Agenda Document Pack - Audit and Risk Committee - 11/12/2023
Perth and Kinross Council · 11 December 2023
Back to Audit and Risk Committee — 11 December 2023 and its agenda
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Securing the future… • Improving services • Enhancing quality of life • Making the best use of public resources Council Building 2 High Street Perth PH1 5PH 26/06/2024 A hybrid meeting of the Audit and Risk Committee will be held in the Council Chamber on Monday, 11 December 2023 at 11:30. If you have any queries please contact Committee Services on (01738) 475000 or email Committee@pkc.gov.uk. THOMAS GLEN Chief Executive Those attending the meeting are requested to ensure that all notifications are silent on their device and other devices are in silent mode. Please note that the meeting will be broadcast online and recorded. The recording will be publicly available on the Council’s website following the meeting. Members: Councillor David Illingworth (Convener) Councillor Andy Chan (Vice-Convener) Councillor Liz Barrett Councillor Ken Harvey Councillor Iain MacPherson Councillor Colin Stewart Councillor Grant Stewart Page 1 of 226
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Audit and Risk Committee Monday, 11 December 2023 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/SUBSTITUTES 2 DECLARATIONS OF INTEREST 3 MINUTE OF MEETING OF THE AUDIT AND RISK COMMITTEE OF 30 OCTOBER 2023 FOR APPROVAL (copy herewith) 5 - 8 4 OUTSTANDING BUSINESS STATEMENT (copy herewith 23/282) 9 - 10 5 DRAFT AUDITED 2022/23 ACCOUNTS AND DRAFT 2022/23 ANNUAL AUDIT REPORT Report by Head of Finance (copy herewith 23/363) 11 - 172 6 INTERNAL AUDIT FOLLOW UP Report by Chief Internal Auditor (copy herewith 23/364) 173 - 176 7 INTERNAL AUDIT UPDATE Report by Chief Internal Auditor (copy herewith 23/365) 177 - 180 8 BEST VALUE THEMATIC REVIEW Report by Director (Strategy, People and Resources) (copy herewith 23/366) 181 - 226 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 REPORT - INFORMATION SECURITY • Exempt Reason 14 - Any action taken or to be taken in connection with the prevention, investigation or prosecution of crime. Page 3 of 226
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AUDIT AND RISK COMMITTEE Minute of Special Meeting of the Audit and Risk Committee held hybrid on Monday 30 October 2023 at 09.30am. Present: Councillors D Illingworth, L Barrett, A Chan, K Harvey, I MacPherson, G Stewart and Provost X McDade (substituting for Councillor C Stewart). In Attendance: J Clark, S MacKenzie, K Molley, A Brown, and R Ramsay (all Corporate and Democratic Services); M Butterworth, F Crofts, R Lyle, and N Taylor (Communities); and C Palmer (Education and Children’s Services) Apologies: Councillor C Stewart. Councillor D Illingworth, Convener, Presiding. 1. WELCOME AND APOLOGIES/SUBSTITUTIONS The Convener welcomed everyone to the meeting and apology was noted as above. 2. DECLARATIONS OF INTEREST There were no declarations of interest made in terms of the Councillors’ Code of Conduct. S MacKenzie, Head of Finance, provided a verbal update on the position of the unsigned Audited Accounts. Members questions were answered. S MacKenzie confirmed that the unsigned Audited Accounts would be presented to Committee on 11 December 2023 for approval. 3. MINUTE OF MEETING OF THE AUDIT AND RISK COMMITTEE OF 26 JUNE 2023 FOR APPROVAL The minute of meeting of the Audit and Risk Committee of 26 June 2023 was submitted and approved as a correct record. 4. OUTSTANDING BUSINESS STATEMENT Resolved: The contents of the Outstanding Business Statement, be noted. 5. INTERNAL AUDIT FOLLOW UP There was submitted a report by Chief Internal Auditor (23/284) presenting a current summary of Internal Audit’s ‘follow up’ work relating to actions due for completion up to August 2023. 3 Page 5 of 226
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In resposne to a question from Councillor G Sewart regarding resourcing issues, J Clark advised that resourcing within the Service had been resolved and the action on Tay Cities Region Deal should be completed by the end of the year. Resolved: The current position in respect of the agreed actions arising from Internal Audit’s work, be noted. 6. INTERAL AUDIT UPDATE There was submitted a report by Chief Internal Auditor (23/282) presenting a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2021/22 and 2022/23. Resolved: The progress with Internal Audit activity, be noted. 7. COMMUNITIES 7. (i) (a) 21-07 AGENCY WORKERS There was a report submitted (23/285) detailing an audit that was undertaken of the management of the ‘Provision of a Managed Service for Term Operational Resource’ contract (Agency Workers Contract) as part of the Internal Audit Plan for 2021/22. In response to a question from Councillor L Barrett regarding Services involved in Contract Management being made aware of the procurement regulations, J Clark advised that this should be considered as part of the procurement process. J Clark added that the audit undertaken had highlighted that Services must understand the procurement regulations when setting the Contract Strategy. N Taylor confirmed that the Service are now fully aware of the necessary requirements. Councillor L Barrett raised concerns over other Services being unaware of the procurement regulations when managing Contracts. J Clark confirmed that further information would be shared with members following Committee. In response to a question from the Convener regarding areas that staff are involved in, N Taylor confirmed that the three main areas of work include the collection of bins for green waste, grass cutting and cover for sickness absences. N Taylor confirmed that staff engaged in the contracts are temporary staff. In response to a question from Councillor K Harvey, N Taylor advised that assessments undertaken of the contract tender are based on cost and quality. In response to a question from Councillor G Stewart regarding the Council spend on the contract, N Taylor advised that the increased spend on the contract was a combination of inflation and the Council’s requirement for staff to be paid the voluntary wage. N Taylor added that pandemic had also been a contributing factor which had led to additional cover for staff absences. Page 6 of 226
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Resolved: The contents of Report 22/285, be noted. 7. (i) (b) FOOD, HEALTH AND SAFETY The was a report submitted (23/294) detailing an audit undertaken of Food, Health, and Safety as an addition to the Internal Audit Plan, as agreed with the Service. Resolved: The contents of report 23/294, be noted. 8. INTERNAL AUDIT PLAN 2023/24 There was submitted a report by Chief Internal Auditor (23/295) presenting the strategy for delivery of Internal Audit and the proposed approach for the direction of planned Internal Audit work for 2023/24. In response to a question from Councillor K Harvey regarding staffing resource, J Clark advised that Internal Audit are currently undergoing recruitment for Internal Auditors and that the team should be fully staffed by the end of the Financial Year. Members thanked J Clark and her team for their ongoing work. Resolved: The contents of report 23/295 to be noted. ~~~~~~ Page 7 of 226
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AUDIT AND RISKCOMMITTEE OUTSTANDING BUSINESS STATEMENT (OBS) (Report No. 23/282) Please note that this statement sets out outstanding decisions of this committee along with an update and estimated completion date. Actions which are overdue are shaded for ease of reference. Where an update reflects that an action is complete then the Committee’s agreement will be sought to its removal from the OBS. No Minute Reference Subject Title Outstanding Action Update Lead Officer /Service Action due Action Expected 3. 26 June 2023. Item 9. Annual Report – Strategic Risk Management A demonstration on PK Performs be provided to members. The session to include how the impact of flooding is dealt with in the Strategic Risk Register. A session will be arranged for members in due course. NOT COMPLETED Charlene Guild March 2024 March 2024 4. 30 October 2023. Item 7(i)(a) Agency Workers Further information from Procurement to be shared with the Committee. Email response was circulated to the Committee. COMPLETED Jackie Clark 11 December 2023 11 December 2023 4 Page 9 of 226
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PERTH & KINROSS COUNCIL AUDIT & RISK COMMITTEE 11 December 2023 DRAFT AUDITED 2022/23 ANNUAL ACCOUNTS DRAFT 2022/23 ANNUAL AUDIT REPORT Report by the Head of Finance (Report No. 23/363) 1. PURPOSE 1.1 This report presents the Council’s draft Audited 2022/23 Annual Accounts in accordance with the Local Authority Accounts (Scotland) Regulations 2014 and draft 2022/23 Annual Audit Report. 2. RECOMMENDATIONS 2.1 It is recommended that the Committee: • approves the Audited 2022/23 Annual Accounts – see Appendix 1. • authorises the Leader of the Council, the Chief Executive and the Head of Finance to sign the Audited 2022/23 Annual Accounts and the Head of Finance to sign the Letter of Representation – see paragraph 5.5. • Notes the contents of Audit Scotland’s Draft 2022/23 Annual Audit Report – see paragraph 6.3. 3. STRUCTURE OF THE REPORT 3.1 This report includes the following sections: • Section 4 - Background • Section 5 - Draft Audited 2022/23 Annual Accounts • Section 6 - Draft 2022/23 Annual Audit Report • Section 7 - Conclusions 4. BACKGROUND 4.1 In line with legislative requirements, the Audit & Risk Committee considered the Unaudited 2022/23 Annual Accounts on 26 June 2023 (Report No. 23/196 refers). 4.2 The Unaudited 2022/23 Annual Accounts were then submitted to Audit Scotland, the Council’s external auditors on the same day (26 June 2023). 5 Page 11 of 226
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4.3 The Annual Accounts are prepared in accordance with the 2022/23 CIPFA Code of Practice on Local Authority Accounting (“the Code”). 4.4 These accounts also comply with the Local Authority Accounts (Scotland) Regulations 2014 which revoked the Local Authority Accounts (Scotland) Regulations 1985. 4.5 The Unaudited 2022/23 Annual Accounts were available for public inspection between 30 June and 20 July 2023 (inclusive). During this period, Audit Scotland received no objections to the Unaudited 2022/23 Annual Accounts. 5. DRAFT AUDITED 2022/23 ANNUAL ACCOUNTS 5.1 The audit of the 2022/23 Annual Accounts took place between July and November 2023. The audit considered not only the financial statements but also areas such as financial performance and corporate governance. 5.2 Two primary audit misstatements were identified. Firstly, in relation to the Council’s share of Tayside Pension Fund following a review of the actuarial assumptions during the audit. And secondly, in relation to the valuation of land and buildings. More information on these is included in Exhibit 3 within the draft 2022/23 Annual Report. None of the misstatements identified within Exhibit 3 have an impact on the level of resources available to the Council. In addition, there were a few minor presentational adjustments. 5.3 Approval of the Accounts at today’s meeting will provide authorisation for the Leader of the Council, the Chief Executive and the Head of Finance to sign them. The Draft Audited 2022/23 Accounts (unsigned) are attached to this report at Appendix 1. 5.4 The Head of Finance will also sign the Letter of Representation included at Appendix 2. Once signed, the Draft Audited 2022/23 Annual Accounts and Letter of Representation will be passed to Audit Scotland so that they may issue their opinion in the form of an audit certificate. 5.5 ACTION: The Committee is asked to approve the Draft Audited 2022/23 Annual Accounts and authorises the Leader of the Council, the Chief Executive and the Head of Finance to sign them and also to authorise the Head of Finance to sign the Letter of Representation. 5.6 All signatures will be provided electronically using a system recognised by Audit Scotland that ensure the signings comply with the legislative requirements. 6. DRAFT 2022/23 ANNUAL AUDIT REPORT 6.1 The Draft 2022/23 Annual Audit Report is set out at Appendix 3. The Draft 2022/23 Annual Audit Report sets out Audit Scotland’s opinions and conclusions on the overall audit and their findings to be reported under ISA260: Report to those Charged with Governance. The Draft 2022/23 Page 12 of 226
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Annual Audit Report also includes the findings in relation to Perth & Kinross Charitable Trusts which were distributed separately to Trustees. 6.2 The key messages from the 2022/23 audit are set out in the Audit Conclusions on page 3 of Appendix 3 and are summarised as follows: Audit of 2022/23 annual accounts 1. Audit opinions on Perth & Kinross Council’s 2022/23 Annual Accounts and the connected charities’ 2022/23 financial statements are unmodified. Financial management and sustainability 2. The Council’s budget setting and financial management arrangements operated effectively during 2022/23. 3. The budget included a planned draw on reserves of £32.3 million and the actual outturn was £16.4 million less than this. 4. There are clear links to Corporate Plan priorities within the Medium- Term Financial Plan and cumulative funding gaps of up to £192 million are projected over the next six years. 5. One of the Council’s major capital projects has been paused due to inflationary cost pressures and the Council is developing an asset management strategy. Other wider scope audit work 6. The Council continues to have a clear vision and a transformation and change strategy that is extensive and ambitious. 7. Reporting of performance has improved although further work is required to monitor actions against previous Best Value recommendations. 6.3 ACTION: The Committee is asked to note the contents of Audit Scotland’s Draft 2022/23 Annual Audit Report. 6.4 It is anticipated that the final 2022/23 Annual Audit Report will be issued by Audit Scotland following completion of the final accounts process. 7. CONCLUSIONS 7.1 Audit Scotland’s findings on the 2022/23 audit are set out in the Draft 2022/23 Annual Audit Report which is attached Appendix 3 to this report. Author(s) Name Designation Contact Details Scott Walker Strategic Lead – Finance & Business Support chxfinance@pkc.gov.uk Alison O’Brien Corporate Accounting Manager Page 13 of 226
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Approved Name Designation Date Stewart Mackenzie Head of Finance 4 December 2023 Karen Donaldson Chief Operating Officer Page 14 of 226
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ANNEX 1. IMPLICATIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan Yes Resource Implications Financial Yes Workforce Yes Asset Management (land, property, IST) Yes Assessments Equality Impact Assessment Yes Strategic Environmental Assessment Yes Sustainability (community, economic, environmental) Yes Legal and Governance None Risk None Consultation Internal Yes External None Communication Communications Plan None 1. Strategic Implications 1.1 Corporate Plan 1.2 The Council’s Corporate Plan 2022 – 2027 lays out seven outcome focussed strategic objectives which provide clear strategic direction, inform decisions at a corporate and service level and shape resources allocation. They are as follows: (i) Tackling poverty (ii) Tackling climate change and supporting sustainable places (iii) Growing a sustainable and inclusive local economy (iv) Enabling our children and young people to achieve their full potential (v) Protecting and caring for our most vulnerable people (vi) Supporting and promoting physical and mental wellbeing (vii) Placing communities at the heart of how we work 1.3 This report relates to all these objectives. 2. Resource Implications 2.1 Financial 2.1.1 There are no direct financial implications arising from this report other than those reported within the body of the main report. Page 15 of 226
