Agenda Document Pack - Audit and Risk Committee - 23/03/2026
Perth and Kinross Council · 23 March 2026
Back to Audit and Risk Committee — 23 March 2026 and its agenda
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Ambition | Compassion | Integrity Our vision is for a Perth and Kinross where everyone can live life well, free from poverty and inequality Council Building 2 High Street Perth PH1 5PH 16/03/2026 A hybrid meeting of the Audit and Risk Committee will be held in the Council Chamber on Monday, 23 March 2026 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 Bob Brawn (Vice-Convener) Councillor Liz Barrett Councillor Andy Chan Councillor Ken Harvey Councillor Iain MacPherson Councillor Grant Stewart Page 1 of 82
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Audit and Risk Committee Monday, 23 March 2026 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 1 DECEMBER 2025 FOR APPROVAL (copy herewith) 5 - 8 4 PERTH AND KINROSS COUNCIL DRAFT ANNUAL AUDIT PLAN 2025/26 Report by Audit Scotland (copy herewith 26/68) 9 - 30 5 INTERNAL AUDIT UPDATE Report by Chief Internal Auditor (copy herewith 26/69) 31 - 36 6 INTERNAL AUDIT - 25-09 PETTY CASH (copy herewith 26/70) 37 - 54 7 INTERNAL AUDIT - 25-05 HOUSING REGULATOR SUBMISSION (copy herewith 26/71) 55 - 78 8 INTERNAL AUDIT FOLLOW UP Report by Chief Internal Auditor (copy herewith 26/72) 79 - 82 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 P1 INTERNAL AUDIT FOLLOW UP - APPENDIX 2 - ACTIONS WITH A COMPLETION DATE UP TO JANUARY 2026 WHICH HAVE YET TO BE COMPLETED • Exempt Reason 15 - The identity of a protected informant. Page 3 of 82
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DRAFT Audit and Risk Committee Minute of hybrid meeting of the Audit and Risk Committee held in the Council Chambers on Wednesday 1 December 2025 at 1.00pm. Present: Councillors D Illingworth, B Brawn, A Chan, L Barrett, I MacPherson and G Stewart. In Attendance: T Glen, Chief Executive; S Walker, Chief Finance Officer; L Simpson, Strategic Lead – Legal and Governance; J Clark, K Molley, A Brown and M Pasternak (all Legal and Governance); S Cooper and S Wilson (Children, Families and Justice) Z Robertson and S Thomson (Health and Social Care Partnership). Apology: Councillor K Harvey Also in Attendance: R Browne and P Bryan (Audit Scotland). Councillor D Illingworth, Convener, Presiding. 1. Welcome and Apologies/Substitutions The Convener welcomed everyone to the meeting and gave a special welcome to Councillor B Brawn as the new Vice-Convener. The Convener also thanked Councillor C Stewart for his contributions on the committee since 2022. An apology was noted as above. 2. Declarations of Interest There were no declarations of interest made in terms of the Councillors’ Code of Conduct. 3. Minute of Meeting of the Audit and Risk Committee of 17 September 2025 for Approval The minute of meeting of the Audit and Risk Committee of 17 September 2025 was submitted and approved as a correct record. 4. Outstanding Business Statement Resolved: The contents of the Outstanding Business Statement, be noted and it was agreed to remove the completed actions. 5. Draft 2024/25 Annual Accounts (Audited) Draft 2024/25 Annual Audit Report There was submitted a report by Chief Finance Officer (25/330) presenting the Council’s draft 2024/25 Annual Accounts (Audited) in accordance with the Local 3 Page 5 of 82
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DRAFT Authority Accounts (Scotland) Regulations 2014 and draft 2024/25 Annual Audit Report. R Browne, Audit Scotland, provided a summary of the Audit Scotland’s Draft 2024/25 Annual Audit Report. The Convener asked the Chief Executive to make a statement about the inclusion of termination payments. T Glen confirmed he was content with Audit Scotland’s findings and advised that significant conversations had been held with colleagues from Audit Scotland over the period. T Glen referred to the recent instance where a senior post had left the organisation. T Glen confirmed the process was carried out in line with the governance procedures and the organisation’s Scheme of Delegation which led to a mutually agreed departure. T Glen added that verbal updates were provided to the appropriate Elected Members at the time to advise them of the situation. The Vice-Convener queried if the Chief Finance Officer was satisfied that procedures in place are robust to protect the Council from fraud. S Walker confirmed that a lot of work was involved in providing assurance that the correct measures are in place. Internal controls are scrutinised by Internal Audit and the organisation’s systems and controls are assessed by Audit Scotland which would be reported annually to the Audit and Risk Committee. Audit Scotland are in contact with the Chief Finance Officer and Chief Internal Auditor to see if they have any concerns. S Walker reassured members that the measures in place are robust as far as possible to protect the organisation from fraud. Councillor A Chan queried how exit packages are calculated. L Simpson confirmed that it would depend on the nature of the exit. If the exit was for redundancy or voluntary severance, the payment would be set out in terms of regulations and calculations would be carried out through a formulaic approach. S Walker added that work would be carried out internally with HR and if appropriate the Tayside Pension Fund on the process. Members thanked officers from Audit Scotland for their report Members thanked S Walker and his teams for the preparation of the Accounts. Members thanked J Clark for the reassurance from internal audit. Resolved: (i) The 2024/25 Audited Annual Accounts, be approved. (ii) The Leader of the Council, the Chief Executive and the Chief Finance Officer be authorised to sign the 2024/25 Audited Annual Accounts and the Chief Finance Officer be authorised to sign the Letter of Representation. (iii) The contents of Audit Scotland’s Draft 2024/25 Annual Audit Report, be noted. Page 6 of 82
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DRAFT 6. INTERNAL AUDIT FOLLOW-UP There was submitted a report by Chief Internal Auditor (25/331) presenting a summary of Internal Audit’s follow-up work that relate to actions completed up to September 2025. Resolved: The current position in respect of the agreed actions arising from Internal Audit’s work, be noted. 7. INTERNAL AUDIT UPDATE There was submitted a report by Chief Internal Auditor (25/332) presenting a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2024/25 and 2025/26. Resolved: The progress with Internal Audit activity, be noted. 8. 24-03 Multi-Agency Screening-Hub (MASH) There was submitted a report by Chief Internal Auditor (25/333) presenting an audit undertaken on Multi-Agency Screening Hub (MASH) as part of the Internal Audit Plan for 2024-25, which was approved by the Audit & Risk Committee on the 24th of June 2024. Councillor I Macpherson referred to a statement in the report that ‘there were no limitations identified that would impact the Audit. However, we were not able to comment on the effectiveness of the arrangements of the partner agencies’ and queried if this was standard practice across other Local Authorities for similar events. J Clark confirmed that the process was consistent as internal audit do not look at the effectiveness from the partner agencies perspective. The Convener asked the Chief Internal Auditor if she was content that all the actions she had recommended had been implemented. J Clark advised that she had not yet asked for evidence for the November dates. S Cooper added that work was currently being undertaken to update the Memorandum of Understanding and to improve the administration of sharing information. S Cooper confirmed that those actions should be completed by the end of December. Members thanked J Clark, her team and other relevant officers for their work in the audit. Resolved: The contents of Report 25/333, be noted. Page 7 of 82
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DRAFT IT WAS AGREED THAT THE PUBLIC AND PRESS SHOULD BE EXCLUDED DURING CONSIDERATION OF THE FOLLOWING ITEM IN ORDER TO AVOID THE DISCLOSURE OF INFORMATION WHICH IS EXEMPT IN TERMS OF SCHEDULE 7A TO THE LOCAL GOVERNMENT (SCOTLAND) ACT 1973 P1. Internal Audit – Health and Social Care Partnership There was submitted a report by Chief Internal Auditor (25/335) regarding an investigation at a Care Home in Perth and Kinross in accordance with the Council’s Whistleblowing Policy. Resolved: The contents of Report 25/335, be noted. Page 8 of 82
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Perth and Kinross Council Annual Audit Plan 2025/26 - Draft Prepared for Perth and Kinross Council March 2026 4 Page 9 of 82
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Perth and Kinross Council Annual Audit Plan | 2 Contents Introduction 3 Audit scope and responsibilities 4 Audit of the annual accounts 6 Wider scope audit 13 Best Value audit 14 Reporting arrangements, timetable and audit fee 16 Other matters 19 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Page 10 of 82
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Introduction | 3 Introduction Purpose of the Annual Audit Plan 1. The purpose of this Annual Audit Plan is to provide an overview of the planned scope and timing of the 2025/26 audit of Perth and Kinross Council’s annual accounts. It outlines the audit work planned to meet the audit requirements set out in auditing standards and the Code of Audit Practice, including supplementary guidance. Appointed auditor and independence 2. Rachel Browne, of Audit Scotland, has been appointed by the Accounts Commission as external auditor of Perth and Kinross Council, hereafter referred to as ‘the council’, for the period from 2023/24 until 2026/27. The 2025/26 financial year is the third year of Rachel’s four-year audit appointment. 3. Rachel Browne and the audit team are independent of the council in accordance with relevant ethical requirements, including the Financial Reporting Council’s Ethical Standard. This standard imposes stringent rules to ensure the independence and objectivity of auditors. Audit Scotland has robust arrangements in place to ensure compliance with ethical standards. The arrangements are overseen by the Executive Director of Innovation and Quality, who serves as Audit Scotland’s Ethics Partner. 4. The Ethical Standard requires auditors to communicate any relationships that may affect the independence and objectivity of the audit team. There are no such relationships pertaining to the audit of the council to communicate. Page 11 of 82
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Audit scope and responsibilities | 4 Audit scope and responsibilities Scope of the audit 5. The audit is performed in accordance with the Code of Audit Practice, including supplementary guidance, International Standards on Auditing (UK), and relevant legislation. These set out the requirements for the scope of the audit which includes: • An audit of the financial statements and an opinion on whether they give a true and fair view and are free from material misstatement. • An opinion on statutory other information published with the financial statements in the annual accounts, namely the Management Commentary and the Annual Governance Statement. • An opinion on the audited part of the Remuneration Report. • Conclusions on the council's arrangements in relation to the wider scope areas: Financial Management, Financial Sustainability, Vision, Leadership, and Governance, and Use of Resources to Improve Outcomes. • Reporting on the council’s arrangements for securing Best Value. • Providing assurance on the Housing Benefit Subsidy Claim and Non-Domestic Rates Return. • A review of the council’s arrangements for preparing and publishing statutory performance information. • Provision of an Annual Audit Report setting out significant matters identified from the audit of the annual accounts and the wider scope areas specified in the Code of Audit Practice. Responsibilities 6. The Code of Audit Practice sets out the respective responsibilities of the council and the auditor. A summary of the key responsibilities is outlined below. Auditor’s responsibilities 7. The responsibilities of auditors in the public sector are established in the Local Government (Scotland) Act 1973. These include providing an independent opinion on the financial statements and other information Page 12 of 82
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Audit scope and responsibilities | 5 reported within the annual accounts, and concluding on the council’s arrangements in place for the wider scope areas. Perth and Kinross council’s responsibilities 8. The council has primary responsibility for ensuring proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety and regularity that enables it to successfully deliver its objectives. The features of proper financial stewardship include: • Establishing arrangements to ensure the proper conduct of its affairs. • Preparation of annual accounts, comprising financial statements that give a true and fair view and other information. • Establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. • Implementing arrangements to ensure its financial position is soundly based. • Making arrangements to secure Best Value. • Establishing an internal audit function. Communication of fraud or suspected fraud 9. In line with ISA (UK) 240 (The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements), in presenting this plan to the Audit and Risk Committee we seek confirmation from those charged with governance of any instances of actual, suspected or alleged fraud that should be brought to our attention. Should members of the committee have any such knowledge or concerns relating to the risk of fraud within the council, we invite them to communicate this to the appointed auditor for consideration. Similar assurances will be sought as part of the audit completion process. Page 13 of 82
