Internal Audit Report - 24-04 - Afforrdable Housing
Perth and Kinross Council · 29 June 2026
Back to Audit and Risk Committee — 29 June 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
1 Internal Audit Report Housing & Communities 24-04 Affordable Housing June 2026 Final Report (Report No. 26/196) Legal and Governance Perth & Kinross Council Council Offices 2 High Street Perth PH1 5PH
Page 2
2 PK 24-04 Affordable Housing 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 3
3 1. Introduction 1.1 The audit of PK 24-04 Affordable Housing was undertaken as part of the Internal Audit Plan for 2024/2025, which was approved by the Audit & Performance Committee on 24 June 2024. The period under review for the purposes of the audit exercise was financial years 2024/2025. 1.2 The indicative scope for the audit was to review the arrangements in place for the Affordable Housing Strategy included in the Internal Audit Plan for 2024/25. 1.3 This audit is linked to the Strategic Risk Register SRCP-004 and SRCP-010, SRCP-004 states that ‘Our actions to tackle poverty and address the inequalities gap within Perth & Kinross are ineffective’ and this is rated as Very High Risk, priority 1. SRCP-010 refers to ‘Council buildings and other assets that are not safe, fit for purpose or providing the best value’ and it was reported to be priority 2, as High risk for both. 2. Executive Summary 2.1 The audit has found that reasonable assurance can be placed on the Council’s internal controls in relation to the arrangements in place to support delivering the Affordable Housing plans of the Council. 2.2 There are nine actions arising from the findings in Section 6. An action plan is included in 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 Affordable housing delivery refers to the strategic process of planning, constructing, and providing housing options that are financially accessible to individuals and families with low to moderate incomes. The Scottish Government has several initiatives and fundings for affordable housing, which have a direct impact on Perth and Kinross Council. Each local authority has a responsibility to develop and implement strategic housing plans that outline their priorities and targets for delivery. 3.2 Based on the requirement, Perth and Kinross Council’s Strategic Housing Investment Plan (SHIP) 25-30 is developed to align with the priorities and outcomes set out in the Local Housing Strategy (LHS) 22-27. This ensures that the investment in affordable housing supports the broader housing goals of the local authority. The SHIP provides a detailed plan for the delivery of affordable housing projects, including timelines, funding allocations, and resource planning. 3.3 The SHIP 25-30 aims to deliver 1,152 affordable homes over the five-year period committed 210 per year according to LHS. Affordable housing within the SHIP includes variety of initiatives such as new build projects, refurbishment
Page 4
4 and renovation projects, regeneration projects, off the shelf acquisitions and buybacks. Responsibility for Affordable Housing spreads across three Strategic Lead Areas Economy, Development & Planning; Housing & Communities; and Property. 3.4 The PKC Corporate Plan 22-27 explains our vision and priorities. As part of the strategic approach, Appendix 1 contains a list of priorities and the Local Housing Strategy is one of them, which is designed in alignment with Scottish Government strategy Housing to 2040. PKC Risk Register lists the PKC Local Housing Strategy (LHS) 2022-27 as a control to mitigate the risk, however, it states that the ‘control effectiveness’ as ‘improvement required’. 4. Scope and Limitations 4.1 The review consisted of identifying measures are in place to ensure the efficient and effective key controls operating around delivering against all aspects of affordable housing targets according to the LHS and Strategic Housing Improvement Plan (SHIP). It is acknowledged that responsibility in this area spans 3 Strategic Lead areas, namely Economy, Development & Planning; Housing & Communities; and Property. To arrive at an opinion on the achievement and transparency of the control objective, the review included: • Document review in relation to the LHS and SHIP. • Interviews with key staff who are responsible for LHS and SHIP • Analysis and review of the effective delivery of Monitoring and Progress and implementation of the LHS and SHIP. • Review of any third-party arrangements (financial, process and communication) 4.2 The focus of the Internal Audit has been on ensuring that the overall plans of PKC for affordable housing delivery are in place and of the arrangements in place for the monitoring and reporting of performance for all partners in delivering affordable housing. However, the audit did not assess the status of individual projects assigned to RSL housing providers, as the delivery of their building projects is the responsibility of the relevant Housing Associations. 4.3 Internal Audit recognised that a big part of the Action Plan for delivering the LHS target will be out with the control of the Council and that funding for the future planning period within the LHS required from Scottish and/or UK Government may not be forthcoming. 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.
