023/24 31 March 2024 Fund: £'000 £'000 £'000 Perth City 1,600 109 1,709 Aberfeldy 125 3 128 Abernethy 1 0 1 Alyth 20 0 20 Auchterarder 309 (7) 302 Blairgowrie 20 0 20 Crieff 15 0 15 Kinross 161 5 166 Pitlochry 7 2 9 Total 2,258 112 2,370 Coupar Angus Common Good Fund has a nil balance for both years. 4. Common Good Fixed Assets The Community Empowerment (Scotland) Act 2015 requires the Council to establish and maintain a list of property which is held as part of the Common Good. The review of property titles to facilitate the publication of the list has been completed, and following a period of public consultation, the findings are now available on the Perth and Kinross Council Citizen Space website at Draft Common Good Land Register. The review of moveable Common Good property has commenced and is expected to complete in 2024/25. 93 | Perth and Kinross Council Annual Accounts 2023/24 Page 112 of 214
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Restated Restated Authority's Authority's General Housing Capital Insurance Capital Capital Total Unusable TOTAL share of share of TOTAL Fund Revenue Fund Fund Receipts Grants Usable Reserves Authority subsidiaries associates Reserves Balance Account Reserve Unapplied Reserves Reserves and managed and joint funds ventures £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2022 (85,900) (3,282) (24,817) (1,366) (2,556) (87) (118,008) (623,763) (741,771) (22,036) (13,824) (777,631) Movement in reserves during 2022/23 Total Comprehensive Income and Expenditure 16,868 6,401 0 0 0 0 23,269 (148,700) (125,431) (8,509) 5,090 (128,850) Adjustments to Usable Reserves permitted by accounting standards (4,511) (2,897) 0 0 0 0 (7,408) 7,408 0 0 0 0 Adjustments from income and expenditure charged under the accounting basis to the funding basis 1,514 (2,029) 0 0 311 0 (204) 204 0 0 0 0 (Increase)/Decrease in 2022/23 13,871 1,475 0 0 311 0 15,657 (141,088) (125,431) (8,509) 5,090 (128,850) Transfers to/(from) Other Statutory Reserves 2,306 (840) (1,526) 60 0 0 0 0 0 0 0 0 Balance at 31 March 2023 carried forward (69,723) (2,647) (26,343) (1,306) (2,245) (87) (102,351) (764,851) (867,202) (30,545) (8,734) (906,481) Movement in reserves during 2023/24 Total Comprehensive Income and Expenditure 41,392 9,901 0 0 0 0 51,293 (23,807) 27,486 969 3,293 31,748 Adjustments to Usable Reserves permitted by accounting standards (6,454) (2,357) 0 0 0 0 (8,811) 8,811 0 0 0 0 Adjustments from income and expenditure charged under the accounting basis to the funding basis (19,833) (7,157) 0 0 143 0 (26,847) 26,847 0 0 0 0 Adjustment to the statutory repayment of debt for service concession arrangements - permitted flexibility (34,262) 0 0 0 0 0 (34,262) 34,262 0 0 0 0 (Increase) or Decrease in 2023/24 (19,157) 387 0 0 143 0 (18,627) 46,113 27,486 969 3,293 31,748 Transfers to/(from) Other Statutory Reserves 5,086 0 (4,683) (403) 0 0 0 0 0 0 0 0 Balance at 31 March 2024 carried forward (83,794) (2,260) (31,026) (1,709) (2,102) (87) (120,978) (718,738) (839,716) (29,576) (5,441) (874,733) The Group Movement in Reserves Statement has been restated in terms of presentation for the Authority's share of subsidiaries and managed funds to include Common Good and Charities previously included in the Authority's share of associates and joint ventures. GROUP MOVEMENT IN RESERVES STATEMENT 94 | Perth and Kinross Council Annual Accounts 2023/24 Page 113 of 214
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2022/23 Net Note Gross Income Net Expenditure Expenditure Expenditure £'000 £'000 £'000 £'000 SERVICES 204,343 Education and Children's Services 267,197 (31,060) 236,137 88,314 Health and Social Care 199,468 (110,826) 88,642 91,723 Communities 159,123 (46,869) 112,254 44,885 Corporate and Democratic Services 64,129 (24,464) 39,665 2,894 Chief Executives Service 4,707 (56) 4,651 5,449 Housing Revenue Account 43,489 (33,507) 9,982 1,338 Valuation Joint Board 1,436 0 1,436 133 Charitable Trusts 104 0 104 (110) Common Good 289 (287) 2 438,969 COST OF SERVICES 739,942 (247,069) 492,873 143 Other Operating Expenditure / Income 0 (944) (944) 20,214 Financing and Investment Income and Expendtiure 4 25,608 (7,505) 18,103 (432,699) Taxation and Non-Specific Grant Income 0 (458,048) (458,048) 26,627 Deficit on Provision of Services 765,550 (713,566) 51,984 9,790 Share of the (Surplus)/Deficit on the provision of services by Associates and Joint Ventures 3,931 36,417 Group Deficit 55,915 (86,473) Surplus on revaluation of non current assets (23,936) (74,297) Remeasurement of the net defined benefit liability/asset 632 9 Other gains and losses (225) (4,506) Share of the other comprehensive income and expenditure of Associates and Joint Ventures (638) (165,267) Other Comprehensive Income and Expenditure (24,167) (128,850) Total Comprehensive Income and Expenditure 31,748 2023/24 GROUP COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 95 | Perth and Kinross Council Annual Accounts 2023/24 Page 114 of 214
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31 March 2023 Notes 31 March 2024 £'000 £'000 1,437,497 Property, Plant and Equipment 1,527,977 51,814 Heritage Assets 51,814 15,015 Investment Property 14,715 963 Intangible Assets 348 403 Assets Held for Sale 0 3,083 Long Term Investments 5 7,463 8,805 Investment in Joint Venture 5,441 541 Long Term Debtors 543 1,518,121 Long Term Assets 1,608,301 157,558 Short Term Investments 5 38,900 273 Assets Held for Sale 676 508 Inventories 751 54,212 Short Term Debtors 6 54,795 27,517 Cash and Cash Equivalents 36,456 240,068 Current Assets 131,578 Cash and Cash Equivalents (12,114) Short Term Borrowing (19,398) (98,608) Short Term Creditors 7 (94,817) (295) Provisions (1,668) (111,017) Current Liabilities (115,883) (5,312) Provisions (3,564) (599,351) Long Term Borrowing (616,330) (71) Liabilities in associates and joint ventures 0 (135,957) Other Long Term Liabilities (129,369) (740,691) Long Term Liabilities (749,263) 906,481 NET ASSETS 874,733 102,351 Usable Reserves 120,978 764,851 Unusable Reserves 718,738 27,888 Group Reserves 23,319 11,391 Charitable and Common Good Reserves 11,698 906,481 TOTAL RESERVES 874,733 The accompanying notes form an integral part of these financial statements. Scott Walker CPFA Chief Finance Officer Date: GROUP BALANCE SHEET The Unaudited Annual Accounts were issued on 24 June 2024 and the Audited Annual Accounts were authorised for issue on 2 December 2024. 96 | Perth and Kinross Council Annual Accounts 2023/24 Page 115 of 214
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2022/23 Notes 2023/24 £'000 £'000 (26,627) Deficit on the provision of services (51,984) 85,234 Adjustments to net surplus or deficit on the provision of services for non cash movements 86,989 (44,143) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (49,490) 14,464 Net cash flows from Operating Activities (14,485) (23,696) Investing Activities 10 4,228 (13,263) Financing Activities 11 19,196 (22,495) Net increase/(decrease) in cash and cash equivalents 8,939 50,012 Cash and cash equivalents at the beginning of the reporting period 27,517 27,517 Cash and cash equivalents at the end of the reporting period 36,456 GROUP CASH FLOW STATEMENT 97 | Perth and Kinross Council Annual Accounts 2023/24 Page 116 of 214
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2022/23 2023/24 £'000 £'000 23,269 Deficit on the single entity Comprehensive Income and Expenditure Statement 51,293 for the year Add: 0 ● Managed Funds - Charitable Trusts and Common Good (374) 8,208 ● Joint Venture 4,270 1,583 ● Associates (339) 3,357 ● Subsidiaries 1,065 36,417 Deficit for the year on the Group Comprehensive Income and Expenditure Statement 55,915 RECONCILIATION OF THE SINGLE ENTITY DEFICIT FOR THE YEAR TO THE GROUP DEFICIT 98 | Perth and Kinross Council Annual Accounts 2023/24 Page 117 of 214
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99 | Perth and Kinross Council Annual Accounts 2023/24 Notes to the Group Accounts 1. Combining Entities The results of Tayside Valuation Joint Board which is jointly administered with Dundee City and Angus Councils have been included in the Group Accounts. The Council is exempt from including the Board as a subsidiary as the Scottish Government exercises a dominant influence on the Board evidenced particularly by its ability to reconstitute or abolish statutory bodies or otherwise influence their operating and financial policies. A number of Councillors have voting rights on the Board. The Council has an obligation to contribute to the Joint Board losses or deficits and the ability to exercise significant influence over it. The Joint Board has therefore been incorporated in the Group Accounts under the equity method of Accounting for Associates. For the purpose of consolidation and incorporation within the Group Accounts recognition has been made of the Council’s interest which is based on its share of the contributions made to the Tayside Valuation Joint Board, which in 2023/24 was 46.2% (2022/23 42.68%). The accounting period for the Board is the year to 31 March 2024 and the Board Statements of Accounts presents fairly its individual financial position. The individual accounts relating to Tayside Valuation Joint Board are published separately and can be obtained from the Director of Corporate Services, Dundee City Council, Dundee House, 50 North Lindsay Street, Dundee, DD1 1QE. In addition, the Council has also included Live Active Leisure Ltd., Perth Theatre and Concert Hall Ltd. and Culture Perth and Kinross Ltd. as subsidiaries within its Group Accounts in accordance with IAS 27 Consolidated and Separate Financial Statements, and in particular SIC 12 Consolidation – Special Purpose Entities. These organisations deliver services on behalf of the Council and the Council therefore obtains benefit from their operations. In addition, service delivery is managed through Service Level Agreements specific to the service provision required from the organisations by the Council. Live Active Leisure Ltd., Perth Theatre and Concert Hall Ltd. and Culture Perth and Kinross Ltd. are governed by company and charitable trust regulation. For the purpose of consolidation and incorporation within the Group Accounts it has been assumed that the Council’s interest in these organisations is 100% due to the nature of Council control and direction over their operations. Live Active Leisure Ltd., Perth Theatre and Concert Hall Ltd. and Culture Perth and Kinross Ltd. are arm’s length companies with sole member status with the Council being the sole member in each company. The individual accounts relating to these organisations are published separately, and can be obtained from the following addresses:- Live Active Leisure Ltd. Caledonia House, Hay Street, Perth, PH1 5HS Perth Theatre and Concert Hall Ltd. Perth Concert Hall, Mill Street, Perth, PH1 5HZ Culture Perth and Kinross Ltd. A K Bell Library, 2-8 York Place, Perth, PH2 8EP The income, expenditure, assets and liabilities of the Charitable Trusts which are administered and controlled by the Council have also been included as a managed fund. The nature of the assets of the managed fund are heritable property, investments and debtors. The assets are not the property of Perth and Kinross Council and are subject to charitable trust regulations. The Income and Expenditure Account of the Charitable Trusts is detailed on page 91 of the Annual Accounts. The income, expenditure, assets and liabilities of the Common Good Accounts which are administered and controlled by the Council have also been included as a managed fund. The nature of the assets of the managed fund are heritable property, investments and debtors. The assets are the property of Perth and Kinross Council and are subject to the Accounting Code of Practice. The Income and Expenditure Account of the Common Good is detailed on page 92 of the Annual Accounts. Perth and Kinross Council’s share of the assets and liabilities of Tayside Contracts Joint Committee, which is jointly administered and controlled with Dundee City Council and Angus Council, has been included in the Group Accounts using the equity method for an associate due to the Council having significant influence rather than joint control over the entity. The Council’s investment in Tayside Contracts for 2023/24 is 40% (2022/23 34%). Copies of Tayside Contracts Joint Committee’s individual accounts are published separately, and can be obtained from Tayside Contracts, 1 Soutar Street, Dundee, DD3 8SS. Perth and Kinross Integration Joint Board (IJB) is the statutory body established to integrate health and social care services between the Council and NHS Tayside. The IJB Board consists of eight voting members, four of whom are Perth and Kinross councillors. The Council can therefore exercise joint control over the arrangement and the IJB has been consolidated into the Council Group accounts as a joint venture using the equity method and a percentage share of 50%. Copies of the Perth and Kinross Integration Joint Board individual accounts are published separately and can be obtained from the Chief Financial Officer, Perth and Kinross Integration Joint Board, 2 High Street, Perth, PH1 5PH. Tayside and Central Scotland Transport Partnership (TACTRAN) is a statutory body established under the Transport (Scotland) Act 2005. The partnership covers Angus, Dundee City, Perth and Kinross and Stirling Council areas. The results of TACTRAN have been excluded from Perth and Kinross Council’s Group accounts on the grounds of materiality. 99 | Perth and Kinross Council Annual Accounts 2023/24 Page 118 of 214
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100 | Perth and Kinross Council Annual Accounts 2023/24 2. Nature of Combination The Council inherited its interest in the Tayside Valuation Joint Board following the reorganisation of local government in 1996. It is considered that the Council’s interest was obtained on an acquisition basis. However, as no consideration was given, no goodwill requires to be accounted for. 3. Financial Impact of Consolidation and Going Concern The effect of inclusion of the Subsidiaries and Associates listed above in the Group Balance Sheet is to increase both reserves and net assets by £35.017 million (2022/23 £39.279 million increase). All Subsidiaries and the Associate have prepared their accounts on a ‘going concern’ basis. The Council’s Group Accounts have been prepared on a ‘going concern’ basis as there is no reason to suggest that future funding will not continue. Apart from the disclosures made in the Notes to the Group Accounts there were no material amounts or details in relation to associates or managed funds. 4. Group Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure 2023/24 2022/23 £'000 £'000 Council Financing and Investment Income and Expenditure 18,809 20,309 Subsidiaries (226) (71) Charitable Trusts (366) 15 Common Good (114) (39) Total Group CIES Financing and Investment Income and Expenditure 18,103 20,214 5. Group Balance Sheet – Investments 2023/24 2022/23 £'000 £'000 Council Investments 36,560 155,339 Charitable Trusts Investments 3,271 3,083 Common Good Investments 2,340 2,219 Subsidiaries 4,192 0 Total Group Investments 46,363 160,641 6. Group Balance Sheet – Short Term Debtors (net of provisions) 2023/24 2022/23 £'000 £'000 Net Debtors Balance - Note 28 to the Financial Statements 52,344 52,019 Subsidiary Debtors 2,428 2,156 Charitable Trust Debtors 381 316 Inter-company elimination (374) (288) Common Good Debtors 426 462 Inter-company elimination (410) (453) Total Group Debtors 54,795 54,212 100 | Perth and Kinross Council Annual Accounts 2023/24 Page 119 of 214
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101 | Perth and Kinross Council Annual Accounts 2023/24 7. Group Balance Sheet – Short Term Creditors 2023/24 2022/23 £'000 £'000 Net Creditors Balance - Note 29 to the Financial Statements (91,611) (96,104) Charitable Trust Creditors (9) (18) Inter-company elimination 374 288 Common Good Creditors (106) (134) Inter-company elimination 410 453 (90,942) (95,515) Subsidiary Creditors (3,875) (3,093) Total Group Creditors (94,817) (98,608) 8. Group Balance Sheet – Pension Liability 2023/24 2022/23 £'000 £'000 Net Pensions Liability at 31 March - Note 18 to the Financial Statements (20,748) (20,917) Subsidiaries (7) 0 Group Pension Liability at 31 March (20,755) (20,917) 9. Group Cash Flow Statement There has been no impact on the Group Cash Flow Statement from the inclusion of the Tayside Valuation Joint Board, Tayside Contracts Joint Committee, or the Perth and Kinross Integration Joint Board. Cash transactions between the Joint Boards and the Council are already included within the Council’s Cash Flow Statement and there were no dividend transactions. The impact of the inclusion of Live Active Leisure Ltd., Perth Theatre and Concert Hall Ltd. and Culture Perth and Kinross Ltd. within the Group Cash Flow Statement is to increase the movement in the net cash position by £5.273 million (2022/23, increase of £9.854 million). A cash increase of £3.149 million represents the Council’s 100% share of Live Active Leisure Ltd., a cash increase of £1.082 million represents the Council’s 100% share of Perth Theatre and Concert Hall Ltd and a cash increase of £1.042 million represents the Council’s 100% share of Culture Perth and Kinross Ltd. 10. Group Cash Flow – Investment Activities 2023/24 2022/23 £'000 £'000 Council Investing Activities 8,267 (22,818) Subsidiaries (4,039) (878) 4,228 (23,696) 11. Group Cash Flow – Financing Activities 2023/24 2022/23 £'000 £'000 Council Financing Activities 19,196 (13,223) Subsidiaries 0 (40) 19,196 (13,263) 101 | Perth and Kinross Council Annual Accounts 2023/24 Page 120 of 214
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102 | Perth and Kinross Council Annual Accounts 2023/24 Remuneration Report 1. Introduction The Local Authority Accounts (Scotland) Amendment Regulations 2011 (SSI No. 2011/64) require local authorities in Scotland to prepare a Remuneration Report as part of their annual statutory accounts. The disclosures within this report have been prepared in accordance with guidance issued by the Scottish Government on 13 May 2011 in Local Government Finance Circular No 8/2011 (subsequently updated). This guidance prescribes the content and format of the information presented within the Remuneration Report and specifies that remuneration disclosures are to be based upon taxable expenses and benefits. The disclosures are set out in accordance with proper accounting practice as prescribed by the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 and include prior year comparative figures. 2. Audit of Remuneration Report The Remuneration Report is a statement in its own right rather than a note to the accounts and certain disclosures within the report are subject to audit. All information disclosed in Tables 1 to 7 in this Remuneration Report has been audited by the Council’s appointed auditor, Audit Scotland. The other sections of the Remuneration Report have been reviewed by Audit Scotland to ensure that they are consistent with the financial statements. 3. Remuneration of Senior Councillors 3.1 The remuneration of Councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI No. 2007/183). The Regulations provide for the grading of Councillors for the purposes of remuneration arrangements, as either, the Leader of the Council, the Civic Head (Provost), Senior Councillors or Councillors. The Leader of the Council and the Civic Head cannot be the same person for the purposes of payment of remuneration. A Senior Councillor is a Councillor who holds a significant position of responsibility in the Council’s political management structure. 3.2 When determining the level of remuneration for Councillors, the Scottish Ministers considered the recommendations of the former Scottish Local Authority Remuneration Committee (SLARC). SLARC was an advisory Non-Departmental Public Body set up in 2005 to advise Scottish Ministers on the remuneration, allowances and expenses incurred by local authority councillors. The Committee was stood down in February 2013 however reconvened in April 2023 to undertake a one-off independent review of Councillor Remuneration to ensure terms and conditions reflect the responsibilities of a modern-day Councillor. Recommendations are currently being considered by the Scottish Ministers and COSLA. 3.3 The Regulations set out the salary that is to be paid to the Leader of the Council in accordance with bandings also set out in the Regulations. The Regulations also permit the Council to remunerate one Civic Head, which in the case of Perth and Kinross Council is the Provost and set out the maximum salary that may be paid to that Civic Head. For 2023/24 the maximum salary for the Leader of Perth and Kinross Council is £40,205 and the Council has agreed that the Civic Head be paid 75% of the salary of the Leader, which for 2023/24 is a maximum of £30,154. Please refer to Table 1. 3.4 In addition to the Leader of the Council and Civic Head, Regulations also set out the maximum number of senior councillors the Council may have; the maximum yearly amount that may be paid to a senior councillor (75% of the total yearly amount payable to the Leader of the Council) and the maximum yearly amount payable by the Council for all senior councillors. Perth and Kinross Council may have a maximum of 14 senior councillors with a maximum salary of £30,154 and a maximum yearly amount payable for all senior councillors of £351,771 in 2023/24 (excluding the Council Leader, Civic Head, Conveners and Vice Conveners of Joint Boards). The Council is able to exercise local flexibility in the determination of the precise number of senior councillors and their salary within these maximum limits. 3.5 The Regulations also set out the remuneration payable to councillors with the responsibility of a Convener or a Vice- Convener of a Joint Board such as Tayside Valuation Joint Board. The Regulations require the remuneration to be paid by the Council of which the Convener or Vice-Convener is a member. Joint Board Conveners and Vice-Conveners are considered to be senior councillors for remuneration disclosure purposes. In financial year 2023/24, one councillor from Perth and Kinross Council served as Convener or Vice Convener of a Joint Board. 3.6 During 2023/24 Perth and Kinross Council had 13 Senior Councillors and a Vice-Convener of a Joint Board. Details are provided in Table 1. Together with the Leader of the Council and the Provost, the total remuneration including taxable expenses paid to these Councillors was £444,520. The individual amounts payable to the Leader of the Council, the Provost, senior councillors of Perth and Kinross Council and the Vice-Convener of a Joint Board in 2023/24 are set out in Table 1. The Regulations also permit the Council to pay contributions or other payments as required to the Local Government Pension Scheme in respect of those Councillors who elect to become councillor members of the pension scheme. 102 | Perth and Kinross Council Annual Accounts 2023/24 Page 121 of 214