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Audit of the annual accounts | 6 Audit of the annual accounts Introduction 10. The audit of the annual accounts is driven by materiality and the risks of material misstatement in the financial statements, with greater attention being given to the significant risks of material misstatement. This chapter outlines materiality, the significant risks of material misstatement that have been identified, and the impact these have on the planned audit procedures. Materiality 11. The concept of materiality is applied by auditors in planning and performing an audit, and in evaluating the effect of any uncorrected misstatements on the financial statements or other information reported in the annual accounts. 12. The concept of materiality is to determine whether matters identified during the audit could reasonably be expected to influence the decisions of users of the financial statements. Auditors set a monetary threshold when determining materiality, although some issues may be considered material by their nature. Therefore, materiality is ultimately a matter of the auditor’s professional judgement. 13. The materiality levels determined for the audit of the council and its group are outlined in Exhibit 1. Exhibit 1 2025/26 Materiality levels for Perth and Kinross Council and its group Materiality Council Group Materiality – based on an assessment of the needs of users of the financial statements and the nature of the council operations, the benchmark used to determine materiality is gross expenditure based on the audited 2024/25 financial statements. Materiality has been set at 2% of the benchmark. £15.2 million £15.4 million Page 14 of 82
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Audit of the annual accounts | 7 Materiality Council Group Performance materiality – this acts as a trigger point. If the aggregate of misstatements identified during the audit exceeds performance materiality, this could indicate that further audit procedures are required. Using professional judgement, performance materiality has been set at 60% of planning materiality. £9.1 million £9.2 million Reporting threshold – all misstatements greater than the reporting threshold will be reported. £0.5 million £0.5 million Source: Audit Scotland Significant risks of material misstatement to the financial statements 14. The risk assessment process draws on the audit team’s cumulative knowledge of the council, including the nature of its operations and its significant transaction streams, the system of internal control, governance arrangements and processes, and developments that could impact on its financial reporting. 15. Based on the risk assessment process, significant risks of material misstatement to the financial statements have been identified and these are summarised in Exhibit 2. These are the risks which have the greatest impact on the planned audit approach, and the planned audit procedures in response to the risks are outlined in Exhibit 2. 16. The risk assessment process is an iterative and dynamic process. The assessment of risks set out in this Annual Audit Plan and Exhibit 2 may change as more information and evidence is obtained over the course of the audit. Where such changes occur, these will be reported to the council and those charged with governance, where relevant. This may include risks arising from the shared risk assessment process where scrutiny bodies meet to share intelligence and agree scrutiny risks at councils. 17. The Local Area Network meeting for the council is scheduled to take place on 16 March 2026. Any risks arising from this meeting which impact upon our planned audit approach, or shared scrutiny activity which may be deemed necessary, will be reported to the council and those charged with governance as appropriate. Page 15 of 82
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Audit of the annual accounts | 8 Exhibit 2 Significant risks of material misstatement to the financial statements Risk of material misstatement Planned audit response Fraud caused by management override of controls Management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. The audit team will: • Evaluate 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. • Use data analytics to consider, identify, and test journal entries, focusing on those that are assessed as higher risk, such as those affecting revenue and expenditure recognition around the year-end. • Evaluate significant transactions outside the normal course of business. • Assess the adequacy of controls in place for identifying and disclosing related party relationships and transactions in the financial statements. • Assess changes to the methods and underlying assumptions used to prepare accounting estimates and assess these for evidence of management bias. Page 16 of 82
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Audit of the annual accounts | 9 Risk of material misstatement Planned audit response Valuation of property, plant and equipment The council held £1.6 billion of property, plant and equipment (PPE) at 31 March 2025, of which £746 million was other land and buildings (OLB) assets. The council is required to value land and building assets at existing use value where an active market exists for these assets. Where there is no active market, these assets are valued on a depreciated replacement cost (DRC) basis. As a result, there is a significant degree of subjectivity in these valuations which are based on specialist assumptions, and changes in the assumptions can result in material changes to valuations. Also new for 2025/26, CIPFA/LASAAC has updated the Code of Practice to reflect HM Treasury’s reforms to public- sector asset valuations. Under the revised approach, local authorities will now move to quinquennial (five-yearly) full valuations, with annual indexation applied in the intervening years to ensure asset values remain materially accurate. There is an increased risk of material misstatement due to greater reliance on management judgement and estimation, particularly in selecting appropriate indices and determining when additional valuations are necessary in between formal valuations. The audit team will: • Evaluate the design and implementation of controls over the valuation process. • Review the information provided to the valuers and assess this for completeness and accuracy. • Evaluate the competence, capabilities and objectivity of the valuers. • Obtain an understanding of management’s involvement in the valuation process to assess if appropriate oversight has occurred. • Review the reconciliation between the accounts, property asset register and valuers’ reports. • Test a sample of OLB assets subject to revaluation in 2025/26, confirm to valuers’ reports, critically assess the appropriateness of key data and assumptions and challenge these where required. • Review the indices applied by management to assets not subject to valuation in 2025/26 and assess if these are reasonable and have been applied correctly. Source: Audit Scotland Key audit matters 18. The Code of Audit Practice requires public sector auditors to communicate key audit matters. Key audit matters are those matters, that in the auditor’s professional judgement, are of most significance to the audit of the financial statements and require most attention when performing the audit. 19. In determining key audit matters, auditors consider: Page 17 of 82
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Audit of the annual accounts | 10 • Areas of higher or significant risk of material misstatement. • Areas where significant judgement is required, including accounting estimates that are subject to a high degree of estimation uncertainty. • Significant events or transactions that occurred during the year. 20. The matters determined to be key audit matters will be communicated in the Annual Audit Report. Exhibit 2 outlines the significant risks of material misstatement to the financial statements that have been identified. 21. In addition to these risks, the following matter has been identified as an area where significant judgement is required. Focused audit work will be undertaken as set out below and will be reported on in the Annual Audit Report. • Estimation in the valuation of pension assets and liabilities – these valuations are based on a range of assumptions including life expectancy, CPI growth and discounting (based on corporate bond rates). Small changes in these assumptions can result in a material change to the valuations. We will assess the scope, independence and competence of the professional actuaries engaged to provide these estimates and review the appropriateness of the actuarial assumptions and results including comparison with other councils. We will also establish officers’ arrangements for ensuring the reasonableness of the professional estimates and the accuracy of the information provided to the council by the actuary. Group audit 22. The council is part of a group and prepares group financial statements. The group is made up of ten components, including the council which is the parent of the group. Risk assessment procedures have been performed on the group audit to identify if there are any risks of material misstatement to the group financial statements, or any components where audit procedures are required for the purposes of the group audit. The outcome of the risk assessment procedures on the group audit are outlined in Exhibit 3. Page 18 of 82
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Audit of the annual accounts | 11 Exhibit 3 Outcome of risk assessment procedures on the group audit Group component Accounting treatment Risk of material misstatement Audit procedures required Auditor Perth and Kinross Council Parent body – Consolidated on a line-by-line basis Yes – Exhibit 2 Yes – full scope audit Audit Scotland Common Good Funds Consolidated on a line-by-line basis No – not material to the group financial statements Yes – analytical procedures at group level Audit Scotland Charitable Trusts Consolidated on a line-by-line basis No – not material to the group financial statements Yes – analytical procedures at group level Audit Scotland Live Active Leisure Ltd Consolidated on a line-by-line basis No – not material to the group financial statements Yes – analytical procedures at group level Azets Culture Perth and Kinross Consolidated on a line-by-line basis No – not material to the group financial statements Yes – analytical procedures at group level Azets Perth Theatre and Concert Hall (Horsecross Arts Ltd) Consolidated on a line-by-line basis No – not material to the group financial statements Yes – analytical procedures at group level Henderson Loggie LLP Tayside Contracts Joint Committee Accounted for on equity basis No – not material to the group financial statements Yes – analytical procedures at group level Audit Scotland Tayside Valuation Joint Board Accounted for on equity basis No – not material to the group financial statements Yes – analytical procedures at group level Audit Scotland Page 19 of 82
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Audit of the annual accounts | 12 Group component Accounting treatment Risk of material misstatement Audit procedures required Auditor Perth and Kinross Integration Joint Board Accounted for on equity basis No – not material to the group financial statements Yes – analytical procedures at group level Audit Scotland Tayside and Central Scotland Partnership (Tactran) Not consolidated on grounds of materiality N/A N/A Audit Scotland Source: Audit Scotland 23. Where audit procedures are required on a component’s financial statements, and the component auditor is different to Perth and Kinross Council’s appointed auditor, group audit instructions will be issued to the component auditor outlining expectations and requirements in performing these audit procedures. Page 20 of 82
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Wider scope audit | 13 Wider scope audit Introduction 24. Reflecting the fact that public money is involved, the Code of Audit Practice requires that public audit is planned and undertaken from a wider perspective than in the private sector. The wider scope audit set out by the Code of Audit Practice broadens the audit of the annual accounts to include consideration of additional aspects or risks in four wider scope areas, which are summarised below: • Financial Management – this means having sound budgetary processes. Factors that can impact on the council being able to secure sound financial management include the strength of the financial management culture, accountability, and arrangements to prevent and detect fraud, error and other irregularities, bribery and corruption. • Financial Sustainability – this means looking forward over the medium and longer term in planning the services to be delivered and how they will be delivered effectively. This is assessed by considering the council’s medium to longer-term planning for service delivery. • Vision, Leadership and Governance – this means having a clear vision and strategy, with set priorities within the vision and strategy. This is assessed by considering the clarity of plans in place to deliver the vision and strategy and the effectiveness of the governance arrangements to support delivery. • Use of Resources to Improve Outcomes – this means using resources to meet stated outcomes and improvement objectives through effective planning and working with partners and communities. This is assessed by considering the council’s arrangements for ensuring resources are deployed to improve strategic outcomes, meet the needs of service users, and deliver continuous improvement. 25. Our planning work has not identified any significant risks in the wider scope areas. 26. A conclusion on the effectiveness and appropriateness of arrangements the council has in place for each of the wider scope areas will be reported in the Annual Audit Report. Page 21 of 82