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2.2 Workforce 2.2.1 There are no direct workforce implications arising from this report other than those reported within the body of the main report. 2.3 Asset Management (land, property, IT) 2.3.1 There are no direct asset management implications arising from this report other than those reported within the body of the main report. 3. Assessments 3.1 Equality Impact Assessment 3.1.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. 3.1.2 The information contained within this report has been considered under the Corporate Equalities Impact Assessment process (EqIA) and has been assessed as not relevant for the purposes of EqIA. 3.2 Strategic Environmental Assessment 3.2.1 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.2.2 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. 3.3 Sustainability 3.3.1 Under the provisions of the Local Government in Scotland Act 2003 the Council has to discharge its duties in a way which contributes to the achievement of sustainable development. In terms of the Climate Change Act, the Council has a general duty to demonstrate its commitment to sustainability and the community, environmental and economic impacts of its actions. 3.3.2 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Page 16 of 226
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4. Consultation 4.1 Internal 4.1.1 The Executive Leadership Team have been consulted in the preparation of this report. 2. BACKGROUND PAPERS 2.1 No background papers, as defined by Section 50D of the Local Government (Scotland) Act 1973 (other than any containing confidential or exempt information) were relied on to any material extent in preparing the above report. 3. APPENDICES Appendix 1 – Draft Audited 2022/23 Annual Accounts Appendix 2 – Letter of Representation Appendix 3 – Draft 2022/23 Annual Audit Report Page 17 of 226
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Corporate & Democratic Services PERTH & KINROSS COUNCIL ANNUAL ACCOUNTS 2022/23 AUDITED 5 Page 19 of 226
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CONTENTS Page MANAGEMENT COMMENTARY 1 ANNUAL GOVERNANCE STATEMENT 16 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PERTH & KINROSS COUNCIL 22 THE FINANCIAL STATEMENTS: MOVEMENT IN RESERVES STATEMENT 25 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 26 BALANCE SHEET 27 CASH FLOW STATEMENT 28 STATEMENT OF RESPONSIBILITIES FOR THE ANNUAL ACCOUNTS 29 NOTES TO THE FINANCIAL STATEMENTS Note 1 Accounting Policies 30 Note 2 Accounting Standards that have been issued but have not yet been adopted 39 Note 3 Critical Judgements in Applying Accounting Policies 40 Note 4 Assumptions made about the Future and Other Major Sources of Estimation Uncertainty 40 Note 5 Adjustments between Accounting Basis and Funding Basis under Regulations 42 Note 6 Expenditure and Funding Analysis 43 Note 7 Transfer (to)/from Earmarked Reserves 46 Note 8 Other Operating Expenditure / Income 48 Note 9 Financing and Investment Income and Expenditure 48 Note 10 Taxation and Non Specific Grant Income 48 Note 11 Material Items of Income and Expense 48 Note 12 Premiums and Discounts on Debt Rescheduling Written Down 48 Note 13 General Grants, Bequests and Donations 49 Note 14 Expenditure and Income Analysed by Nature 49 Note 15 Agency Services 50 Note 16 External Audit Costs 51 Note 17 Termination Benefits 51 Note 18 Post-Employment Benefits 51 Note 19 Related Parties 56 Note 20 Leases 57 Note 21 Property, Plant and Equipment 58 Note 22 Heritage Assets 63 Note 23 Investment Properties 64 Note 24 Intangible Assets 65 Note 25 Assets Held for Sale 66 Note 26 Long Term Debtors 66 Note 27 Inventories 66 Note 28 Debtors 66 Note 29 Creditors 67 Note 30 Provisions Other than Bad and Doubtful Debts 67 Note 31 Usable Reserves 67 Note 32 Unusable Reserves 67 Note 33 Impairment Losses 70 Note 34 Grants 70 Note 35 Capital Expenditure and Capital Financing 71 Note 36 Public Finance Initiatives and Similar Contracts 71 Note 37 Authorisation of Annual Accounts 72 Note 38 Contingent Liabilities 73 Note 39 Financial Instruments 74 Note 40 Devolved School Management (DSM) Schools 78 Note 41 Operating Activities 78 Note 42 Investing Activities 78 Note 43 Financing Activities 78 Note 44 Cash and Cash Equivalents 79 Note 45 Trust Funds 79 Note 46 The Statutory Loans Fund 79 Page 20 of 226
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HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT 81 Statement of Movements on the Housing Revenue Account Balance 82 The Accompanying Notes to the Housing Revenue Account Income and Expenditure Statement 83 COUNCIL TAX INCOME ACCOUNT 84 The Accompanying Notes to the Council Tax Income Account 85 NON-DOMESTIC RATE INCOME ACCOUNT 86 The Accompanying Notes to the Non-Domestic Rate Income Account 87 CHARITABLE TRUSTS 88 COMMON GOOD 89 The Accompanying Notes to the Common Good Accounts 90 GROUP ACCOUNTS Group Movement in Reserves Statement 91 Group Comprehensive Income and Expenditure Statement 92 Group Balance Sheet 93 Group Cash Flow Statement 94 Reconciliation of the Single Entity Deficit for the Year to the Group Deficit 95 NOTES TO THE GROUP ACCOUNTS Note 1 Combining Entities 96 Note 2 Nature of Combination 97 Note 3 Financial Impact of Consolidation and Going Concern 97 Note 4 Group Comprehensive Income & Expenditure Statement – Financing and Investment Income & Expenditure 97 Note 5 Group Balance Sheet – Investments 97 Note 6 Group Balance Sheet – Short Term Debtors (net of provisions) 97 Note 7 Group Balance Sheet – Short Term Creditors 98 Note 8 Group Balance Sheet – Pension Liability 98 Note 9 Group Cash Flow Statement 98 Note 10 Group Cash Flow – Investing Activities 98 Note 11 Group Cash Flow – Financing Activities 98 REMUNERATION REPORT 99 GLOSSARY 108 Page 21 of 226
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MANAGEMENT COMMENTARY 1. Introduction These Annual Accounts contain the financial statements of Perth & Kinross Council and its group for the year ended 31 March 2023. This management commentary outlines the key messages in relation to financial planning and performance for the year 2022/23 and how this has supported delivery of the Council’s strategic objectives. This commentary also looks forward, outlining the future financial plans for the organisation and the challenges and risks which it will face as it strives to meet the needs of the people of Perth and Kinross. A glossary of terms is set out from page 108. 2. Who are we, our vision and priorities The Council is situated in a central location in Scotland. It covers a geographical area of around 5,286 km² and has an estimated population of 153,810, which is an increase of 1.3% since 2020. Over the same period, the population of Scotland increased by 0.3%. Between 2001 and 2021, the population of Perth and Kinross has increased by 14%. This is the 7th highest percentage change out of the 32 council areas in Scotland. Over the same period, Scotland’s population rose by 8.2%. The latest population projections over the next 10 years show a 1% increase compared to 1.8% across Scotland. Like all councils, the pandemic of recent years has only added to the increasingly complex challenges we face, against a backdrop of the most testing financial circumstances local government has ever experienced. This means that it will be impossible to continue doing the same things we have done in the past and we are rethinking how we work with, and within, our communities and with all of our partners to achieve the best outcomes for the people of Perth and Kinross. The Corporate Plan 2022 – 28, that was approved in December 2022, sets out a vision for “a Perth and Kinross where everyone can live life well, free from poverty and inequality”. It sets out the Council’s corporate outcomes which are aligned with its organisational values and designed to address or mitigate the impact of the many challenges the Council and its communities are facing both now and in the future. We have committed to working in partnership and better engaging with people and communities to ensure that they are involved and can have their say on where the Council must focus time and resources. The strategic outcomes are underpinned by seven key priorities, aimed to address or mitigate the challenges, focus our work where it is needed most, and support the delivery of our vision: • Tackling poverty • Tackling climate change and supporting sustainable places • Developing a resilient, stronger and greener local economy • Enabling our children and young people to achieve their full potential • Protecting and caring for our most vulnerable people • Supporting and promoting physical and mental wellbeing • Working in partnership with our communities – which is woven through all of the key priorities above The priorities incorporate the careful consideration of the feedback received from our communities, elected members, partners and staff about what is important for Perth and Kinross. They are also evidence-based and reflect the areas of greatest need and those that we can most directly influence in our work. Importantly the Corporate Plan sets the strategic direction for the Council and will act as a guide when making difficult decisions around where to invest funding and resources to support their achievement and ensure we have the greatest impact. The Plan is not designed to stand alone but is supported and strengthened by a wider strategic framework which overarches several areas of work all designed to contribute to our vision and outcomes. It connects the vision of the Council and its partners to the detailed plans that guide the delivery of our services. This framework ensures that all Council plans and strategies are driven by and focused towards the delivery of a single shared vision for the area and our services, connecting everything we do. 1 Perth & Kinross Council Annual Accounts 2022/23 Page 22 of 226
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The main components of our Corporate Plan’s wider strategic framework are as follows: • The Local Outcome Improvement Plan - details new priorities with a focus on poverty in a number of key areas, setting out the actions that the Community Planning Partnership will take in the coming years to focus on inequalities which are stubborn and require continued collaborative approaches. • The Perth and Kinross Offer Framework - details the actions that we will take over the next five years to deliver and embed the Offer and the programme of cultural change that will transform how we work with colleagues, communities, and our partners. • The Transformation & Change Strategy is a five-year strategy which sets out our extensive transformation programme acting as enabler to deliver on our corporate priorities. Delivery of the Transformation & Change programme will be underpinned by the principles in our Perth and Kinross Offer Framework including our organisational-wide cultural and behavioural change programme. This also sets out our clear commitment to fully embed our values of Ambition, Compassion, and Integrity and work in partnership with communities to improve outcomes for all. • The Financial Strategy – details the financial challenges we face, the extent of the structural deficit and measures we must take now and over the next five years to identify savings, reduce our budgets and support the Council to become financially sustainable. The Plan demonstrates our commitment to improving services, enhancing the quality of life for people in Perth and Kinross and making best use of our resources and funding. We will continue to deliver effective and efficient services, delivering best value by working collaboratively with our partners. To achieve our vision, we have outlined clear outcomes, priorities, actions, and measurements of performance which will ensure we are held accountable, can report consistently, and remain focussed on the areas that matter to people in our communities. While this is a five-year plan, we know that there will be things outwith our control that will change. We will regularly review and monitor our performance against each of the key priorities to ensure that they are still relevant and effectively contribute to our vision. 3. The Annual Accounts 2022/23 The Annual Accounts report the financial performance of the Council. Their main purpose is to demonstrate the stewardship of public funds which have been entrusted to it for the delivery of the Council’s vision and strategic objectives. The requirements governing the format and content of the Council’s Annual Accounts are contained in the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (the 2022 Code). The 2022/23 Annual Accounts have been prepared in accordance with this Code. 4. The Financial Plan To support the delivery of the strategic objectives during 2022/23, Perth & Kinross Council approved a balanced gross revenue budget of £513 million for the General Fund (February 2022). In addition, the Housing and Communities Committee approved a gross revenue budget of £32.8 million for the Housing Revenue Account (January 2022). As part of its consistent approach to longer term financial planning, the Council has in place a Medium Term Financial Plan through to 2028/29, a final Revenue Budget for 2023/24 and provisional Revenue Budgets for 2024/25 and 2025/26. The HRA Budget was also updated in January 2023. The Financial Strategy approved in June 2022 also remains in place. Councils need to account for their spending and income in a way which complies with the legislative requirements. Most day to day spending and income is recorded within the General Fund and the costs and income in relation to the management of our housing stock are recorded within the Housing Revenue Account. Key to the delivery of Council functions is investment in the assets which are used to deliver these services (including schools, houses, and transport infrastructure) and the utilisation of capital funding to stimulate development and regeneration in local areas. At the start of 2022/23 the Council budgeted for gross capital investment of £162.5 million on General Fund activities and £19 million in respect of the Housing Revenue Account. This expenditure is funded from borrowing, government grants, other external contributions, capital receipts, revenue contributions and earmarked reserves. The Council approved a new five-year delivery programme for 2023/24 to 2027/28 at its meeting on 1 March 2023. 2 Perth & Kinross Council Annual Accounts 2022/23 Page 23 of 226