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103 | Perth and Kinross Council Annual Accounts 2023/24 Table 1: Remuneration of Senior Councillors, Conveners and Vice-Conveners of Joint Boards for Financial Year 2023/24 Name and Post Title Salary, Fees and Allowances 2023/24 £ Total Remuneration 2023/24 £ Total Remuneration 2022/23 £ Grant Laing Council Leader 40,205 40,205 35,853 Xander McDade Provost (Civic Head) 30,154 30,154 25,031 Peter Barrett Convener Licensing Board 24,648 24,648 17,841 Bob Brawn Convener Local Review Body 24,648 24,648 22,939 Dave Cuthbert Vice-Convener Tayside Valuation Joint Board 23,872 23,872 18,134 Stewart Donaldson Convener Finance and Resources Committee 27,729 27,729 23,018 Eric Drysdale Deputy Leader 27,729 27,729 25,497 John Duff Leader of Largest Opposition Party 27,729 27,729 25,497 David Illingworth Convener Audit and Risk Committee 27,729 27,729 23,018 Ian Massie Convener Planning and Placemaking Committee 27,729 27,729 23,018 Tom McEwan Convener Housing and Social Wellbeing Committee 27,729 27,729 23,018 Andrew Parrott Depute Provost Convener Environment, Infrastructure and Economic Development Committee (01/04/2023 – 05/12/2023) Please refer to Note (1) 26,784 26,784 23,018 John Rebbeck Convener Learning and Families Committee 27,729 27,729 23,018 Colin Stewart Convener Scrutiny and Performance Committee 27,729 27,729 23,018 Richard Watters Convener Climate Change and Sustainability Committee 27,729 27,729 23,018 Michael Williamson Convener Licensing Committee 24,648 24,648 20,460 TOTAL 444,520 444,520 375,396 Notes: (1) Depute Provost Andrew Parrott was the Convener of the Environment, Infrastructure and Economic Development Committee up until 5 December 2023. The FTE Salary was £27,729. From 6 December 2023 the FTE Salary payable was £24,648. Councillor Drysdale was the Convenor of this Committee from 6 December 2023 until 5 March 2024 for which he received no additional remuneration as he was already a senior councillor. The Committee is no longer active. (2) After adjusting for the salaries of the Leader of the Council, the Civic Head (Provost) and the Vice-Convener of Tayside Valuation Joint Board, the total salaries paid to Senior Councillors in 2023/24 was £350,289 which compares with the maximum under Regulations of £351,771. 3.7 The arrangements for political decision-making structures within Perth and Kinross Council as at 31 March 2024, which encompassed the salaries of all elected members including the Council Leader, Civic Head and Senior Councillors, were agreed at the meeting of the Council on 25 May 2022 (Report No. 22/110 refers) and are available on the Council’s website. 103 | Perth and Kinross Council Annual Accounts 2023/24 Page 122 of 214
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104 | Perth and Kinross Council Annual Accounts 2023/24 3.8 The Council paid the following salaries and expenses to all Councillors (including those listed in Table 1 above) in financial year 2023/24: Table 2: Remuneration Paid to Councillors 1 April 2023 to 31 March 2024 2023/24 2022/23 Type of Remuneration £ £ Salaries 926,897 893,775 Allowances and Expenses 35,499 28,754 Total 962,396 922,529 The annual return of Councillors’ salaries and expenses for 2023/24 is available for any member of the public to view at Culture Perth and Kinross Ltd. libraries and Council local area offices during normal working hours and is also available on the Council’s website at Councillors Expenses. 4. Remuneration of Senior Employees 4.1 The Council is required to publish the remuneration of senior employees as defined by the disclosure regulations. Senior employees are defined with reference to their management authority; to the political restriction placed upon their post under section 2(1) (a), (b) or (c) of the Local Government Housing Act 1989 and with reference to their reporting relationship to the Council’s ‘Head of Paid Service’ or Chief Executive. The disclosure requirements also include any employee whose annual remuneration is £150,000 or more. One employee of Perth and Kinross Council was remunerated at this level in 2023/24 (Chief Executive). 4.2 The application of the disclosure regulations in relation to the management structure of Perth and Kinross Council defines the following post-holders as senior employees in 2023/24: • The Chief Executive as statutory head of paid service. • The Strategic Lead of Legal and Governance Services as the Council’s statutory monitoring officer; the Chief Finance Officer as the Council’s proper officer for financial administration (previously the Head of Finance) and the Chief Officer of the Perth and Kinross Health and Social Care Partnership as the Council’s statutory Chief Social Work Officer. • The following officers are directly accountable to the Council’s head of paid service and/or are directly accountable to the Council or any committee or sub-committee: o Executive Director of Communities o Chief Education Officer o Director of Strategy, People and Resources o Director of Economy, Place and Learning o Chief Operating Officer o Chief Officer of the Perth and Kinross Health and Social Care Partnership 4.3 The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services sets the salaries for the Chief Executives of Scottish local authorities. 104 | Perth and Kinross Council Annual Accounts 2023/24 Page 123 of 214
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105 | Perth and Kinross Council Annual Accounts 2023/24 4.4 The remuneration of senior employees of Perth and Kinross Council for 2023/24 is detailed in Table 3 below: Table 3: Remuneration of Senior Employees of the Council for Financial Year 2023/24 (Job titles as at 31 March 2024) Notes: (1) The substantive salary for the Chief Executive is laid down in COSLA Circular 11.23b. (2) Remuneration includes non-taxable Relocation Expenses of £4,369. The Full Year Equivalent Salary for the post of Director of Economy, Place and Learning was £135,517. (3) Arun Singh was appointed Chief Social Work Officer from 29 January 2024, taking over this role from Jacqueline Pepper at that date. The Full Year Equivalent Salary for the post of Chief Social Work Officer is £105,847. 4.5 Election fees (where applicable) are included with senior employee salaries. No other taxable benefits or bonuses were received by the above-named senior employees of Perth and Kinross Council in 2023/24. Name and Post Title Salary, Fees and Allowances 2023/24 £ Total Remuneration 2023/24 £ Total Remuneration 2022/23 £ Thomas Glen Chief Executive (Note 1) 154,609 154,609 148,054 Clare Mailer Director of Strategy, People and Resources 124,797 124,797 73,126 Jacqueline Pepper Chief Officer, Perth and Kinross Health and Social Care Partnership and Chief Social Work Officer 135,517 135,517 127,786 Barbara Renton Executive Director of Communities 140,050 140,050 130,631 Alison Williams Director of Economy, Place and Learning (from 05/02/2024) (Note 2) 25,880 25,880 n/a Sheena Devlin Chief Education Officer 135,517 135,517 127,956 Arun Singh Chief Social Work Officer (from 29/01/2024) (Note 3) 18,728 18,728 0 Karen Donaldson Chief Operating Officer 124,639 124,639 118,068 Stewart MacKenzie Head of Finance 103,354 103,354 97,458 Lisa Simpson Strategic Lead – Legal and Governance 107,647 107,647 101,816 TOTAL 1,070,738 1,070,738 924,895 105 | Perth and Kinross Council Annual Accounts 2023/24 Page 124 of 214
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106 | Perth and Kinross Council Annual Accounts 2023/24 4.6 The remuneration paid to the Chief Executive of each of the Council’s subsidiary bodies for 2023/24 is detailed in Table 3A below: Table 3A: Remuneration of Council’s Subsidiary Bodies Senior Employees for Financial Year 2023/24 Notes: (1) Nick Williams left Perth Theatre and Concert Hall Limited on 31 July 2023. FTE Salary was £73,738. (2) Christopher Glasgow was appointed Interim Chief Executive on 1 August 2023. FTE Salary was £63,000. From 7 November 2023 he was appointed permanently into the role. FTE Salary was increased to £68,000 from this date. 5. General Disclosure of Remuneration by Pay Band 5.1 In accordance with the disclosure regulations, Table 4 below details the number of Perth and Kinross Council employees (including teachers) whose annual remuneration in 2023/24 was £50,000 or more, including senior employees subject to individual disclosure in section 4 of this report. The information is presented, as required, in bandings of £5,000. Table 4: Remuneration of Employees by Pay Band for 2023/24 Remuneration Bands Number of Employees 2023/24 2022/23 £50,000-£54,999 566 233 £55,000-£59,999 132 88 £60,000-£64,999 123 61 £65,000-£69,999 81 41 £70,000-£74,999 62 15 £75,000-£79,999 22 0 £80,000-£84,999 14 7 £85,000-£89,999 7 3 £90,000-£94,999 2 11 £95,000-£99,999 13 2 £100,000-£104,999 4 2 £105,000-£109,999 4 0 £110,000-£114,999 0 0 £115,000-£119,999 0 1 £120,000-£124,999 2 0 £125,000-£129,999 0 3 £130,000-£134,999 1 0 £135,000-£139,999 2 0 £140,000-£144,999 0 0 £145,000-£149,999 0 1 £150,000-£154,999 1 0 Total 1,036 468 (See Notes) Name and Post Title Salary, Fees and Allowances 2023/24 £ Total Remuneration 2023/24 £ Total Remuneration 2022/23 £ Paul Cromwell Live Active Leisure – Chief Executive 85,586 85,586 81,152 Helen Smout Culture Perth and Kinross Limited – Chief Executive 72,000 72,000 66,391 Nick Williams Perth Theatre and Concert Hall Limited – Chief Executive. (Note 1) 28,798 28,798 70,902 Christopher Glasgow Perth Theatre and Concert Hall Limited – Chief Executive. (Note 2) 44,123 44,123 n/a TOTAL 230,507 230,507 218,445 106 | Perth and Kinross Council Annual Accounts 2023/24 Page 125 of 214
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107 | Perth and Kinross Council Annual Accounts 2023/24 Notes: As stated in the audited 2022/23 Annual Accounts, due to the delay in concluding the teachers and associated professionals 2022/23 pay award, the increase in remuneration was not applied until April 2023 and therefore was not reflected in the actual salary received up to 31 March 2023. The increase in numbers are mainly due to fact that 445 teaching staff are now falling into the £50,000 - £54,999 band following the application of the 2022/23 and 2023/2024 pay award, which includes backdated arrears for the period 1 April 2022 to 31 March 2023. Table 5: The number of Exit Packages with Total Cost per band and Total Cost of Compulsory and Other Redundancies (a) Exit package cost band (including special payments) (b) Number of compulsory redundancies (c) Number of other departures agreed (d) Total number of exit packages by cost band (b) + (c) (e) Total cost of exit packages in each band 2023/24 2022/23 2023/24 2022/23 2023/24 2022/23 2023/24 £’000 2022/23 £’000 £0 - £20,000 1 2 14 5 15 7 126 46 £20,001 - £40,000 0 0 2 1 2 1 79 22 £40,001 - £60,000 0 0 1 0 1 0 53 0 £60,001 - £80,000 0 0 1 0 1 0 72 0 £80,001 - £100,000 0 0 3 0 3 0 276 0 Over £100,000 0 0 3 0 3 0 905 0 Total 1 2 24 6 25 8 1,511 68 5.2 The costs included within Table 5 are all non-recurring and include payments to individual officers and to the relevant Pension Fund. 5.3 All of the individual exit packages included within Table 5 have been subject to a full business case or legal agreement outlining the implications for the Council or are related to officers who have temporary contracts, and their contract has ceased but they are entitled to a redundancy payment due to their length of employment. In terms of the financial assessment for each business case, the maximum payback period is up to five years. The departure of individuals has delivered significant recurring savings to the Council in the past and also facilitated the delivery of an ambitious and challenging transformation / modernisation programme. 6. Remuneration by Subsidiary Bodies of Perth and Kinross Council 6.1 Councillors and senior employees of Perth and Kinross Council serve as board members, officials and technical advisors to subsidiary bodies of the Council. In 2023/24, the Strategic Lead – Legal and Governance served as a proper officer to the Tayside and Central Scotland Transport Partnership (TACTRAN). No remuneration was paid to councillors or senior employees of Perth and Kinross Council by subsidiary bodies of the Council in 2023/24. 7. Disclosure of Pension Benefits 7.1 The disclosure regulations require the separate disclosure of accrued pension benefits for senior councillors and senior employees of Perth and Kinross Council. Pension Benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS). Councillors have only been eligible to join this scheme since May 2007. 7.2 Councillor’s pension benefits are based on career average pay. The councillor’s pay for each year or part year ending 31 March (other than the pay in the final year commencing 1 April) is increased by the increase in the cost of living as measured by the appropriate index between the end of that year and the last day of the month in which their membership of the scheme ends. The total of the revalued pay is then divided by the period of membership to calculate the career average pay. This is the value used to calculate the pension benefits. 7.3 From 1 April 2015 a career average scheme was implemented for local government employees. This means that pension is built up based on the pensionable pay for each year. The benefit is added to the employee’s pension account plus inflation increases. The scheme’s normal retirement age for both councillors and employees will vary dependant on age and length of pensionable service. 7.4 From 1 April 2009 a tiered contribution scheme was introduced with contributions from scheme members being based on how much pay falls into each tier. Prior to 2009 contribution rates were set at 6% for all non-manual employees. 107 | Perth and Kinross Council Annual Accounts 2023/24 Page 126 of 214
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108 | Perth and Kinross Council Annual Accounts 2023/24 Tiered Pension Contribution Rates for Local Government Pension Scheme Members in 2023/24 Actual Pensionable pay Contribution Rate 2023/24 On earnings up to and including £25,300 5.5% On earnings above £25,301 and up to £31,000 7.25% On earnings above £31,001 and up to £42,500 8.5% On earnings above £42,501 and up to £56,600 9.5% On earnings of £56,601 and above 12% 7.5 Pensionable Pay includes salary, plus any contractual elements of pay such as shift payment, night working payment, standby and the monetary value of any accommodation or other allowances in kind pertaining to employment. 7.6 Under the scheme there is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. The pension is built up based on pensionable pay in the year with an accrual rate of 1/49th added to the pension account. (Prior to 2015 the accrual rate was 1/60th of final pensionable salary and years of pensionable service. Prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service). 7.7 The value of accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a pension on their retirement without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation. The pension figures shown relate to the benefits that the person has accrued as a consequence of their local government service, and not just their current appointment. 7.8 Pension Entitlements of Senior Councillors The pension entitlements of senior councillors of Perth and Kinross Council for the year to 31 March 2024 are shown in Table 6 below, together with the contribution made by the Council to each senior councillor’s pension during the year. Table 6: Pension Entitlements of Senior Councillors for Financial Year 2023/24 Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2023/24 £ 2022/23 £ as at 31/03/2024 £’000 as at 31/03/2023 £’000 Difference £’000 Grant Laing Council Leader 6,835 6,268 Pension Lump Sum 6 0 5 0 1 0 Xander McDade Provost (Civic Head) 5,126 4,742 Pension Lump Sum 3 0 2 0 1 0 Peter Barrett Convener Licensing Board 4,190 3,888 Pension Lump Sum 8 2 7 2 1 0 Bob Brawn Convener Local Review Board 4,190 4,073 Pension Lump Sum 4 0 3 0 1 0 Dave Cuthbert Vice-Convener Tayside Valuation Joint Board 4,058 3,493 Pension Lump Sum 1 0 0 0 1 0 Stewart Donaldson Convener Finance and Resources Committee 4,714 4,400 Pension Lump Sum 4 0 3 0 1 0 Eric Drysdale Deputy Leader 4,714 4,508 Pension Lump Sum 4 0 3 0 1 0 John Duff Leader of Largest Opposition Party 4,714 4,508 Pension Lump Sum 3 0 2 0 1 0 David Illingworth Convener Audit and Risk Committee 4,714 4,400 Pension Lump Sum 3 0 2 0 1 0 Ian Massie Convener Planning and Placemaking Committee 4,714 4,400 Pension Lump Sum 2 0 1 0 1 0 Tom McEwan Convener Housing and Social Wellbeing Committee 4,714 4,400 Pension Lump Sum 3 0 2 0 1 0 Andrew Parrott Convener Environment, Infrastructure and Economic Development Committee 4,553 4,400 Pension Lump Sum 4 0 3 0 1 0 John Rebbeck Convener Learnings and Families Committee 4,714 4,400 Pension Lump Sum 3 0 2 0 1 0 108 | Perth and Kinross Council Annual Accounts 2023/24 Page 127 of 214
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109 | Perth and Kinross Council Annual Accounts 2023/24 Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2023/24 £ 2022/23 £ as at 31/03/2024 £’000 as at 31/03/2023 £’000 Difference £’000 Colin Stewart Convener Scrutiny and Performance Committee 4,714 4,400 Pension Lump Sum 3 0 3 0 0 0 Richard Watters Convener Climate Change and Sustainability Committee 4,714 4,400 Pension Lump Sum 3 0 2 0 1 0 Michael Williamson Convener Licensing Committee 4,190 3,965 Pension Lump Sum 5 0 4 0 1 0 TOTAL 75,568 70,645 Notes: (1) The in-year employer pension contributions shown are based on all pensionable earnings for financial year 2023/24, not just current appointments. (2) The pension benefits shown relate to the benefits that the individual has accrued as a consequence of their total local government service, including any service with a Council subsidiary body, and not just their current appointment. Councillors have only been eligible to join the Local Government Pension Scheme since May 2007. 7.9 Table 7: Pension Entitlements of Senior Employees of the Council for Financial Year 2023/24 (Post titles as at 31 March 2024) Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2023/24 £ 2023/24 Strain on Fund (Note 4) £ 2022/23 £ as at 31/03/2024 £’000 as at 31/03/2023 £’000 Difference £’000 Thomas Glen Chief Executive (Note 3) 26,283 0 25,169 Pension Lump Sum 77 0 4 0 73 0 Clare Mailer Director of Strategy, People and Resources 21,215 0 17,599 Pension Lump Sum 53 67 43 55 10 12 Jacqueline Pepper Chief Officer, Perth and Kinross Health and Social Care Partnership and Chief Social Work Officer 23,038 0 21,724 Pension Lump Sum 55 35 44 33 11 2 Barbara Renton Executive Director of Communities 23,038 93,404 21,724 Pension Lump Sum 40 9 35 9 5 0 Alison Williams Director Economy, Place and Learning (from 05/02/2024) 3,657 0 n/a Pension Lump Sum 0 0 n/a n/a 0 0 Sheena Devlin Chief Education Officer 22,329 0 21,724 Pension Lump Sum 78 125 72 122 6 3 Karen Donaldson Chief Operating Officer 21,214 175,115 20,004 Pension Lump Sum 64 100 58 95 6 5 Arun Singh Chief Social Work Officer (from 29/01/2024) 3,184 0 0 Pension Lump Sum 0 0 0 0 0 0 Stewart MacKenzie Head of Finance 17,570 297,151 16,568 Pension Lump Sum 53 72 48 68 5 4 Lisa Simpson Strategic Lead – Legal and Governance 18,208 0 17,256 Pension Lump Sum 20 0 16 0 4 0 TOTAL 179,736 565,670 161,768 109 | Perth and Kinross Council Annual Accounts 2023/24 Page 128 of 214
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110 | Perth and Kinross Council Annual Accounts 2023/24 Notes: (1) The in-year employer pension contributions shown are based on all pensionable earnings for financial year 2023/24, not just the current appointment. (2) Accrued pension benefits include total benefits accumulated during all membership of the Local Government Pension Scheme and not just service in their current role. (3) Transfer-in of service completed 2023/24 for Chief Executive Thomas Glen. (4) These are additional in-year pension contributions, representing strain costs being the amount the Council is required to pay to the pension fund. This is chargeable when an employee retires before the assumed retirement age, that would otherwise result in a shortfall in contributions up to the assumed retirement age. 7.10 Pension Entitlements – Council’s Subsidiary Bodies The pension entitlements of the Chief Executives of each of the Council’s subsidiary bodies for the year to 31 March 2024 are show in Table 7A below, together with the contribution made to each Senior Employees’ pension during the year. Table 7A: Pension Entitlements of Senior Employees of each of the Council’s Subsidiary Bodies for Financial Year 2023/24 Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2023/24 £ 2022/23 £ as at 31/03/2024 £’000 as at 31/03/2023 £’000 Difference £’000 Paul Cromwell Live Active Leisure – Chief Executive 14,550 13,796 Pension Lump Sum 27 13 24 12 3 1 Helen Smout Culture Perth and Kinross Limited - Chief Executive 12,240 11,287 Pension Lump Sum 29 26 25 24 4 2 Nick Williams Perth Theatre and Concert Hall Limited – Chief Executive (Note 3) 4,179 12,053 Pension Lump Sum 6 0 5 0 1 0 Christopher Glasgow Perth Theatre and Concert Hall Limited – Chief Executive (Note 4) 10,259 n/a Pension Lump Sum 3 0 n/a n/a 3 0 TOTAL 41,228 37,136 Notes: (1) The in-year employer pension contributions shown are based on all pensionable earnings for financial year 2023/24, not just the current appointment. (2) Accrued pension benefits include total benefits accumulated during all membership of the Local Government Pension Scheme and not just service in their current role. (3) Nick Williams left Perth Theatre and Concert Hall Limited on 31 July 2023. (4) Christopher Glasgow was promoted to Interim Chief Executive on 1 August 2023. From 7 November 2023 he was appointed permanently into the role. 8. Trade Union (Facility Time Publication Requirements) Regulations 2017 8.1 The Council is required to report from 1 April 2017 a range of information on facility time made available to its employees who are trade union representatives. This link provides the information: Trade Union Statutory Return 2023/24. Signed: Thomas Glen Councillor Grant Laing Chief Executive Leader of the Council Perth and Kinross Council Date: Perth and Kinross Council Date: 110 | Perth and Kinross Council Annual Accounts 2023/24 Page 129 of 214
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111 | Perth and Kinross Council Annual Accounts 2023/24 Glossary ACCOUNTING PERIOD The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the Balance Sheet date. ACCRUALS Sums included in the final accounts to recognise revenue and capital income and expenditure earned or incurred in the financial year, but for which actual payment had not been received or made as at 31 March. BEACON METHOD (ADJUSTED VACANT POSSESSION METHOD) Based on the (vacant possession) market value of the asset which is the adjusted to reflect the assets’ use for social housing with a sitting tenant. CAA Capital Adjustment Account CAPITAL EXPENDITURE Expenditure on the acquisition of a fixed asset, which will be used in providing services beyond the current accounting period, or expenditure which adds to and not merely maintains the value of an existing fixed asset. CAPITAL FINANCING Funds raised to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing, usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves. CAPITAL RECEIPT The proceeds from the disposal of land or other fixed assets. Proportions of capital receipts can be used to finance new capital expenditure, within rules set down by the Government but they cannot be used to finance revenue expenditure. CONTINGENT LIABILITY A contingent liability is either: • A possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control; or • A present obligation arising from past events where it is not probable that a transfer of economic benefits will be required, or the amount of the obligation cannot be measured with sufficient reliability. CORPORATE and DEMOCRATIC CORE The corporate and democratic core comprises all the activities that local authorities engage in specifically because they are elected, multi-purpose authorities. The cost of these activities are thus over and above those which would be incurred by a series of independent single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. CREDITOR Amount owed by the Council for work done, goods received or services rendered within the accounting period, but for which payment has not been made by the Council by the end of that accounting period. CRR Capital Receipts Reserve CURRENT VALUE The measurement of operational assets used for the delivery of Council services. Property, plant and equipment is measured on the basis of service potential using existing use value for assets where an active market exists, existing use value-social housing for operational Council dwellings or depreciated replacement cost for assets where there is no market and/or the asset is specialised. DBFM Design Build Finance Maintain - A Non-Profit Distribution (NPD) model to Design, Build, Finance, and Maintain infrastructure which requires the private sector to take a fixed rate of return. The DBFM agreement provides the Council with the right to receive services in return for an annual payment (unitary charge) which comprises the costs of construction, finance, and maintenance, and for the provision of any agreed additional services, for the duration of the agreement. DEBTOR Amount owed to the Council for works done, goods received or services rendered within the accounting period, but for which payment has not been received by the Council by the end of that period. 111 | Perth and Kinross Council Annual Accounts 2023/24 Page 130 of 214