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Best Value audit | 14 Best Value audit Introduction 27. Under the Code of Audit Practice, the audit of Best Value in councils is fully integrated within the annual audit. As part of the annual audit, auditors are required to take a risk-based approach to assessing and reporting on whether the council has made proper arrangements for securing Best Value, including follow up of findings previously reported in relation to Best Value. Best Value Thematic review 4: Asset Management 28. The Accounts Commission also reports nationally on thematic aspects of councils’ approaches to, and performance in, meeting their Best Value duties. As part of the annual audit, thematic reviews, as directed by the Accounts Commission, are conducted on the council. The thematic review for 2025/26 is on the subject of asset management and involves considering how the council is managing its assets to ensure high quality services whilst also responding to the challenges around financial sustainability and climate change. Conclusions and judgements on the thematic review will be reported in a separate Management Report and summarised in the Annual Audit Report. Controller of Audit Report 29. At least once over the five-year appointment, the Controller of Audit will report to the Accounts Commission on the council’s performance in meeting its Best Value duties. The third year of this programme runs from October 2025 to August 2026. The council is not included in the third year of the programme. Statutory Performance Information / LGBF 30. Auditors have a statutory duty to satisfy themselves that councils have made proper arrangements for preparing and publishing statutory performance information in accordance with the Statutory Performance Information Direction 2024 (the Direction) issued by the Accounts Commission. The outcome of this will be reported in the Annual Audit Report, which will include: • A conclusion on the council’s arrangements for preparing and publishing the statutory performance information. • Any instances where the arrangements or reporting are not in accordance with the Direction. • Areas where the arrangements require to be improved. Page 22 of 82
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Best Value audit | 15 31. In addition, the Accounts Commission requires auditors to include a summary of Local Government Benchmarking Framework (LGBF) indicators that the council has reported in the Annual Audit Report. Fairness and equality 32. There is an expectation that equalities will be advanced through the audit process, and auditors should carry out work on the Fairness and Equality Best Value theme at least once during the five-year audit appointment. We will assess the fairness and equalities arrangements in place at the council and report our conclusions in our 2025/26 Annual Audit Report. Significant Best Value risks 33. No significant Best Value risks were identified from the risk assessment process. Audit work on the wider scope areas will help support conclusions around Best Value. Page 23 of 82
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Reporting arrangements, timetable and audit fee | 16 Reporting arrangements, timetable and audit fee Audit outputs 34. The outputs from the 2025/26 audit include: • This Annual Audit Plan. • An Independent Auditor’s Report to the council and the Accounts Commission setting out opinions on the annual accounts. • An Annual Audit Report to Perth and Kinross Council and the Accounts Commission setting out significant matters identified from the audit of the annual accounts, conclusions from the wider scope and Best Value audit, recommendations, where required, and any good practice identified. 35. The matters to be reported in the outputs will be discussed with the council for factual accuracy before they are issued. All outputs from the audit will be published on Audit Scotland’s website, apart from the Independent Auditor’s Report, which is included in the audited annual accounts. 36. Target dates for the audit outputs are set by the Accounts Commission. In setting the target dates for the audit outputs, consideration is given to the statutory date for approving the annual accounts, which is 30 September 2026 for local government bodies. 37. The audit team will be unable to achieve the target date of 30 September 2026 for issuing the Independent Auditor’s Report and Annual Audit Report. This is due to prioritising the quality of our audit work over meeting target dates, as required by the Accounts Commission, and consistent with messaging from the Financial Reporting Council which has made clear that audit quality takes precedence. The audit team are working towards completion of the audit by the Audit and Risk Committee meeting date of 30 November 2026 and are working towards delivering the audit by target dates over the course of the five-year audit appointment. Audit timetable 38. Achieving the timetable for production of the annual accounts, supported by complete and accurate working papers, is critical to delivery Page 24 of 82
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Reporting arrangements, timetable and audit fee | 17 of the audit to agreed target dates. Exhibit 4 includes a timetable for the audit, which has been agreed with management. Agreed target dates will be kept under review as the audit progresses, and any changes required, and their potential impact, will be discussed with the council and reported to those charged with governance, where required. Exhibit 4 2025/26 audit timetable Audit activity Council target date Audit team target date Audit and Risk Committee date Issue of Annual Audit Plan N/A 2 March 2026 23 March 2026 Annual Accounts: • Consideration of unaudited annual accounts by those charged with governance 29 June 2026 N/A 29 June 2026 • Submission of unaudited annual accounts and all working papers to audit team 30 June 2026 N/A N/A • Latest date for audit clearance meeting 26 October 2026 26 October 2026 N/A • Issue of draft Letter of Representation, proposed Independent Auditor’s Report, and proposed Annual Audit Report N/A 09 November 2026 30 November 2026 • Agreement of audited and unsigned annual accounts 09 November 2026 09 November 2026 N/A • Approval by those charged with governance and signing of audited annual accounts 30 November 2026 N/A 30 November 2026 • Signing of Independent Auditor’s Report and issue of Annual Audit Report N/A 30 November 2026 N/A Issue of Best Value Management Report N/A 31 August 2026 21 September 2026 Certification of Non-Domestic Rates Return N/A 31 October 2026 N/A Page 25 of 82
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Reporting arrangements, timetable and audit fee | 18 Audit activity Council target date Audit team target date Audit and Risk Committee date Certification of Housing Benefit Subsidy Claim N/A 30 November 2026 N/A Source: Audit Scotland Audit fee 39. The council’s audit fee is determined in line with Audit Scotland’s fee setting arrangements. The proposed audit fee for the 2025/26 audit is £372,000 (2024/25 £358,370). 40. In setting the audit fee, it is assumed that the council has effective governance arrangements in place and the complete annual accounts will be provided for audit in line with the agreed timetable. The audit fee assumes there will be no significant changes to the planned scope of the audit. Where the audit cannot proceed as planned, for example, due to incomplete or inadequate working papers, the audit fee may need to be increased. Page 26 of 82
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Other matters | 19 Other matters Internal audit 41. The council is responsible for establishing an internal audit function as part of an effective system of internal control. As part of the audit, the audit team will obtain an understanding of internal audit, including its nature, responsibilities, and activities. 42. While internal audit and external audit have differing roles and responsibilities, external auditors may seek to rely on the work of internal audit where it is considered appropriate. A review of internal audit’s 2025/26 audit plan was carried out to identify if there were any areas where the audit team could rely on its work. The audit team concluded it will not rely on internal audit’s work. However, the audit team will review internal audit's reports and assess if there is any impact on the audit. Audit quality 43. Audit Scotland is committed to the consistent delivery of high-quality audit. Audit quality requires ongoing attention and improvement to keep pace with external and internal changes. Details of the arrangements in place for the delivery of high-quality audits is available from the Audit Scotland website. 44. The International Standards on Quality Management (ISQM) applicable to Audit Scotland for 2025/26 audits are: • ISQM (UK) 1, which deals with an audit organisation’s responsibilities to design, implement, and operate a system of quality management (SoQM) for audits. Audit Scotland’s SoQM consists of a variety of components, such as governance arrangements and culture to support audit quality, compliance with ethical requirements, ensuring Audit Scotland is dedicated to high- quality audit through engagement performance and resourcing arrangements, and ensuring there are robust quality monitoring arrangements in place. Audit Scotland carries out an annual evaluation of its SoQM and has concluded it complies with this standard. • ISQM (UK) 2, which sets out arrangements for conducting engagement quality reviews, which are performed by senior management not involved in an audit, to review significant judgements and conclusions reached by the audit team, and the appropriateness of proposed audit opinions on high-risk audits. Page 27 of 82
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Other matters | 20 45. To monitor quality at an individual audit level, Audit Scotland carries out internal quality reviews on a sample of audits. Additionally, the Institute of Chartered Accountants of England and Wales (ICAEW) carries out independent quality reviews on a sample of audits. 46. Actions to address deficiencies identified by internal and external quality reviews are included in a rolling Quality Improvement Action Plan, which is used to support continuous improvement. Progress with implementing planned actions is monitored on a regular basis by Audit Scotland’s Quality and Ethics Committee. 47. Audit Scotland may periodically seek the views of the council on the quality of audit services provided. The audit team would also welcome feedback at any time. Page 28 of 82
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Perth and Kinross Council Annual Audit Plan 2025/26 - Draft Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot AS.5.0 Page 29 of 82
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Our vision is a Perth and Kinross where everyone can live life well, free from poverty and inequality ___________________________________________________________________ Committee or Board: Audit & Risk Committee Date of Meeting: 23 March 2026 Report Title: Internal Audit Update Report Number: 26/69 Report Author: Jackie Clark, Chief Internal Auditor Organisational Lead: Strategic Lead – Legal and Governance 1 Purpose 1.1 The purpose of this Report is to present a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2024/25 and 2025/26. 1.2 Sections 1. Purpose 2. Recommendations 3. Background/Context 4. Progress Update 5. Outcome from Consultancy Work 6. Conclusion 7. Impact Value Assessment 8. Appendices 2 Recommendation It is recommended that the Committee: 2.1 notes progress with Internal Audit activity. 3 Background/Context 3.1 The Global Internal Audit Standards in the UK Public Sector (GIAS (UKPS)) and the Code of Practice for the Governance of Internal Audit in UK Local Government require that the Audit Committee should receive regular engagement reporting for internal audit activity and on performance relative to the approved plan. 5 Page 31 of 82
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3.2 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. 3.3 Internal Audit continues to support Services to investigate matches for the National Fraud Initiative in line with the timeline as laid down by Audit Scotland. This exercise is near completion and a report detailing the outcomes for Perth & Kinross Council will be prepared for consideration at the next meeting of the Audit & Risk Committee. 4 Progress Update 4.1 Appendix 1 shows the status of audits arising from the Internal Audit Plans. 4.2 Internal Audit continues to undertake a range of unplanned and responsive work in addition to the planned programme. This includes pieces of consultancy and advisory support requested directly by services, reflecting the team’s role not only in providing assurance but also in adding value and supporting improvement across the organisation. Where any significant control matters are identified through this unplanned or consultancy activity, these will be reported to the Audit & Risk Committee. 4.3 Internal Audit has also been commissioned by Housing & Communities to complete an assurance and advisory assignment in relation to the arrangements for disposal of 4 chalets at Double Dykes Gypsy Travellers Site. The objective was to provide reassurance that there have been no breach of legislation or any actions that have resulted in poor practice, and I have been pleased to be able to provide that reassurance. 4.4 Internal Audit has discussed A25-12 Asset Management with external audit colleagues. This will be the focus of Audit Scotland’s thematic work in 2026. Due to the timing of this and the significant overlap in the scope of both assignments, and the fact that this is part of a wider programme of work for External Audit, it is proposed that Internal Audit do not complete their assignment. This will ensure that there is no duplication of audit effort and will ensure that the Service is not stretched in responding to two sets of auditors for a broadly similar purpose 5 Proposals 5.1 Not applicable. 6 Conclusion 6.1 Not applicable. 7 Impact Value Assessment 7.1 This report has been classified as being an operational report and as such does not require a full Impact and Value Assessment. Page 32 of 82