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5. Performance Management Our new Corporate Plan for 2022-28 sets out our strategic outcomes, which are aligned with our organisational values, and underpinned by seven key priorities. It contains clear outcomes, priorities, and actions and well- defined measurements of performance which we can be held accountable for and consistently report progress against. Over the next year, we will be introducing revised arrangements for reporting on our performance. This will demonstrate our commitment to continuous improvement by strengthening alignment between Corporate Plan performance, improvement activity, budget and resource allocation and the involvement of communities in decision making and influencing Council priorities. Interim arrangements have been agreed for reporting performance for 2022/23 and progressing current year improvements. Improvement activity for 2022/23 mainly related to the previous Corporate Plan objectives. Performance against these was reported to Scrutiny and Performance Committee in June 2023 and to relevant service committees via Service Annual Performance Reports. Performance against priorities and actions within the new Corporate Plan are detailed within the Corporate Annual Report considered by Council in August 2023. Council also considered a draft Corporate Delivery Improvement Plan detailing actions and improvements for the following year. We will carry out an engagement exercise to ask the people of Perth and Kinross where we need to focus our money in relation to the priorities. The timing of this draft report will align with Council’s consideration of the Medium-Term Financial Plan and provide Councillors with public engagement feedback at a later stage to consider the Council’s proposed improvement actions within the context of its financial situation. A finalised Corporate Delivery Improvement Plan will be presented for information in February/March 2024. Throughout the organisation, performance and improvement is routinely managed and reported within teams, Senior Management Teams, the Extended Executive Leadership Team, and the Executive Leadership Team as well as to elected members and the wider public. The Council has a statutory duty to publish performance information for comparison and benchmarking purposes to its citizens and communities. In meeting this duty, we actively participate in the Local Government Benchmarking Framework (LGBF), providing a summary report to Elected Members in April 2023 and linking to the LGBF from the performance website. Additionally, we have carried out engagement activities (elected member briefings, presentations to Leaders and development sessions on using the LGBF dashboard). Just over half of the performance indicators listed in the new Corporate Plan, which will be reported through our Annual Performance Report, have data collected nationally and therefore provide a mechanism for benchmarking. 2022/23 Performance Summary Service Annual Performance Reports have been considered by the Scrutiny and Performance Committee on 7 June 2023, and were submitted to relevant Service Committees between May and August 2023. The Corporate Annual Performance Report was considered by Scrutiny and Performance Committee on 13 September 2023 and then by Council on 4 October 2023. These reports provide comprehensive information on the Council’s performance for 2022/23. The full range of performance information for 2022/23 is available online at PK Performs. This includes the Council’s Annual Performance Report, Service performance reports, and links to further relevant information, such as the Local Government Benchmarking Framework. For 2022/23 a selection of performance outcomes are set out in the following table: Tackling poverty • We created an Anti-Poverty Task Force comprising membership from the Council, Third Sector, partners and businesses to bring additional focus and a partnership approach to mitigating the effects of poverty on the residents of Perth and Kinross. • We rehoused 158 households through the Rent Bond Guarantee Scheme (RBGS) by providing a Bond Guarantee in lieu of a deposit and therefore removing one of the key barriers to entry to the private-rented sector. • Together with Citizens Advice Bureau, we supported 926 tenants to access specialist money advice, helping to minimise the impact of the cost-of-living crisis and prevent some from losing their home. • Using the Scottish Government Parental Employment Support Fund, we supported nearly 120 eligible parents, both in and out of work, with assistance towards securing well paid, highly skilled employment. 3 Perth & Kinross Council Annual Accounts 2022/23 Page 24 of 226
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Tackling climate change and supporting sustainable places • The Broxden – Low Carbon Transport Hub project started on site in October 2022. This will increase the number and range of chargers available and provide a sustainable EV charging hub that will reduce carbon emissions and energy costs for the council. • We upgraded our Building Management System platform to provide clearer performance information to reduce energy consumption and carbon emissions. This has seen positive results, including a 12% reduction in energy consumption last year and a 35% reduction in gross consumption over the last 10 years. • We have undertaken changes in our grassland management to improve biodiversity, and consultation with the community around this has been positive. • We reduced the recycling contamination rate from a peak of 28.52% in November 2020 to an average of 19.38% in 2022 and received national recognition and an award for our ‘stick to the six’ kerb side recycling campaign. Developing a resilient, stronger and greener local economy • Phase 2 of the Cross Tay Link Road (CTLR) project is well underway. This will address the long-term transportation needs of the area and facilitate investment of £174 million in new commercial space and bring the prospect of more than 5,000 new jobs to the area. • We supported a £1.5 million project in central Perth, bringing approximately 900m2 of disused commercial space back into use, whilst directly creating 32 high skilled jobs. • In partnership with Jupiter Artland, we regenerated and transformed a city centre unit into an immersive creative space that attracted 8,000 people over 10 weeks. • With CodeClan, we ran a four-week intensive ‘introduction to software and coding skills’ course for 16-24 year olds. All those who completed the course are looking to utilise their skills going forward in further education or work. Enabling our children and young people to achieve their full potential • Overall educational attainment remains strong, with the achievement of Curriculum for Excellence levels across P1-S3 among the highest seen over the last five years. • Participation in education, training or employment for all 16–19 year olds shows a gradual long-term improvement. Whilst latest year figures have been impacted by the economic effects of the Covid-19 pandemic, overall results for Perth and Kinross remain higher than the national average. • Supporting children and young people within the community continues to be effectively managed, with 93% of Looked After Children in community placements. Protecting and caring for our most vulnerable people • To date, we have continued to support over 450 people from Ukraine to settle into accommodation and continue to work with the third sector and community groups to provide support to these and the 109 people seeking asylum. • The average time taken to complete approved applications for medical adaptations increased from 40.58 to 57.42 days. A review of our procedures is being undertaken to identify areas for improvement. • We have progressed a range of independent living accommodation projects for people with particular housing support needs. Two projects have been completed, providing 12 units of bespoke accommodation with communal facilities in Rattray. • There has been increased demand and complexity of reporting which has impacted upon our ability to submit all reports to court on time. We are working to manage this pressure through reviewing staffing levels. Supporting and promoting physical and mental wellbeing • Our leisure facilities attendance levels are sitting positively at approximately 87% of pre-Covid-19 levels. The industry average sits at approximately 80-90%. • We invested over £1 million in active travel infrastructure to encourage residents and visitors to walk and cycle in Perth and Kinross. 4 Perth & Kinross Council Annual Accounts 2022/23 Page 25 of 226
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• In December 2022, we approved our Physical Activity and Sports Strategy, which is a one-year action plan focused on increasing participation in physical activity and sport to help the positive mental and physical wellbeing of residents of Perth and Kinross Working in partnership with communities • A partnership approach involving our employability and welfare rights teams, Perth Citizens Advice Bureau (CAB), other third sector and community-based organisations, and private sector employers has resulted in the delivery of employability skills training and support packages, incentivised work placements, employment support including access to childcare, housing, and income maximisation. • There was a reduction in the number of groups receiving Community Investment Funding (CIF). This is likely due to CIF only being available once in the previous year and a wider range of alternative grant schemes being available. • The number of community groups supported to increase their capacity rose from 236 to 343, exceeding target. • An external thematic review in Spring 2022 highlighted significant strengths in relation to supporting and growing volunteer capacity and identified that we could make improvements in our approach to volunteering. As a result, we are developing a consistent approach to volunteering across the Council. For information about the Health and Social Care Partnership, please see the Perth & Kinross Integration Joint Board Annual Accounts 2022/23 which are available at Perth & Kinross Integration Joint Board. 6. Financial Performance Financial performance is part of the Council’s performance management culture with regular reporting during 2022/23 to elected members at the Finance & Resources Committee as well as regular briefings. This section summarises the main elements for 2022/23. The Expenditure and Funding Analysis brings local authority performance reporting based on expenditure measured under proper accounting practices together with statutorily defined charges to the General Fund and Housing Revenue Account. Both the Comprehensive Income and Expenditure Statement and the Expenditure and Funding Analysis include a segmental analysis which requires Councils to report performance based on how they are structured and how they operate, monitor and manage financial performance. The 2022 Code requires that Councils present the segmental analysis based on the organisational structure under which they operate. Additionally, the Code requires that if a local authority changes the presentation or classification of items in its financial statements, the authority shall reclassify comparative amounts unless reclassification is impracticable. The prior year figures in the Comprehensive Income and Expenditure Statement, Expenditure and Funding Analysis and Group Comprehensive Income and Expenditure Statement have been restated to reflect separation of activity relating to the Chief Executive’s Service from Corporate and Democratic Services in 2022/23. Although the Expenditure and Funding Analysis reflects the main variances, for operational reporting the Council’s Comprehensive Income and Expenditure reflects proper accounting practice. The Comprehensive Income and Expenditure Statement movements are not directly comparable with the movements in the Expenditure and Funding analysis. a) General Fund Revenue Expenditure for 2022/23 In 2022/23 the Council incurred actual net expenditure on Services of £435.516 million (which is the Cost of Services disclosed in the Comprehensive Income and Expenditure Statement on page 26). When Taxation and Non-Specific Grant Income, Financing and Investment Income and Expenditure and Other Operating Income and Expenditure are included there was a net Deficit on the Provision of Services of £23.269 million. The Expenditure and Funding Analysis information on pages 43 and 44 sets out adjustments between the net Deficit on the Provision of Services of £23.269 million included in the Comprehensive Income and Expenditure Statement and the net expenditure charged to the General Fund & HRA in the table below of £15.346 million. The adjustments of £7.923 million represent the difference between the net expenditure of the Council that is chargeable to taxation and rents and the figures reported in the Comprehensive Income and Expenditure Account. The deficit in the Expenditure and Funding Analysis is set out in the way in which the Council organises itself and manages and reports on financial performance. 5 Perth & Kinross Council Annual Accounts 2022/23 Page 26 of 226
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The following table sets out adjustments to the most recently approved Revenue Budget to ensure that budget and actual figures are comparable. These include the Public Finance Initiative, external income and capital accounting adjustments. On a comparable basis the table shows a net variance (under spend/additional income) of £15.455 million which is explained in further detail. Updated Budget Per Revenue Monitoring Report No.4 Virements Capital Accounting Adjustments Revised Budget Net Expend. Charged to the General Fund & HRA Balances per Expend. & Funding Analysis Variance £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 SERVICES Education & Children's Services 226,773 (16,255) (13,367) 197,151 191,577 (5,574) Health & Social Care 82,581 75 0 82,656 82,433 (223) Communities 75,559 (902) (3,269) 71,388 61,769 (9,619) Chief Executive's Service 2,862 (342) 0 2,520 2,498 (22) Corporate & Democratic Services 40,956 (3,271) (1,919) 35,766 35,469 (297) Housing Revenue Account 0 (7,064) 0 (7,064) (7,064) 0 Valuation Joint Board 1,309 0 0 1,309 1,338 29 Non Distributed Costs 1,565 0 0 1,565 1,540 (25) NET COST OF SERVICES 431,605 (27,759) (18,555) 385,291 369,560 (15,731) Taxation & Non-Specific Grant (410,595) 20,691 0 (389,904) (390,043) (139) Finance / Investment / Other 8,610 8,399 18,555 35,564 35,829 265 Use of General Fund per Comprehensive Income & Expenditure Statement 29,620 1,331 0 30,951 15,346 (15,605) Contibutions from other Reserves 2,647 (1,331) 0 1,316 1,466 150 Use of General Fund Balances 32,267 0 0 32,267 16,812 (15,455) The contribution from the General Fund of £16.812 million, which is £15.455 million less than planned is made up of additional income and service under spends and is comparable with the revenue monitoring positions that have been presented regularly to the Finance & Resources Committee throughout the financial year. The following section provides a more detailed explanation of the final year end outturns. Education & Children’s Services delivered net under spends / additional income of £5.6 million. The main reasons for this are - • In respect of the Devolved School Management (DSM) Scheme there was a net under spend (£722,000) reflecting savings on staff costs (teachers and support staff) (£800,000) and additional income (£100,000) which was partially offset by additional expenditure on supplies & services (educational materials) (£200,000). These resources will be carried forward by schools into 2023/24. This has reduced significantly from the £1.2 million carried forward from 2021/22 into 2022/23. • In 2022/23 schools were awarded Pupil Equity Funding direct from the Scottish Government to contribute towards raising attainment (£1.9 million). Expenditure from this Fund is incurred by academic year rather than financial year. On that basis the under spend (£140,000) has been earmarked within Reserves to be utilised by schools in 2023/24. Again this is significantly less than the £1 million carried forward from 2021/22 into 2022/23. • In terms of non-DSM budgets there were further budget variances / additional income as follows: o Across Business & Resources Services there was a net under spend of £700,000. The main reasons for this were staff slippage in excess of budget, a rephasing of planned property works and an under spend on supplies and services. 6 Perth & Kinross Council Annual Accounts 2022/23 Page 27 of 226