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112 | Perth and Kinross Council Annual Accounts 2023/24 EXISTING USE VALUE FOR SOCIAL HOUSING (EUV-SH) Is the estimated amount for which a property should exchange on the date of valuation, between a willing buyer and a willing seller in an arm’s length transaction. FAIR VALUE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FIAA Financial Instruments Adjustment Account IMPAIRMENT A reduction in the value of a fixed asset to below its carrying amount on the Balance Sheet. MATERIALITY The concept that the Annual Accounts should include all amounts which, if omitted, or mis-stated, could be expected to lead to a distortion of the financial statements and ultimately mislead a user of the accounts. NET BOOK VALUE The amount at which fixed assets are included in the Balance Sheet, i.e. their historical costs or current value less the cumulative amounts provided for depreciation. NON-DISTRIBUTED COSTS These are overheads which cannot be directly allocated to a specific area of activity and as such are not apportioned to services. PPE Property, Plant and Equipment PRIOR YEAR ADJUSTMENT Material adjustments applicable to previous years arising from changes in accounting policies or from the correction of fundamental errors. This does not include normal recurring corrections or adjustments of accounting estimates made in prior years. PROVISION An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur but the amounts or dates of when they will arise are uncertain. PUBLIC WORKS LOAN BOARD (PWLB) An agency of HM Treasury, which provides loans mainly for capital purposes of one year or more to authorities at interest rates of up to 2% above those at which the UK Government can itself borrow at. REVENUE EXPENDITURE The day-to-day expenses of providing services. SERVICE CONCESSION ARRANGEMENTS Service concession (PPP and PFI) arrangements involve the operator undertaking an obligation to provide assets (and related services) that are used to provide services to the public (irrespective of who provides those services to the public). 112 | Perth and Kinross Council Annual Accounts 2023/24 Page 131 of 214
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Rachel Browne, Audit Director Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN Finance and Business Support Strategic Lead – Scott Walker 2 High Street, Perth, PH1 5PH Tel 01738 475000 www.pkc.gov.uk Contact Scott Walker Tel 01738 475515 Email SWWalker@pkc.gov.uk Our ref SW/KD Your ref Date 26 November 2024 Dear Rachel Perth and Kinross Council Annual Accounts 2023/24 1. This representation letter is provided about your audit of the annual accounts of Perth and Kinross Council and its group (hereafter referred to as Perth and Kinross Council), for the year ended 31 March 2024 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view and have been properly prepared, and for expressing other opinions on the Remuneration Report, Management Commentary, and Annual Governance Statement. 2. I confirm to the best of my knowledge and belief and having made appropriate enquiries of the Chief Executive and Executive and Strategic Leadership Teams, the following representations given to you in connection with your audit of Perth and Kinross Council’s annual accounts for the year ended 31 March 2024. General 3. Perth and Kinross Council and I have fulfilled our statutory responsibilities for the preparation of the 2023/24 annual accounts. All the accounting records, documentation, and other matters which I am aware are relevant to the preparation of the annual accounts have been made available to you for the purposes of your audit. All transactions undertaken by Perth and Kinross Council have been recorded in the accounting records and are properly reflected in the financial statements. 4. I confirm that the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. I am not aware of any uncorrected misstatements other than those reported by you. Financial Reporting Framework 5. The annual accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 (2023/24 Code), and the Delayed Office Opening for Employee Training This office will be closed from 8.45 am - 11.00 am on the first Thursday of each month. 4 Page 133 of 214
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requirements of the Local Government (Scotland) Act 1973, the Local Government in Scotland Act 2003, and The Local Authority Accounts (Scotland) Regulations 2014. 6. In accordance with the 2014 Regulations, I have ensured that the financial statements give a true and fair view of the financial position of the Perth and Kinross Council and its group at 31 March 2024 and the transactions for 2023/24. Accounting Policies and Estimates 7. All material accounting policies applied are as shown in the notes to the financial statements. The accounting policies are determined by the 2023/24 Code where applicable. All accounting policies applied are appropriate to Perth and Kinross Council’s circumstances and have been consistently applied. 8. The significant assumptions used in making accounting estimates are reasonable and properly reflected in the financial statements. Judgements used in making estimates have been based on the latest available, reliable information. Estimates have been revised where there are changes in the circumstances on which the original estimate was based or as a result of new information or experience. Going Concern Basis of Accounting 9. I have assessed Perth and Kinross Council’s ability to continue to use the going concern basis of accounting and have concluded that it is appropriate. I am not aware of any material uncertainties that may cast significant doubt on Perth and Kinross Council’s ability to continue to adopt the going concern basis of accounting. Assets 10. Where a rolling programme of asset valuations has been used, I have satisfied myself that the carrying amount of assets at 31 March 2024 does not differ materially from that which would be determined if a revaluation had been carried out at that date. 11. I carried out an assessment at 31 March 2024 as to whether there is any indication that an asset may be impaired and have recognised any impairment losses identified. 12. I have provided you with all information of which I am aware regarding any valuation exercises carried out after 31 March 2024. 13. There are no plans or intentions that are likely to affect the carrying value or classification of the assets recognised within the financial statements. 14. Owned assets are free from any lien, encumbrance or charge except as disclosed in the financial statements. Liabilities 15. All liabilities at 31 March 2024 of which I am aware have been reported in the financial statements. Page 134 of 214
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16. Provisions have been recognised in the financial statements for all liabilities of uncertain timing or amount at 31 March 2024 of which I am aware where the conditions specified in the 2023/24 Code have been met. The amount recognised as a provision is the best estimate of the expenditure likely to be required to settle the obligation at 31 March 2024. Where the effect of the time value of money is material, the amount of the provision has been discounted to the present value of the expected payments. 17. Provisions recognised in previous years have been reviewed and adjusted, where appropriate, to reflect the best estimate at 31 March 2024 or to reflect material changes in the assumptions underlying the calculations of the cash flows. 18. The accrual recognised in the financial statements for annual leave untaken by 31 March 2024 has been estimated on a reasonable basis. 19. The pension assumptions made by the actuary in the IAS 19 report for Perth and Kinross Council have been reviewed and I confirm that they are consistent with management's own view. 20. There are no plans or intentions that are likely to affect the carrying value or classification of the liabilities recognised in the financial statements. Contingent Liabilities 21. There are no significant contingent liabilities, other than those disclosed in Note 38 to the financial statements, arising either under formal agreement or through formal undertakings requiring disclosure in the accounts. All known contingent liabilities have been fully and properly disclosed in accordance with the 2023/24 Code and IAS 37. Litigation and Claims 22. All known actual or possible legal claims have been disclosed to you and have been accounted for and disclosed in the financial statements in accordance with the 2023/24 Code. Fraud 23. I understand my responsibilities for the design, implementation, and maintenance of internal control to prevent fraud and I believe I have appropriately fulfilled those responsibilities. 24. I have provided you with all information in relation to: my assessment of the risk that the financial statements may be materially misstated because of fraud any allegations of fraud or suspected fraud affecting the financial statements, and fraud or suspected fraud that I am aware of involving management, employees who have a significant role in internal control, or others that could have a material effect on the financial statements. Page 135 of 214
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Laws and Regulations 25. I have disclosed to you all known instances of non-compliance or suspected non- compliance with laws and regulations whose effects should be considered when preparing financial statements. Related Party Transactions 26. All material transactions with related parties have been appropriately accounted for and disclosed in the financial statements in accordance with the 2023/24 Code. I have made available to you the identity of all Perth and Kinross Council’s related parties and all the related party relationships and transactions of which I am aware. Remuneration Report 27. The Remuneration Report has been prepared in accordance with the Local Authority Accounts (Scotland) Regulations 2014, and all required information of which I am aware has been provided to you. Management Commentary 28. I confirm that the Management Commentary has been prepared in accordance with the statutory guidance and the information is consistent with the financial statements. Corporate Governance 29. I confirm that Perth and Kinross Council has undertaken a review of the system of internal control during 2023/24 to establish the extent to which it complies with proper practices set out in the Delivering Good Governance in Local Government: Framework 2016. I have disclosed to you all deficiencies in internal control identified from this review or of which I am otherwise aware. 30. I confirm that the Annual Governance Statement has been prepared in accordance with the Delivering Good Governance in Local Government: Framework 2016 and the information is consistent with the financial statements. There have been no changes in the corporate governance arrangements or issues identified since 31 March 2024 which require to be reflected. Group Accounts 31. I have identified all the other entities in which Perth and Kinross Council has a material interest and have classified and accounted for them in accordance with the 2023/24 Code. Any significant issues with the financial statements of group entities, including any qualified audit opinions, have been advised to you. Common Good Fund 32. I confirm, to the best of my ability, that all material common good assets have been identified and correctly accounted for within the common good fund financial statements and where appropriate, common good assets in use by the council have been assessed and accounted for in line with IAS 17. Page 136 of 214
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Events Subsequent to the Date of the Balance Sheet 33. All events subsequent to 31 March 2024 for which the 2023/24 Code requires adjustment or disclosure have been adjusted or disclosed. Yours sincerely Scott Walker Chief Finance Officer Page 137 of 214
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Prepared for the Members of Perth and Kinross Council and the Controller of Audit 2 December 2024 Perth and Kinross Council 2023/24 Annual Audit Report – DRAFT 4 Page 139 of 214
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Perth and Kinross Council 2023/24 Annual Audit Report – DRAFT | 2 Contents Key messages 3 Introduction 5 1. Audit of 2023/24 annual accounts 6 2. Financial management 15 3. Financial sustainability 20 4. Best Value 27 5. Vision, leadership, governance and use of resources 31 Appendix. Action plan 2023/24 39 Page 140 of 214
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Key messages | 3 Key messages 2023/24 annual accounts 1 Audit opinions on the annual accounts of the council, its group and the connected charities are unmodified. Financial management 2 The council’s budget setting and financial management arrangements operated effectively during 2023/24. 3 Excluding the one-off impact of service concession flexibility, the council reported a £15.1 million (3.2 per cent) deficit on general fund services for 2023/24 which was £20.2 million less than planned. The Housing Revenue Account balance reduced by £0.4 million during 2023/24 due to the planned use of reserves (£0.3 million) and additional one-off costs identified during the year (£0.1 million). 4 The council delivered 76 per cent of its capital programme in 2023/24. External debt levels remained relatively static during the year as the council had taken advantage of low borrowing rates in previous years and these loans have been used to fund capital expenditure. 5 Key financial controls operated effectively during 2023/24. Financial sustainability 6 The council’s general fund balance increased in the year due to the application of the service concession financial flexibility accounting arrangements. The council has used this to support its 2023/24 outturn and plans to use the remainder to support its budgets through to 2027/28. 7 The 2024/25 budget included a planned use of reserves of £13.8 million, but subsequent amendments increased this to £28.1 million. 8 The medium-term financial plan has not been updated since October 2023 and will be reviewed following publication of the Scottish Government’s Medium-Term Financial Strategy. The council has yet to develop its revenue financial planning beyond six years as recommended in the 2019 Best Value Assurance Report. Page 141 of 214
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Key messages | 4 9 The council’s capital investment programme totals £674 million over the next five years and a Corporate Asset Management Framework has been approved to inform investment decision-making. Following an updated options appraisal, the PH2O project, which was paused last year due to inflationary pressures, is going ahead on an alternative site. 10 The Transformation and Change Programme is progressing in line with the planned timetable. Best Value 11 Our Best Value thematic review of workforce innovation confirmed that the council has a workforce plan to support the delivery of its strategic objectives but has yet to set targets against which to measure and report on progress. 12 Two of the 2019 Best Value Assurance Report recommendations remain outstanding and there has been limited reporting of progress to members or the Executive Leadership Team. Vision, leadership, governance, and use of resources 13 The council revised its service and senior leadership structure during the year as part of its Transformation and Change Programme. 14 The council has appropriate governance arrangements in place for delivery of its plans. 15 In line with national trends, there has been an overall decline in LGBF performance indicators over the last 5 years, although performance relative to other councils is largely unchanged. KPI trend analysis suggests improvement in performance compared to last year. 16 The council is compliant with the Accounts Commission’s SPI direction with comprehensive performance information available via ‘PK Performs.’ Page 142 of 214
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Introduction | 5 Introduction 1. This report summarises the findings from the 2023/24 annual audit of Perth and Kinross Council (the council) and will be published on Audit Scotland’s website: website www.audit-scotland.gov.uk. 2. The scope of the audit was set out in an annual audit plan presented to the March 2024 meeting of the Audit and Risk Committee. This annual audit report comprises significant matters arising from the audit of the council’s annual accounts and conclusions on the wider scope areas set out in the Code of Audit Practice. It also provides a summary of the conclusions from our Best Value thematic report as presented to the September 2024 meeting of the Audit and Risk Committee. 3. We would like to thank elected members, management, and staff, particularly those in finance, for their cooperation and assistance during the audit. Responsibilities and reporting 4. Perth and Kinross Council has primary responsibility for ensuring the proper financial stewardship of public funds. This includes preparing annual accounts that are in accordance with proper accounting practices. The council is also responsible for compliance with legislation and putting arrangements in place for governance and propriety that enable it to successfully deliver its objectives. 5. The responsibilities of the independent auditor are established by the Local Government (Scotland) Act 1973, the Code of Audit Practice 2021 and supplementary guidance, and International Standards on Auditing in the UK. 6. This report contains an agreed action plan at the Appendix setting out specific recommendations, responsible officers, and dates for implementation. Weaknesses or risks identified are only those which have come to our attention during our audit work and may not be all that exist. Communicating these does not absolve management of responsibility to address the issues raised and to maintain adequate systems of control. Auditor independence 7. We confirm that we comply with the Financial Reporting Council’s Ethical Standard and that we have not undertaken any non-audit related services. The 2023/24 audit fee of £356,400 (£350,000 for the council and £6,400 for the charitable trusts), as set out in our Annual Audit Plan, remains unchanged. We are not aware of any relationships that could compromise our objectivity or independence. Page 143 of 214
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1. Audit of 2023/24 annual accounts | 6 1. Audit of 2023/24 annual accounts Public bodies are required to prepare annual accounts comprising financial statements and other related reports. These are the principal means of accounting for the stewardship of public funds. Main judgements Audit opinions on the annual accounts of the council, its group and the connected charities are unmodified. Audit opinions on the annual accounts are unmodified 8. The independent auditor’s report included the following audit opinions on the annual accounts: • the financial statements give a true and fair view and were properly prepared in accordance with the financial reporting framework • the audited part of the remuneration report was prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. • the management commentary and annual governance statement were consistent with the financial statements and properly prepared in accordance with the applicable requirements. The annual accounts were certified on 2 December 2024, in line with the agreed audit timetable 9. We received the unaudited annual accounts on 26 June 2024, in line with the agreed audit timetable. The accounts presented for audit were of a good standard, and the associated working papers had improved in response to our prior year audit recommendation (Appendix, b/f Recommendation 3). 10. Management and finance staff provided good support to the team during the audit process. We continue to work towards recovery of reporting timescales and are on track to restore these by the end of the current appointment round. Page 144 of 214
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1. Audit of 2023/24 annual accounts | 7 Our audit approach and testing were informed by the overall materiality level of £15.2 million 11. The concept of materiality is applied by auditors to determine whether misstatements identified during the audit could reasonably be expected to influence the economic decisions of users of the financial statements, and impact on the opinion set out in the independent auditor’s report. Auditors set a monetary threshold when considering materiality, although some issues may be considered material by their nature. It is ultimately a matter of the auditor’s professional judgement. 12. Our initial assessment of materiality was carried out during the planning phase of the audit and was based on the audited 2022/23 annual accounts. These materiality levels were reported in our annual audit plan presented to the March 2024 meeting of the Audit and Risk Committee. 13. On receipt of the unaudited 2023/24 annual accounts, we reconsidered our materiality levels based on the financial results for the year ended 31 March 2024 and revised the amounts to reflect the increase in gross expenditure. Materiality amounts used for the audit are detailed in Exhibit 1. Exhibit 1 Materiality levels for the 2023/24 audit Materiality level Council Group Overall materiality: this is the figure we calculate to assess the overall impact of audit adjustments on the financial statements. Materiality has been set based on our assessment of the needs of the users of the financial statements and the nature of the council’s operations. For the year ended 31 March 2024, we set materiality at 2% of gross expenditure. £15.2 million £15.4 million Performance materiality: this acts as a trigger point. If the aggregate of errors identified during the financial statements audit exceeds performance materiality, this could indicate that further audit procedures are required. Using our professional judgement, we have assessed performance materiality at 60% of overall materiality. £9.1 million £9.2 million Reporting threshold: we are required to report to those charged with governance on all unadjusted misstatements more than the ‘reporting threshold’ amount. £0.5 million £0.5 million Source: Audit Scotland Page 145 of 214
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1. Audit of 2023/24 annual accounts | 8 Our audit identified and addressed the risks of material misstatement 14. Exhibit 2 sets out the significant risk and non-significant risks of material misstatement to the financial statements. It also summarises the further audit procedures performed during the year to obtain assurances over these risks and the conclusions from the work completed. Exhibit 2 Risks of material misstatement in the annual accounts Audit risk Assurance procedure Results and conclusions Significant risks of material misstatement 1. Risk of material misstatement due to fraud caused by management override of controls As stated in ISA(UK) 240, management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. Assess the design and implementation of controls over journal entry processing. Make inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries and other adjustments. Use data analytics to consider, identify and test journals at the year-end and post-closing entries and focus on significant risk areas. Consider the need to test journal entries and other adjustments throughout the year. Evaluate significant transactions outside the normal course of business. Assess any changes to the methods and underlying assumptions used to prepare accounting estimates compared to the prior year. Substantively test income and expenditure transactions around the year-end to confirm they are accounted for in the correct financial year. The completion of the assurance procedures did not identify any evidence of management override of controls. Page 146 of 214