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8 Appendices 8.1 Appendix 1 – Internal Audit Activity Page 33 of 82
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Appendix 1 INTERNAL AUDIT UPDATE Internal Audit Activity Audit No. Title Lead Service(s) Status as at October 2025 Audit Committee 2024/25 A24-04 Affordable Housing Housing & Communities Draft report June 2026 2025/26 C25-01 Strategic Partnering – Education & Learning Education & Learning Ongoing June 2026 C25-02 Strategic Partnering – Environment & Infrastructure Environment & Infrastructure Ongoing June 2026 A25-03 External Funding Multiple Services Ongoing June 2026 A25-04 Health & Safety Strategic Planning, People & Performance Ongoing June 2026 A25-05 Housing Regulator Submission Housing & Communities Completed March 2026 A25-06 Risk Maturity Strategic Planning, People & Performance June 2026 A25-07 Insurance Finance & Business Support Ongoing June 2026 A25-08 Administration of a social care establishment Adult Social Work Completed December 2025 A25-09 Petty Cash All Services Completed March 2026 A25-10 Payroll Strategic Planning, People & Performance Ongoing June 2026 A25-11 Assessment & Charging Finance & Business Support June 2026 A25-12 Asset Management Finance & Business Support Recommended for deletion from planned work 5 Page 35 of 82
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Internal Audit Report All Services PK 25-09 Petty Cash March 2026 Final Report (Report No. 26/70) Legal and Governance Strategy, People & Resources Perth & Kinross Council Council Offices 2 High Street Perth PH1 5PH 6 Page 37 of 82
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25-09 Petty Cash 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 38 of 82
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1. Introduction 1.1 The audit of 25-09 Petty Cash was undertaken as part of the Internal Audit Plan for 2025-2026, which was approved by the Audit & Performance Committee in June 2025. The period under review for the purposes of the audit exercise was financial years 2024-2025 and 2025-2026. 1.2 The indicative scope for the audit was to review the appropriate use and arrangement of Petty Cash within PKC. 1.3 The audit is not directly linked to any particular risk on the Strategic Risk Register. Internal Audit team would like to acknowledge that the requirement for the Petty Cash review was highlighted from a separate audit review, performed prior to this, and as a result some of the related findings are transferred to this Audit report. 2. Executive Summary 2.1 The audit has found that Limited Assurance can be placed on the Council’s internal controls in relation to the Petty Cash arrangements currently in place. 2.2 There are 12 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 The strategy for Internal Audit is to deliver a risk based Internal Audit service by designing planned activity around the key risks to the Petty Cash Management and Operational Controls. 3.2 The Local Government (Scotland) Act 1973 requires the Council to have proper arrangements in place for the administration of its financial affairs. Cash management is a crucial aspect of financial regulations for local councils. Cash is easy to lose or misappropriate. As such, Petty Cash and cash operations are an area of risk, and therefore assurance is necessary that adequate controls are present and effective. 3.3 Petty Cash advances may be used for making small payments or as a change float. Purchases made through petty cash are restricted, in line with guidance provided by the Chief Finance Officer. The administration, compliance and control over Petty Cash is outlined in the Council’s Financial Regulations and Petty Cash Procedure. 3.4 Responsibility for the administration of petty cash reimbursements was transferred to the Customer Services Centre (CSC) in September 2024. Prior to that, these operations were actioned by the Revenue & Benefits Team; however, it is important to note that responsibility for the overall process responsibilities still lay within Finance & Business Support. Page 39 of 82
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3.5 CSC team float manages all Council’s cash payment requests and serves as a replenishment float for subsequent smaller Petty Cash Floats within the establishments and teams in the Council. We would like to add that Criminal justice does not fall under CSC team and has it’s own G4S service. The Petty Cash float based in Pullar House is the largest and is independently reconciled by a financial officer through the PKC financial systems, Integra. It reimburses its remuneration amount with Secure G4S delivery service. The rest of the Petty Cash floats, due to their lower value and the lack of access to use Financial Control Systems, follow the cash collection procedure for secure storage. 3.6 CSC Team petty cash float is additionally used as a cash request service desk for the needs covering all services across the council, such as providing funds for HSCP services under Section 12 and Section 22, under the Health and Social Care Act, allowing to access client funds; DWP funds where PKC is the appointee; child protection team funds and many more. 3.7 During 2025/26 financial year we noted a total of 48 Petty Cash active floats with a total value of approximately £32,000. In the timeframe of the audit, 3 of those floats are being phased out. During the audit review float holders have identified that the use of the float is not required and creates additional administrative tasks, cash not required and cash use being slowly phased out, especially as a result of the COVID-19 pandemic, cash use has been reduced. 3.8 We would like to highlight, that as the review of the petty cash Audit progressed, there has been an incident of theft reported of one of the floats, with an Imprest limit of £120, within the HSCP, which was therefore added as part of the testing sample for further investigation. 4. Scope and Limitations 4.1 There were no limitations identified that would impact the Audit. However, we will not duplicate testing already undertaken in connection with other audit work (namely Administration of a Social Care establishment). 4.2 The validation of the operational process was against the published Perth and Kinross Financial Regulations (2024-27) and Petty Cash procedure (2014). All relevant staff were interviewed, and a review of documentary evidence was undertaken. 4.3 Total samples of 6 Petty Cash floats represent 12.5% of the PK Councils active floats. Internal Audit Team covered services such as HSCP, Children and Families, Finance and Youth and Employability Teams. The sample selection was aimed to represent variety of floats with large, medium, and small values. Page 40 of 82
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4.4 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 in Section 10. Action RatingNo. Control Objective 5 4 3 2 1 Control Objective Assessment 1 To ensure that there is a robust Petty Cash Reimbursement process and controls are in place to minimise the risk of Petty Cash mismanagement. 2 1 Reasonable Assurance 2 To review the adequate reconciliation of all petty cash across all the services. 3 1 Limited Assurance 3 To review the general controls, process and procedures are in place for Petty cash 2 3 Limited Assurance 5.2 The auditor has assessed that limited assurance can be placed on controls overall in relation to 25-09 Petty Cash from the audit. Meaning: ‘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”. 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 Since transferring the Petty Cash/ Cash Operations to the newly appointed cash office team (CSC Team), this has improved the daily operations within the petty cash/ cash office tasks. We have observed new electronic recording sheets, cross checking with each PC transaction. Documents for each transaction are shared on EDMS site, accessible within the team. There are spreadsheets for cash records and daily monitoring for each transaction. Page 41 of 82
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5.3.2 Improved, however not yet fully implemented, PC financial systems traceability process has been observed in the work of CSC Team. One of these improvements is having a log list for the cash operations team, where each designated officer, uses their own access for processing cash requests from Pullar House. 5.3.3 CSC Team have taken the initiative and are currently taking the lead to streamline the process since it has been transferred from the Revenues & Benefits Team to the service and resulted in appointing meetings with finance officers. 5.3.4 During the audit we have witnessed effective communication within the CSC Team and the rest of the Petty Cash/ Cash float users. The CSC Team responded quickly to all incoming enquiries, providing valuable advice and support. 5.3.5 As a result of the changes, an updated draft of a new Petty Cash request form has been created for wider service approval. This would simplify petty cash/cash requests across the council and reduce the variety of Petty Cash request formats that come to the CSC Team centre. 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 are in place to assure robust Petty Cash Reimbursement process and minimise the risk of Petty Cash mismanagement. 6.2.1 The Financial Regulations stipulates the general controls relevant to the use and management of a petty cash float. The Petty Cash Procedure supports these. The audit examined whether the staff involved with cash/ petty cash followed the outlined procedure; whether the council had sufficient controls in place to provide the safeguarding of the cash should the float be stolen or no longer needed, and is there continuous training 6.2.2 The current published Petty Cash Procedures were written in 2014. It was noted this version did not reflect the recent changes in Pullar House, which is now actioned by the Customer Services Centre Team and not the Revenues Section, Housing & Community Care. 6.2.3 During our review, we requested the Petty Cash Operating Procedures followed by each service to confirm consistency with Council requirements. There were three areas that had their own related versions of Petty Cash Procedures on the intranet which detracts from the centralised and consistent approach across all services. Page 42 of 82
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6.2.4 In the current Cash/PC Procedure it is referred to as petty cash usage and reimbursement. The same is applicable for establishments which hold Petty Cash floats and have established limits. However, no clear reference was made for processing on Cash requests for the CSC Team in Pullar House office, instead the procedure referred to Petty cash expenses. Therefore, we found that cash withdrawals, although validated with budget holder approval, were not always supported by receipts confirming the expenditure. The audit team acknowledges the fact, that on some occasions receipts are not available, based on type of transaction. However, follow up action on receipts was inconsistent. [Action Point 1] 6.2.5 Reimbursement for petty cash is initiated by submitting a template form. This form includes an authorisation section requiring approvals from both the budget holder and the payment support assistant. However, we have identified that the reimbursement process lacks standardisation. The approvals are inconsistently documented. They vary from typed names and forward emails from budget holders to inserted signatures within the Word document. [Action Point 2] 6.2.6 There have been a variety of forms identified that have been used to request cash/ petty cash reimbursement. Although, there is one approved template attached to the procedure, we have identified an additional four types of form used for a variety of requests. To ensure consistency and compliance with established procedures, it would be recommended to use one approved cash/petty cash reimbursement template across all Services. All other versions of cash request forms should be discontinued. [Action Point 3] 6.2.7 During the audit of petty cash reimbursements, two floats within the HSCP Service were evaluated by the auditor. Our observations confirm that although approved by the budget holder, where possible, some of the cash and petty cash requests had been administered without adequate checks. Additionally, there is no central point of contact for managing the requests within the HSCP, which contributes to a lack of accountability and consistency in the process. 6.3 Controls are in place to assure the adequate reconciliation of all petty cash done across all the services. 6.3.1 According to the PKC Financial Regulations, regular reconciliation for cash balances should be performed and recorded. During the audit process, we could not identify consistent information nor a template form that is used across all the 48 floats. Page 43 of 82