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o Across non-devolved Education Services there was a net under spend / additional income of £4.4 million which was generated within the following sectors. o Across the Nursery sector there was a net under spend of £900,000. Staff slippage in excess of budgeted levels as well as under spends on facilities management were the primary reasons for this variance. o In the Primary sector, there was a net under spend of £500,000 due, in the main, to staff slippage in excess of budgeted levels. o Within the Secondary sector there was a net under spend of £1.3 million. Staff slippage in excess of budgeted levels as well as an insurance rebate and reduced facilities management costs were the main factors contributing to this under spend. o Across the Special sector there was a net under spend / additional income of £1.6 million. Staff slippage in excess of budgeted levels, home-to-school transport and third party payments were the main factors contributing to the final position. o Within Services for Children, Young People and Families there was a net over spend of £1.3 million. The main reason for this was additional expenditure on services for young people with complex behavioural issues. This was partially offset by staff slippage in excess of budget and additional grant income. o In Catering Services there was an over spend / reduced income of £200,000 due to lower income from school meals as a consequence of reduced uptake. o Across the Grants sector, the Council received £1.3 million which will be carried forward in earmarked Reserves to support activity in 2023/24. Health and Social Care delivered an under spend of £200,000 from within the non-delegated areas of social care in 2022/23. The Perth & Kinross Integration Joint Board 2022/23 Annual Accounts are available separately. Communities delivered a net under spend / additional income of £9.6 million, which is made up of variances across the Service as follows: • On a Service wide basis, the budgeted staff slippage target was exceeded by £1.1 million. • Within Planning & Development there was a net under spend / additional income of £1.3 million. The main reason for this variance was additional income from planning and building warrant fees. • Within Roads there was an over spend of £900,000 on the Council’s response to winter and other weather-related events throughout the year. This was partially offset by under spends of £800,000 from additional income and street lighting savings. • Across Operations there was a net over spend of £300,000 due to additional fuel and hire costs. • In addition, grant funding of approximately £7.6 million was also received across the Service in 2022/23 to take forward initiatives in 2023/24. This income will be carried forward in earmarked Reserves. Corporate & Democratic Services delivered net under spends / additional income of £300,000 as follows: • Across the Service, there were underspends on staff costs as actual levels of slippage exceeded the budgeted target by £500,000. • Property costs were over spent by £900,000 which included additional maintenance and energy expenditure. • Across the remainder of the Service, there was a net under spend due, in the main to the receipt of additional Income of £700,000 from recharges, statutory additions and grants. In addition, Taxation and Non-Specific Grant achieved additional income of £100,000, primarily due to Council Tax collection levels that exceeded the budgeted amount. There was a net over spend of £300,000 on Finance, Investment and Other due to reduced income from Tayside Contracts. General Fund and Housing Revenue Account Balances reduced by £16.812 million to £72.370 million in line with the budget adjustments approved throughout the year by Council and the Finance & Resources Committee as well as recognising the implications of final outturns. When the Housing Revenue Account Balance of £2.647 million and the earmarked Reserves of £51.553 million that are set out on page 46 7 Perth & Kinross Council Annual Accounts 2022/23 Page 28 of 226
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are excluded this leaves an uncommitted General Fund Balance of £18.170 million or 4% of the net 2023/24 Revenue Budget. b) Composite Capital Budget and Housing Revenue Account Investment Programme 2022/23 A summary of the Council’s capital expenditure in 2022/23 is reflected within Note 35 to the Core Financial Statements on page 71. Total gross capital expenditure was £125.9 million, comprising £18.637 million on the Council’s Housing Revenue Account (HRA) and £107.263 million on the Council’s Composite (General Fund) Programme. Many projects in 2022/23 which had been impacted during the Covid-19 pandemic returned to pre- covid levels, with 2 major new construction projects commencing on site. The Council’s gross expenditure includes: • £23.726 million on various school upgrade projects, including the replacement of Perth High School and North Muirton/Balhousie Primary Schools (Riverside Primary School), Perth Academy refurbishments and the Early Learning & Childcare programme. • £51.777 million on roads & transport projects, including structural maintenance, road safety measures, bridges and construction of the Perth Transport Futures project. • £12.984 million on cultural attractions (Perth Museum and Perth Art Gallery) and community projects (Letham Wellbeing Hub). • £18.776 million on other works, including flood protection measures (£2.185 million); placemaking projects (£1.026 million); planning schemes (£886,000); and property, infrastructure & IT upgrades (£11.41 million). The balance of £3.269 million relates to expenditure on various waste initiatives, community greenspace, vehicles and other miscellaneous works. • £18.637 million on the HRA including affordable housing new builds & buy backs (£10.178 million), external fabric (£2.869 million), bathroom upgrades (£1.524 million) and fire precaution measures (£552,000). Capital expenditure is funded by borrowing, asset sales, grants, other capital receipts, and Revenue Budget contributions. The Capital Financing Requirement (CFR, i.e. the underlying requirement to borrow for capital purposes) as at 31 March 2023 was £679.034 million. Actual capital debt was £724.527 million, comprising long-term borrowing (£603.2 million) and a Public Private Partnership (PPP) liability (£121.327 million). The ratio of borrowing to the CFR for 2022/23 has reduced to 106.7% (2021/22 119.4%). During the year the CFR increased by £60.644 million, reflecting the capital expenditure above, less capital receipts, grants and contributions and principal loan repayments, whilst the ratio to borrowing increased as a consequence of no new borrowing being undertaken in the year. c) General Fund Reserves As at 31 March 2023 the Council had uncommitted General Fund balances of £18.17 million which represented 4% of the Council’s 2023/24 Revenue Budget approved in April 2023. Council policy, as set out in the Reserves Strategy approved by Council on 1 March 2023, is to retain uncommitted reserves of between 2% and 4% of net revenue expenditure over the medium term. The Council’s Reserves Strategy will continue to be reviewed and updates will be considered by the Finance & Resources Committee and the Council as part of the revenue monitoring cycle. Full details of the Council’s General Fund Reserves are shown on page 25 and page 67 of the Financial Statements, along with information on future commitments. The Reserves position is summarised as follows: £’000 £’000 General Fund (69,723) Revaluation Reserve (411,175) Housing Revenue Account (2,647) Capital Adjustments Account (400,119) Capital Fund (26,343) Financial Instruments Adjustment Account 17,002 Insurance Fund (1,306) Pensions Reserve 20,917 Capital Receipts Reserve (2,245) Employee Statutory Adjustment Account 8,524 Capital Grants Unapplied (87) TOTAL USABLE RESERVES (102,351) TOTAL UNUSABLE RESERVES (764,851) TOTAL RESERVES (867,202) The Balance Sheet The Balance Sheet on page 27 summarises the Council’s assets and liabilities as at 31 March 2023 and explanatory notes are provided from page 30. Total net assets have increased by £125.431 million to £867.202 million. Long Term Assets increased by £166.455 million, current assets reduced by £68.906 million, current liabilities increased by £16.285 million and long-term liabilities reduced by £44.167 million. The major changes in the Council’s Balance Sheet between 31 March 2022 and 31 March 2023 are explained in more detail in the following paragraphs. 8 Perth & Kinross Council Annual Accounts 2022/23 Page 29 of 226
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Long Term Assets The value of Property, Plant and Equipment increased by £166.283 million due to the continuation of the major capital investment being undertaken by the Council described above, and a £90.398 million valuation adjustment in respect of the estimated movement in prices for school assets revalued on the basis of Depreciated Replacement Cost. Current Assets The level of Short-Term Investments reduced by £53.962 million with a reduction of £20.774 million in the level of Cash or Cash Equivalents. This was a result of no new long-term borrowing being undertaken in 2022/23 to fund the capital programme, with the cash and investment balances being applied to meet the ongoing expenditure over the year. Short term debtors increased during the year by £5.967 million due to an increase in the receivables from the Scottish Government, Central Government, NHS Bodies and Council Tax Entities; this being slightly offset by a reduction in receivables from Other Local Authorities. Current Liabilities Short Term Borrowing reduced by £2.64 million as a result of less longer-term borrowing falling due within 12 months of the balance sheet date compared to last year. Short Term Creditors increased by £22.534 million primarily due to higher amounts payable to Central Government, Other Local Authorities, NHS Bodies, Public Corporations and Trading Funds, Other Entities and Trade Creditors; this is slightly offset by a reduction in the amount payable to the Scottish Government. Long Term Liabilities Long-Term Liabilities reduced by £44.167 million primarily due to a decrease in the net pension liability of £35.078 million and a reduction in the liability for public private partnerships of £6.286 million in line with the remaining contract. Also within Long Term Liabilities is a net reduction in Long Term Borrowing of £5.156 million resulting from PWLB debt with a maturity date within the next 12 months moving into short term debt. The Council’s annual Treasury Management Strategy outlines the Council’s policy in relation to borrowing and investment. This is prepared in accordance with the Code of Practice on Treasury Management in Local Authorities. The majority of the Council’s borrowing comes from the Public Works Loan Board and market loans. Further details are provided at Note 39. Pensions Reserve International Accounting Standard 19 Revised (IAS19R) requires the disclosure of the Council’s share of Tayside Pension Fund’s assets and liabilities, both current and future. The information disclosed in the accounts is provided to the Council by the Pension Fund’s actuaries. The position at 31 March 2023 indicates a net liability of £20.917 million compared to a net pension liability of £55.995 million on 31 March 2022 due to changes in the assumptions. This liability is based on a snapshot valuation at 31 March 2023 and is a result of prevailing market conditions at that date. Triennial valuations of the Fund are carried out with the last valuation having taken place at 31 March 2020. Employer’s contributions are currently 17% of pensionable pay. For more information see Note 18. Provisions, Contingencies and Write Offs The Council made provision for a number of eventualities which may have an effect on the financial position of the Council. The reasons for the provisions are outlined in Note 30 on page 67. There were a number of write-offs of debt and stock during the year which were approved by the Finance and Resources Committee on 7 June 2023 – Authority to Write Off Debts and Obsolete Stock. d) Accounting Ratios The following financial indicators have been developed to provide an indication of the sustainability and affordability of the Council’s financial plans. 9 Perth & Kinross Council Annual Accounts 2022/23 Page 30 of 226
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FINANCIAL INDICATOR 2022/23 2021/22 PURPOSE Uncommitted General Fund Reserve as a proportion of Annual Budgeted Net Expenditure 4.0% 3.8% Reflects the level of funding available to manage financial risk / unplanned expenditure. Movement in the Uncommitted General Fund Balance £1.592m £8.378m Reflects the extent to which the Council has increased its Uncommitted General Fund Reserve including unspent Covid grant funding. Council Tax – In Year Collection Rate 98.4% 97.7% Demonstrates the Council’s effectiveness in collecting council tax debt. Ratio of Council Tax Income to Overall Level of Funding 20.0% 21.0% This reflects the Council’s capacity to vary expenditure by raising Council Tax Income. Capital Financing Requirement £679.034m £618.39m Measurement of requirement to borrow for capital purposes. External Debt Levels £724.527m £738.391m Actual borrowing for capital investment purposes. Capital Financing Requirement Ratio 106.7% 119.4% Measurement of prudence in relation to borrowing levels – borrowing only to invest in capital. Ratio of Financing Costs to Net Revenue Stream 4.7% 5.6% Measurement of the Council’s ability to fund borrowing costs. e) Financial Statements The primary financial statements presented within the Annual Accounts are as follows: • The Movement in Reserves Statement reports movements on the different Reserves held by the Council analysed into Usable Reserves (i.e. those that can be applied to fund expenditure or reduce local taxation) and Unusable Reserves. • The Comprehensive Income and Expenditure Statement reports the accounting cost of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Councils raise taxation to cover expenditure in accordance with regulations which may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. • The Balance Sheet brings together all the assets and liabilities of the Council. It is a statement of the resources of the Council and the means by which they have been financed. It is also a report on the Council’s financial position at a particular point in time and represents a snapshot of its financial affairs at the close of the year expressed in accounting terms. • The Cash Flow Statement summarises the inflows and outflows of cash and cash equivalents arising from transactions with third parties on both day to day revenue transactions and capital activities. Cash is defined for the purpose of this statement as cash in hand and deposits repayable on demand less overdrafts repayable on demand. Cash equivalents are investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with an insignificant risk of change in value. The Code also requires the following to be included within the Annual Accounts: • The Statement of Responsibilities for the Annual Accounts explains the responsibilities of the Council and of the Head of Finance as they relate to the Annual Accounts. • The Notes to the Financial Statements provide further information on the above financial statements. • The Notes include an Expenditure and Funding Analysis which compares the net expenditure that is chargeable to taxation and rents and reconciles it to the Comprehensive Income and Expenditure Account. The service analysis for both the Expenditure and Funding Analysis and the Comprehensive Income and Expenditure Statement are now both provided in the way in which the Council organises itself and manages financial performance. • The Annual Governance Statement explains how the Council has complied with the Chartered Institute of Public Finance and Accountancy (CIPFA) / Society of Local Authority Chief Executives (SOLACE) standard for good corporate governance and meets the requirements of relevant legislation and current good practice. 10 Perth & Kinross Council Annual Accounts 2022/23 Page 31 of 226