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1. Audit of 2023/24 annual accounts | 9 Audit risk Assurance procedure Results and conclusions Test accounting accruals and prepayments focusing on significant risk areas. 2. Estimation in the valuation of other land and buildings (OLB) There is a significant degree of subjectivity in the valuation of other land and buildings. Valuations are based on specialist assumptions, and changes in these can result in material changes to valuations. OLB are revalued on a five-year rolling basis. Values may change between periodic valuations. OLB are valued at 1 April and there is a risk of material movement between the date of valuation and the balance sheet date. The council undertakes fair value assessments to ensure the financial statements accurately reflect the carrying value of land and buildings at 31 March 2024. This resulted in a material adjustment to the accounts in 2022/23. Review the information provided to the valuer to assess for completeness. Evaluate the competence, capabilities, and objectivity of the professional valuer. Review the reconciliation between the accounts, property asset register and valuers’ reports. Confirm a sample of asset valuations to valuers’ reports including useful lives. Test a sample of OLB subject to revaluation in 2023/24 and critically assess the appropriateness of estimates and assumptions. Confirm our understanding of management’s involvement in the valuation process for OLB to assess if appropriate oversight has occurred. Examine management’s assessment of fair value of OLB assets not revalued in 2023/24 and assess the appropriateness of any assumptions. We reviewed and tested information, reports and valuations as planned and did not find any errors in the 2023/24 revaluations, nor any issues with the competence, capability, or objectivity of the professional valuer. We confirmed there was appropriate oversight of the valuation process by management, and the reconciliation between the accounts, property asset register and valuers’ reports did not identify any issues. Management’s assessment of the fair value of OLB at 31 March 2024 did not identify any material movements and we were in agreement with their conclusions. We concluded that the value of Other Land and Buildings at 31 March 2024 is not materially misstated. Other non-significant risks of material misstatement 3. Estimation in the valuation of pension assets and liabilities Actuarial estimates are a complex combination of liabilities over significant future periods based on life expectancy, CPI growth and discounting Assess the scope, independence and competence of the professionals engaged in providing estimates for pensions. Review the appropriateness of actuarial assumptions and results including comparison with other councils and the pension fund as a whole. We identified that information relating to the early retiral/voluntary severance of six individuals which was approved during the 2023/24 financial year was not communicated to the actuary of the Tayside Pension Fund by the administrators of the Fund. We undertook further audit Page 147 of 214
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1. Audit of 2023/24 annual accounts | 10 Audit risk Assurance procedure Results and conclusions (based on corporate bond rates). Assets are based on an individual employer body’s share of assets at the last triennial valuation. Roll forward adjustments are provided to members data and to asset valuations. There is a risk that small changes in the assumptions used can lead to large changes in the resulting valuations resulting in a material misstatement in the annual accounts. Establish officers’ arrangements for ensuring the reasonableness of professional estimations and the accuracy of information provided to the actuary by the council. procedures to confirm this had not led to a material misstatement in the annual accounts, and these procedures concluded satisfactorily. Should there be a future, large, voluntary severance scheme however, such omitted information may lead to a material misstatement. Recommendation 1 Completion of our other assurance procedures did not identify any errors in the valuation of pension assets or liabilities. Source: Audit Scotland We reported the significant findings from the audit prior to the annual accounts being approved and certified 15. Under ISA (UK) 260, we are required to communicate significant findings from the audit, including our view about the qualitative aspects of the council’s accounting practices, to those charged with governance, prior to the audited accounts being approved and certified. 16. The Code of Audit Practice also requires us to highlight key audit matters which are defined in ISA (UK) 701 as those matters judged to be of most significance. 17. The significant findings are summarised in Exhibit 3. Exhibit 3 Significant findings and key audit matters from the audit of the annual accounts Issue Resolution 1. Error in accounting for depreciation of council dwellings The annual depreciation charge for council dwellings was calculated for a full year, both before and after revaluation at 31 March 2024. This Both of these calculation errors were corrected in the audited accounts. Page 148 of 214
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1. Audit of 2023/24 annual accounts | 11 Issue Resolution resulted in the annual depreciation charge being overstated by £10.4 million. In addition, an error in the calculation of the amount to transfer from the revaluation reserve to compensate for the difference between current value and historic cost depreciation resulted in the adjustment being understated by £1.3 million. 2. Omission of additional pension contributions for senior staff As explained in Exhibit 2, Point 3, we identified six individuals whose early retiral/voluntary departure had not been notified to the pension fund actuary. We also identified that strain on the fund costs associated with three of these individuals, who formed part of the senior management team, had not been properly disclosed as additional pension contributions in the remuneration report. The pension disclosures for the affected senior staff were amended in the remuneration report in the audited accounts. Recommendation 1 3. Classification error within non-current assets We identified one asset classified as asset under construction (AUC) which had been completed prior to 31 March 2024, and consequently was mis- classified within the annual accounts. The asset was reclassified and revalued within the audited accounts. This resulted in a net decrease in the value of property, plant, and equipment of £0.549 million. We undertook additional audit procedures and confirmed that there was no potential for material misstatement from other AUC being incorrectly classified. 4. Reporting of performance within the management commentary The management commentary contained within the annual accounts should be fair, balanced, understandable, comprehensive, and concise. Key performance indicators (KPIs) should be corroborated by supporting documentation. We found that the standard of reporting in the management commentary met the requirements but could be improved with regard to performance reporting. The management commentary presented for audit did not contain a summary of KPIs or any details of how the council had performed against its targets. Performance outcomes/achievements are instead listed against each of the council’s priority areas. These lack context. We also identified three of The narrative within the outcome disclosures was amended for the audited accounts, and the 2023/24 performance summary section of the management commentary was updated to give a more balanced overview of the council’s performance. The council produces a separate Annual Performance Report (APR) which has been extensively improved as a result of the council revisiting its performance management framework during 2022/23 and 2023/24. It now provides readers with a clear summary and detailed analysis of the council’s targets and performance against these. Page 149 of 214
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1. Audit of 2023/24 annual accounts | 12 Issue Resolution these disclosures which could not be agreed to the supporting documentation. A link to this APR was added to the audited accounts. Recommendation 2 5. Errors in group accounts The council consolidates its material group components into group accounts included in the financial statements. Our review of the group accounts in the unaudited accounts identified an error in the consolidation of the IAS 19 entries for one of the council’s subsidiaries. As a result, net assets and reserves were overstated by £2.1 million. The audited accounts were amended to correct these misstatements. 6. Statutory basis for reserves Reserves held and operated by local government bodies in Scotland are required to have a basis in statute. Local authorities are not required to establish a Capital Fund (CF), but the Code of Practice on Local Authority Accounting in the UK states that if an authority chooses not to have a Capital Fund, then capital receipts require to be credited to a Capital Receipts Reserve (CRR). It is therefore expected that a CRR is only established if a Capital Fund does not exist. Mandatory LASAAC guidance issued in 2021 permits only one capital fund to be presented on the face of the Movement in Reserves Statement (MIRS). Perth and Kinross Council operates both a Capital Fund and a Capital Receipts Reserve, and present both on the face of the MIRS. It is our view that this is not permitted under statute. We recommended that the Capital Receipts Reserve be combined with the Capital Fund, as only one such fund is permitted under statute. If the council wishes to maintain separation between elements of the Capital Fund to record capital receipts separately, this can be done in a note to the accounts. Officers do not agree with our conclusions and did not amend the presentation of the MIRS in the audited accounts. 7. Application of financial flexibility for service concession arrangements The Scottish Government introduced a series of enhanced financial flexibility arrangements to enable local authorities to vary proper accounting practice and help mitigate the financial impact of the Covid-19 pandemic. The council agreed to apply the flexibility permitted by Local government finance circular 10/2022 - finance leases and service concession arrangements: statutory guidance (PFI/PPP schemes) from 1 April 2023. We are satisfied that the council has correctly accounted for the permitted financial flexibility for service concession arrangements, and that the disclosures in the audited accounts are compliant with the requirements of the finance circular. This was judged to be a key audit matter. Page 150 of 214
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1. Audit of 2023/24 annual accounts | 13 Issue Resolution This allows the associated debt to be repaid over the life of the asset rather than the contract period as per the previously mandated accounting practice. The council has four of these schemes and applied the flexibility to two of these (Investment in Learning PPP arrangement for six school community campuses, and the DBFM scheme for Bertha Park High School). The retrospective application of financial flexibility accounting arrangements to these schemes resulted in a one- off cumulative saving of £31 million which has been added to usable reserves. We comment further on the financial impact of this at paragraphs 48 and 49. Source: Audit Scotland Total misstatements identified during the audit were £14.3 million and these have been adjusted 18. It is our responsibility to request that all misstatements, other than those below the reporting threshold, are adjusted, although the final decision on making the correction lies with those charged with governance. 19. Total misstatements identified were £14.3 million which exceeds our performance materiality threshold. We considered whether further audit procedures were required. We reviewed the nature and causes of these misstatements, which mainly related to council dwelling depreciation calculations, the re-classification and revaluation of non-current assets, and an error in the group pension disclosures. We have concluded that the issues have been isolated and identified in their entirety and do not indicate further systemic error. We considered whether other misstatements presented material risks of misstatement in the relevant account area and concluded they did not. 20. There are no unadjusted misstatements to report. Our audit opinions on the connected charities’ financial statements are unmodified 21. The council prepares connected charity accounts for six trusts registered as Scottish charities, with net assets of £2.4 million. The preparation and audit of financial statements of registered charities is regulated by the Charities and Trustee Investment (Scotland) Act 2055 and the Charities Accounts (Scotland) Regulations 2006. 22. We set a separate materiality for our audit of the connected charities. Our initial assessment was carried out during the planning phase of the audit and Page 151 of 214
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1. Audit of 2023/24 annual accounts | 14 was based on the audited 2022/23 annual accounts. On receipt of the unaudited 2023/24 annual accounts, we reconsidered our materiality levels based on the financial results for the year ended 31 March 2024 and concluded that they remained appropriate. Materiality amounts used for the audit are detailed in Exhibit 4. Exhibit 4 Materiality levels for the 2023/24 audit of the connected charities Materiality level Amount Overall materiality: this is the figure we calculate to assess the overall impact of audit adjustments on the financial statements. For the year ended 31 March 2024 we have set our materiality at 2% of gross assets. £45,000 Performance materiality: this acts as a trigger point. If the aggregate of errors identified during the financial statements audit exceeds performance materiality, this could indicate that further audit procedures should be considered. Using our professional judgement, we have assessed performance materiality at 75% of overall materiality. £35,000 Reporting threshold: we are required to report to those charged with governance on all unadjusted misstatements more than the ‘reporting threshold' amount. £2,250 Source: Audit Scotland 23. At the audit planning stage, we identified one significant risk of material misstatement in relation to the audit of the connected charities. As stated in International Standard on Auditing (UK) 240, management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. 24. We undertook audit procedures designed to provide an appropriate level of assurance over the transactions relating to the connected charities and did not identify any material misstatements due to management override of controls. As a result, our audit opinions on the connected charities’ financial statements are unmodified. There were no significant findings to report to those charged with governance. Good progress was made on prior year recommendations 25. Our 2022/23 Annual Audit Report contained 6 recommendations for improvement, which included two recommendations from our Best Value thematic review of leadership in the development of the council’s strategic priorities. The council has made good progress in implementing the agreed prior year audit recommendations, with all but one fully addressed. For the actions not yet fully implemented, revised responses and timescales have been agreed with management and are set out in the Appendix. Page 152 of 214
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2. Financial management | 15 2. Financial management Financial management means having sound budgetary processes, and the ability to understand the financial environment and whether internal controls are operating effectively. Main judgements The council’s budget setting and financial management arrangements operated effectively during 2023/24. Excluding the one-off impact of service concession flexibility, the council reported a £15.1 million (3.2 per cent) deficit on general fund services for 2023/24 which was £20.2 million less than planned. The Housing Revenue Account balance reduced by £0.4 million during 2023/24 due to the planned use of reserves (£0.3 million) and additional one-off costs identified during the year (£0.1 million). The council delivered 76 percent of its capital programme in 2023/24. External debt levels remained relatively static during the year as the council had taken advantage of low borrowing rates in previous years and used these to fund capital expenditure in 2023/24. Key financial controls operated effectively during 2023/24. The council’s budget setting and financial management arrangements operated effectively during 2023/24 26. The council has a well-established budget setting process that supports members to develop and scrutinise plans and understand the impact of proposed service changes. 27. On 1 March 2023, the council approved its 2023/24 general services revenue budget. Budgeted net expenditure of £450.5 million was approved after inclusion of budget pressures totalling £31.1 million and deduction of savings totalling £6 million. The council used the following measures to balance its budget: • increase Council Tax by 3.9 per cent or £3.8 million • use of service concessions fiscal flexibility of £17 million • use of reserves, including earmarked reserves, of £9.9 million. Page 153 of 214
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2. Financial management | 16 28. Subsequent adjustments throughout the year resulted in a revised net budget at the year-end of £478.5 million and a planned contribution from general fund reserves, including the service concession flexibility and contributions to other reserves, of £39.7 million. 29. As part of our audit, we reviewed the council’s budget monitoring arrangements and concluded that these are appropriate. Members of the Finance and Resources Committee receive regular budget monitoring reports which set out the main changes to the budget, the current and forecast out-turn position, key variances and actions being taken to address these. Excluding the one-off impact of service concession flexibility, the council reported a £15.1 million (3.2 per cent) deficit on general fund services during 2023/24 which was £20.2 million less than planned 30. The council reported a £15.1 million (3.2 per cent) deficit on general fund services during 2023/24 which was funded from reserves. This was £20.2 million less than planned, mainly due to service underspends and receipt of additional grant funding. The most significant underspends are detailed in Exhibit 5. Exhibit 5 Summary of significant under/overspends against budget Service Area Underspend Main reasons for underspends Education and Children’s Services £8.2 million £3.4 million of this relates to staff vacancies and underspends on operational budgets; £2.1 million to grant funding received in 2023/24 for use in future years which has been carried forward in earmarked reserves; and £1.6 million is due to reduced costs within Catering Services and higher than anticipated uptake of school meals. Communities £10.5 million The majority (£8 million) of this relates to grant funding received in 2023/24 for use in future years which has been carried forward in earmarked reserves. The remainder relates to staff vacancies (£1.4 million) and additional income (£1 million). Source: Perth and Kinross Council 2023/24 Annual Accounts 31. The council also took advantage of service concession financial flexibility arrangements during 2023/24 which resulted in a one-off increase in the Page 154 of 214
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2. Financial management | 17 General Fund balance of £34.3 million. This is further discussed at paragraphs 48 and 49. The Housing Revenue Account balance reduced by £0.4 million during 2023/24 due to the planned use of reserves (£0.3 million) and additional one-off costs identified during the year (£0.1 million) 32. The council is required by legislation to maintain a separate Housing Revenue Account (HRA) and to ensure that rents are set at a level which will at least cover the costs of its social housing provision. Rent levels are, therefore, a direct consequence of the budget set for the year. In January 2023, the Housing and Social Wellbeing Committee approved a 2.2 per cent increase in the average weekly rent levels for tenants for 2023/24. The rent level set reflected the income required to fund the annual HRA budget of £33.8 million. 33. The HRA balance reduced by £0.4 million during 2023/24 due to the planned use of reserves (£0.3 million) and additional one-off costs identified during the year (£0.1 million) resulting in a balance of £2.3 million as at 31 March 2024. The council delivered 76 percent of its capital programme in 2023/24 34. The council approved a capital programme of £220.2 million (£198.7 million for general fund projects and £21.5 million for HRA projects) for 2023/24. 35. Capital works amounting to £167.7 million (76 per cent) of the approved programme) were completed during 2023/24. This included expenditure of £47.4 million on school upgrade projects including replacement of Perth High School; £72.8 million on roads and transport projects; £20.4 million on property, infrastructure, and IT upgrades and £23.1 million on Housing Revenue Account projects including new builds and buy-backs to increase the supply of council dwellings. The council had taken advantage of low borrowing rates in previous years and so external debt levels remained relatively static during the year 36. The Capital Financing Requirement (CFR) identifies the borrowing required to support the council’s capital investment plans. Actual borrowing may differ from CFR if, for example, the council decides to borrow early to take advantage of low interest rates on new borrowing. Any difference is managed within working capital, and this may mean the council invests in short term investments. 37. During 2023/24 the council’s external debt levels increased by £18.6 million, from £724.7 million at 31 March 2023 to £743.2 million at 31 March 2024. In previous years, the council’s capital debt exceeded its Capital Financing Requirement as the council had borrowed at low interest rates and held the Page 155 of 214