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3 out of 6 Imprest Floats (CSC Team, and Children and Families and one HSCP service) presented recorded evidence of using a template, where the form was clearly signed and dated, although reconciliation was not done regularly. The other 3 holders were not aware of specific form (2 x HSCP, Children and Families- Youth and Employability), although the staff were aware that reconciliation checks should be performed, guidelines were not available. It is advisable that all required forms according to the PC procedure, to be attached as Appendix for consistent and convenient use. [Action Point 4] 6.3.2 As part of the verification process on the Imprest/ Float account holders, we requested a list of all floats within PKC for year end of 2024/2025. It was noted that the paperwork supporting the balance in Pullar House newly inherited CSC Team float was submitted in July 2025 instead of 31/3/25 accounting year end in April 2025. Additionally, there was a discrepancy (of £100) between the total amount of the of Imprest from the Accounts list and the amount submitted on the form. [Action Point 05] 6.3.3 According to Financial Regulations 10.3, each petty cash float must have an assigned account holder. However, a consolidated list of all floats and their respective account holders was not available but provided in separate emails. The names of two Imprest floats did not match the Imprest received by the Accounts team (CSC & Youth Employability float). While some floats were listed individually with responsible officers, others were grouped together (e.g., Children and Families, HSCP), and a few included multiple names or lacked a designated account holder entirely. [Action Point 06] 6.3.4 During the audit, we have reviewed the need of the Petty Cash Floats. We have identified that 4 Teams no longer use Petty Cash and have enquired to close the cash. The note for closing the account was highlighted during the final accounts process at year-end in April 2025, however no steps have been taken yet to support the action. Using the available Standard Operating Procedure, Audit team could not identify such instruction. [Action Point 7] 6.4 Controls are in place to assure processes and procedures are in place for Petty cash, including budget monitoring. 6.4.1 The CSC Team in Pullar House is responsible for verifying authorisations and ensuring that approved ledger codes are used for the claims. However, they do not review the underlying reasons for cash withdrawals. Additionally, in HSCP floats ledger codes are being entered by a clerical assistant and approved by the budget holder. The possible budget overspends, and misallocation of funds was checked at a later stage during revenue monitoring, and not at the time of payment of expenses. However, the value of the Petty Cash floats is not material and there is no requirement to be included at that stage. Page 44 of 82
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6.4.2 In our review, we acknowledge the fact that the Financial System used in P& K Council, controls the authorisation limits database and it is a manged process. The limit is set per management level and not type of expenditure. 6.4.3 Petty Cash/ cash reimbursement was transferred to the new team in September 2024. As part of every change and process implementation, individual training is essential. Meanwhile, we could not see evidence of any training records providing assurance on understanding and following financial procedures for the CSC team during the transition. Additionally, there is no evidence on training for new starts on these financial Operations. [Action Point 8] 6.4.4 As part of the Petty Cash Procedure ‘Services should ensure independent checks are carried out on petty cash records on an ad hoc basis to ensure appropriate controls are being adhered to’. There was no clear awareness on what controls and checks are referred to, nor that those checks are still adhered to. There was no clear awareness on what controls and checks are referred to, nor that those checks are still adhered to. [Action Point 9] 6.4.5 During the testing process, firstly we identified 1 out of 58 vouchers on the PC Float, where the receipt was dated November’24 then reimbursed in June’ 25, 5 more dated from April ’25 and reimbursed in June. According to the PC Procedure ‘No retrospective payments, etc, will be made for the previous year once the Petty Cash books have been closed’. There is no clear time frame for claiming reimbursement of receipts within the Petty Cash Procedure. Additionally, the year-end requirements were not followed. [Action Point 10] 6.4.6 Secondly, one of the 58 reviewed items was approved based on an invalid receipt, which consisted only of a screenshot showing an online basket total. The purchase included items that are not permitted under petty cash procedures and should have been processed via a credit card transaction instead. Similar identification was seen in HSCP float transactions, where majority of cash payments could have been progressed through usual PECOS purchasing. [Action Point 11] 6.4.7 The auditor examined 30 receipts in one of the Children and Families petty cash floats. Of these, 21 were paid using personal cards and 9 were paid in cash. As per the given Children and Families PC procedure ‘Use of personal cash, debit, or credit cards in anticipation of retrospective authorisation is not permitted’. This indicates a procedural gap that should be addressed in the PKC Petty Cash Procedure to ensure compliance and clarity. Page 45 of 82
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6.4.8 During the audit, an incident involving theft of a petty cash float. The fact that cash has gone missing (float with Imprest limit of £120), highlights a weakness in the current cash handling and security arrangements. As part of the audit testing, we found that 2 of the petty cash float holders were not following the outlined guidelines for secure key storage. Immediate improvements are required to strengthen safeguarding measures, enhance accountability, and ensure compliance with financial procedures to prevent recurrence. Security of cash is at risk. [Action Point 12] 6.4.9 Secure cash storage arrangements are outlined in the existing Petty Cash Procedure. However, this procedure was originally written in 2014, when PKC operated under more traditional working arrangements, including closed office spaces. Since 2024/2025, and particularly following the COVID-19 pandemic, PKC has adopted flexible working practices, including hot-desking and open- plan office layouts. As a result, teams responsible for managing petty cash floats are now situated in open workspaces, which introduces increased risks related to cash storage and accountability. There is an increased need of Process review, and the Audit team wants to emphasize the need of reduction of the Petty Cash floats where possible. 7. Conclusion 7.1 The Internal Audit review is able to place Limited Assurance on the overall control environment for the Internal Petty Cash/ Cash operations. 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: Liz Colledge, Service Centre Manager, Customer Service Centre Alison O’Brien, Manager CDS - Accountancy Shona Welsh, Finance & Governance Team Leader Alison Stewart, Finance Administrator, Finance & Governance Jamie Ridgway, Senior Incomes Officer Craig Robertson, Central Services Manager, CDS – Accountancy Claire Palmer, Finance and Governance Service Manager Lorraine Kelly, Business & Management Officer, Finance & Business Support Almondbank House Kathryn Devine, Youth Employability Co-ordinator Lorna Davage, Team Leader, HSCP - Mental Health Elaine Mudie, Finance Officer, Children and Families - Finance & Governance Bunjan Phimjaras, Payment Support Assistant Hazel Rylance, Supply Payment Support Assistant Page 46 of 82
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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 47 of 82
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10. Management Action Plan Acti on Poin t Para. No Finding Risk Rating Agreed Action & Evidence Action Owner Target Completion Date 1. 6.2.2 6.2.3 6.2.4 The current published PKC Petty Cash and Cash request Procedure were written in 2014: It was noted this version did not reflect the recent changes in Pullar House Encashment office, which is now actioned by the Customer Services Centre Team and not the Revenues Section, Housing & Community Care. There were three areas that had their own related versions of the Petty Cash Procedures on the intranet which that detracts from the centralised and consistent approach across all services. Follow up action on receipts was inconsistent. 3 Agreed action: New procedures to be prepared once completed these additional versions will be removed. Agreed evidence: 1. New procedures 2. If there is supplementary guidance it will be identified as such. J. Jennings Senior Accountant March 2026 Page 48 of 82
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2. 6.2.5 We have identified that the reimbursement process lacks standardisation. The approvals are inconsistently documented. They vary from typed names and forward emails from budget holders to inserted signatures within the Word document. 3 Agreed action: New procedures to be prepared Agreed evidence: New procedures L. Colledge, Service Centre Manager J. Jennings Senior Accountant March 2026 3. 6.2.6 To ensure consistency and compliance with established procedures, it would be recommended to use one approved cash/petty cash reimbursement template across all Services. All other versions of cash request forms should be discontinued. 1 Agreed action: New procedures to be prepared. There will be separate forms for petty cash float reimbursement and a petty cash payment. Agreed evidence: All forms will be on integra and reports can be pulled to ensure that these match any outlays. J. Jennings Senior Accountant March 2026 4. 6.3.1 According to the PKC Financial Regulations, regular reconciliation for cash balances should be performed and recorded. During the audit process, we could not identify consistent information nor a template form that is used across all the 48 floats. 3 Agreed action: New procedures to be prepared Agreed evidence: New procedures J. Jennings Senior Accountant March 2026 Page 49 of 82
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5. 6.3.2 As part of the verification process on the Imprest/ Float account holders, we requested a list of all floats within PKC for year end of 2024/2025. It was noted that the paperwork supporting the balance in Pullar House newly inherited CSC Team float was submitted in July 2025 instead of 31/3/25accounting year end in April 2025. Additionally, there was a discrepancy (of £100) between the total amount of the of Imprest from the Accounts list and the amount submitted on the form. 2 Agreed action: An annual list will be agreed as part of the schedules returned during the Final Accounts process. The year end guidance states that return must be submitted in April each year. Agreed evidence: Annual List Schedules returned in line with year end guidelines C Robertson, Central Accounting J Ridgway Senior Incomes Officer June 2026 6. 6.3.3 The names of two Imprest floats did not match the Imprest received by the Accounts team (CSC & Youth Employability float). While some floats were listed individually with responsible officers, others were grouped together (e.g., Children and Families and Children’s Services, HSCP), and a few included multiple names or lacked a designated account holder entirely. 3 Agreed action: Finance Business Partners will ensure there is a designated person recorded on the forms for each float at Final Accounts. This will be added to the updated procedures. Agreed evidence: C. Robertson, C. France, C. Palmer Finance Business Partners M. Grant J. Jennings Senior Accountant June 2026 Page 50 of 82
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Updated guidance and Imprest final accounts returns forms. 7. 6.3.4 During the audit, we have reviewed the need of the Petty Cash Floats. We have identified that 4 Teams no longer use Petty Cash and have enquired to close the cash. The note for closing the account was highlighted during the final accounts process at year-end in April 2025, however no steps have been taken yet to support the action. Using the available Standard Operation Procedure, Audit team could not identify such instruction. 3 Agreed action: New procedures to be prepared with such addition. Agreed evidence: New procedures J. Jennings Senior Accountant March 2026 8. 6.4.3 Petty Cash/ cash reimbursement was transferred to the new team in September 2024. As part of every change and process implementation, individual training is essential. Meanwhile, we could not see evidence of any training records providing assurance on understanding and following financial procedures for the CSC team during the transition. Additionally, there is no evidence 3 Agreed action: Once new form launched and policy and procedure agreed, training will be carried out. Agreed evidence: Confirmation from staff member that they have read, understood and L. Colledge Service Centre Manager April 2026 Page 51 of 82
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on training for new starts on PKC financial Operations. agreed that sufficient training has been undertaken, and a log kept of this. 9. 6.4.4 As part of the PK Petty Cash Procedure ‘Services should ensure independent checks are carried out on petty cash records on an ad hoc basis to ensure appropriate controls are being adhered to’. There was no clear awareness on what controls and checks are referred to, nor that those checks are still adhered to. 3 Agreed action: New procedures to be prepared Eform process will fill this need No requirement to check on ad hoc basis this will be removed from the guidelines Agreed evidence: New procedures J. Jennings Senior Accountant March 2026 10. 6.4.5 According to the PC Procedure ‘No retrospective payments, etc, will be made for the previous year once the Petty Cash books have been closed’. There is no clear time frame for claiming reimbursement of receipts within the Petty Cash Procedure. Additionally, the year- end requirements were not respected. 3 Agreed action: New procedures to be prepared Agreed evidence: New procedures J. Jennings Senior Accountant March 2026 Page 52 of 82