Page 5
5 5. Assessment of the Control Environment 5.1 The table below contains a summary of the number of findings and their ratings, as detailed in Section 12, against each control objective, along with 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. No. Control Objective Action Rating Control Objective Assessment 5 4 3 2 1 1 To ensure that the LHS delivered through SHIP is achievable, there is no risk of failing delivery of the plan of providing more affordable homes to support liveable places of average 210 homes per year over 5- year period. 2 4 3 Reasonable assurance 5.2 The auditor has assessed that reasonable assurance can be placed on controls overall in relation to Affordable Housing plans of the PKC. Meaning: ‘There is a generally sound system of governance, risk management and control in place. Some issues, non-compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited.’ 5.3 A summary of the key findings and actions are provided in section 6, please note however, the following areas of good practice which have been highlighted during the audit: 5.4 The Council has created a dedicated Strategic Affordable Housing Strategy Board (SAHB) where meetings are recorded and discussions cover all aspects of the PKC SHIP, including newbuild projects through Housing Associations. There is an average of 5 meetings per year, which are focused as per the group remit objectives. Topics cover project progress, planning updates, current and potential future opportunities with well monitored financial and timeline structure. SHIP and LHS projects have clearly set targets allocated in the LHS Action Plan 2022-2027, where in addition to the yearly updates, there are additional quarterly performance updates, accessible to the public on Council’s webpage. 5.5 SAHB consists of proactive members and considers utilising flexible housing funding options to deliver the SHIP. From the reviewed resources there was visible spend in the following areas: £1.5 million from Developer Contributions to assist in delivering affordable housing initiatives throughout Perth and Kinross including new build houses in Kinross; delivery of £4m in funding from Scottish Government’s Gypsy/Traveller Accommodation Fund at the Double Dykes site to replace 20 chalets, utilising £700,000 from the second home Council tax income towards purchasing twenty National Trust buildings in
Page 6
6 Dunkeld; as well as utilising the major funding through prudential borrowing via the Housing Revenue Account (HRA) as evidenced in the delivery of the last phase of 5 modern homes in Methven and few more as per SAHB plan. 5.6 The assigned Team Leader, Affordable Housing Strategy and connected team members, have in depth and broad knowledge of the government requirements of delivery of affordable housing. This was visible, through well organised delivery plans and implemented communication flow, internally between departments and externally, through Housing Associations, including to the Housing Regulator and Scottish Government. PKC Affordable Housing Strategy Team updates the yearly plan (SHIP), which is annually approved and continuously reviewed between PKC and Scottish Government, as observed on the received Resource Planning Allocation letter (RPA), September 2024. The RPA confirms the allocated funding for 2025-26. It should be noted that while the overall SHIP covers a five-year period, the specific funding allocations within the RPA can be adjusted and confirmed only for that year. 5.7 Considering the limited confirmation of future government funding, which is out of the audit scope, it is observed through compelling evidence that PKC is committed to the delivery of the SHIP. As a result, if a delay in new builds occurs, PKC can react promptly and fulfil the annual affordable housing target quantities, through quick response with the well- established Affordable Housing Strategy Team. 5.8 The latest Strategic Housing Investment Plan (SHIP) for 2025/26 forms the basis of the plan to deliver the affordable housing of overall £87 million investment. It includes the delivery of 1,152 homes, which has a significantly higher investment than the previous SHIP 2024-29 with a target of delivering 1,435 homes. The latest SHIP 2025-30 has an increased target with already incorporated modern design standards, focusing on higher quality and more complex projects with expanded scope, such as sustainability and energy efficiency. 5.9 The reviewed evidence presents a greater programme performance in 2024/25 than the previous year’s delivery, due to exceeding the target of buybacks; as of March 2025, the data showed that there was a total of 238 additional affordable housing units against a projection of 223, compared to a total of 170 additional affordable housing units against a target of 210 in 2023/24. 5.10 The associated finance team members within SAHB, demonstrate well- established practices through the overall Capital Financial Monitoring Plan; this confirms projects match the SAHB plan. Capital planning includes close monitoring of all undergoing RSL projects with PKC involvement as well as additional future projects. The SAHB Monitoring Projects Plan indicates a clear view of how current or future projects could potentially affect the budget plan. During the interview with the Finance Team Leader, we observed lessons learnt over the years in adapting the capital budget and expenditure. Current monitoring sheets reflect more accurately this adaptability in relation to additional affordable housing projects, as shown in the approach to progressing buybacks. Before reaching for PKC prudential borrowing to purchase buybacks over the agreed target, there is communication with the Scottish Government