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2. Financial management | 18 balance in short-term investments, earning interest, until required to fund capital expenditure. The council used its investments to fund the majority of its capital expenditure this year and so its ratio of borrowing to CFR reduced to 91.1 per cent in 2023/24 from 106.7 per cent last year. As a result, short-term investments reduced to £36.6 million from £155.3 million in the previous year. Key financial controls operated effectively during 2023/24 38. As required by Audit Scotland’s Code of Audit Practice, as part of our audit we identified and evaluated the key internal controls in the accounting systems. Our objective was to gain assurance that it has systems of recording and processing transactions which provide a sound basis for the preparation of the financial statements. We concluded that the key controls in the main financial systems were operating as expected but noted that an annual review of external users of the Concerto estate management system is not routinely undertaken. The council has advised that it will review its processes in response to our audit finding. We also considered whether there was any impact on our audit opinion and concluded that there was not, as compensating controls are in operation. 39. Last year we reported that there was one control that could be strengthened (annual establishment checks) and recommended that management within services should respond to these requests in a timely fashion. Our 2023/24 controls testing confirmed that all services responded to the 2023/24 establishment checks request within the required timeframe. Internal audit provided reasonable assurance on the council’s framework of governance, risk management and control 40. We considered internal audit’s annual report, presented to the Audit and Risk Committee in June 2024, as part of our review of the Annual Governance Statement within the 2023/24 annual accounts. This included internal audit’s opinion that reasonable reliance can be placed on the council’s risk management and governance arrangements, and systems of internal control for 2023/24, subject to management implementation of the agreed actions detailed in the Internal Audit report. 41. The internal audit section had been operating under capacity for some time, but two new staff members were recruited in May 2024 which returns the team to full establishment level. We also note that the external review of internal audit’s compliance with the Public Sector Internal Audit Standards is overdue although the self-assessment has been completed. Plans are in place to complete the external assessment with outcomes to be reported to the Audit and Risk Committee in March 2025. Standards of conduct and arrangements for the prevention and detection of fraud and error are appropriate 42. The council has a range of established procedures for preventing and detecting fraud and irregularity including a whistleblowing policy, fraud and corruption policy and codes of conduct for members and officers. We assessed these arrangements to ensure that they were appropriate and that documents Page 156 of 214
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2. Financial management | 19 are readily available to staff and regularly reviewed to ensure they remain relevant and current. Overall, we concluded that the council’s arrangements are appropriate. The council has well-established arrangements for investigating and reporting data matches identified by the NFI 43. The National Fraud Initiative (NFI) in Scotland is a counter-fraud exercise coordinated by Audit Scotland which aims to prevent and detect fraud. It uses computerised techniques to compare information about individuals held by different public bodies, and on different financial systems, to identify 'matches' that might suggest the existence of fraud or irregularity. 44. The current NFI exercise ran over 2022/23 and 2023/24, and participating bodies began to receive matches for investigation in January 2023. These matches are categorised by risk and all recommended matches, plus any further matches based on findings, should be investigated. 45. The council has participated in the initiative for a number of years and has well-established processes in place for investigating the data matches identified by the NFI and reporting the results to the Audit and Risk Committee. The final results of the NFI exercise were reported to the Audit and Risk Committee in September 2024. 46. The next NFI exercise will take place in 2024/25, with datasets for matching to be submitted in October and November 2024. The council has submitted all the required datasets in accordance with the timetable. Matches for investigation will be issued in December 2024 and January 2025. Page 157 of 214
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3. Financial sustainability | 20 3. Financial sustainability Financial Sustainability means being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. Main judgements The council’s general fund balance increased in the year due to the application of the service concession financial flexibility accounting arrangements. The council has used this to support its 2023/24 outturn and plans to use the remainder to support its budgets through to 2027/28. The 2024/25 budget included a planned use of reserves of £13.8 million, but subsequent amendments increased this to £28.1 million. The medium-term financial plan has not been updated since October 2023 and will be reviewed following publication of the Scottish Government’s Medium-Term Financial Strategy. The council has yet to develop its revenue financial planning beyond six years as recommended in the 2019 Best Value Assurance Report. The council’s capital investment programme totals £674 million over the next five years. A Corporate Asset Management Framework has been approved to inform investment decision-making. Following an updated options appraisal, the PH2O project is going ahead on an alternative site. The Transformation and Change Programme is progressing in line with the planned timetable. The council’s general fund balance increased in the year due to the application of the service concession financial flexibility accounting arrangements 47. As shown in Exhibit 6, the level of usable reserves held by the council increased by £18.6 million during 2023/24, from £102.4 million at 31 March 2023 to £121 million at 31 March 2024. 48. The Scottish Government introduced a series of enhanced financial flexibility arrangements to enable local authorities to vary proper accounting practice and help mitigate the financial impact of the Covid-19 pandemic. The council agreed to apply the flexibility permitted by Local government finance circular 10/2022 - finance leases and service concession arrangements: statutory guidance (PFI/PPP schemes) from 1 April 2023. This allows the Page 158 of 214
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3. Financial sustainability | 21 associated debt to be repaid over the life of the asset rather than the contract period as per the previously mandated accounting practice. 49. The council has four service concession schemes: the Pullar House scheme, the Pullar House car park scheme, the Investment in Learning Public, Private Partnership (PPP) scheme, and the Bertha Park High School Design, Build, Finance and Maintain (DFBM) scheme. The Pullar House and Pullar House car park schemes are due to end in September 2025 and have been excluded from the reprofiling in line with the statutory guidance. The retrospective application of financial flexibility accounting arrangements to the remaining schemes resulted in a one-off cumulative saving of £34.3 million during 2023/24 which has been added to usable reserves. This resulted in the general fund balance increasing by £14.1 million during 2023/24, from £69.7 million at 31 March 2023 to £83.8 million at 31 March 2024. The impact on the general fund balance was partly offset by the planned use of £15.1 million of reserves to support the revenue budget position during the year and transfers to/from statutory reserves of £5.1 million. 50. Of the total balance of usable reserves, £65.1 million (54 per cent) has been earmarked by the council for specific areas of future spending including: £17 million of expenditure to be funded from Revenue Grants, £7.6 million for expenditure on workforce management including transformation, £6.5 million of expenditure on infrastructure and affordable housing funded from developers’ contributions and £5.6 million on affordable housing funded from council tax on second homes. 51. The unallocated general fund balance at 31 March 2024 was £18.7 million which is in line with the council’s reserves strategy of holding between 2 per cent and 4 per cent of its net revenue budget as uncommitted reserves. Exhibit 6 Perth and Kinross Council usable reserves Reserve 31 March 2022 (£m) 31 March 2023 (£m) 31 March 2024 (£m) General Fund – uncommitted 16.6 18.2 18.7 General Fund – committed 69.3 51.6 65.1 Total General Fund balance 85.9 69.8 83.8 Housing Revenue Account 3.3 2.6 2.3 Insurance Fund 1.4 1.3 1.7 Capital grants unapplied account 0.1 0.1 0.1 Page 159 of 214
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3. Financial sustainability | 22 Reserve 31 March 2022 (£m) 31 March 2023 (£m) 31 March 2024 (£m) Capital Fund (including Capital Receipts Reserve) 27.3 28.6 33.1 Total usable reserves 118.0 102.4 121.0 The council used £17 million of the financial flexibility to support its 2023/24 budget and plans to use the remainder to support its budgets through to 2027/28 52. As noted at paragraphs 48 and 49, the council agreed to apply the service concession financial flexibility accounting arrangements from 1 April 2023 which resulted in a one-off cumulative saving of £31.2 million during 2023/24, reflecting the retrospective impact of the change in accounting treatment (i.e. the change in debt repayments that would have been made up to 1 April 2023 had the revised accounting treatment been applied to the council’s PPP scheme and DFBM scheme from the start). 53. In addition to the retrospective impact of the new accounting treatment, an in-year saving of £3.1 million was also achieved in scheduled debt repayments during 2023/24 due to the extended repayment period for the borrowing taken for these PPP/DFBM schemes. Annual debt repayment ‘savings’ will also be generated each year until the service concession arrangement contracts have been repaid. However, statutory charges will then be made over the remaining lives of the assets which would not have been required had the original accounting treatment continued to be applied as this would have resulted in the borrowing being fully repaid by the end of the contracts. Over the full lives of the service concession arrangement the total capital repayments for the debt liability remains the same under both approaches. 54. The council used £17 million of the financial flexibility to support its 2023/24 budget and created an earmarked reserve for the remaining £17.3 million as at 31 March 2024. The council plans to use the remaining flexibility, to support its budgets for the next four years (2024/25 to 2027/28). As noted above, this will provide short-term benefit but will result in the council’s general fund being charged for the cost of funding these assets until 2070. 55. It is important to note that this change in accounting treatment does not in any way affect the existing contracts or any financial arrangements with the parties operating these assets on behalf of the council. Charges will continue to be paid as per contractual obligations over the agreed contract terms which includes annual inflationary increases. Service concession assets will also continue to be included on the council’s Balance Sheet. Page 160 of 214
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3. Financial sustainability | 23 The 2024/25 budget included a planned use of reserves of £13.8 million, but subsequent amendments increased this to £28.1 million 56. On 28 February 2024, the council approved its 2024/25 general services revenue budget. Budgeted net expenditure of £467.9 million was approved after inclusion of budget pressures totalling £4.1 million and deduction of savings totalling £8.7 million. The council used the following measures to balance its budget: • additional funding of £4.7 million received from the Scottish Government to support the Council Tax freeze • use of reserves, including earmarked reserves, of £13.8 million. 57. The council has subsequently updated its 2024/25 budget to reflect increased expenditure funded from additional government grant (£7.5 million), the impact of the 2023/24 outturn (£8.1 million) and additional expenditure to be funded from earmarked reserves (£6.2 million). The revised budget totals £490.5 million, of which £28.1 million will be funded from reserves (including service concessions fiscal flexibility). Budget reports indicate an overspend of £1.1 million (0.2 per cent) against 2024/25 budget 58. The latest budget monitoring report (as at 20 November 2024) notes that the council is projecting a small overspend of £1.1 million (0.2 percent) against its budget. The council approved a 6 per cent increase in rent levels for 2024/25 59. In January 2024, the council approved a 6 percent increase in the average weekly rent levels for tenants for 2024/25. The rent level set reflected the income required to fund the annual HRA budget of £36 million. 60. The approved budget included an allowance for staff pay increases of 3 per cent for 2024/25 and the increased costs relating to the agreed 2023/24 pay award. It also reflects the increased costs of building materials resulting from current shortages. The medium-term financial plan was last updated in October 2023 and will be reviewed following publication of the Scottish Government’s Medium-Term Financial Strategy 61. The council last updated its Medium-Term Financial Plan (MTFP) in October 2023. The plan covers the six years to 31 March 2030 and considers a range of key financial variables that impact on the council’s financial planning including funding levels, inflation and pay awards. These are grouped together under three scenarios: optimistic, mid-range and pessimistic and show that the council needs to make cumulative budget reductions of between £7.6 million and £192 Page 161 of 214
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3. Financial sustainability | 24 million by 31 March 2030. The council plans to update its MTFP following publication of the Scottish Government’s Medium-Term Financial Strategy. 62. The 2024/25 budget papers include provisional balanced budgets for 2025/26 and 2026/27. The council plans to use £4 million of the earmarked service concession flexibility reserve to support both its 2025/26 and 2026/27 budgets with an additional £0.3 million of reserves required to fund the 2025/26 budget. The provisional budget for 2026/27 indicates that £2.9 million will be available to add to uncommitted reserves during the year resulting in a net draw on reserves of £1.1 million in 2026/27. Reserves will not be required to support the council’s recurring budget from 2027/28. The budget paper acknowledges that the assumptions used to prepare these budgets are subject to change and that they will be revised as part of the council’s ongoing budget monitoring. Contingencies of £1.4 million and £2 million respectively have been included to cover unforeseen events such as cost pressures, service needs and income shortfalls. The council has yet to develop its revenue financial planning beyond six years as recommended in the 2019 Best Value Assurance Report 63. The 2019 Best Value Assurance Report recommended that the council should build on its strong financial management and consider developing a longer-term financial plan covering a five to ten-year period as part of its modernisation agenda. The council has yet to develop its revenue financial planning beyond six years. Capital investment planning now covers thirty years but only six of these are funded (see paragraphs 67 to 69 below). The council’s capital investment programme totals £674 million over the next five years 64. The approved capital programme for 2024/25 to 2028/29 is £674 million, split between £571 million of general fund projects and £103 million of housing revenue account projects, with expenditure of £202.8 million (£175 million general fund projects and £27.8 million HRA projects) scheduled for 2024/25. Following an updated options appraisal, the PH2O project has been reviewed and is going ahead on an alternative site 65. Last year we reported that the council had paused the development and delivery of one of its major capital projects (PH2O) due to inflationary cost pressures. In September 2024, the council considered six options for the PH2O project as part of a wider Perth City integrated investment proposal. Each option was assessed against the critical success factors set out in the original business case, and the preferred option, to construct a new-build facility on an alternative smaller site, was approved by members. This together with the previously approved removal of leisure water, ice and indoor bowling from the project scope has resulted in estimated costs of £61 million compared to the previous estimate for the original project of £90 million. The alternative site also has the added benefit of allowing more housing to be built at the previous preferred location. Page 162 of 214
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3. Financial sustainability | 25 66. The council’s other significant capital projects are on track to deliver on time and within budget. The most significant of these is the Cross Tay Link Road project, budgeted to cost £150 million and due to be completed in Spring 2025. The council has approved a Corporate Asset Management Framework to inform investment decision-making 67. We reported last year that the council was updating its corporate asset management strategy and plan to inform investment decision-making; help protect services and ensure that assets are optimised to achieve its strategic aims and operational priorities. A revised Corporate Asset Management Framework consisting of a policy, strategy and 30-year investment plan was approved by the council in January 2024. 68. The plan provides a breakdown of the estimated long-term investment requirements for the existing asset base and will inform the next update of the medium-term financial plan. The first six years of the investment plan are funded and form part of the council’s current capital programme to 31 March 2030. Current estimates are that the council needs to invest a further £2,594 million in its asset base over the remaining twenty-four years of the plan. 69. A new Strategic Investment Advisory Group has been established to ensure a more collective approach to asset management and investment planning. This group includes members and officers and will oversee the rolling 30-year investment plan and assess and prioritise investment requests to ensure assets are fit for purpose and that any investment is directed where it is most needed. The Transformation and Change Programme is progressing in line with the planned timetable 70. The Council approved its Transformation and Change Strategy in June 2022 and developed a Transformation and Change Programme to deliver on the vision of “a Perth and Kinross where everyone can live life well, free from poverty and inequality”. The programme is phased over a 5-year period. Phase 1 completed in September 2024 and Phase 2 is now underway. 71. Phase 1 focused primarily on review of the Senior Leadership team and consolidation of workstreams where areas of overlap or synergy were identified. The Senior Leadership review was fully implemented by 01 April 2024 and is expected to realise cumulative savings of £2.3 million by 2025/26. Consolidation of workstreams focused on bringing historically disaggregated teams under newly formed single points of management, to remove areas of duplication, deliver financial savings and introduce greater consistency. It is expected to deliver cumulative savings of £2 million by 2025/26. 72. Phase 2 includes a Leadership Development programme and continues to build on the Cultural Change programme which began in Phase 1 with a focus on Employee Engagement, Leadership Development and Communications. This includes employee workshops on strategic direction, values and behaviours and a series of ‘masterclasses’ for all staff with line management responsibilities. Page 163 of 214
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3. Financial sustainability | 26 73. A Transformation and Change Programme Management Office (PMO) model will support the programme from Phase 2 onwards, replacing the temporary team which has been in place since the Strategy was originally approved in June 2022. 74. We will continue to review and report on the council’s delivery of its Transformation and Change Programme as part of our 2024/25 Best Value Thematic report on ‘Transformation - how councils are redesigning and delivering more efficient services to achieve planned outcomes’. Page 164 of 214
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4. Best Value | 27 4. Best Value Councils have a statutory duty to make arrangements to secure continuous improvement in the performance of their functions. Main judgements Our Best Value thematic review of workforce innovation confirmed that the council has a workforce plan to support the delivery of its strategic objectives but has yet to set targets against which to measure and report on progress. Two of the 2019 Best Value Assurance Report recommendations remain outstanding and there has been limited reporting of progress to members or the Executive Leadership Team. Best Value audit work is now fully integrated within our annual audit work 75. Councils have a statutory duty to make arrangements to secure continuous improvement in the performance of their functions. Expectations are laid out in the Best Value Revised Statutory Guidance 2020. 76. As set out in the Code of Audit Practice, Best Value audit is integrated within our annual audit work and will be assessed comprehensively over the period of the audit appointment. This will include an annual evaluation of the Council’s approach to demonstrating improvement in its services and public performance reporting. We will also follow up findings reported previously on Best Value to assess the pace and depth of improvement. 77. As part of the new reporting arrangements, the Controller of Audit will also report to the Accounts Commission on a council’s performance in meeting its Best Value duties at least once every five years. Around eight councils are selected each year for a Controller of Audit report. Perth and Kinross Council is not included in the current year’s programme which is running from October 2024 to August 2025. For 2023/24 the Accounts Commission directed auditors to conduct a Best Value thematic review of workforce innovation and how councils are responding to workforce challenges 78. For 2023/24 the Accounts Commission directed auditors to conduct a Best Value thematic review of workforce innovation and how councils are responding to workforce challenges through building capacity, increasing productivity and Page 165 of 214
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4. Best Value | 28 innovation. In carrying out the thematic work auditors considered the following questions: • How effectively are the council’s workforce plans integrated with its strategic plans and priorities? • How effectively has digital technology been used to support workforce productivity and improve service quality and outcomes? • How effectively is the council using hybrid and remote working and other innovative working practices such as a four-day week to achieve service and staff benefits? • What innovative practice is the council using to develop its future workforce capacity and skills needs and manage staff reductions in line with its priorities? • What progress has the council made with sharing roles or functions across its services and/or with other councils and partners? • How effectively is the council measuring the impact of its workforce planning approach? The council has a workforce plan to support the delivery of its strategic objectives but has yet to set targets against which to measure and report on progress 79. We issued our report on the Best Value Thematic Review 2023/24: Workforce Innovation – How councils are responding to workforce challenges to the council in September 2024, and it was considered by the Audit and Risk Committee at the meeting on 30 September 2024. The key messages in the report highlighted the following: • The People and Culture Strategy 2024-28 sets out the council’s approach to delivering sustainable workforce development. The strategy is aligned with the council’s strategic plans and priorities and the council engaged with staff across the organisation to develop the strategy. The change to the Executive and Leadership structure and development of the People and Culture team will support delivery of the actions in the People and Culture Strategy 2024-28. Service workforce plans are being developed and the council is developing its systems to provide access to service level workforce data • The council continues to invest in, build on and make extensive use of digital technology to deliver workforce productivity benefits, improvements in the efficiency of service delivery and better user experience. Although there is some recorded impact of the related workforce benefits and productivity gains, there is scope for these to be more formally quantified • The council has formalised hybrid working as part of its new flexible working framework with over a quarter of the council’s workforce being Page 166 of 214