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11. 6.4.6 The purchase included items that are not permitted under petty cash procedures and should have been processed via a credit card transaction instead. Similar identification was seen in HSCP float transactions, where majority of cash payments could have been progressed through usual PECOS purchasing. 4 Agreed action: New procedures will make this clear that it is the Budget Holders responsibility to purchase through the appropriate route. Eform will allow Finance to identify issues and raise this with Budget Holders. Agreed evidence: New procedures J. Jennings Senior Accountant March 2026 12. 6.4.8 The fact that cash has gone missing (float with Imprest limit of £120), highlights a weakness in the current cash handling and security arrangements. As part of the audit testing, we found that 2 of the petty cash float holders were not following the outlined guidelines for secure key storage. 4 Agreed action: Updated guidance will be completed and will be circulated to Budget Holders Agreed evidence: Email to budget holders J. Jennings Senior Accountant (Updated Guidance) C. France C. Palmer C. Robertson M. Grant Finance Business Partners March 2026 Page 53 of 82
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Internal Audit Report Housing & Communities 25-05 Housing Regulator Submission March 2026 Final Report (Report No. 26/71) Legal and Governance Perth & Kinross Council Council Offices 2 High Street Perth PH1 5PH 7 Page 55 of 82
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25-05 Housing Regulator Submission Contents by Section 1. Introduction 2. Audit Background Information 3. Scope and Limitations 4. Assessment of the Control Environment 5. Summary of Findings 6. Conclusions 7. Acknowledgement 8. Action Implementation & Follow Up 9. Management Action Plan 10. Authorisation 11. Distribution 12. Assessment Definitions Page 56 of 82
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1. Introduction 1.1 The audit of the Housing Regulator Submission was undertaken as part of the Internal Audit Plan for 2025/26, which was approved by the Audit and Risk Committee on 25 June 2025. The period under review for the purposes of the audit exercise was the financial year 2024-25. 1.2 The indicative scope for the audit was to review arrangements for the compilation of the annual submissions to the Housing Regulator. 1.3 The audit is not directly linked to any particular risk on the Strategic Risk Register, however, forms the basis for external assurance provider, which may be relied on by Internal Audit as part of planning, in accordance with the Global Internal Audit Standards in the UK Public Sector. 2. Executive Summary 2.1 The audit has found that Substantial Assurance can be placed on the Council’s internal controls in relation to the review for the compilation of the annual submissions to the Housing Regulator by the Council, with no improvement actions arising from the Internal Audit (Objectives 1 and 2 below). Areas of good practice have been highlighted within Section 5 of this report. 2.2 Whilst reviewing the arrangements for the compilation of the annual submission, Internal Audit reviewed in detail the content of the Submission (Objective 3 below). We found that the Service were aware of these and were taking actions to address the issues, where possible. These findings are captured in Section 6 and an action plan in Section 10 includes the actions which are on-going to address the issues raised. As a result of this part of the audit, there are ten actions arising. These actions are designed to enhance performance as reported in the Submission. 3. Audit Background Information 3.1 The Scottish Housing Regulator (SHR) was established on 01 April 2011 in accordance with the Housing (Scotland) Act 2010. Its objective is to protect and promote the interests of tenants and other service users of Local Authorities and Registered Social Landlords (RSLs). 3.2 The Regulatory Framework states that each landlord is responsible for delivering good outcomes and services for its tenants and service users. Landlords need to be self-aware, analytical, open and honest about their performance, and identify and drive improvement. 3.3 Section 2.4 of the Regulatory Framework requires landlords to prepare and publish an Annual Assurance Statement. This statement serves to confirm to both tenants and the Scottish Housing Regulator that the landlord is meeting the relevant regulatory requirements applicable to Local Authorities and Registered Social Landlords (RSLs). Page 57 of 82
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3.4 In accordance with section 2.9 of the Framework, the main risks that they consider are: poor outcomes for tenants, people who are homeless and other service users poor quality or safety of tenants’ homes 3.5 Further, the Regulatory Framework advises that landlords should consider how best to utilise Internal Audit as a source of independent assurance when preparing their Annual Assurance Statements. This includes providing assurance on compliance with regulatory requirements, such as the Standards of Governance and Financial Management applicable to Registered Social Landlords (RSLs). 3.6 According to section 4.2 the statement should be completed and agreed by the governing body or local authority committee. It is mentioned that the governing body or committee should confirm that they have appropriate assurance that they comply with: all relevant regulatory requirements set out in Chapter 3 of the Regulatory Framework all relevant standards and outcomes in the Scottish Social Housing Charter all relevant legislative duties the Standards of Governance and Financial Management (RSLs only) any specific assurance requirements asked landlords to cover in their Statement. 4. Scope and Limitations 4.1 The Audit has reviewed the relevant standards and outcomes in the Scottish Social Housing Charter and identified the arrangements for the compilation of the annual submissions to the Housing Regulator (HR). 4.2 To arrive at an opinion on the achievement of the control objective, the review included, Document reviews concerning Housing Regulator submission Interviews with key staff who are responsible for the various indicators Reviewing of any third-party documents and arrangements with relevant performance indicators Ensuring lessons learned from previous non-compliance are incorporated into future planning. 4.3 There were no limitations identified that would impact the Audit. 4.4 The details of the control objectives reviewed and the Internal Audit’s assessment of their strength of control in each area are contained within Section 5 of this report. Page 58 of 82
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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. Action RatingNo. Control Objective 5 4 3 2 1 Control Objective Assessment 1 To ensure appropriate evidence has been gathered to support the level of assurance. Substantial Assurance 2 To assess whether the conclusion arrived at is appropriate based on the evidence available and satisfies the governance requirement. Substantial Assurance 3 To ensure all relevant standards and outcomes in the Scottish Social Housing Charter and legislative duties have been achieved. 7 2 1 Reasonable Assurance 5.2 The auditor has assessed that Substantial Assurance can be placed on controls overall in relation to the arrangements for the compilation of the annual submissions to the Housing Regulator. Meaning: “A sound system of governance, risk management and control exists, with internal controls operating effectively and being consistently applied to support the achievement of objectives in the area audited”. 5.3 A summary of the key findings and actions is provided in section 6. Please note, however, the following areas of good practice which have been highlighted during the audit: 5.3.1 The submission of Annual Assurance Statements commenced in 2018/19, and over the past six years, there has been a consistent demonstration of commitment and the delegation to ensure timely submission. Cross functional teams worked together for the compilation of the Annual Assurance Statement for the 2024/25 and to meet the 31 October 2025 deadline. 5.3.2 There are certain delegated authorities have been appointed to oversee all aspects related to the housing regulator submission and delivery of the different services to the tenants. Service performance is reported regularly to the Housing Management Team, Communities Senior Management Team and Executive Leadership Team. Page 59 of 82
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5.3.3 According to the Scottish Housing Regulator website 8,226 homes are owned by Perth and Kinross council as of 31 March 2025. The total rent due to this landlord reported for the year 2024/25 was £32,978,973. It further mentioned that the PKC increased its weekly rent on average by 6.0% from the previous year but it is still below the Scottish average weekly rents. 5.3.4 Our observations confirm that appropriate measures have been implemented to ensure all the houses achieve the Gas Servicing Compliance requirements 2024/25 year. We commend the Housing Compliance Team for their dedication and performance in achieving this target and encourage the continued application of the Gas Servicing Quality Assurance Framework. 5.3.5 Our review indicates that PKC remains committed to delivering home adaptations, with 404 completed during 2024/25. Notably, the number of households waiting for adaptations was reduced from 45 to 32. While the average completion time has slightly decreased, it remains better than the Scottish average. The efficient use of resources has also led to a significant reduction in total expenditure. The dedication of the Property - Housing Capital Projects and New Builds team, in collaboration with the Occupational Therapist, is commendable in achieving these outcomes. 5.3.6 It has been noticed that PKC charges the lowest factoring fee of £20 compared with the Scottish Average and other Registered Social Landlords. Currently, there are 116 owners across multi-storey and other blocks who are subject to this fee. Satisfaction with factoring services has increased over the year, reflecting strong performance in delivering good value for money (outcome 13), communication (outcome 2) and participation (outcome 3) in line with the Scottish Social Housing Charter. 5.3.7 According to Social Housing Allocation Guidelines, in allocating housing, social housing landlords need to balance a range of factors such as, the individual's housing need, the suitability of the house for that applicant and the needs of the community. In April 2025, PKC revised the Common Allocation Policy (CAP) to better identify the priority tenants in response to housing pressure. We appreciate the steps taken to implement Perth and Kinross Common Housing Register (CHR), a computer-based, single waiting list shared by PKC, Caledonia Housing Association, Hillcrest Homes and Kingdom Housing Association. This system uses Group Plus Points System to ensure fair and consistent allocations, in alignment with relevant housing legislation and the Scottish Social Housing Charter. 5.3.8 The preparation of Assurance Statements requires the collection and input of various data into the Scottish Housing Regulator’s system. This process has been effectively coordinated by a designated officer who possesses comprehensive knowledge across all relevant areas. The officer has provided consistent support to the Team Leader, ensuring that all necessary evidence has been appropriately gathered. The resulting Assurance Statement addresses all key indicators in accordance with the requirements of the Regulatory Framework. 5.3.9 In our observation, the Assurance Statement was prepared well in advance, with all supporting documentation clearly itemised in a separate annexe. The Page 60 of 82
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assurance provided is consistent with the evidence presented, which has been reviewed and found satisfactory by the Internal Audit. 5.3.10We observed that appropriate governance arrangements were in place for the submission to the Scottish Housing Regulator. This was evidenced by participation in the Housing and Social Wellbeing Committee meeting held on 01 October 2025. During this meeting, the Assurance Statement along with the relevant appendices was formally approved for submission to the Regulator. This approval aligns with the Framework’s requirements and was granted by the Committee on the same day. 5.3.11As internal audit we agree with the conclusion derived in the Assurance Statement which states that “during 2024/25 Perth and Kinross Housing Service complied with all except one regulatory requirement as set out in Chapter 3 of the Scottish Housing Regulator's Framework.” Also, we are satisfied with the explanation provided in relation to the recognised non- compliance. 5.3.12During 2024/25, Perth and Kinross Council reported non-compliance in relation to the management of Gypsy/Traveller sites. The details of this non- compliance have been outlined in our findings. However, the Assurance Statement clearly highlights the steps taken to address the issue, including the provision of quarterly updates to the Scottish Housing Regulator. We acknowledge and commend the ongoing efforts made throughout the year to achieve and maintain full compliance in the management of Gypsy/Traveller sites. 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 The assurance process was conducted effectively, and sufficient evidence was gathered to support the expressed opinion. 6.3 As part of the audit, whilst testing was undertaken for the third control objective, as detailed in Section 5 above, Internal Audit has identified areas where additional controls could be beneficial particularly in relation to certain national key performance indicators. 6.4 Our observation confirm that the Customer Satisfaction Survey was conducted by an independent, third-party organisation, Knowledge Partnership, using a representative sample to assess overall tenant satisfaction. Key areas evaluated included keep tenants informed, opportunities to participate, housing quality, repairs, neighbourhood management and rent value. During 2024/25 most of these indicators showed a decline compared to the previous year and indicating a downward trend in tenant satisfaction. [Action point 01] Page 61 of 82