Page 7
7 to consider the potential of using the SHIP’s funding. The agreement to proceed with additional buybacks subsequently supports the meeting of the overall yearly SHIP targets. In March 2025, the buybacks properties totalled 116, in comparison to the previously expected 40 properties; this has maximised the use of the available budget and has supported the overall annual additional affordable housing units set out in the SHIP for 2024/25. 5.11 All updates regarding acquiring any property as part of the PKC stock is communicated between Economy, Development & Planning; Housing & Communities; and Property, which is then subsequently reflected on their databases. Approval to proceed above the agreed target of 40 is also discussed and agreed at regular SAHB meetings and at regular Housing Management Team meetings. 5.12 An initiative-taking approach to identifying and addressing additional potential projects, which are suitable for the Council needs and where the Council can increase housing quantities to meet the housing needs and reach the annual PKC target, has been observed. Team officers are working with external agencies and housing associations to find more flexible and creative options to obtain additional stock. We can evidence that through the variety of projects discussed in the SAHB meetings. 5.13 PKC demonstrates strong tenant and community involvement, following a consultation with over 3000 responses with the latest tenancy increase proposals. The latest approved Housing Revenue Account (HRA) Strategic Financial Plan 2025-2030 presented at the Housing and Social Wellbeing Committee on 22 January 2025, agreed a 6% increase on the rent-setting for Council social housing tenants. The income from the rent increase will continue to support the buyback funding of £20m over 5 years and addresses the Council’s active approach of addressing funding options for financial sustainability of the affordable housing projects. 5.14 We have observed that PKC manages the above Affordable Housing projects accurately. An effective method for implementing a strong plan is to create focused responsibilities. This group’s focus is on detailed review on new build projects, matching latest standards and housing requirements, reflecting good practices. This has been reflected in the formation of the PKC New Builds Team meetings in autumn 2023, which collaborates closely with related parties Finance, Legal, Procurement, Property and Economy, Development & Planning. 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 Strategic Affordable Housing Board (SAHB) 6.2.1 The SAHB oversees the implementation of the Strategic Housing Investment Plan (SHIP). During document review, it was noticed that the buyback
Page 8
8 quantities for September 2024 of the legal team were much higher than listed on the SAHB plan (40 against the actual 90). The total estimated expenditure figure on buybacks was not reflected as the number of properties increased. Although not all buyback properties are funded through the SHIP, all the purchased quantities can be reflected in the planning sheet to increase the total number of affordable housing units against the target for PKC. At each SAHB meeting the total buyback quantity increased from 40, to 64, then to 90, however this change was not reflected in the total projected spend column in the SAHB spreadsheet. [Action Point 1] 6.2.2 In our observation of the SAHB meetings minutes are recorded, however the discussions blend in with the action points. There is no further clear outcome and separate follow up Action Plan. This could result in some action points remaining unaddressed. Clearly defined actions with designated responsible persons and timelines would assist in leading to clearer responsibilities. [Action Point 2] 6.2.3. We acknowledge that although there is strong control of affordable housing delivery through SAHB, a clear flow outlining each delivery group and its responsibilities within and exactly which areas are being covered in the delivery plan, is not evident. The responsibilities between Property, Economy, Development & Planning and Housing & Communities are very closely related. There is a risk of misalignment between the groups, which may result in conflicting information and inefficiencies during decision-making processes, and ultimately delivery of outcomes, especially during acquiring new build properties. [Action Point 3] 6.2.4 While we recognize the importance of evaluating the PKC New Build Delivery Group’s performance, we believe it is too soon to draw definitive conclusions at this stage. 6.3 Processing Buyback Properties 6.3.1 Affordable housing, particularly the buybacks programme, is delivered through plans with specified quantities of properties. The buybacks process of acquiring each property includes different departments, before it becomes part of PKC stock. It was observed lack of transparency of upcoming plans between buybacks in Property Team and paralegal team. Each team had their own stand-alone records with no shared access of other team’s progress. Shared detailed information or access to upcoming work can improve on wider team’s planning schedule. [Action Point 4] 6.3.2 It was noted that the meetings between Property buybacks team and paralegals were not regular and not recorded. Structured plan with feedback from both departments working in collaboration, can improve efficiency in delivery of the