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• The Remuneration Report provides details of the Council’s remuneration of its senior councillors and senior officers with regard to salary, taxable expenses and pension benefits and states how remuneration arrangements are managed. The report also provides information on exit packages agreed by the Council during the financial year. Supplementary Financial Statements The supplementary financial statements are as follows: • The Housing Revenue Account shows the major elements of housing revenue account expenditure and how these are funded by rents and other income. • The Council Tax Income Account reports the gross and net income from Council Tax, together with details of the number of properties on which Council Tax is levied, and the charge per property. • The Non-Domestic Rates Income Account shows the gross and net income from non-domestic rates and details the amount payable to the national non-domestic pool and resulting net income for the financial year to the Council that is shown in the Comprehensive Income and Expenditure Statement. • The Charitable Trusts statement includes the summary Income and Expenditure Account and Balance Sheet of those Charitable Trusts and Endowments administered by the Council. • The Common Good statement includes the summary Income and Expenditure Account and Balance Sheet for the Common Good Funds administered by the Council. • The Group Accounts incorporate the share of the Council’s Managed Funds, Subsidiaries and Associates into the Group Movement in Reserves Statement, Group Comprehensive Income and Expenditure Statement, Group Balance Sheet, Group Cash Flow Statement and include the Reconciliation of the Single Entity (Council) Surplus or Deficit for the year to the Group Surplus or Deficit. 7. Financial Outlook, Risks and Plans for the Future The local government landscape has never been more complex or challenging. As we try to recover from the global health pandemic, we are also experiencing increased levels of poverty across our communities, rapid growth in our elderly population and the impact of poor mental health and wellbeing. Added to that we have an ambitious policy agenda to regenerate our economy, reduce the impact of climate change, raise educational attainment, and to increase and optimise the use of digital technology; all of which will come with a significant cost attached. Furthermore, the strategic risk register highlights significant challenges around failing to protect children and vulnerable adults from harm and mitigating or reducing the impact of climate change across Perth and Kinross. At the same time, the Council is experiencing unprecedented financial and other resource pressures because of real terms reductions in funding, significant cost increases due to inflation and an increasing demand for services. Like all councils, the pandemic, its impact on the needs of its citizens and the current cost of living crisis have only added to the increasingly complex challenges the Council faces. The medium to long term implications of Covid-19 remain uncertain, the continuing war in Ukraine, increases in inflation and energy costs and the ongoing cost of living crisis are all placing significant pressure on the workforce and the budget we have available to deliver services to communities. This means the Council is facing the most testing organisational pressures and financial circumstances it has ever experienced. To make best use of available resources, the Council will need to make decisions on what it will stop doing, do less of, do more efficiently or do differently through redesign and working as collaboratively as possible with partners and communities. As the Council faces these challenges, there are several key drivers which require it to transform its services and the way it works with partners and communities to deliver improved outcomes. These include: • new and emerging priorities – social, economic and climate – that require the Council to review what, how and where it delivers services to meet these challenges. • a growing ageing population and increasing complexity of need and demand for services. • delivery of the promise made to our communities in the Perth and Kinross Offer to balance the relationship between the people who design and deliver services and those who ultimately use them. 11 Perth & Kinross Council Annual Accounts 2022/23 Page 32 of 226
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Through transforming how the Council works, driving efficiencies and reviewing service delivery, it will help address these challenges and respond to these drivers. The purpose of bringing together the Council’s budget and change plans is to make greater links between how it allocates its resources and mitigates the impact of budget cuts whilst continuing to make best use of available resources to meet its priorities. The Council’s policy framework provides parameters as to how it will make difficult decisions to deliver its agreed priorities by taking an evidence-based approach and placing a focus on need, not simply demand. The new Corporate Plan 2022-28 approved in December 2022 sets out a vision for “a Perth and Kinross where everyone can live life well, free from poverty and inequality”. The seven key priorities included in the plan show how the Council will address the challenges it faces and focus its work where it is needed most to support the delivery of that vision. In recognition of the challenges the Council faces and to ensure that it continues to deliver on its priorities, a Financial Strategy was approved in June 2022. The Financial Strategy is the link between the Council’s long-term priorities and its financial capacity. Its aim is to build resilience and ensure that the Council has an affordable and sustainable Medium Term Financial Plan, which directs its resources to where they are most needed in line with Council agreed priorities and strategic outcomes. The Financial Strategy included a set of principles that assist in decision making. The budgetary strategy was further developed on 28 September 2022 when the Council approved the Medium-Term Financial Plan (MTFP) which included agreement to set Revenue Budgets for 2023/24, 2024/25 and 2025/26. The update of the MTFP considered future funding levels, increasing costs and rising need / demand over the short to medium term, insofar as they may impact on Perth & Kinross Council. The MTFP places the development of budgetary strategy in the context of delivering the Council’s key outcomes and considers the financial and process risks considered in the management of the Council’s finances. The MTFP is designed to inform the direction of travel of the Council for financial planning purposes. As detailed budget proposals are developed, the broad assumptions included within the MTFP are superseded by more detailed analysis of individual cost pressures and the identification of budget reduction options. The refinement of these assumptions is included in the 2023/24 Final and 2024/25 and 2025/26 Provisional Revenue Budgets. The 2023/24 Final Revenue Budget includes the use of the Service Concession scheme (Local Government Finance Circular 10/2022 - Finance Leases and Service Concession Arrangements: Statutory Guidance refers) which will impact on the future financial management of the Council. The final Housing Revenue Account (HRA) Revenue Budget for 2023/24 and Five-Year Capital Investment Programme and Rent Strategy to 2027/28 were approved by the Housing and Social Wellbeing Committee on 25 January 2023 (Report No. 23/9 refers). The Committee approved the recommendation of an average weekly rent increase for 2023/24 of 2.2% or £1.62 per week in accordance with the requirements of the Council’s approved Housing Business Plan including supporting investment in new council housing. In June 2022, Council also agreed a five-year Transformation & Change Strategy. This recognised that the shape and structure of the organisation, as well as the way it operates, needs to change. Transformation alone will not address the funding issues; budget cuts and service reductions will be required. Some transformation will reduce over spends, mitigate costs, or enable a shift of expenditure to new and emerging priorities. A combination of measures and approaches will therefore lead to the removal of the structural deficit, with the aim of delivering a balanced budget and removing the need to draw on Reserves. The Transformation & Change Strategy recognises that due to the size and complexity of the organisation a range of approaches to change will be required: • transforming our customer’s experience • transforming the shape and structure of our organisation • transforming our systems and processes • transforming our spending and response to demand The need for transformation and change is not unique to Perth and Kinross. All public and private sector services and organisations are facing significant challenges and rethinking how they will operate in the future to address these challenges and meet new and emerging demands. In its Covid-19 Recovery Strategy, for a fairer future, the Scottish Government sets out its vision for recovery and the actions it will take to address systemic inequalities made worse by Covid-19, make progress towards a wellbeing economy, and accelerate inclusive person-centred public services. The Scottish Government’s strategy highlights the need to re-build public services and sets out how it will work differently with partners to deliver change. 12 Perth & Kinross Council Annual Accounts 2022/23 Page 33 of 226
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Financial sustainability will be achieved and maintained through prudent financial management, targeted investment and dis-investment, increasing income, reducing costs and developing more efficient and effective ways of working. Capital The Council approved a revised five-year Composite Capital Budget for 2023/24 – 2028/29 on 1 March 2023. The Housing & Social Wellbeing Committee approved the Housing Revenue Account (HRA) Capital Budget for 2023/24 – 2027/28 on 25 January 2023. Both these Capital plans were subsequently updated by the Finance & Resources Committee on 26 April 2023. The Council’s Composite Capital Budget includes major transport infrastructure improvements, including the Perth Transport Futures project to create a third crossing over the River Tay. Significant investment in improvements to existing infrastructure is also included within the Capital Budget, including the replacement of Blairgowrie Recreation Centre, as well as ongoing works within annual rolling programmes and road network improvements. Also included is the replacement of Perth High School and the merger of North Muirton and Balhousie Primary Schools into one new campus at Riverside Primary School. There are also various school refurbishments under the Early Learning & Childcare programme. There is significant investment included in relation to new technologies such as a replacement for the existing SWIFT Social Work database and investment in the Microsoft Estate, as well as the upgrading and replacement of School Audio Visual equipment and other technology upgrades. Other expenditure is planned in relation to various flood protection schemes, the development of Perth City Centre cultural attractions, economic development and planning initiatives, parks and public spaces improvements, waste reduction & recycling and property improvements. The HRA Investment Programme 2023/24 to 2027/28 continues to focus upon increasing the affordable housing stock with the provision of new affordable housing and Council house buy-backs, as well as the enhancement of the existing housing stock, including energy efficiency and external fabric maintenance. The Capital Financing Requirement is estimated to peak at £1.195 billion in 2027/28 under current approved plans. The annual cost of servicing the borrowing and Public Private Partnership liabilities is being managed through the Capital Fund Strategy within the Medium-Term Financial Plan. This ensures the Council’s plan remains affordable, prudent and sustainable. More detailed narrative on the Council’s capital investment plans, treasury management (borrowing and investments), prudential indicators and loans fund liabilities can be found in the Council's Treasury & Investment Strategy and Prudential Indicators 2023/24 to 2027/28 report presented to Council on 10 May 2023. Risk Management Effective risk management is an essential element of good governance and integral to the Council’s ability to deliver positive outcomes for its communities. The Council undertook a wholescale review of its approach to risk and developed and approved a new Risk Management Framework in 2017. Since then it has been reviewed and further refined to ensure that it remains fit for purpose and reflects the complex risk landscape of local government in these changing and challenging times. The risk management framework has been developed based on best practice industry standards including the International Standard in Risk Management – ISO: 31000 and the Office of Governance & Commerce (OGC) Management of Risk Guidance (MoR) and guidance from the Association of Local Authority Risk Managers (ALARM) and comprises: • Risk Management Policy – statement of the Council`s commitment to effective risk management; • Risk Management Strategy – articulates our overall approach to risk and provides a detailed risk hierarchy; • Risk Management Appetite Statement – describes the levels of risk the Council is prepared to tolerate in pursuit of our objectives; and • Risk Management Process Guide – provides a toolkit of techniques and processes to ensure that risk is managed effectively and that our approach to risk management is consistent across the organisation. Within the Council there is a cross-Service cohort of trained risk practitioners who provide technical guidance and support to ensure that a consistent approach to risk management is taken across the whole organisation. Extensive work has been further undertaken throughout 2022/23 to embed the risk management framework to ensure that risk management activities are integrated with key business process and aligned to the delivery of the Council’s objectives and defined outcomes. Strategic and operational risks are regularly monitored and reported in accordance with the principles of the framework. 13 Perth & Kinross Council Annual Accounts 2022/23 Page 34 of 226
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Workforce Management The Council values its employees, their skills, dedication, and passion to ensure it delivers essential services to the people, businesses and communities of Perth and Kinross. Our people continue to be our most important asset and remain at the heart of everything we do. The Council is currently undertaking a senior leadership review that sets out our ambitions to build and deliver our vision in a way that reflects our values and allows us to best serve the needs of the people of Perth and Kinross. The new structure and operating model will ensure that we are organised to deliver our refreshed Corporate Plan and priorities agreed in December 2022. Several Transformation & Change consolidation workstreams have also commenced over the last year to ensure that we have people with the right skills in the right place doing the right things for and with the communities we serve. To support the delivery of this significant transformation and change across the organisation we continue to focus our efforts on what makes change a success – our people – and have created learning and engagement opportunities to support our ambition of growth and change. A series of risk and transition planning workshops to manage this change over the next financial year are taking place to minimise impact on service delivery. These activities together with the Financial Strategy and principles agreed in 2022 and the Medium-Term Financial Plan, Transformation & Change Strategy 2022-2027, Corporate Workforce Plan (21-23), the Organisational Development Plan, Digital Strategy and Health and Wellbeing Plan set a clear direction and highlight how our workforce needs to develop, within available resources, to ensure our people are prepared and resilient to deliver our future goals and aspirations. The Council’s purpose, values, culture and ethos to transform services and deliver efficiencies to prepare for the future remain pivotal. Investment in building the capability and capacity in the workforce through learning and development opportunities, boosting productivity, encouraging innovation and creativity, embracing agility, digital technology and promoting wellbeing and resilience continue to be key to our future plans. These commitments will enable it to match its ambition for transforming services, growing the economy, reducing inequalities, protecting vulnerable people and supporting young people to be all they can be. Financial pressures, changing priorities and demand for Council services continue to inform the Council with a focus on multi-disciplinary teams, integrated working and more locality-based decision-making. The Council in recognition of the inter-connectedness of workforce, digital and use of property are taking a proactive approach in working with communities, its partners and other stakeholders to deliver and prepare for new influences to ensure our workforce supports the delivery of the Perth and Kinross Offer. One of the enabling projects being progressed is Working Smarter, enabling us to be more flexible about when we work, where we work and how we use space and technology to find new and more effective ways of doing things. The Council’s workforce management strategy continues to provide a strong basis for developing the workforce of the