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6.5 Regarding the complaint handling, all the complaints are received via email or telephone and are recorded in Firmstep (Case Viewer), before being downloaded to Excel for verification. Housing-related complaints are manually identified, sorted, and documented as a part of this process. Although discussions have taken place regarding the implementation of a complaint’s dashboard, it should be noted that the dashboard was not fully operational during the 2024/25 reporting period and therefore was not utilised for the Housing Regulator submission. [Action point 02] 6.6 The review of documents and discussions with the Corporate Complaints Team Leader revealed an increase in Stage 2 complaints rising from 60 to 80 from 2023/24 to 2024/25. Stage 2 Complaints means if the complainant is dissatisfied with the Stage 1 outcome or if the issue remains unresolved, the complaint is escalated to Stage 2. Additionally, more serious complaints may be classified directly as Stage 2. These are typically resolved within 20 working days. It was noted that 9 of the 80 complaints received during the year were carried forward to 25/26 financial year and resolved fully. Actions have already been implemented in this area; therefore, no further actions are currently required. 6.7 The audit has identified that a substantial amount of information in relation to the social housing is publicly available in the PKC website. This includes the access to applications, common allocation policy and clarifications addressing misconceptions regarding the allocation process. However, it was noticed that certain information on the website is outdated. For instance, the update provided for the Common Housing Register Waiting List is dated 13 September 2021 which may lead to confusion or misinformed expectations among applicants. [Action point 03] 6.8 According to the Scottish Housing Quality Standards (SHQS), social landlords must ensure that their tenants’ homes: energy efficient, safe and secure, not seriously damaged have kitchen and bathrooms that are in good condition. Landlords are expected to maintain these standards unless otherwise they prevent by social or technical reason from completing improvements required by SHQS. It is mentioned that in general, SHQS should be achieved rather than avoided. 6.9 From our observation, we found that there are 1662 houses which do not pass this minimum SHQS in 2024/25; from these, 123 houses are in abeyance (refers to the situation where planned work cannot be completed due to social reasons such as tenant behaviour), and 417 houses are under exemption (due to technical or economic reasons). Page 62 of 82
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1082 houses have fully failed to meet the standards. Specifically, 999 houses failed on one criterion, while 83 houses failed on two or more criterion. The most common failures notified were roof structure and common floor/parts failures. For the year 2024/25 SHQS pass rate is 80.28%, reflecting an improvement from the previous year pass rate of 76.32%. It is noted that the Council will not achieve 100% conformance in this area, due to reasons such as tenant preference, the type of housing stock etc, and that the Council’s performance is above the local authority average; the Service continues to progress towards achieving the maximum compliance rate possible. [Action point 04] 6.10 The Energy Efficiency Standard for Social Housing (EESSH) was introduced to improve the energy efficiency of social housing in Scotland, with the aim of reducing energy consumption, fuel poverty and greenhouse gas emissions. As part of our review, it was identified that a significant number of properties failed to meet EESSH requirements. Specifically, 1055 properties did not comply with the standard in 2024/25; 451 of these properties are under exemption (due to technical or economic reasons) or an abeyance (tenant issues, for example, opting out of the improvements required or not allowing access). [Action point 05] 6.11 The status of the Energy Performance Certificate (EPC) of PKC Housing Stock as of 31 March 2025 has been observed as follows. Following the introduction of the Energy Team, the number of properties without an EPC has significantly decreased from 919 to 198. As of 31 March 2025, there were 210 properties with Energy Performance Certificates (EPC) rated in Bands E and F, comprising 170 properties in Band E and 40 in Band F. 6.12 As per the updated figures as of 30 June 2025, we noted that there are 185 properties without Energy Performance Certificate (EPC) and 874 out of date which require attention from the Housing Capital Projects & New Builds team in Property Services. It is appreciated that these figures can be impacted by lack of access provided to carry out the EPC surveys. [Action point 06] Page 63 of 82
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6.13 Currently, there are multiple software solutions used by the Council to support various aspects of housing management operations. The primary asset database utilised by the Housing Capital Projects & New Builds Team is the “Houses” Database, which is operated by BACRA. This system underpins reporting requirements for both ARC (Annual Return on the Charter) and SHQS (Scottish Housing Quality Standards). The Housing Service employs the NEC Housing Management System to effectively manage and maintain a range of functions including Housing Advice, Homelessness, Allocations, Tenancies, Rents, Arrears, Customer Services, Planned Maintenance, and Housing Online. Additionally, the Housing Repairs Service utilises the Total Mobile (Total Connect) system for job management, scheduling, and mobile delivery. 6.14 Whilst it is appreciated that the current reports and quality assurance processes for the compilation of the submission to the Scottish Housing Regulator ensure that the information is accurate, there is scope for considering some improvement. The audit identified the Council does not maintain a centralised asset database accessible across all departments. For instance, the “Houses” database is not integrated with other systems such as NEC and Total Mobile. [Action point 07] 6.15 Regarding the indicator Anti-social behaviour cases resolved, it was noted that there is a 13.77% (From 91.37% to 79.60%) reduction from previous year of resolving them within the agreed time. [Action point 08] 6.16 We have observed positive progress in rent collection, accompanied by a significant reduction in gross rent arrears. However, it has been identified that there is currently no utilisation of advanced technologies to proactively detect potential rent arrears at the tenant level. Several other councils have successfully implemented predictive analytics to identify early indicators of financial distress among tenants and this may be a route for PKC to consider. [Action point 09] 6.17 During the audit, we observed that concerns were raised in relation to the safety, standards, communication and human rights concerns at Gypsy/Travellers site by the Scottish Housing Regulator published on 21 March 2025. In the Double Dykes site, PKC failed to meet the minimum standard for Essential Fabric Standards (Standard 1), Safety and Security (Standard 4), Maintenance and Repairs (Standard 5), Fair Treatment (Standard 6) and Consultation (Standard 7). In the Bobbin Mill site, PKC failed to meet the Essential Fabric Standards (Standard 1), Energy Efficiency (Standard 2), Safety and Security (Standard 4) and Consultation (Standard 7). 6.18 The Housing Regulator mentioned both Gypsy/Travellers sites are failing to meet several Social Housing Charter Outcomes such as Equalities (outcome 1), Communication (outcome 2), Participation (outcome 3), Repairs, maintenance and improvement (outcome 5), Gypsy/Travellers (outcome 16). Page 64 of 82
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There is an ongoing replacement of the chalets and general upgrades in both sites. However, on the completion day of this audit, the Comprehensive Satisfaction Survey has not been carried out. [Action point 10] 6.19 The latest Stock Condition Survey was carried out in June 2021 and covered 30% of the housing stock at that time. As per Regulator guidance, the next scheduled Survey is to be held before June 2026 and this was also due to cover 30% of different houses for SHQS compliance, as per the Annual return submitted. Since the Annual Return was submitted in May 2025, the Service has reconsidered its position going forward, to improve the accurate understanding of the condition of the housing stock. A new contract is being progressed that will ensure that 100% of the properties are reviewed within the lifetime of the contract, therefore within the five year period required for the next Stock Condition Survey. 7. Conclusion 7.1 The Internal Audit review is able to place Substantial Assurance on the overall control environment for arrangements for the compilation of the annual submissions to the Housing Regulator. 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, Elaine Ritchie (Strategic Lead – Housing & Communities), Calvin Cameron (Housing Development Worker, Communities - Performance & Business Support), Andrea McCallum (Service Manager - Housing - Communities), Mark Weir (Team Leader - Income Maximisation, Communities - Performance & Business Support), June McColl (Service Manager (Housing) Communities - Repairs & Improvements), Nicola Lennon (Service Manager - Capital Projects & New Build), Nicola Sworowski (Place Strategies Manager & Chief Planning Officer Communities - Planning & Housing Strategy), Martin Smith (Service Manager - Perth City and Specialist Services Communities - Perth City & Specialist), Connor Wilson (Business Support Service Manager – Finance & Business Support), Joy Mayglothling (Corporate Complaints Team Leader) 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. Page 65 of 82
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Where a decision is taken by management not to act in response to findings 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 66 of 82
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10. Management Action Plan Action Point Para. No Finding Risk Rating Agreed Action & Evidence Action Owner Target Completion Date 1 6.4 Our observations confirm that the Customer Satisfaction Survey was conducted by an independent, third-party organisation, Knowledge Partnership, using a representative sample to assess overall tenant satisfaction. Key areas evaluated included keeping tenants informed, opportunities to participate, housing quality, repairs, neighbourhood management and rent value. During 2024/25 most of these indicators showed a decline compared to the previous year and indicating a downward trend in tenant satisfaction. 3 Agreed action: The findings of the Satisfaction Survey for 2025/26 are being reviewed for any areas where action can be taken to address areas of concerns being raised. Agreed evidence: Outomes from the review of tenant satisfaction within Perth and Kinross. A. McCallum (Service Manager - Housing - Communities) May 2026 2 6.5 Regarding the complaint handling, all the complaints are received via email or telephone and are recorded in Firmstep (Case Viewer), before being downloaded to Excel for verification. Housing- related complaints are manually identified, sorted, and documented as a part of this process. Although discussions have taken place 2 Agreed action: A pilot dashboard has been developed with managers presenting live data, tracking and themes with a view to resolving complaints quickly and efficiently. Roll out took place from January 2025, becoming fully operational from April 2025. C. Wilson (Business Support Service Manager – Finance & Business Support) Completed Page 67 of 82
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regarding the implementation of a complaints dashboard, it should be noted that the dashboard was not fully operational during the 2024/25 reporting period and therefore was not utilised for the Housing Regulator submission. Agreed evidence: Live dashboard 3 6.7 The audit has identified that a substantial amount of information in relation to the social housing is publicly available in the PKC website. This includes the access to applications, common allocation policy and clarifications addressing misconceptions regarding the allocation process. However, it was noticed that certain information on the website is outdated. For instance, the update provided for the Common Housing Register Waiting List is dated 13 September 2021 which may lead to confusion or misinformed expectations among applicants. 1 Agreed action: We recognise the importance of providing data that is meaningful and relevant to both applicants and tenants, and significant progress has been made in this area. Agreed evidence: The updated waiting list M. Smith (Service Manager - Housing) Completed 4 6.9 From our observation, we found that there are 1662 houses which do not pass this minimum SHQS in 2024/25; out of that 123 houses are in abeyance (refers to the situation where planned work cannot be 3 Agreed action: New Contract put in place for Stock Condition Survey. New Asset Management Database for all areas of Housing to feed data into to N. Lennon (Service Manager - Capital Projects & New Build) October 2027 Page 68 of 82