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4. Best Value | 29 classified as hybrid workers. The council has set out the intended benefits from flexible working in its flexible working framework but has not yet articulated how these will be measured. The council reported an increase of over ten percent on spend on its use of casual workers between 2022/23 and 2023/24 • Employees are generally positive about working for the council and the relationship between the council and trades unions is good. In the main, trades unions feel they are consulted with appropriately and their views are taken into account • The council is facing challenges with recruitment and retention of staff and has initiatives in place to address this. It has introduced programmes to develop staff skills and capacity • The council is involved in an extensive number and variety of shared services arrangements and partnerships across Tayside. The council participates in various other partnerships outwith Tayside and shared working arrangements that provide workforce-related benefits • The council has agreed proposals to report to elected members annually on the delivery and impact of the People and Culture Strategy 2024-28, but arrangements for reporting on service level workforce plans are still to be finalised. The council is developing measures and targets to monitor and report on progress against the People and Culture Strategy 2024-28 80. The report also included six recommendations for improvement which are replicated in the Appendix. Action plan 2023/24 81. of this report along with the council’s planned response, responsible officers and dates for implementation. We will report on the council’s progress in implementing these actions as part of our 2024/25 audit. Two of the 2019 Best Value Assurance Report recommendations remain outstanding and there has been limited reporting of progress to members or the Executive Leadership Team 82. The Perth & Kinross Council Best Value Assurance Report (BVAR) was published in August 2019. The report made eight recommendations for improvement. 83. Last year we reported that there was no formal reporting to committee of progress against the Best Value Assurance Report’s recommendations, and that reporting to management on progress had not been completed since June 2021. In response, management agreed to provide an annual update to members and report six monthly to the Executive Leadership Team. We also concluded that there had been slow progress in implementing some of these actions, with the Covid-19 pandemic and revisions to Corporate Plans affecting this, and that two were still outstanding in November last year: Page 167 of 214
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4. Best Value | 30 • the council should build on its strong financial management and consider developing a longer-term financial plan covering a five to ten- year period as part of its modernisation agenda • the ongoing review of the community planning partnership should be wide-ranging and include the effectiveness of the board, outcome delivery groups and the local action partnerships. 84. The council has made limited progress with these outstanding recommendations since we concluded our 2022/23 audit. As noted in paragraph 63, the council has yet to develop its revenue financial planning beyond six years. A further review of the Community Planning Partnership is ongoing and is due to report in early 2025. As a result, we have concluded that these BVAR recommendations are still outstanding. 85. A Best Value Performance Summary report was presented to the Performance and Scrutiny Committee in September 2024 and to the full Council meeting in October 2024 but contained little information on progress made against the outstanding BVAR recommendations. Six monthly reporting to the Executive Team has been delayed until 2025. Refer to the Appendix, point b/f 2 for revised date for implementation. Page 168 of 214
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5. Vision, leadership, governance, and use of resources | 31 5. Vision, leadership, governance, and use of resources Public sector bodies must have a clear vision and strategy and set priorities for improvement. Through effective planning, they work together with partners and communities to improve outcomes, make best use of resources, and foster a culture of innovation. Main judgements The council revised its service and senior leadership structure during the year as part of its Transformation and Change Programme. The council has appropriate governance arrangements in place for delivery of its plans. There has been an overall decline in LGBF performance indicators over the last 5 years, although performance relative to other councils is largely unchanged. KPI trend analysis shows improvement in performance compared to last year. The council is compliant with the Accounts Commission’s SPI direction with comprehensive performance information available via ‘PK Performs.’ The council revised its service and senior leadership structure during the year 86. As part of its Transformation and Change Programme, the council revised its service structure during 2023/24 reducing from three services to two: Strategy, People and Resources, and Economy, Place and Learning, plus the Health and Social Care Partnership. 87. The council further streamlined its executive level in August 2024 after the Director of Economy, Place and Learning left the council. The Director post was removed from the revised structure and the Chief Executive is now supported by a Deputy Chief Executive and the Chief Officer for the Health and Social Care Partnership. Page 169 of 214
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5. Vision, leadership, governance, and use of resources | 32 88. The operation and organisation of the Executive and Strategic Leadership Teams continues to develop as part of the council’s wider Transformation and Change Programme, and to ensure that it is aligned to the strategic objectives and key priorities of the council. External support has been engaged to provide learning and development opportunities as part of this development process. 89. The council acknowledges that the restructure has resulted in the loss of skilled and experienced officers at a senior level. Key officers at service manager and team leader level have also been left through retiral or moving to opportunities elsewhere. The council intends to manage the resulting risk through an ongoing programme of leadership redesign and development. Appropriate governance arrangements were in place during 2023/24 90. We reviewed the council’s governance arrangements during the year and concluded that they are appropriate and support effective scrutiny, governance, and transparency. 91. There is, however, scope to strengthen council officer compliance with governance arrangements regarding activity undertaken outwith their council employment. We were notified of one instance of a senior officer participating in a marketing video for a local business. Further investigation confirmed this business supplied goods and services to the council. Council procedures require senior officers to declare any activity which might give rise to a potential conflict of interest. The activity was not declared by the officer. 92. There is a risk of perceived bias when awarding contracts for good or services if the council is not fully transparent in disclosing and addressing potential conflicts of interest. Senior officers should be reminded of the need to disclose activity which might create, or be perceived to create, a conflict of interest with their council role. Recommendation 3 Senior officers should be reminded of the need to disclose all activity which might be, or perceived to be, in conflict with their council role. The council is open and transparent 93. The council continues to be open and transparent, with agendas, reports and meeting minutes published on the council website. Members of the public are able to attend meetings of the council and its committees, and livestreaming of council meetings is available for those unable to attend in person. 94. The council website is regularly refreshed and kept up to date. Residents, businesses, and visitors to the area can access a wide range of information, including councillor registers of interest, and senior officer gifts and hospitality registers. The public are also able to access a variety of online council services. This includes functionality to pay bills, report problems or request repairs. Page 170 of 214
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5. Vision, leadership, governance, and use of resources | 33 95. The council makes its annual accounts available on its website. These include a management commentary which gives a good summary of the council’s financial performance for the year. Procurement and commissioning were identified as an area for change and improvement in the Transformation and Change Programme 96. The Sustainable Procurement Strategy 2024-2029 has been designed to provide additional economic, social, and environmental benefits to the people of Perth and Kinross, whilst procuring what the council requires to deliver its services. The strategy was approved at the full Council meeting on 26 June 2024. 97. The strategy is based on six guiding principles of Accountability, Equity, Legal Compliance, Strategic Importance, Sustainability and Value Delivery. These are underpinned by six strategic procurement aims which are well aligned to the Corporate Plan. The strategy aims to lead sustainable public procurement that “empowers our communities, fuels local economic growth, sparks innovation, and protects our planet.” 98. An implementation plan for the strategy is under development. Reporting will be annually to the Finance and Resources Committee, and we will monitor progress as part of our 2024/25 annual audit. 99. As well as annual procurement reporting, the council publishes a yearly ‘Following the public pound’ report, which details the level of spend and funding granted to ALEOs and other external organisations. The public can make enquiries about any of the specific items of activity listed in the report, helping to ensure transparency and accountability. 100. Similar transparency is seen within Note 13 of the 2023/24 annual accounts which lists monies paid out in support of various local organisations and grants awarded to third parties, allowing the public to form a view on where and how the council is providing support. A performance framework aligned to the Corporate Plan is now well established 101. The Best Value Revised Statutory Guidance 2020 sets out that councils should be able to demonstrate a trend of improvement over time in delivering their strategic priorities. The guidance also notes that performance management arrangements should promote the effective use of the local authority’s resources, which includes effective performance reporting. 102. As reported in our 2022/23 Best Value thematic review, performance reporting was revised in August 2023 following approval of the Corporate Plan. The revised performance framework identified 53 key indicators against the seven priorities of the Corporate Plan. For 2023/24, this increased to 54 following approval of an additional key indicator during 2023. Page 171 of 214
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5. Vision, leadership, governance, and use of resources | 34 103. The Annual Performance Report (APR) is considered at the Scrutiny and Performance Committee each year and by full Council. Reporting includes an Executive Summary which provides a helpful overview of key performance measures (KPI) trends for each strategic priority. Supporting information is available via the PK Performs section of the council’s website. 104. Targets have now been set for all but 4 of the KPIs for which it would be appropriate to set a target. 2023/24 performance was mixed, with 15 of the KPI targets met and 15 not met. Trend analysis paints a slightly more favourable position, with 32 KPIs trending in a positive direction, 14 in a negative direction and 6 static. Trend data is not available for 2 of the KPIs. 105. Despite 50 per cent of KPI targets not being met, trend data suggest performance against the priority areas identified in the Corporate Plan is generally improving, as summarised in Exhibit 7. Exhibit 7 Progress against Corporate Plan priorities Corporate Plan Priority Number of KPIs Target met Target not met Target N/A Overall trend Tackling poverty 7 3 2 2 Improving Tackling climate change and supporting greener sustainable places 7 1 4 2 Improving Developing a resilient, stronger, and greener local economy 10* 3 4 3 Improving Enabling our children and young people to achieve their full potential 9 - - 9 Improving Protecting and caring for our most vulnerable people 8 1 3 4 Static Supporting and promoting physical and mental wellbeing 6 2 1 3 Static Working in partnership with communities 7 5 1 1 Improving Total 54 15 15 24 Improving *includes 1 new indicator agreed in 2023, for which data will not be available until December 2024 Source: Perth and Kinross Council Annual Performance Report 2023/24 Page 172 of 214
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5. Vision, leadership, governance, and use of resources | 35 106. The greatest success is seen against the ‘Working in partnership with communities’ priority, with 5 of the 7 KPIs meeting target. Of the remaining 2, 1 KPI (Number of participation requests) has no target set, and the other (Number of community groups supported to increase their capacity) is within 5 per cent of the target, although there is a noticeable decrease in performance compared to 2022/23 where performance exceeded the current target level by 27 per cent. The apparent decline in performance is attributed to smarter reporting mechanisms, preventing groups in receipt of support across multiple areas from being over-counted. The 2023/24 figures are therefore considered to be more accurate. 107. The Annual Performance Report notes that whilst KPI trends are indicative of performance, they need to be considered within the context of the wider operating environment which includes factors which the council can and cannot influence. Overall, the Annual Performance Report is clear and well-presented, with improvement actions identified which feed into a corporate improvement plan for the year. A Corporate Development and Improvement Plan is in place 108. A Corporate Development and Improvement Plan (CDIP) was approved in May 2024, as part of the council’s revised strategic planning and performance framework. The CDIP is set at organisational level and replaces the previous service-by-service approach. 109. The CDIP details the activities to be undertaken to address areas for development identified in the 2023/24 APR. It is presented towards the start of the financial year, allowing for better scrutiny of improvement activity throughout the year. Mid-year progress was reported to the Scrutiny and Performance Committee in September 2024 and the year-end position will be reported as part of the Annual Performance Report for 2024/25. Performance compared to other councils has remained broadly static over the last 5 years 110. A Local Government Benchmarking Framework (LGBF) briefing is provided to members each year. The most recent was issued to members in March 2024. It provided a summary of the most recently published data and a link to the National Benchmarking Overview Report, which primarily relates to 2022/23 data. 111. The briefing reports that since the base year, 60 per cent of the council’s indicators have improved and 36 per cent have declined. Whilst this is an overall positive picture, the briefing notes an overall increase in the proportion of indicators showing negative trends, a decline which is mirrored by national long- term trends since 2014/15. 112. Since April 2024, the Improvement Service have issued monthly data updates and Exhibit 8 shows how the council has performed based upon the latest dataset as published in October 2024. Financial and satisfaction indicators are not included, as these are not directly comparable between councils. Indicators without full data have also been excluded. Page 173 of 214
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5. Vision, leadership, governance, and use of resources | 36 113. We analysed a total of 50 indicators over a 5-year period, from 2018/19 to 2022/23. Over this period, 17 performance indicators improved (34 per cent) and 27 declined (54 per cent). This is consistent with the picture seen across Scotland. In their National Benchmarking Overview Report 2022-23, the Improvement Service note that 2022/23 is the first year in which the rate of decline has overtaken the rate of improvement, with fiscal, workforce and demand pressures beginning to have an impact on service performance. Exhibit 8 Select LGBF data comparison to the 31 other Scottish councils Source: Audit Scotland analysis of LGBF data available at October 2024 16% 16% 20% 18% 16% 30% 36% 28% 32% 30% 30% 30% 28% 28% 38% 24% 18% 24% 22% 16% 0% 20% 40% 60% 80% 100% 2018/19 2019/20 2020/21 2021/22 2022/23 4th quartile 3rd quartile 2nd quartile 1st quartile Page 174 of 214
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5. Vision, leadership, governance, and use of resources | 37 114. Performance relative to other councils in Scotland has been broadly static over the 5-year period. There has been a decline in the number of indicators in the first quartile, but an increase in the number in the second quartile. In 2018/19, 54 per cent of indicators were in the top two quartiles and this remained the case in 2022/23. 115. Areas of notable improvement include: • Corporate Services indicator 11: Proportion of SWF budget spent. The council has improved 21 places since 2018/19 and is now the 3rd ranked council in Scotland • Corporate Services Asset indicator 01: Proportion of operational buildings that are suitable for their current use. The council is now ranked 3rd compared to 20th in 2018/19, an improvement of 17 places. 116. Areas of notable decline include: • Adult Social Care Services indicator 07: Proportion of adult care services graded good or better: The council has dropped 17 places in the rankings, from 7th in 2018/19 to 24th in 2022/23. • Financial Sustainability indicator 01: Total useable reserves as a percentage of council annual budgeted revenue. This has declined by 13 places, with the Council now ranked 18th in Scotland in 2022/23, compared to 5th in 2018/19. • Corporate Services indicator 06b: Sickness absence days per employee (non-teacher). The council was ranked highest in Scotland in 2018/19 but is placed 14th in the 2022/23 data. The council is compliant with the Accounts Commission’s SPI direction 117. The Accounts Commission’s 2021 Statutory Performance Direction defines the performance information that councils must publish. The Commission does not prescribe how councils should report this information but expects them to provide the public with fair, balanced, and engaging performance information. The Direction applies for 3 years from 2022/23 and is therefore in force for the 2023/24 financial year. 118. Under the direction, a council must report its: • performance in improving local public services (including those provided with its partners and communities), and progress against agreed desired outcomes (SPI 1). The Commission expects this reporting to allow comparison both over time and with other similar bodies (drawing on Local Government Benchmarking Framework and/or other benchmarking activities) Page 175 of 214
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5. Vision, leadership, governance, and use of resources | 38 • own assessment and audit, scrutiny, and inspection body assessments of how it is performing against its duty of Best Value and how it has responded to these assessments (SPI 2). 119. Based on the reporting of performance as detailed above, and our review of compliance with Best Value duties as detailed in Section 4, we have concluded that the council has complied with the Direction for 2023/24. The Annual Performance Report provides a clear and balanced overview of performance, including trend analysis, and the PK Performs website provides members of the public with easy access to more detailed performance information. Page 176 of 214
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Appendix. Action plan 2023/24 | 39 Appendix. Action plan 2023/24 2023/24 recommendations Issue/risk Recommendation Agreed management action/timing 1. Communication with Tayside Pension Fund actuary Council officers do not communicate directly with the Tayside Pension Fund, relying instead on Dundee City Council (DCC) as the administering authority. Our audit found that information on early retirement and voluntary severance of 6 individuals was not communicated to the actuary by DCC. The omissions could have been readily identified through detailed review of the curtailment cost information included in the IAS19 report received from the actuary and associated supporting documents. Risk - whilst this did not result in a material error in the accounts, future significant levels of voluntary severance or early retirals could lead to errors through incomplete information being provided to the actuary. Officers should review the information provided by the pension fund actuary for consistency with their own understanding of voluntary severance and early retirals approved in year. Discrepancies identified should be raised with DCC contacts for communication to the pension fund actuary. Exhibit 2, Point 3 Officers will review early retirals as part of their management review of the pension disclosures for the accounts. Council officers will also engage with Dundee City Council to ensure that the information is provided to the actuary. Responsible officer: Corporate Accounting Manager Agreed date: 31 May 2025 2. Performance reporting in the Management Commentary Reporting of performance in the Management The Annual Performance Report (APR) presented to the Scrutiny and Performance committee in September each year contains details of KPIs and targets, with a clear Agreed to meet with Audit Scotland early in the 2024/25 process and review disclosure requirements. Page 177 of 214
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Appendix. Action plan 2023/24 | 40 Issue/risk Recommendation Agreed management action/timing Commentary could be improved through the inclusion of KPIs and a summary of how the council has performed with respect to its targets for the year. The existing presentation lists a series of ‘outcomes’ which lack context and do not give users of the accounts a sense of whether performance is improving, declining, or static. Risk – the Management Commentary does not provide a balanced view of performance. summary of whether targets have been met and an analysis of whether the trend over time is one of improvement or decline. Performance reporting in the Management Commentary can be improved through summarising performance in relation to KPIs and targets as presented in the APR. The use of graphs and trend analysis in public performance reporting should also be considered for inclusion, as recommended by the Accounts Commission. Exhibit 3, Point 4 Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: June 2025 3. Senior Officer compliance with governance procedures A senior officer participated in a marketing video for a local business which supplies goods and services to the council. Council procedures require senior officers to declare any activity which might give rise to a potential conflict of interest. The activity was not declared by the officer. Risk – the council is perceived to be biased when awarding contracts for goods or services. Senior officers should be reminded of the need to disclose all activity which might be, or perceived to be, in conflict with their council role. Paragraph 90 to 91 Agreed to remind Senior officers of procedures for disclosing conflict of interest or other works. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: January 2025 Recommendations from the Best Value thematic review 2023/24 Issue/risk Recommendation Agreed management action/timing BV1. Service level workforce plans The council should ensure its service level workforce planning measures align with Management response/agreed action: Page 178 of 214