future helping us create the conditions to meet the future workforce, financial and demographic challenges and requirements of the organisation. Adopting a more effective and consistent approach to workforce management, a new leadership competency framework and new leadership performance framework will also be developed and rolled out. This will focus our contributions against Corporate Priorities and the delivery of key outcomes and associated output by leaders and their teams. Development and talent management will also enable us to provide versatile people solutions to support the future strategic direction of the organisation. We continue to invest in training and development opportunities for young people via Apprenticeship and Graduate Programmes. A focus on health and wellbeing and resilience are key to sustaining a healthy working environment and positive wellbeing culture and we continue to review and refresh the wide range of health and wellbeing initiatives and support we offer to our workforce. The Council is proud to be a Fair Work employer and continues to consult and engage with employees and their trade union representatives on improvements in our employment practices and arrangements. Equalities and fairness will continue to be core principles in its workforce strategy. This will ensure we continue to have the right skills in the right place when we need them and will contribute to working together to ensure everyone can live life well. 8. Supplementary Information (a) Group Accounts The Code of Practice on Local Authority Accounting in the United Kingdom requires the Council to produce group financial statements where it has an interest in entities that meet the definition of a subsidiary, associate or joint venture. The Group results are presented alongside the results for the Council in the Annual Accounts. Further details of the associated entities that have been incorporated into the financial statements can be found on page 96. The Council has an interest in six organisations (detailed on page 96) that do not form part of the main Accounts. The Council includes the results of these organisations in its Group Accounts due to the significant influence it has over their financial and operating practices. The Council also includes Charitable Trusts administered and controlled by the Council and Common Good Funds as managed funds within the Group Accounts. In accordance with the Code, the 2022/23 Group Accounts Statements are included on pages 91 to 95. The basis for consolidation is set out in the Notes to the Group Accounts Statements on pages 96 to 98. 14 Perth & Kinross Council Annual Accounts 2022/23 Page 35 of 226
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The effect of consolidation is to increase the Council’s net assets by £39.279 million resulting in a Group Balance Sheet showing net assets of £906.481 million at 31 March 2023 as set out on page 93. This position reflects the Council’s share of the pension assets of the Associate included within the Group Balance Sheet. (b) Common Good and Charitable Trust Funds Common Good Funds are administered by the local authority for the general benefit of the relevant communities. Overall, the Common Good Funds recorded an in-year surplus of £149,000 which, when applied to the surplus brought forward, results in an accumulated revenue surplus as at 31 March 2023 of £2.258 million. Details of income and expenditure accounts and balance sheets can be found on pages 89 and 90 of the Annual Accounts. These funds are subject to similar accounting policies and procedures to those that are applied to the Council’s main accounts. The main source of income to Common Good Funds is rent. The Council also administers several Charitable Trust Funds. Details of income and expenditure accounts and balance sheets can be found on page 88 of these Annual Accounts. Overall, the Trust Funds recorded an in-year deficit of £149,000 which, when applied to the surplus brought forward, results in an accumulated surplus as at 31 March 2023 of £3.461 million. Perth & Kinross Council’s Trust Funds, for which the Council is the sole trustee, also have to prepare their own Trustees’ Annual Report and this is separately available on the Council website. (c) Public Private Partnerships / Design Build Finance Maintain In September 2000 the Council entered into a 25-year PPP contract for the construction, maintenance and operation of office accommodation and a car park. In 2022/23 the Council paid £2.824 million to the contractor under the terms of the contract. Between 2009 and 2012 six school campuses were also brought into operation at Blairgowrie, Glenearn, Loch Leven, Strathearn, North Inch and Breadalbane. The contractor’s obligation was to construct the schools and is to maintain them to a pre agreed standard. In 2022/23 the Council paid £18.91 million to the contractor under the terms of the contract. In addition, the Council paid £3.139 million in relation to Bertha Park High School in 2022/23. 9. Conclusion The Council has continued to demonstrate sound financial management in 2022/23 by delivering services during challenging times with the resources which are available to it. The pressures being experienced by Services in relation to demand are known and plans are in place to mitigate them. The Council is also facing significant inflationary pressures. These pressures have been reflected in budgets and the medium and long-term financial plans. The Council will face many challenges in the future from the combined effect of reduced resources; increasing demands and expectations for our services. It is confident that by working more creatively with all its residents and partners, it will not only embrace these challenges but will maintain its performance and service delivery. 10. Acknowledgements As in previous years, we would like to acknowledge the significant work of the finance teams in producing the Annual Accounts and thank colleagues across the Council and the wider Group for their continuing support. Thomas Glen Councillor Grant Laing Stewart MacKenzie Chief Executive Leader of the Council Head of Finance Perth & Kinross Council Perth & Kinross Council Perth & Kinross Council Date Date Date: 15 Perth & Kinross Council Annual Accounts 2022/23 Page 36 of 226
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ANNUAL GOVERNANCE STATEMENT 1 Purpose 1.1 The purpose of the Annual Governance Statement is to give assurance to the people of Perth & Kinross, our Elected Members, staff, partner agencies and other stakeholders that our governance arrangements are adequate and effective and that our system of internal control is robust. 2 Scope of Responsibility 2.1 As well as providing assurance as to the effectiveness of the governance arrangements in place for the Council, this Annual Governance Statement also covers the six organisations that are included in the Council’s Group Accounts. • Live Active Leisure Limited (subsidiary) • Perth Theatre & Concert Hall Limited (subsidiary) • Culture Perth & Kinross Limited (subsidiary) • Tayside Valuation Joint Board (associate) • Tayside Contracts (associate) • Perth & Kinross Integration Joint Board (joint venture) 3 Our Governance Framework 3.1 Our governance framework comprises our culture, values, rules, resources, systems, tools and processes which we have in place to help us achieve our strategic objectives. We recognise that the following are fundamental elements of good governance within public sector organisations: - • Leadership, Culture & Values • Vision, Direction & Purpose • Stakeholder Engagement • Organisational Development • Effective Decision Making • Internal Controls • Scrutiny & Accountability 3.2 These fundamental elements of our governance framework reflect and seek to embed the principles of good governance within 2016 CIPFA Framework for Delivering Good Governance in Local Government, namely: • Behaving with integrity, demonstrating strong commitment to ethical values and respecting the rule of law • Defining outcomes in terms of sustainable economic, social and environmental benefits • Ensuring openness and comprehensive stakeholder engagement • Developing the entity’s capacity, including the capability of its leadership and the individuals within it • Determining the interventions necessary to optimise the achievement of the intended outcomes • Managing risks and performance through robust internal control and strong public financial management • Implementing good practices in transparency, reporting and audit to deliver effective accountability. 3.3 A crucial part of the framework is the system of internal control which is designed to manage and mitigate risk in relation to the achievement of our intended outcomes. 3.4 The Council manages risk through a continuous process of identification, assessment, evaluation, prioritisation and mitigation. We evaluate risk based on likelihood and impact in both financial and non- financial terms. We do however need to mitigate and manage risk proportionately; recognising that risk can never be eliminated completely and that only reasonable assurance can ever be given. 4 Our Governance Arrangements 4.1 Our culture and values are reflected in our behaviour and our decision-making. Our policies, processes and procedures including Elected Member and Employee Codes of Conduct, Whistleblowing and Anti- fraud and Corruption policies, Elected Member Register of Interests and Gifts & Hospitality Policy ensure that, as a Council, we respect the rule of law, behave with integrity, promote a culture of good governance and demonstrate a strong commitment to ethical values. 16 Perth & Kinross Council Annual Accounts 2022/23 Page 37 of 226
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4.2 There are appropriate and effective arrangements in place for the discharge of the following statutory functions: • Head of Paid Service • Monitoring Officer • Chief Finance Officer • Chief Social Work Officer • Data Protection Officer 4.3 The 2022 Local Government Elections brought a change of political administration within the Council and 14 new Councillors. This presented an opportunity to review and refresh our strategic vision and our leadership culture and values. During the year officers and Elected Members have engaged with our communities and worked together in partnership to develop a new Corporate Plan which reflects the strategic priorities of the new Council. The more detailed delivery plan is being developed to ensure that we deliver on those objectives and continue to provide high quality operational services. 4.4 An extensive induction/refresher programme of training was put in place for Elected Members following the Election and a long-term programme of personal development is being implemented. Similarly, an extensive leadership development programme is in place for officers, with a new leadership competency framework being implemented to enhance capacity and effectiveness, not only in senior leadership roles but across all levels of the organisation. To ensure that the political and executive leadership is aligned to optimise the organisation’s ability to achieve its strategic outcomes, the political decision-making structures have been reviewed and revised and the operational senior leadership structure is currently being reshaped. 4.5 Leadership within the organisation is effective with good communication between Elected Members and Senior Management through Leaders Meetings, Convenors meetings, Member Officer Working Groups and all-member briefings, where appropriate. There are also regular pre-agenda discussions in respect of each scheduled Council and Committee meeting. 4.6 Our Local Outcomes Improvement Plan and Corporate Plan set out our vision and purpose and have been subject to consultation and approved during the year. The Financial Strategy and approved Medium Term Financial Plan and Revenue and Capital budgets prioritise how our financial resources are to be deployed. The Transformation & Change Strategy highlights our ambition to better support the delivery of services to the people of Perth and Kinross, particularly those in the greatest need. Key strategic documents such as the Perth and Kinross Offer Framework, Capital Investment Blueprint, Housing Investment Programme, Economic Wellbeing Plan and Climate Change Strategy provide the necessary direction to the organisation to enable it to deliver on its vision and priorities and to achieve its purpose. 4.7 We recognise the importance of good stakeholder engagement and will continue to engage and work in partnership with our communities, partners, and other stakeholders to ensure that we design and deliver the public services that our communities need and value. Our approach to consultations is based on the National Standards for Community Engagement and we have established a wide range of consultation processes and procedures. The Community Empowerment (S) Act 2015 provides a framework for improving the quality of engagement and participation which will be reflected in the Local Outcome Improvement Plan. 4.8 We are operating in an increasingly complex and financially challenging public sector landscape and must be able to adapt and evolve our services and workforce to continue delivering cost-efficient, high- quality services. Our people remain our most valuable assets and as an organisation we will secure the best outcomes for our communities by investing in the development of our workforce and of our leaders to ensure that they have the right skills and have sufficient capacity to deliver. Our approach is outlined in our Corporate Workforce Plan – Resourcing PKC Everyone Has Something To Offer. 4.9 Strategic, operational and political leadership is an integral element of effective governance. There has been an extensive programme of induction and continuous development for Elected Members, following the Election in May 2022. A programme of leadership development for our managers is also in place and a new leadership competency framework has been developed. There is an ongoing review of the current operational leadership structure to ensure that it is fit for purpose and better aligned to deliver on the strategic objectives and key priorities of the Council. 4.10 The Council’s Scheme of Administration sets out the Council’s decision-making structure in terms of roles, remits and responsibilities to ensure transparency and accountability. This has been revised to reflect the priorities and objectives of the new Council. 17 Perth & Kinross Council Annual Accounts 2022/23 Page 38 of 226