Page 9
9 Affordable Housing Plan and reduce potential delays during conveyancing process. [Action Point 5] 6.3.3 Currently, the property criteria of buybacks are quite generic when submitting to paralegals for an offer letter to be sent out. We understand that detailed information for each property can be added during the assessment process from the initial viewing. All the unique applicable information can be reflected to its acquisition form for use of the paralegal team. All additional information can expedite the conveyancing process by reducing the need for feedback at a later point. [Action Point 6] 6.3.4 The buyback policy for processing properties will need to be optimized and further developed. This should include purpose, scope, responsibilities, procedures, and compliance measures, approved by, date of issue and last revision. Strong and clear instructions, formalised within the PKC template, will ensure quality assurance in the process. [Action Point 7] 6.3.5 Conveyancing process can be lengthy with various bottleneck points occurring during legal work. We acknowledge the experience of the paralegal team, however lessons learned practises during conveyancing are not captured. A database of past issues serves as a valuable information resource for future training and educating of the wider paralegal team. [Action Point 8] 6.3.6 The paralegal team involved in the buyback process is experienced and efficient, using well-established work routine and process. However, the steps of the conveyancing process are not captured and reflected directly on a process-based sheet or work instruction. [Action Point 9] 7. Conclusion 7.1 The Internal Audit review can place reasonable assurance on the overall control environment for the delivery for the affordable housing plans of the Council. 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: N Sworowski, Place Strategies Manager & Chief Planning Officer
Page 10
10 N Lennon, Service Manager - Capital Projects & New Build H Hatfield, Project Officer B Mitchell, Paralegal A Smith, Paralegal W O’Connor, Paralegal S Coyle, Team Leader - Finance & Governance 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 11
11 10. Management Action Plan Action Point Para. No Finding Risk Ratin g Agreed Action & Evidence Suggested Action Owner Target Completion Date 1 6.2.1 During document review, it was noticed that the buyback quantities for September 2024 of the legal team were much higher than listed on the SAHB plan (40 against the actual 90). The total estimated expenditure figure on buybacks was not reflected as the number of properties increased. Although not all buyback properties are funded through the SHIP, all the purchased quantities can be reflected in the planning sheet to increase the total number of affordable housing units against the target for PKC. At each SAHB meeting the total buyback quantity increased from 40, to 64, then to 90, however this change was not reflected in the total projected spend column in the SAHB spreadsheet. 3 Agreed action: • Add a column on the SAHB Monitoring Sheet reflecting the current spend amount on Buyback Properties, based on the increased number of properties. Agreed evidence: • Updated SAHB Monitoring sheet N. Sworowski, Place Strategies Manager & Chief Planning Officer June 2026 2 6.2.2 In our observation of the SAHB meetings minutes are recorded, however the discussions blend in with the action points. There is no further clear outcome and separate follow up Action Plan. 3 Agreed action: • Create an Action Plan table as part of the meeting minutes outcomes. Agreed evidence: • Action Plan Appendix E. Ritchie Strategic Lead - Housing & Communities Completed
Page 12
12 3 6.2.3 We acknowledge that although there is strong control of affordable housing delivery through SAHB, a clear flow outlining each delivery group and its responsibilities within and exactly which areas are being covered in the delivery plan, is not evident. The responsibilities between Property, Economy, Development & Planning and Housing & Communities are very closely related. 2 Agreed action: • To create Process Flow Map covering each department within Affordable Housing Delivery. • Communicate the outlined Responsibilities and keep within shared folder Agreed evidence: • Flow Map N.Sworowski, Place Strategies Manager & Chief Planning Officer N.Lennon, Service Manager - Capital Projects & New Build J Beveridge, Strategic Lead - Property Services September 2026 4 6.3.1 It was observed lack of transparency of upcoming plans between buybacks in Property Team and paralegal team. Each team had their own stand-alone records with no shared access of other team’s progress. Shared detailed information or access to upcoming work can improve on wider team’s planning schedule. 2 Agreed action: • Access to paralegal team of spreadsheets with upcoming property volumes Agreed evidence: • Buybacks Master Spreadsheet Access Granted N. Lennon, Service Manager - Capital Projects & New Build Completed
Page 13