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Appendix. Action plan 2023/24 | 41 Issue/risk Recommendation Agreed management action/timing Service workforce plans are being developed and the council is developing its systems to provide access to service level workforce data. Risk - the council may fail to deliver on the People and Culture Strategy. actions in the People and Culture Strategy 2024-28 action plan as well as agreeing any additional service level workforce measures. This is part of the remit of the Workforce Planning Themed Board who will monitor and agree actions within the People and Culture Strategy. HSCP has a separate Strategy and governance and reporting arrangement in place. Education and Learning undertakes annual staffing exercise. All other Strategic leads will develop their own service workforce plans that will be collectively reviewed at the Workforce Planning Themed Board, ELT, and Committee. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: Ongoing and annual update to Finance and Resources Committee BV2. Quantifying workforce benefits from the introduction of digital technology The council has established many workforce benefits and productivity gains of its digital technology improvements but there is scope for more of these to be quantified. Risk - there is a risk that the council does not fully understand the workforce benefits from digital technology improvements to inform future decision- making. The council should build on the work it has done to date to demonstrate and quantify what workforce benefits and productivity gains have been made through its use of digital technology. Management response/agreed action: The Council will continue to grow the culture of embedding a standardised approach to Benefits Realisation: baselining service delivery costs and related “softer” metrics at the start of any improvement journey to ensure the impact of digital technology and new ways of working is maximised for improving efficiency of our workforce and outcomes for employees and citizens of Perth and Kinross. Responsible officer: Strategic Lead for Customer and Digital Services Agreed date: December 2025 Page 179 of 214
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Appendix. Action plan 2023/24 | 42 Issue/risk Recommendation Agreed management action/timing BV3. Flexible working benefits Although the council’s flexible working framework contains a section on how the council will measure effectiveness of the framework, no specifics are provided in relation to how this will be done. Risk - there is a risk the council is not aware of the impact of flexible working on wellbeing and productivity. The council should develop measures to assess the impact of its flexible working framework on staff productivity, wellbeing, and service performance to ensure these are being maintained or improved. Management response/agreed action: Strategic Leadership Team, Performance Improvement Team and People and Culture team will devise arrangements to capture qualitative and quantifiable data via pulse surveys, employee survey actions and feedback. Consideration will be given to how this can be captured via data and technology i.e. PK Performs to provide a standard approach in terms of performance monitoring. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: September 2025. BV4. Workforce-related benefits from shared service arrangements There will be inherent workforce related benefits arising from each of the shared working arrangements that the council has with its partners in Tayside and further afield. Risk - Lessons are not learned and applied when creating new, or developing existing, shared working arrangements. The council may not be utilising opportunities for shared services and collaboration opportunities across partner organisations. The council should develop a formalised analysis of the workforce-related benefits arising from shared service arrangements and further explore additional opportunities for shared service arrangements. Management response/agreed action: The Workforce Planning Themed Board will determine an approach to identify agreed measures and performance monitoring arrangements. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: September 2025. Page 180 of 214
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Appendix. Action plan 2023/24 | 43 Issue/risk Recommendation Agreed management action/timing BV5. Monitoring and reporting on service level workforce plans The council will need to set out its approach to monitoring and reporting on service level workforce plans. Risk – service level workforce planning arrangements may not be supporting the delivery of the People and Culture Strategy. The council should set out its arrangements for monitoring and reporting on service level workforce plans. Management response/agreed action: This will be discussed with the Workforce Planning Themed Board to agree how to take this forward in respect of monitoring progress and reporting arrangements. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: March 2025 BV6. Measuring the impact of workforce planning The council has still to develop measures and targets to monitor and report on progress against the workforce plan. Risk - workforce planning arrangements may not be supporting the delivery of the council’s strategic priorities. The council should further develop SMART measures and targets to assess the impact and effectiveness of its workforce planning actions in the People and Culture Strategy 2024-28. Management response/agreed action: This will be discussed with the Workforce Planning Themed Board to agree how to take this forward in respect of identifying measures to monitor progress, refreshing new or emerging priorities and reporting arrangements. Responsible officer: Strategic Lead – Strategic Planning, People and Performance Agreed date: June 2025. Follow-up of prior year recommendations Recommendation Agreed Management Action and Timing Progress 2022/23 audit recommendations b/f 1. Non-current asset valuations We recommend that the council reviews its approach to the rolling programme of asset valuations and refines its process for considering Officers have agreed to meet with audit to review arrangements for asset valuations and those not included in the rolling programme to provide a Implemented Officers met with audit ahead of the 2023/24 revaluation exercise and agreed to bring forward the valuation of PFI campuses and council Page 181 of 214
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Appendix. Action plan 2023/24 | 44 Recommendation Agreed Management Action and Timing Progress the current valuation of assets (OLB and Housing) not subject to a full valuation process at each year end. The current process for other land and buildings is highly detailed and labour intensive and could benefit from simplification. robust position for the 2023/24 accounts. Responsible officer: Corporate Accounting Manager Agreed date: 31 December 2023 dwellings into the 2023/24 valuation cycle. Going forward, an annual indexation percentage, provided by the expert valuer, will be applied to council dwellings to reduce the risk of material misstatement arising in the years between formal valuations. The process for reviewing movement in the value of other land and buildings since the last formal revaluation remains very detailed. Council officers are content to continue with this approach. No further action to be taken. b/f 2. Completeness of non- current assets We recommend that the council prepares a reconciliation between the financial ledger, asset register and valuer’s report as part of the working papers package in future years. Officers will reconcile the financial ledger at 1 April annually and reconcile the valuer’s report to asset register as part of the working papers. Responsible officer: Corporate Accounting Manager Agreed date: 30 June 2024 Implemented A reconciliation between the asset register and the valuer’s report was provided as part of the working papers package supplied to support the 2023/24 audit. The asset register was reconciled separately to the financial ledger. b/f 3. Working papers Management should review processes for generating the financial statements, providing clear cross references and links between (and within) working papers, and the source data used to create them. Officers will meet with auditors to review the simplification of working papers to improve audit efficiency. Responsible officer: Corporate Accounting Manager Agreed date: 31 January 2024 Implemented Officers met with audit following the 2022/23 audit completion and took on board audit recommendations to modify the working papers. A further meeting was held prior to the 2023/24 audit to explain the changes made. The 2023/24 working papers showed good improvement in some areas, with many now containing linkages and cross-references to supporting information. Page 182 of 214
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Appendix. Action plan 2023/24 | 45 Recommendation Agreed Management Action and Timing Progress b/f 4. Establishment checks Establishment checks are an important anti-fraud control and are carried out annually. Management within services should ensure they respond in timely fashion to the request for confirmation. Officers will ensure that all returns not completed are highlighted to appropriate line managers for action. Any outstanding returns post December will be escalated to Strategic Lead – Finance and Business Support for action. Responsible officer: Corporate HR Manager Agreed date: 31 December 2023 Implemented 2023/24 establishment checks for all service areas were completed and responded to in the required timeframe. Best Value Thematic Review 2022/23 recommendations BV b/f 1. Workforce planning The council should revise the workforce plan. This should set out the challenges facing the council workforce; data in terms of workforce numbers, deployment, age profile; and risks and actions in individual employment groups. A detailed People and Culture Plan will be taken to the Finance and Resources Committee by June 2024. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 June 2024 Implemented The People and Culture Strategy 2024-28 was approved by the Finance and Resources Committee on 12 June 2024. The Strategy is aligned with the council’s strategic plans and priorities and sets out the council’s approach to delivering sustainable workforce development. We comment further on the People and Culture Strategy 2024-28 in our Best Value Thematic Review on Workforce innovation – how councils are responding to workforce challenges. BV b/f 2. Best Value Reporting The council should implement a process for routinely reporting Best Value action plan progress to committee. An annual update will be provided through the Corporate Annual Performance Report which is reported to the Scrutiny and Performance Committee and the Council in September. This will also sit on our website as part of the supporting information which Outstanding Refer paragraph 78 Responsible officer: Strategic lead – Strategic Planning, people and Performance Revised date: 31 March 2025 Page 183 of 214
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Appendix. Action plan 2023/24 | 46 Recommendation Agreed Management Action and Timing Progress is accessible to the public. In addition, we will report six monthly to the Executive Leadership Team. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 September 2024 Page 184 of 214
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Appendix. Action plan 2023/24 | 47 Perth and Kinross Council Draft 2023/24 Annual Audit Report Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk AS.4.0 Page 185 of 214
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Audit & Risk Committee 2 December 2024 INTERNAL AUDIT UPDATE Report by Chief Internal Auditor (Report No 24/341) 1. PURPOSE 1.1 This report presents a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2023/24 and 2024/25. 2. RECOMMENDATION 2.1 It is recommended that the Committee notes progress with Internal Audit activity 3. STRUCTURE OF REPORT 3.1 This report is structured over the following sections: • Section 4: Background • Section 5: Progress Update • Section 6: Global Internal Audit Standards • Appendix 4. BACKGROUND 4.1 The Public Sector Internal Audit Standards (PSIAS) require that the Chief Internal Auditor reports periodically to the Audit Committee on internal audit activity and on performance relative to the approved plan. 4.2 Work has continued on assignments from Perth & Kinross Council’s Internal Audit Plans. In addition, work has continued to be undertaken in connection with the Internal Audit provision for Perth & Kinross’ Integration Joint Board. 4.3 In line with the timetable as laid down by Audit Scotland, all relevant datasets have been uploaded to enable the National Fraud Initiative matches to take place nationally. These matches should be made available shortly for officers to commence investigations. 5. PROGRESS UPDATE 5.1 Appendix 1 shows the status of audits arising from the Internal Audit Plans. 5 Page 187 of 214
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5.2 Internal Audit is currently involved with further areas of unplanned work, including investigating a whistleblowing disclosure. If any control issues arise as a result of these, reports will be presented to the Audit & Risk Committee. 6. GLOBAL INTERNAL AUDIT STANDARDS (GIAS) 6.1 New Global Internal Audit Standards (GIAS) were published earlier this year and will come into effect on 1 April 2025. The Chief Internal Auditor has responded to consultations from CIPFA regarding their application within the public sector. The final Application Note, along with the Code of Practice for the Governance for Internal Audit, will be published within the coming months, and these will be shared with this Committee. In the meantime, the Chief Internal Auditor is reviewing how Internal Audit will comply with the GIAS in the initial and subsequent years. 6.2 The GIAS will place obligations on this Committee, as the Audit Committee as defined within the Standards, and the Committee will be briefed on these obligations and a development session held to ensure that these are fully understood. Authors Name Designation Contact Details Jackie Clark Chief Internal Auditor InternalAudit@pkc.gov.uk APPENDICES • Appendix 1 Internal Audit Activity Page 188 of 214
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Appendix 1 INTERNAL AUDIT UPDATE Internal Audit Activity Audit No. Title Lead Service(s) Status as at November 2023 Audit Committee 2023/24 C23-02 Mosaic Corporate / HSCP / ECS Ongoing June 2025 A23-03 Local Employability Partnership Communities Ongoing March 2025 A23-04 Child Poverty Communities Completed September 2024 2024/25 A24-01 Business Continuity March 2025 A24-02 Financial Sustainability Finance & Business Support Ongoing March 2025 A24-03 Multi Agency Safeguarding Hub Children, Families & Justice March 2025 A24-04 Affordable Housing Housing & Communities Ongoing March 2025 A24-05 Procurement Legal & Governance; June 2025 C24-06 3rd Sector Review All Services Ongoing March 2025 A24-07 Credit Cards Finance & Business Support Completed December 2024 5 Page 189 of 214
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1 Internal Audit Report All Services 24 - 07 Credit Card Usage November 2024 Final Report (Report No. 24/342) Legal and Governance Corporate and Democratic Services Perth & Kinross Council Council Offices 2 High Street Perth PH1 5PH 6 Page 191 of 214
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2 24-07 Credit Card Usage Contents by Section 1. Introduction 2. Executive Summary 3. Audit Background Information 4. Scope and Limitations 5. Assessment of the Control Environment 6. Summary of Findings 7. Conclusions 8. Acknowledgement 9. Action Implementation & Follow Up 10. Management Action Plan 11. Authorisation 12. Distribution 13. Assessment Definitions Page 192 of 214
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3 1. Introduction 1.1 The audit of Credit Card Usage was undertaken as part of the Internal Audit Plan for 2024-2025, which was approved by the Audit & Performance Committee on 24 June 2024. The period under review for the purposes of the audit exercise was financial years 2022-23 to 2024-25. 1.2 The indicative scope for the audit was to review the appropriate use of the authorised credit card and adherence to the financial regulations, procurement policy and other relevant finance procedures. 2. Executive Summary 2.1 The audit has found that reasonable assurance can be placed on the Council’s internal controls in relation to credit card usage, the auditor cannot, at this point, properly assess best value or the extent to which the commissioned services are delivering the desired outcomes. 2.2 There are 5 actions arising from the findings in Section 6. An action plan is included at Section 10. Once these actions are completed, Internal Audit should be able to place substantial assurance on the arrangements in place. 3. Audit Background Information 3.1 This assignment forms part of the Internal Audit plan for 2024-25, approved by the Audit Committee on 24 June 2024. The period under review for the purposes of the audit exercise was financial years 2022-23 and 2023- 24. Please note, that due to the financial years reviewed, the report refers to strategic areas in place prior to the recent leadership restructure. 3.2 The Council’s credit card facility is administered by the central services team in Finance & Business Support. The use of credit cards is governed by the Financial Regulations 2023-26, which state the following: 8.5 The operation of credit card facilities or similar payment methods by the Council requires the prior approval of the Head of Finance (Chief Finance Officer), who may issue additional guidance on the procedures to be followed. Page 193 of 214
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4 9.12 The Head of Finance* is responsible for all debit and credit card transactions. Any income stream that accepts card payments must use a Payment Card Industry Data Security Standards compliant system. All card processing systems require approval of the Head of Finance and the Head of Legal and Governance Services. 11.10 The Head of Finance* will specify the records to be kept in respect of purchasing or credit card transactions. 11.22 It will be the Intelligent Client* who will ensure that any purchase made within their service by a credit card is valid and appropriate and the transaction is properly accounted for. The Intelligent Client should ensure periodic compliance checks are undertaken (as a minimum this must be completed annually). * It is to be noted that as from April 2024 the role of Head of Finance was replaced within the leadership structure with the Strategic Lead for Finance & Business Support and the Intelligent Client role was superseded by a new role of Business Finance Partner. 3.3 In addition to the Financial Regulations, there are Credit Card Guidelines, written in 2017, that show the standard operating procedure for the use of credit cards. 3.4 The Senior Income Officer in Finance & Business Support has administrative oversight for credit card deployment. The Finance Management Team approves all credit users. 3.5 There are nominated staff in Services who hold credit cards, with varying different limit values. The senior manager for each relevant service has responsibility for expenditure and use of the credit card held by their services. 3.6 Since January 2024 all finance teams have been under the management of the Strategic Lead for Finance & Business Support. 4. Scope and Limitations 4.1 The Audit reviewed appropriate use of authorised credit cards and user's adherence to the financial regulations, procurement policy and other relevant finance procedures. 4.2 There were no limitations identified that would impact the Audit. However, no checks were made of the accuracy of credit card reconciliation or journal entries passed in the Integra system. Page 194 of 214
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5 4.3 The audit referred to information from published regulations and guidelines. 4.4 In order to validate the operational process against the published standard operating procedure relevant staff were interviewed and a review of documentary evidence was undertaken. 4.5 A sample audit of purchases and the reconciliation process was conducted. 4.6 The details of the control objectives reviewed and Internal Audit’s assessment of their strength of control in each area is contained within Section 5 of this report. 5. Assessment of the Control Environment 5.1 The table below contains a summary of the findings against each control objective and Internal Audit’s assessment of the adequacy and effectiveness of the controls in place to meet each of the objectives agreed for this audit. Further details, including any improvement actions, are set out in the Management Action Plan. NB: Where there are no actions identified against an objective there is no action rating applicable, only an overall control objective assessment. No. Control Objective Action Rating Control Objective Assessment 5 4 3 2 1 1 To ensure there are sufficient controls in place to assure the appropriate deployment and security of credit cards in use. 1 Substantial Assurance 2 To ensure there are sufficient controls in place to assure the appropriate use of credit cards in purchasing goods and services out with the PECOS system. 2 Reasonable Assurance 3 To ensure there are sufficient controls in place to enable reconciliation of purchases made and sufficient budget monitoring. Substantial Assurance 5.2 The auditor has assessed that reasonable assurance can be placed on controls overall in relation to credit card usage from the audit. Meaning: Page 195 of 214
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6 There is a generally sound system of governance, risk management and control in place. Some issues, non-compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited. 5.3 A summary of the key findings and actions are provided in section 6, please note however, the following areas of good practice which have been highlighted during the audit. 5.3.1 Individual training is given to each new credit card holder on behalf of the allocated Financial Controller (Business Partner) for that Service. This is supplemented with credit card guidelines issued to all new credit card holders who are required to confirm they have read and understood them. 5.3.2 The Finance and Governance Team Leader in the former Communities contextualises the Credit Card Guidelines to the relevant team in that service. 5.3.3 In Communities when a credit card holder went on maternity leave the staff members card was temporarily stopped at the bank by the Senior Incomes Officer and the card was handed in and is kept in the Finance Team’ safe until the member of staff returns to work. 5.3.4 During COVID 19, due to office closure, the Finance Officer who administers housing purchases developed an e-form for emergency purchase retrospective approval. This enabled the purchase request form, authorisation and receipts to be scanned and attached to the same form. This system remains in use today. 5.3.5 All purchases requests within the former Education and Children’s Services are sent to the contracts team for validation prior to being sent to the credit card holder for purchasing. 6. Summary of Findings 6.1 Below is a summary of key findings and actions, which are reflected in the Management Action Plan, detailed in section 10. 6.2 Controls in place to assure the deployment and security of credit cards 6.2.1 The audit examined whether there were staff in named roles to ensure the safeguarding and use of credit cards; whether the council had sufficient controls in place to provide security should a card be lost or stolen, or no longer needed due to staff leaving or changing roles; and whether sufficient training and controls were in place to assure staff had awareness of credit card security and fraud prevention. Page 196 of 214