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4.11 We have a robust suite of policies, procedures and management processes to ensure that there are appropriate internal controls in place in respect of: - • Workforce Planning & Management • Financial Planning & Management • Risk & Performance Management • Transformation & Change Management • Procurement • Major Investment Project Management • Health & Safety • Information Management & Security • Civil Contingencies & Business Continuity • Anti- Fraud & Corruption • Conflicts of Interests • Gifts & Hospitality • Whistleblowing and Reporting Concerns • Complaints Handling • Officer and Elected Member Conduct 4.12 As a public body we must be open, transparent and accountable for our decisions, actions, and performance. Our management and democratic structures and processes are designed to facilitate effective decision making and the proper scrutiny of those decisions and their impact in terms of performance and the achievement of our intended outcomes. 4.13 The Council set a revenue budget for the year 2023/24 in March 2023, along with provisional budgets for 2024/25 and 2025/26. This revenue budget for the year demonstrated clear linkages with the Transformation & Change strategy. Each budget is allocated to a named budget holder. Budgets are monitored regularly by Service Management Teams and overall financial performance is monitored regularly by the Executive Leadership Team. Council, through the Finance & Resources Committee, receives regular financial monitoring information as part of the budgetary control framework and provides the required political scrutiny of our financial management and performance. 4.14 Capital spend is monitored by the Executive Leadership Team and reported regularly to the Finance & Resources Committee as part of the budgetary control framework. The Capital Programme Office monitors project milestones. 4.15 The Business Management & Improvement Plans set out detailed actions and outcomes for each Service and include appropriate performance indicators. Service performance is reported regularly to the Executive Leadership Team and publicly through the Council’s Scrutiny & Performance Committee and relevant themed committees. Financial performance is publicly reported through the Finance & Resources Committee and relevant service committees. 4.16 The Council publishes an Annual Performance Report on its performance against the objectives set out within the Corporate Plan and Local Outcomes Improvement Plan. 4.17 In order to improve transparency and clarity of these links, a Corporate Delivery and Improvement Plan is being developed for 2023/24. 4.18 The Council has a published process for dealing with the following and annually reports on performance in this respect of these areas: - • Complaints from members of the public • Requests for accessing information under the Freedom of Information legislation • Accessing information under the Data Protection legislation 5 Governance Assurance Process 5.1 The Council utilises a robust process of gathering assurance information from Service Management Teams, which concludes with Certificates of Assurance being signed by the Executive Directors for Education & Children’s Services and Communities, the Chief Operating Officer, and the Executive Lead – Strategic Planning & Transformation. 18 Perth & Kinross Council Annual Accounts 2022/23 Page 39 of 226
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5.2 Corporate assurance has also been provided as regards the adequacy of the internal controls from the following Officers: • Chief Finance Officer (S 95 Officer) • Head of Legal & Governance Services /Monitoring Officer • Chief Internal Auditor • Data Protection Officer • Records and Information Security Manager • Corporate Procurement Manager • Corporate HR Manager • Head of Innovation 5.3 For Arm’s Length External Organisations, reliance has been placed upon: • Unaudited financial statements of the companies (audited accounts will be scrutinised when available) • Assurance self-assessment evaluations • Terms and conditions of Service Level Agreements • Contract monitoring meetings with Services • Performance information and financial monitoring reports to Services • Presentations and reports to Scrutiny & Performance Committee 5.4 For Tayside Contracts Joint Committee, Tayside Valuation Joint Board and Perth & Kinross Integration Joint Board, reliance is placed upon each organisation’s own Annual Governance Statement. 5.5 The draft Annual Governance Statement is considered by the Executive Leadership Team and the Council’s Scrutiny & Performance Committee prior to inclusion within the final draft Annual Accounts. 5.6 The Annual Governance Statement is considered by the Audit & Risk Committee as part of the Annual Accounts. 6 Effectiveness of Governance Arrangements for 2022/23 6.1 Based on the assurance process outlined above, in terms of effectiveness, the Council’s governance arrangements continue to be regarded as fit for purpose in accordance with the governance framework, subject to the areas identified for review or improvement set out in section 8 below. 6.2 Our financial management arrangements conform with the governance requirements of the CIPFA Statement on the Role of the Chief Financial Officer in Local Government (2015). 6.3 Our assurance arrangements conform with the governance requirements of the CIPFA Statement on the Role of the Head of Internal Audit (2010). 6.4 The Council has designated the Head of Legal & Governance Services as the Senior Information Risk Owner, with the Head of Corporate IT & Revenues as Depute. Our information security measures have been reviewed in 2022/23 to ensure continuing compliance with the Public Service Network (PSN) and other cyber security requirements. 6.5 Our counter-fraud and anti-corruption arrangements conform with CIPFA’s Code of Practice on Managing the Risks of Fraud and Corruption. 6.6 The Chief Internal Auditor is the Council’s nominated Money Laundering Reporting Officer. There has been no relevant activity in respect of Council and its group during the year. 6.7 The Council’s Audit & Risk Committee operates in line with CIPFA’s Audit Committees: Practical Guidance for Local Authorities. 6.8 We have structures in place which support constructive challenge and effective scrutiny to our system of internal control and our broader governance arrangements. In particular: - • Audit & Risk Committee • Scrutiny & Performance Committee • Finance & Resources Committee • Themed Committees • Executive Leadership Team / Extended Executive Leadership Team • Policy & Governance Group • Transformation & Change Board • Internal Audit • External Audit (presently Audit Scotland) 19 Perth & Kinross Council Annual Accounts 2022/23 Page 40 of 226
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7 Opinion of the Chief Internal Auditor 7.1 Audit activity and performance is detailed in the Annual Report by the Chief Internal Auditor for the year 2022/23, which was presented to the Council’s Audit & Risk Committee in June 2023. The report contains the Chief Internal Auditor’s opinion in respect of the effectiveness of the governance arrangements in place, as follows: - “In the Chief Internal Auditor’s opinion, reasonable reliance can be placed on the Council’s risk management and governance arrangements, and systems of internal control for 2022/23, subject to management implementation of the agreed actions detailed in Internal Audit reports.” 8 Areas for Review/Continued Improvement Action 8.1 The last three years have demonstrated our reliance on technology and the way in which technology can shape and influence how we deliver services and work as an organisation in the future. We continue to review our cyber resilience and information governance arrangements to ensure that they are fit for purpose and robust and continue to support new and innovative ways of working. 8.2 The Council’s financial management, governance and reporting arrangements have been assessed against the financial management standards set out within the CIPFA Financial Management Code (2019). The Code is based upon the standards set out elsewhere within the Annual Governance Statement and the Council is considered to be compliant with the Code. Improvement actions arising from the review include consideration of how the Council can build upon existing practice in its budget consultation with stakeholders and strengthening existing reporting arrangements which was taken forward through the submission of a Financial Strategy report to Council in June 2022. 8.3 The adoption of our Climate Change Strategy in December 2021 will require all strategies and policies to be reviewed for their impact in this area. Progress has been made in developing an Integrated Assessment Tool which captures these considerations for future reports and existing strategies and policies will be subject to a similar process for ensuring their alignment with the Climate Change Strategy. 8.4 In addition to these areas, there are some specific areas which will be held under review pending the outcome of current transformation and change activity: • Leadership culture and capacity • Capacity and resources to lead, develop and deliver ongoing and future programme of transformation and change • Implementation of the Financial Strategy to address financial deficits and pressures • Our approach to community engagement and empowerment • Leadership capacity and corporate support to Integration Joint Board. 20 Perth & Kinross Council Annual Accounts 2022/23 Page 41 of 226
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9 Conclusion and Opinion The Council is legally required to review the effectiveness of its governance arrangements and to publish an Annual Governance Statement, with its Annual Accounts. The governance framework and, in particular, the system of internal control, has been assessed in accordance with guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA). The review of the effectiveness of the Council’s system of internal control and overall governance framework has been informed by different sources assessing risk and providing assurance: - • Executive Leadership Team/ Service Management Teams • Chief Finance Officer • Monitoring Officer • Chief Internal Auditor/ Internal Audit • Data Protection Officer • Policy & Governance Group • External Audit • External agencies and inspectorates. The Council’s Governance Framework is considered robust and effective. Each Director, who has responsibility within the Scheme of Delegation for the development and maintenance of the system of internal control, has reviewed the current governance arrangements and internal controls within their service area and provided assurance that these are effective. The Chief Finance Officer has provided assurance that the financial arrangements in place conform to the relevant CIPFA requirements and that our expenditure is lawful. The Monitoring Officer has provided assurance that our governance arrangements ensure compliance with relevant laws, regulations, internal policies, and procedures. The Chief Internal Auditor has provided assurance for the year 2022/23 and an Internal Audit plan will be developed for 2023/24 that will focus on areas which have been identified as corporate or service specific risks in relation to core business and the delivery of the Council’s agreed strategic priorities. We are satisfied that our governance arrangements and, in particular, our system of internal control, continue to be regarded as fit for purpose. Any identified improvement actions will continue to be delivered and monitored through service improvement plans, audit plans and change programmes to avoid duplication of effort. Our governance framework will continue to be reviewed and adapted where necessary to ensure that it remains robust and effective. Signed: Signed: Thomas Glen Councillor Grant Laing Chief Executive Leader of the Council Date Date 21 Perth & Kinross Council Annual Accounts 2022/23 Page 42 of 226
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Independent auditor’s report to the members of Perth & Kinross Council and the Accounts Commission Reporting on the audit of the financial statements Opinion on financial statements I certify that I have audited the financial statements in the annual accounts of Perth & Kinross Council and its group for the year ended 31 March 2023 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the group and council-only Movement in Reserves Statement, Comprehensive Income and Expenditure Statements, Balance Sheets, and Cash Flow Statements, the council-only Housing Revenue Account Income and Expenditure Statement, the Statement of Movements on the Housing Revenue Account Balance, the Council Tax Income Account, the Non-Domestic Rate Income Account, the Charitable Trusts Income and Expenditure Account, the Charitable Trusts Balance Sheet, the Common Good Income and Expenditure Account, the Common Good Balance Sheet, the group-only Reconciliation of the Single Entity Deficit for the year to the Group Deficit and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (the 2022/23 Code). In my opinion the accompanying financial statements: • give a true and fair view of the state of affairs of the council and its group as at 31 March 2023 and of the income and expenditure of the council and its group for the year then ended; • have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2022/23 Code; and • have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003. Basis for opinion I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I was appointed by the Accounts Commission on 2 December 2022. My period of appointment is five years, covering 2022/23 to 2026/27. I am independent of the council and its group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the council. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Conclusions relating to going concern basis of accounting I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the ability of the council and its group to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. These conclusions are not intended to, nor do they, provide assurance on the current or future financial sustainability of the council and its group. However, I report on the council’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. Risks of material misstatement I report in my Annual Audit Report the most significant assessed risks of material misstatement that I identified and my judgements thereon. 22 Perth & Kinross Council Annual Accounts 2022/23 Page 43 of 226
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Responsibilities of the Head of Finance and Audit and Risk Committee for the financial statements As explained more fully in the Statement of Responsibilities for the Annual Accounts, the Head of Finance is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Head of Finance determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Head of Finance is responsible for assessing the ability of the council and its group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there is an intention to discontinue the operations of the council and its group. The Audit and Risk Committee is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using my understanding of the local government sector to identify that the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003 are significant in the context of the council and its group; • inquiring of the Head of Finance as to other laws or regulations that may be expected to have a fundamental effect on the operations of the council and its group; • inquiring of the Head of Finance concerning the policies and procedures of the council and its group regarding compliance with the applicable legal and regulatory framework; • discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and • considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the council’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report. Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report I have audited the parts of the Remuneration Report described as audited. In my opinion, the audited parts of the Remuneration Report for Financial Year 2022/23 have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Head of Finance is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities for the Annual Accounts and the unaudited parts of the Remuneration Report. My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be 23 Perth & Kinross Council Annual Accounts 2022/23 Page 44 of 226
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materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Management Commentary and Annual Governance Statement to the extent explicitly stated in the following opinions prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Management Commentary and Annual Governance Statement In my opinion, based on the work undertaken in the course of the audit: • the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and • the information given in the Annual Governance Statement 2022/23 for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). Matters on which I am required to report by exception I am required by the Accounts Commission to report to you if, in my opinion: • adequate accounting records have not been kept; or • the financial statements and the audited parts of the Remuneration Report are not in agreement with the accounting records; or • I have not received all the information and explanations I require for my audit. I have nothing to report in respect of these matters. Conclusions on wider scope responsibilities In addition to my responsibilities for the annual accounts, my conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in my Annual Audit Report. Use of my report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Brian Howarth ACMA CGMA Audit Director Audit Scotland 4th Floor 8 Nelson Mandela Place Glasgow G2 1BT 24 Perth & Kinross Council Annual Accounts 2022/23 Page 45 of 226