13 5 6.3.2 It was noted that the meetings between property buybacks team and paralegals were not regular and not recorded. Structured plan with feedback from both departments working in collaboration, can improve efficiency in delivery of the Affordable Housing Plan and reduce potential delays during conveyancing process. 1 Agreed action: • Biannual, suitable for both teams (buybacks officer and paralegal team) reviewing current position, process improvement and feedback. • Record and Email outcomes from each meeting. Agreed evidence: • Email outcomes from each meeting N. Lennon, Service Manager - Capital Projects & New Build G. Fogg, Legal Manager Legal and Governance September 2026 6 6.3.3 Currently, the property criteria of buybacks are quite generic when submitting to paralegals for an offer letter to be sent out. We understand that detailed information for each property can be added during the assessment process from the initial viewing. All the unique applicable information can be reflected to its acquisition form for use of the paralegal team. All additional information can expedite the conveyancing process by reducing the need for feedback at a later point. 1 Agreed action: • The covering email from the buyback officer will include a standard separate paragraph with specific instructions on what paperwork/permissions are to be requested in the formal offer to purchase & what works, if any, that have been carried out. • Attach all related property documents to the acquisition form for paralegal use. Agreed evidence: • Covering emails with detailed information N. Lennon, Service Manager - Capital Projects & New Build September 2026
Page 14
14 7 6.3.4 The buyback policy for processing properties will need to be optimized and further developed. This should include purpose, scope, responsibilities, procedures, and compliance measures, approved by, date of issue and last revision. Strong and clear instructions, formalised within the PKC template, will ensure quality assurance in the process. 1 Agreed action: • To revise the Policy • To create a Procedure for Buyback properties Agreed evidence: • Finalised Policy and Procedure N Lennon, Service Manager - Capital Projects & New Build September 2026 8 6.3.5 Conveyancing process can be lengthy with various bottleneck points occurring during legal work. We acknowledge the experience of the paralegal team, however lessons learned practises during conveyancing are not captured. A database of past issues serves as a valuable information resource for future training and educating of the wider paralegal team. 2 Agreed action: • Introducing Lessons Learnt Register/ Database • Share lessons learnt database with Buybacks team for process improvement Agreed evidence: • Guidance Notes G Fogg, Legal Manager, Legal & Governance Services August 2026 9 6.3.6 The paralegal team involved in the buyback process is experienced and efficient, using well-established work routine and process. However, the steps of the conveyancing process are not captured and reflected directly on a process-based sheet or work instruction. 2 Agreed action: • Creating a work instruction of conveyancing steps within paralegal team. • Checklist. Agreed evidence: • Work Instructions/ Procedure G. Fogg, Legal Manager, Legal & Governance Services Completed
Page 15
15 11. Authorisation 11.1 The auditor for this assignment was T Philip. The supervising auditor was D Arachchilage. This report is authorised for issue: ............. 12. Distribution 12.1 This report has been distributed 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 L Simpson, Strategic Lead - Legal & Governance J Beveridge, Strategic Lead – Property Services N Lennon, Service Manager - Capital Projects & New Build N Sworowski, Place Strategies Manager & Chief Planning Officer Geoff Fogg, Legal and Governance Manager, Legal & Governance Services Steven Coyle, Team Leader – Finance & Governance Committee Services External Audit
Page 16
16 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 exist, with internal controls operating effectively and being consistently applied to support the achievement of objectives in the area audited. Reasonable Assurance There is a generally sound system of governance, risk management and control in place. Some issues, non-compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited. Limited Assurance Significant gaps, weaknesses or non-compliance were identified. Improvement is required to the system of governance, risk management and control to effectively manage risks to the achievement of objectives in the area audited. No Assurance Immediate action is required to address fundamental gaps, weaknesses or non-compliance identified. The system of governance, risk management and control are 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.
Page 17
17 Issue represents a control weakness which could have, or is having, significant adverse effect on the ability to achieve process objectives 2 Low Minor observations regarding the adequacy of controls which require action to improve the efficiency, effectiveness, or economy of operations or which otherwise require to be brought to the attention of Senior Management Issue represents a minor control weakness with minimal but reportable impact on the ability to achieve process objectives 1 Trivial / Minor Very minor observations which will be raised during the audit and may not be included within the final report. Issue represents a very minor control weakness with negligible impact on the ability to achieve process objectives. The issue will be raised during the audit and may not be included within the final report.