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7 6.2.2 The Financial Regulations stipulate the named roles relevant to the use of credit card for purchasing goods and services. These are supported by the Credit Card Guidelines. 6.2.3 The published Financial Regulations were written and last reviewed in May 2023. It was noted this version did not reflect the recent changes to the leadership structure. A revised version for 2024-2027 has now been approved by Council in October 2024. 6.2.4 The Credit Card Guidelines were written and last reviewed in 2017 and had not been revised to reflect the recent changes to the leadership structure. [Action point 1] 6.2.5 Other relevant guidance, such as the Counter Fraud and Corruption Strategy, is published on the Financial Matters and Guidance page on ERIC. 6.2.6 However, it was noted that information on fraud and corruption was not highlighted to staff when training was given. [Action point 2] 6.2.7 The Council holds insurance through Fidelity Guarantee Insurance that covers fraud, theft of money, etc. 6.2.8 At the time of audit, there were 73 credit cards issued to council staff. 6.2.9 It was noted that 16 staff on the list of credit card holders in 2023-24 had not used their cards over the past year (or more) and 8 had only been used once. An audit showed that these cards are held by Officers for emergency use i.e. where a card holder is not available to make a purchase out of hours, or when a card holder is absent from work (sick or holiday leave). This was not therefore considered a risk. 6.2.10 Credit cards are held by individual staff and can be taken off the Council office premises. The payment card security system does not allow card holder details or card numbers to be held on the Council system. Thus, staff must have access to them when out of office. Card holders are informed of their responsibility to keep the card safe and must sign (via an email) that they have read and understood the Credit Card Guidelines. 6.2.11 A credit card holder is responsible for informing the bank if a card is lost or stolen or there were anomalies on the statement. 6.2.12 There is a process in place to inform the Senior Incomes Officer in a timely manner when a member of staff is leaving the Council or moves role and no longer has authority to have a credit card, although this appears to be a d hoc. Page 197 of 214
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8 [Action point 3] 6.2.13 Overall, the auditor concluded there are sufficient controls in place to assure deployment and security of credit cards. 6.3 Controls are in place to assure the appropriate use of credit cards in purchasing goods and services out with the PECOS system 6.3.1 The audit reviewed whether standard operating procedures were being followed at each process step by relevant staff and whether there were sufficient controls in place to a) ensure the integrity of a budget holder, who may also be a credit card holder, when making a purchase, b) assure a conflict of interest was reported and mitigated for and c) safeguard against the misuse or fraudulent use of credit cards and dispute management. 6.3.2 The audit found that all services follow the standard operating procedures for the purchase of goods/services by credit cards. However, since COVID-19 the form to request a payment by credit card has not been used by all staff. Instead, an email request that holds all relevant information has been sent and accepted. Although this is out with the current credit card guidance it is recommended that the standard operating procedure be revised with a view to digitalising the process. [Action point 1] 6.3.3 Good practice was noted where an e-form was developed for Housing Officers to complete during COVID-19 for emergency purchase, that allowed scanned receipts to be uploaded into it, and retrospective budget holder approval to be added. 6.3.4 Further, good practice was noted where all requests for purchase by credit cards within Education and Children’s Service were sent to the service contracts team to check and validate the request is appropriate to be purchased by credit card, that the code is the correct one for that purchase, and the budget holder has authorisation for that purchase. If any anomalies are found the request is rejected. 6.3.5 All Services have a process whereby a purchase is questioned if it can be bought through PECOS instead. A budget holder may still insist that this be purchased but they would need to provide a rationale in writing as to why. 6.3.6 All purchases are required to have a receipt or invoice saved with the initial request, or a rationale as to why one isn’t available. Evidence of this practice was noted in the financial audit. Page 198 of 214
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9 6.3.7 Not all receipts/invoices are saved to EDMS at the time of purchase, but rather saved to a local folder or personal email and uploaded to EDMS at point of reconciliation. This is seen as a risk if the person is off work at time of reconciliation. It would be considered better practice for all purchase documentation to be saved directly to EDMS as point of purchase. [Action point 1] 6.3.8 Whilst a budget holder may in theory be able to authorise their own purchase request, all services have a process whereby another budget holder would approve a purchase in that situation. 6.3.9 Conflict of Interest is not part of the training for a credit card holder and no current process is followed by services to mitigate against a known conflict. It is felt there is a risk where a purchase is made on behalf of a person or company known personally by the credit card holder and no action is taken to mitigate this risk. [Action point 2] 6.3.10 Overall, the auditor concluded there are sufficient controls in place to safeguard against the misuse or fraudulent use of credit cards and dispute management. 6.4 Controls in place to enable reconciliation of purchases made and sufficient budget monitoring 6.4.1 The audit reviewed whether the reconciliation process was performed on a regular basis, by the appropriate staff members, and if there was regular management reporting to enable sufficient oversight and understanding of purchases made by credit card. 6.4.2 The audit found that the Senior Incomes Officer (SIO) upon receiving monthly bank statements allocates a spend amount, relevant to each service, to a service specific suspense account. The SIO then distributes the relevant statements to the delegated officer in each Service, as well an individual statement to each credit card holder. 6.4.3 Each credit card holder is responsible for reconciling their purchases against the statement and providing all relevant documentation to the financial controller in their service. 6.4.4 The reconciliation process checked all purchases shown on the statement against the purchase request, receipts and/or invoices by the credit card holder. Anomalies are checked back with the budget holder and raised to the attention of the Finance Controller. 6.4.5 Firstly, a journal entry is made for each purchase with a description of that purchase noted. The journal ledger shows the relevant budget code. Page 199 of 214
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10 6.4.6 Secondly, a check and/or sample audit is made by a Finance Officer before the reconciliation journal is finalised and approved. Where a Finance Officer is a credit card holder, their reconciliation is double checked by another Finance Officer. 6.4.7 Thirdly, the journal is checked and signed off by the delegated officer. Once approved it is imported to the Integra finance system to ensure payment is allocated to the correct budget code and the suspense account cleared back to zero. 6.4.8 Overall the auditor found that reconciliation was performed on a regular basis, by the appropriate staff members, and the process was robust. 6.4.9 It is to be noted that credit card spend is not committed from the budget at the time of purchase, unlike PECOS, but rather at the time of reconciliation, which could be up to 2 months later. No management reports can be which provide a budget holder with oversight of these purchases until reconciliation has taken place. The Finance team stated that they do not consider this to be a material risk, due to the low volumes of transactions accounted for in this manner. 6.4.10 The reconciliation journal is reviewed and approved by the delegated officer in each Service on a monthly basis. 7. Conclusion 7.1 The Internal Audit review can place reasonable assurance on the overall control environment for credit card usage. The agreed actions, once implemented, should enable Internal Audit to place Substantial Assurance on these. 8. Acknowledgements 8.1 Internal Audit would like to thank all officers who were involved in this audit, particularly the Senior Incomes Officer, and the officers who undertake the role of Financial Controller in each Service. 9. Action Implementation & Follow up 9.1 Responsibility for the maintenance of adequate and effective controls rests with management. Where the audit has identified areas for management action, these are identified in the Management Action Plan. Where a decision is taken by management not to act in response to finding from this review, it is the responsibility of management to assess and accept the risk arising from non- implementation. 9.2 Achievement of the agreed actions is monitored through Internal Audit’s ‘follow up’ arrangements. Page 200 of 214
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11 10. Management Action Plan Action Point Para. No Finding Risk Rating Agreed Action & Evidence Action Owner Target Completion Date 1 6.2.4 6.3.2 6.3.7 Guidelines: There is scope to update and improve the Credit Card Guidelines as a result of the following: The Credit Card Guidelines were written and last reviewed in 2017 and do not reflect the recent changes to the leadership structure, nor changes to working practice since COVID19. Processes developed over time and as a result of changing practices during the COVID pandemic and the request to purchase by credit card form is not always being used, instead an email request is accepted. Not all receipts/invoices are saved to EDMS at the time of purchase, but rather may be saved to a local folder or held on personal email. They are only uploaded to EDMS at the point of reconciliation. 2 Agreed action: The Senior Accountant will update the Credit Card Guidelines to reflect the change in leadership structure, as well as reflecting on the working practice relevant to the standard operating procedure. Agreed evidence: Updated Guidelines J Jennings, Senior Accountant March 2025 Page 201 of 214
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12 2 6.2.6 6.3.9 Training It was noted that information on fraud and corruption was not highlighted to staff when training was given. Conflict of Interest is not part of the training for a credit card holder and no current process is followed in Services to mitigate against a known conflict. 2 Agreed action: The Senior Accountant will update the training information to signpost staff to the Finance matters and guidance site on ERIC, with particular reference to the Counter Fraud and Corruption Strategy. He will also signpost to the Employee Code of Conduct, Conflict of Interest procedure. All current credit card holders will be reminded of the need to follow this process to mitigate risk. Agreed evidence Updated guidance J Jennings, Senior Accountant March 2025 3 6.2.12 The process to inform the Senior Incomes Officer in a timely manner when a member of staff is leaving the Council or moves role and no longer has authority to have a credit card appears ad hoc. 2 Agreed action: The Incomes Team will remind managers to inform their delegated finance officer and the Senior Income Officer in Finance Business Services as soon as a member of their team, who is a credit card holder, has handed in their notice or it is known they will change roles and no longer require a credit card. Agreed evidence: Communication with credit card holders J Jennings, Senior Accountant March 2025 Page 202 of 214
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13 10. Authorisation 10.1 The auditor for this assignment was J Borley. The supervising auditor was D Arachchilage. This report is authorised for issue: J Clark 11. Distribution 11.1 This report has been distributed to: T Glen, Chief Executive C Mailer, Depute Chief Executive L Simpson, Strategic Lead, Legal and Governance S Walker, Strategic Lead – Finance & Business Support C Robertson, Central Services Manager, Accountancy A O’Brien, Service Manager, Accountancy J Jennings, Senior Accountant, CDS Accountancy Page 203 of 214
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14 12. Assessment Definitions 12.1 The following table contains the definitions of the control objective assessment. Control Objective Assessment Level of assurance Definition Substantial Assurance A sound system of governance, risk management and control exist, with internal controls operating effectively and being consistently applied to support the achievement of objectives in the area audited. Reasonable Assurance There is a generally sound system of governance, risk management and control in place. Some issues, non-compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited. Limited Assurance Significant gaps, weaknesses or non-compliance were identified. Improvement is required to the system of governance, risk management and control to effectively manage risks to the achievement of objectives in the area audited. No Assurance Immediate action is required to address fundamental gaps, weaknesses or non-compliance identified. The system of governance, risk management and control is inadequate to effectively manage risks to the achievement of objectives in the area audited. 12.2 The following table contains the definitions applied by Internal Audit in rating audit findings/actions. Risk Rating for Individual Findings Rating Rating description Definition 5 Critical Significant observations/ major concerns which require immediate action. Management will need to add these to the appropriate Service risk register. Issue represents a control weakness which could cause, or is causing, severe disruption of the process or severe adverse effect on the ability to achieve process objectives 4 High Significant observations regarding the absence / failure of key controls requiring urgent action. Management should consider adding these to the appropriate Service/ divisional risk register Issue represents a control weakness which could have, or is having, major adverse effect on the ability to achieve process objectives Page 204 of 214
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15 Risk Rating for Individual Findings Rating Rating description Definition 3 Medium Observations regarding the effectiveness of key controls requiring reasonably urgent action. Management should consider these when updating any divisional / team risk registers Issue represents a control weakness which could have, or is having, significant adverse effect on the ability to achieve process objectives 2 Low Minor observations regarding the adequacy of controls which require action to improve the efficiency, effectiveness, or economy of operations or which otherwise require to be brought to the attention of Senior Management Issue represents a minor control weakness with minimal but reportable impact on the ability to achieve process objectives 1 Trivial / Minor Very minor observations which will be raised during the audit and may not be included within the final report Issue represents a very minor control weakness with negligible impact on the ability to achieve process objectives. The issue will be raised during the audit and may not be included within the final report. Page 205 of 214
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Audit & Risk Committee 2 December 2024 INTERNAL AUDIT FOLLOW UP Report by Chief Internal Auditor (Report No 24/343) 1. PURPOSE 1.1 This report presents a current summary of Internal Audit’s ‘follow up’ work relating to actions due for completion up to October 2024. 2. RECOMMENDATION 2.1 It is recommended that the Committee notes the current position in respect of the agreed actions arising from Internal Audit’s work. 3. STRUCTURE OF REPORT 3.1 This report is structured over the following sections: • Section 4: Background • Section 5: Follow Up Outcomes 4. BACKGROUND 4.1 The Public Sector Internal Audit Standards (PSIAS) require the Chief Internal Auditor to establish a follow-up process to monitor and ensure that management actions have been effectively implemented. 4.2 Internal Audit request evidence from Services which confirms that actions have been implemented and, therefore, controls have been improved. 5. FOLLOW UP OUTCOMES 5.1 There were 11 actions due to be completed up to October 2024. Three actions have been verified by Internal Audit as having been satisfactorily completed. The eight remaining actions have revised completion dates, as detailed in the Appendix 1 and 2. Appendix 2 contains actions which were previously considered in private session of the Audit & Risk Committee. Author Name Designation Contact Details Jackie Clark Chief Internal Auditor InternalAudit@pkc.gov.uk 7 Page 207 of 214
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Appendix 1 Actions with a completion date up to October 2024 which have yet to be completed Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion 21-05 Tay Cities Region Deal Action Point : 1 Importance: Medium Audit Committee Date: 26 Jun 2023 Dundee City Council has previously undertaken an audit and the outcomes were shared with PKC Internal Audit during this review. A further high-level review of progress of projects and compliance with grant offer guidance is underway at present and the outcome will also be shared. A summary of their findings from the former was shared with the TCRD Joint Committee as well as their own Council Committee. Consideration should be given to making these assurances available to relevant officers, elected members via an appropriate Committee in Perth & Kinross The Service Manager will ascertain what assurance reports are provided regarding the Tay Cities Region Deal [TCRD] and ensure that the outcomes are shared with relevant officers and elected members in Perth & Kinross Council as part of the annual reporting process. A Seggie, Economic Development Manager Oct 2023 Mar 2024 Aug 2024 Feb 2025 The Service is proposing to address this action by providing an Elected Member briefing containing all the relevant information, with links to the next Annual Report which is due to be finalised by February 2025. Accepted 7 Page 209 of 214
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Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion 22-02 - Climate Change Action Point: 4 Importance: High Audit Committee Date: 25 Mar 2024 Lack of resources both financial and capacity: Lack of resources both financial and capacity. The Council has identified 25 actions as top priority and funding was provided for these 25 top priorities. However, we noted from our review of the Master Action Plan that 9, of these top priority actions had available resources, 7 had partial resources (i.e. for feasibility / design), and 9 were without allocated resources. The Climate Change & Smart Investment Manager will support the Climate Change Board to review the actions to ensure that resourcing is appropriately reflected to deliver these top priority actions. S Merone, Climate Change & Smart Investment Manager Sep 2024 Dec 2024 The responsibility for this action now lies with P Leonard, Climate Change and Zero Waste Manager. The top 25 priority actions have recently been reviewed by Elected Members and members of the Climate Commission, in separate workshops. These priorities will be presented to Council on 4 December 2024 as part of the Annual Climate Action Report and Action Plan Update. Satisfactory Page 210 of 214
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Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion The Climate Change and Sustainability Group has replaced the previous Board structure, and this Group will be assessing the resources required to support the revised top 25 priority actions on 18 November. A copy of the outcome of this meeting with be provided to internal audit colleagues for review.’ 23-06 - Fuel Action Point : 1.1 Importance: High Audit Committee Date: 25 Mar 2024 The monthly audit lapsed during the covid pandemic and has not recommenced following the Fleet Manager leaving. 1. A quarterly audit of all the depots fuel will be carried out by Fleet Manager. P Taggart, Fleet Manager Apr 2024 Aug 2024 Dec 2024 Work has been undertaken on hardware and software up to Sep 2024, with resources dedicated to address the concerns. Accepted Page 211 of 214
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Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion Monthly Fuel Audit: The Fuel Policy requires a monthly audit to be carried out by Fleet Management with a comparison being made between actual fuel held in tanks and that expected within the FuelTran system. Fleet Management informed us that this exercise has not been completed since the COVID pandemic, but recognise that this is a key control in identifying discrepancies, which should be re established Any discrepancies will be identified, investigated and any adjustments will be recorded with a reason and signed off by Fleet Manager. An audit was completed 30 Sep 2024, however, there are still incorrect readings showing between hardware and software. Fleet are continuing to engage with providers but are still not able to confirm that the systems are effectively working the way they should. A further update will follow on progress in December 2024. 23-06 - Fuel Action Point : 2.1 Importance: High Audit Committee Date: 25 Mar 2024 A record of any changes will be kept and any adjustments will be reviewed and verified by an officer designated by the Fleet Manager. Following this, a yearly audit will be carried out. A Brown, Assistant Fleet Manager Apr 2024 Aug 2024 Dec 2024 This action will be completed once the relevant information has been received from FuelTran as per the AP1.1 (see above). Accepted Page 212 of 214
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Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion There is no oversight of the manual adjustments made in the system as they are as they are not reported to Fleet Management nor investigated Any issues cannot be signed off on until both systems are working effectively. 23-06 - Fuel Action Point : 6 Importance: Medium Audit Committee Date: 25 Mar 2024 Pump readings: Pump readings should be recorded for each delivery, however this has not been possible in all cases because of a broken gage at the Friarton pump. Fleet Management was not aware of this fault. Fleet Management will ensure that the broken gauge is fixed, as part of an existing service contract. If required, new fuel gauges will be fitted which will be connected to the fuel tanks and new gauges fitted to the fuel pumps. When gauges are fitted, the Service will arrange to carry out a calibration test of the gauges every 6 months. A yearly audit will take place at each financial year and will be recorded. P Taggart, Fleet Manager Sep 2024 Apr 2025 The broken guage was fixed. However, further work carried out by Service revealed the calibration tests are still not accurate. The Service is in onward discussion with the supplier. Accepted Page 213 of 214
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