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completed due to social reasons such as tenant behaviour), and 417 houses are under exemption (due to technical or economic reasons). 1082 houses have fully failed to meet the standards. Specifically, 999 houses failed on one criterion, while 83 houses failed on two or more criterion. The most common failures notified were roof structure and common floor/ parts failures. For the year 2024/25 SHQS pass rate is 80.28%, reflecting an improvement from the previous year 76.32%. It is noted that the Council will not achieve 100% conformance in this area, due to reasons such as tenant preference, the type of housing stock etc, and that the Council’s performance is above the local authority average; the Service continues to progress towards achieving the maximum compliance rate possible. ensure asset management information is up to date. Review of SHQS failures and targeted inspections carried out to investigate elements shown as failures Agreed evidence: Appointment of contractor for Stock Condition Survey and commencement of contract within 2026 Appointment of new Asset Management Database provider and move from current databases to new Database undertaken Regular reports provided by database to track reduction in SHQS failures Data relating to each failure is fully evidenced and shown with a plan of how this will be addressed J McColl, (Service Manager (Housing) Communities - Repairs & Improvements Nicola Sworowski, (Place Strategies Manager & Chief Planning Officer) Page 69 of 82
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5 6.10 The Energy Efficiency Standard for Social Housing (EESSH) was introduced to improve the energy efficiency of social housing in Scotland, with the aim of reducing energy consumption, fuel poverty and greenhouse gas emissions. As part of our review, it was identified that a significant number of properties failed to meet EESSH requirements. Specifically, 1055 properties did not comply with the standard in 2024/25; 451 of these properties are under exemption (due to technical or economic reasons) or an abeyance (tenant issues, for example, opting out of the improvements required or not allowing access). 3 Agreed action: Targeted plan to address EESSH failures, taking into account budgetary pressures Agreed evidence: EESSH failures list categorised into elements to be addressed to improve EESSH compliance and work towards completion of delivery of the required elements N. Lennon (Service Manager - Capital Projects & New Build) Overall target: March 2030 Interim targets: March 2026 – 114 properties March 2027 – 306 properties March 2028 – 182 properties March 2029 – 1 property March 2030 - 1 property 6 6.12 As per the updated figures as of 30 June 2025, we noted that there are 185 properties without Energy Performance Certificate (EPC) and 874 out of date which require attention from the Housing Capital Projects & New Builds team in Property Services. It is appreciated 3 Agreed action: Properties currently without an EPC or with an out-of-date EPC are being prioritised for surveys through the current contract that is in place; this contract has a planned N. Lennon (Service Manager - Capital Projects & New Build) March 2027 Page 70 of 82
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that these figures can be impacted by lack of access provided to carry out the EPC surveys. delivery requirement to guarantee it meets the required deliverables. Agreed evidence: Progress monitoring reports provided fortnightly by the contractor at the progress meeting Bi-monthly Highlight Reports provided to Housing Management Team. 7 6.14 Whilst it is appreciated that the current reports and quality assurance processes for the compilation of the submission to the Scottish Housing Regulator ensure that the information is accurate, there is scope for considering some improvement in that the audit identified the Council does not maintain a centralised asset database accessible across all departments. 3 Agreed action: A comprehensive contract strategy has been completed to tender for a new system. This strategy acknowledges the limitations and sets out a clear pathway for procuring a new housing asset management solution that meets both current and future operational and regulatory needs. This process has taken significant time given the complexities involved. Market testing has been conducted to ensure the proposed system will deliver improved functionality, integration, and data reliability. N. Lennon (Service Manager - Capital Projects & New Build) J. McColl (Service Manager (Housing) Communities - Repairs & Improvements March 2026 Page 71 of 82
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However, the costs have been passed to our Finance colleagues for review and comment, as the quotation received far exceeds the anticipated costs, therefore it is unclear at this stage whether we will have a budget to meet the full requirements Agreed evidence: Contract award document / outcome from decision on whether to proceed 8 6.15 Regarding the indicator Anti-social behaviour cases resolved, it was noted that the 13.77% (From 91.37% to 79.60%) reduction from previous year of resolving them within the agreed time. 3 Agreed action: Review and update the ASB procedures. Deliver targeted staff training – with a particular focus on trauma informed approach. Encourage the use of a wide range of interventions and legal tools. Promote early intervention through positive engagement, education, mentoring, and diversion activities Agreed evidence: ASB indicator for 25/26 A.McCallum (Service Manager - Housing - Communities) May 2026 Page 72 of 82
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9 6.16 We have observed positive progress in rent collection, accompanied by a significant reduction in gross rent arrears. However, it has been identified that there is currently no utilisation of advanced technologies to proactively detect potential rent arrears at the tenant level. Several other councils have successfully implemented predictive analytics to identify early indicators of financial distress among tenants and this may be a route for PKC to consider. 2 Agreed action: We are currently testing NEC Analytics, which is a form of AI, to help with the identification of trends and forecasting to target our work and free up staff to focus on those more complex and challenging cases. Agreed evidence: Reports run by NEC Analytics A. McCallum (Service Manager - Housing - Communities) Build completion December 2025 Phased go- live Q1 2026 10 6.18 Housing Regulator mentioned both Gypsy/Travellers sites are in failures in meeting several Social Housing Charter Outcomes such as Equalities (outcome 1), Communication (outcome 2), Participation (outcome 3), Repairs, maintenance and improvement (outcome 5), Gypsy/ Travellers (outcome 16). There is an ongoing replacement of the chalets and general upgrades in both sites. However, on the completion day of this audit, the Comprehensive Satisfaction Survey has not been carried out. 3 Agreed action: Tenant satisfaction surveys are embedded within our programme and scheduled in accordance with both statutory requirements and resident feedback. Review the findings of the Satisfaction Survey for 2025/26. Consider the potential to extend the current contract or alternative means of collecting the satisfaction levels. The regulator only requires updates every 3 years for these indicators. A. McCallum (Service Manager - Housing - Communities) April 2026 Page 73 of 82
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Agreed evidence: Comprehensive Satisfaction Survey Page 74 of 82
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11. Authorisation 11.1 The auditor for this assignment was D. Arachchilage. The supervising auditor was J Clark. This report is authorised for issue: 12. Distribution 12.1 The final report will be issued to: T Glen, Chief Executive C Mailer, Depute Chief Executive E Ritchie, Strategic Lead – Housing & Communities S Marone, Strategic Lead – Economy, Development & Planning S Walker, Strategic Lead – Finance & Business Support J Beveridge, Strategic Lead – Property Services A McCallum (Service Manager - Housing - Communities), J McColl (Service Manager (Housing)Communities - Repairs & Improvements, N Lennon (Service Manager - Capital Projects & New Build), M Smith (Service Manager - Perth City and Specialist Services Communities - Perth City & Specialist) C Wilson (Business Support Service Manager – Finance & Business Support) N Sworowski (Place Strategies Manager & Chief Planning Officer Communities - Planning & Housing Strategy) Committee Services External Audit 13. Assessment Definitions 13.1 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 exists, 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. Page 75 of 82
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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. 13.2 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 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 Page 76 of 82
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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 77 of 82
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Our vision is a Perth and Kinross where everyone can live life well, free from poverty and inequality ___________________________________________________________________ Committee or Board: Audit & Risk Committee Date of Meeting: 23 March 2026 Report Title: Internal Audit Follow Up Report Number: 26/72 Report Author: Jackie Clark, Chief Internal Auditor Organisational Lead: Strategic Lead – Legal and Governance 1. Purpose 1.1 The purpose of this Report is to present current summary of Internal Audit’s ‘follow up’ work relating to actions due for completion up to September 2025. 1.2 Sections 1. Purpose 2. Recommendations 3. Background/Context 4. Follow Up Outcomes 5. Conclusion 6. Impact Value Assessment 7. Appendices 2. Recommendation It is recommended that the Committee: 2.1 notes the current position in respect of the agreed actions arising from Internal Audit’s work. 3. Background/Context 3.1 The Global Internal Audit Standards in the UK Public Sector (GIAS (UKPS)) and the Code of Practice for the Governance of Internal Audit in UK Local Government require that the Audit Committee should oversee the tracking and implementation of actions agreed following audits. 3.2 Internal Audit request evidence from Services which confirms that actions have been implemented and, therefore, controls have been improved. 8 Page 79 of 82
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4. Progress Update 4.1 There were 13 actions due to be completed up to January 2026. Five actions have been verified by Internal Audit as having been satisfactorily completed. The remaining actions have revised completion dates, as detailed in Appendix 1 and 2. Appendix 2 contains details of actions which were previously considered in private session of the Audit & Risk Committee. 5 Conclusion 5.1 Not applicable. 6. Impact and Value Assessment 6.1 This report has been classified as being an operational report and as such does not require a full Impact and Value Assessment. 7. Appendices 7.1 Appendix 1 – Actions with a completion date of up to September 2025 which have yet to be completed 7.2 Appendix 2 - Actions with a completion date up to January 2026 which have yet to be completed Page 80 of 82
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Appendix 1 Actions with a completion date up to January 2026 which have yet to be completed Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion A24-01 - Business Continuity Management (BCM) Planning Action Point: Action Point 1.3 Importance: High Audit Committee Date: June 2025 Our observation highlighted the need for Business Continuity Plans (BCPs) to be regularly updated, particularly regarding contact details and emergency actions. Despite the introduction of a new template, upto-date BCPs were not found across all services. The audit concluded without verifying signed BCPs for all services Ensure all Business Continuity Plans are signed by the Strategic Leads Strategic Leads, supported by S Terras, Emergency Planning & Business Continuity Officer June 2025 Dec 2025 Mar 2026 Three Strategic Leads have still to finalise and sign their Plan. The Emergency Planning & Business Continuity Officer has been busy dealing with the aftermath of the Scott Street fire. She is gradually reducing the time she needs to be at Scott Street as it should be finished soon and all families home. She thinks that this should leave enough time for her to arrange sessions with the three Strategic Leads to complete and sign their Plans. Accepted A24-01 - Business Continuity Management (BCM) Planning Action Point : 2 Importance: High Arrange training and exercising of all plans once approved and as per the BCP tracker. S Terras, Emergency Planning & Business Jun 2025 Nov 2025 Mar 2026 As above. Accepted 8 Page 81 of 82
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Our observations revealed that the previous versions of the BCPs had not routinely been subject to adequate testing and communication (training and exercise) since prior to the Covid-19 pandemic. Furthermore, the latest Business Continuity Management (BCM) procedure has not been finalised, preventing us from providing any comments on its effectiveness at this stage. Continuity Officer 24-03 - Multi-Agency Screening Hub (MASH) Action Point : 1.1 Importance: Medium Audit Committee Date: December 2025 There are some discrepancies between the Memorandum of Understanding (MOU) and the actual practice. MOU will be updated (as the list of children, as well as their personal data on the MASH spreadsheet, is available for participants). S Wilson, Improvement Officer Dec 2025 Apr 2026 This action has yet to be completed, due to availability of resources. This is now due to be completed by April 2026. Satisfactory Page 82 of 82