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General Housing Capital Insurance Capital Capital Total Unusable Total Fund Revenue Fund Fund Receipts Grants Usable Reserves Authority Balance Account Reserve Unapplied Reserves (Note 32) Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2021 (72,483) (3,006) (27,944) (2,392) (2,529) (2,730) (111,084) (540,023) (651,107) Movement in reserves during 2021/22 Total Comprehensive Income and Expenditure 11,478 5,147 0 0 0 0 16,625 (107,289) (90,664) Adjustments to Usable Reserves permitted by accounting standards (4,459) (2,995) 0 0 0 0 (7,454) 7,454 0 Adjustments from income & expenditure charged under the accounting basis to the funding basis (Note 5) (16,483) (2,228) 0 0 (27) 2,643 (16,095) 16,095 0 (Increase)/ Decrease in 2021/22 (9,464) (76) 0 0 (27) 2,643 (6,924) (83,740) (90,664) Transfers to/(from) Other Statutory Reserves (3,953) (200) 3,127 1,026 0 0 0 0 0 Balance at 31 March 2022 carried forward (85,900) (3,282) (24,817) (1,366) (2,556) (87) (118,008) (623,763) (741,771) Movement in reserves during 2022/23 Total Comprehensive Income and Expenditure 16,868 6,401 0 0 0 0 23,269 (148,700) (125,431) Adjustments to Usable Reserves permitted by accounting standards (4,511) (2,897) 0 0 0 0 (7,408) 7,408 0 Adjustments from income & expenditure charged under the accounting basis to the funding basis (Note 5) 1,514 (2,029) 0 0 311 0 (204) 204 0 (Increase) or Decrease in 2022/23 13,871 1,475 0 0 311 0 15,657 (141,088) (125,431) Transfers to/(from) Other Statutory Reserves 2,306 (840) (1,526) 60 0 0 0 0 0 Balance at 31 March 2023 carried forward (69,723) (2,647) (26,343) (1,306) (2,245) (87) (102,351) (764,851) (867,202) MOVEMENT IN RESERVES STATEMENT 25 Perth & Kinross Council Annual Accounts 2022/23 Page 46 of 226
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Restated Restated Restated 2021/22 Gross Income Net Notes Gross Income Net Expenditure Expenditure Expenditure Expenditure £'000 £'000 £'000 £'000 £'000 £'000 COUNCIL SERVICES 233,020 (27,525) 205,495 Education & Children's Services 232,396 (28,053) 204,343 172,809 (97,019) 75,790 Health & Social Care 195,655 (107,341) 88,314 119,003 (28,737) 90,266 Communities 122,906 (34,613) 88,293 64,046 (25,005) 39,041 Corporate & Democratic Services 68,812 (23,927) 44,885 2,320 (67) 2,253 Chief Executives Service 2,896 (2) 2,894 34,465 (30,085) 4,380 Housing Revenue Account 36,843 (31,394) 5,449 1,307 0 1,307 Valuation Joint Board 1,338 0 1,338 626,970 (208,438) 418,532 COST OF SERVICES 660,846 (225,330) 435,516 0 (534) (534) Other Operating Income and Expenditure 8 474 (331) 143 25,623 (2,019) 23,604 Financing and Investment Income and Expenditure 9 26,585 (6,276) 20,309 0 (424,977) (424,977) Taxation and Non-Specific Grant Income 10 0 (432,699) (432,699) 652,593 (635,968) 16,625 Deficit on Provision of Services 687,905 (664,636) 23,269 (22,427) Surplus on revaluation of non current assets (86,274) (84,862) Remeasurement of the net defined benefit liability (62,426) (107,289) Other Comprehensive Income and Expenditure (148,700) (90,664) Total Comprehensive Income and Expenditure (125,431) 2022/23 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 26 Perth & Kinross Council Annual Accounts 2022/23 Page 47 of 226
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Notes £'000 £'000 1,255,581 Property, Plant & Equipment 21 1,421,864 51,814 Heritage Assets 22 51,814 14,060 Investment Property 23 15,015 1,674 Intangible Assets 24 963 403 Assets Held for Sale 25 403 613 Long Term Debtors 26 541 1,324,145 Long Term Assets 1,490,600 209,301 Short Term Investments 155,339 273 Assets Held for Sale 25 273 578 Inventories 27 441 46,052 Short Term Debtors 28 52,019 38,437 Cash and Cash Equivalents 44 17,663 294,641 Current Assets 225,735 (14,754) Short Term Borrowing 39 (12,114) (73,570) Short Term Creditors 29 (96,104) (3,904) Provisions 30 (295) (92,228) Current Liabilities (108,513) (2,959) Provisions 30 (5,312) (604,507) Long Term Borrowing 39 (599,351) (177,321) Other Long Term Liabilities 18 & 36 (135,957) (784,787) Long Term Liabilities (740,620) 741,771 NET ASSETS 867,202 118,008 Usable Reserves 102,351 623,763 Unusable Reserves 32 764,851 741,771 TOTAL RESERVES 867,202 The Unaudited Annual Accounts were issued on 26 June 2023 and the Audited Annual Accounts were authorised for issue on 11 December 2023. The accompanying notes form an integral part of these financial statements. Stewart MacKenzie CPFA Head of Finance Date: 31 March 202331 March 2022 BALANCE SHEET 27 Perth & Kinross Council Annual Accounts 2022/23 Page 48 of 226
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2021/22 Notes 2022/23 £'000 £'000 (16,625) Deficit on the provision of services (23,269) 99,842 Adjustments to net deficit on the provision of services for non cash movements 82,679 (47,236) Adjustments for items included in the net deficit on the provision of services that are investing and financing activities (44,143) 35,981 Net cash flows from Operating Activities 15,267 (48,326) Investing Activities 42 (22,818) 23,561 Financing Activities 43 (13,223) 11,216 Net (decrease)/increase in cash and cash equivalents (20,774) 27,221 Cash and cash equivalents at the beginning of the reporting period 38,437 38,437 Cash and cash equivalents at the end of the reporting period 44 17,663 CASH FLOW STATEMENT 28 Perth & Kinross Council Annual Accounts 2022/23 Page 49 of 226
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STATEMENT OF RESPONSIBILITIES FOR THE ANNUAL ACCOUNTS The Council’s Responsibilities The Council is required: - to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for those affairs under Section 95 of the Local Government (Scotland) Act 1975. In this Council that officer is the Head of Finance. - to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. - ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003). - approve the Annual Accounts for signature. I confirm that these Annual Accounts were approved for signature by the Audit & Risk Committee at its meeting on 11 December 2023. Signed on behalf of Perth & Kinross Council Councillor Grant Laing Leader of the Council Date: The Responsibilities of the Head of Finance The Head of Finance is responsible for the preparation of the Council’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing these Annual Accounts, the Head of Finance has: - selected suitable accounting policies and applied them consistently; - made judgements and estimates that were reasonable and prudent; - complied with legislation; and - complied with the Local Authority Accounting Code (in so far as it is compatible with legislation). The Head of Finance has also: - kept proper accounting records which were up to date; - taken reasonable steps for the prevention and detection of fraud and other irregularities; - used the going concern basis of accounting on the assumption that the Council will continue in operational existence for the twelve months following the approval of the Annual Accounts. I certify that the Annual Accounts give a true and fair view of the financial position of the Council and its group at the reporting date and the transactions of the Council and its Group for the year ended 31 March 2023. Stewart MacKenzie CPFA Head of Finance Date: 29 Perth & Kinross Council Annual Accounts 2022/23 Page 50 of 226
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NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies General The Annual Accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) and adapted to the Code of Practice as required by the Local Authority Accounts (Scotland) Regulations 2014 and section 12 of the Local Government in Scotland Act 2003. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 and supported by International Financial Reporting Standards. The Annual Accounts are intended to present a true and fair view of the financial position and transactions of the authority and have been prepared in accordance with the fundamental accounting principles of relevance, reliability, comparability, understandability and materiality. The accounting convention adopted in the Annual Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, or when the Council is entitled to the income, not simply when cash payments are made or received. In particular: − Revenue from contracts with service recipients, whether for services or the provision of goods, is recognised when (or as) the goods and services are transferred to the service recipient in accordance with the performance obligations in the contract. − Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption, they are carried as inventories on the Balance Sheet. − Expenses in relation to services received (including those rendered by the Council’s officers) are recorded as expenditure when the services are received, rather than when payments are made. − Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. − Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where there is evidence that debts are unlikely to be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. − Where the Council is acting as an agent for another party (e.g. in the collection of Non-Domestic Rates and Water & Wastewater), income and expenditure are recognised only to the extent that commission is receivable by the Council for the agency services rendered or the Council incurs expenses directly on its own behalf in rendering the services. Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are highly liquid investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management. Changes in Accounting Policies and Estimates and Errors Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events or conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied. Changes in accounting estimates are accounted for prospectively, i.e., in the current and future years affected by the change. Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding fixed assets during the year: − depreciation attributable to the assets used by the relevant service; − revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off; − amortisation of intangible fixed assets attributable to the service. The Council is not required to raise council tax to cover depreciation, revaluation and impairment losses or amortisations. However, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with the Statutory Repayment of Loans Fund Advances. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by revenue provision in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. 30 Perth & Kinross Council Annual Accounts 2022/23 Page 51 of 226
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Contingent Assets and Liabilities A contingent asset arises where an event has taken place that gives the Council a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent Assets and Liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts. Employee Benefits Benefits Payable During Employment Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, are recognised as an expense in the year in which employees render service to the Council. An accrual is made against services in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements and other forms of leave earned by employees but not taken before the year-end and which employees can carry forward into the next financial year. Any accrual made is required under statute to be reversed out of the General Fund Balance by a credit to the Employee Statutory Absences Adjustment Account in the Movement in Reserves Statement. Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged in the Comprehensive Income and Expenditure Statement when the Council is demonstrably committed to terminate the employment of an officer. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end. Post-Employment Benefits Employees of the Council are members of two separate pension schemes: The Scottish Teachers’ Superannuation Scheme and the Local Government Pension Scheme. The Scottish Teachers’ Superannuation Scheme is a statutory unfunded defined final benefit salary scheme administered nationally by the Scottish Public Pensions Agency on behalf of the Scottish Government. There are no investment assets built up under the scheme to meet pension liabilities. The contributions paid into the scheme by the Council and teaching employees are determined nationally and member’s pension benefits are prescribed under the Teachers’ Superannuation (Scotland) Regulations 2005 with the Scottish Government being responsible for meeting the scheme’s liabilities. Other employees, subject to certain qualifying criteria, are eligible to join the Local Government Pension Scheme (LGPS). The LGPS is a statutory funded defined final benefit salary scheme operated through local pension funds. Perth & Kinross Council and its employees pay contributions into the Tayside Pension Fund administered by Dundee City Council calculated at a level to balance the pension liabilities with investment assets. The contributions paid into the scheme by employees and member pension benefits are prescribed, for the period to which the accounts relate, by the Local Government Pensions Scheme (Scotland) Regulations 1998 as amended. Perth & Kinross Council’s contributions, as employer, into the Tayside Pension Fund are subject to the advice of the Fund actuary. Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the Council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be attributed specifically to the Council. The scheme is therefore accounted for as if it were a defined contributions scheme – no liability for future payments of benefits is recognised in the Balance Sheet and the Education Service line in the Comprehensive Income and Expenditure Statements is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Local Government Scheme is accounted for as a defined benefits scheme. The liabilities of the Tayside Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate which is based on the indicative rate of return on the high quality corporate bond index (i Boxx AA). 31 Perth & Kinross Council Annual Accounts 2022/23 Page 52 of 226
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The assets of the Tayside Pension Fund attributable to the Council are included in the Balance Sheet at their fair value: − quoted securities – current bid price; − unquoted securities – professional estimate; − unitised securities – current bid price; − property – market value. The change in the net pension’s asset / liability is analysed into the following components: • Service cost comprising: − current service cost – the increase in liabilities as result of years of service earned this year – allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked; − past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years – debited to the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs; − net interest on the net defined liability / (asset), i.e. net interest expense for the authority – the change during the period in the net defined benefit liability / (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement – this is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability / (asset) at the end of the period – taking into account any changes in the net defined benefit liability / (asset) during the period as a result of contribution and benefit payments. • Remeasurements comprising: − the return on plan assets - excluding amounts included in net interest on the net defined benefit liability / (asset) – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure; − actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions – charged to the Pensions Reserve as Other Comprehensive Income and Expenditure. • Contributions paid to the Tayside Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year- end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. Discretionary Benefits The Council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. Career Average Revalued Earnings Scheme (CARE) The Local Government Pension Scheme changed from Final Salary to Career Average Revalued Earnings (CARE) on 1 April 2015, with a change of accrual rate from 1/60th to 1/49th. Employees who were previously paying into the Final Salary scheme were automatically transferred into the new CARE scheme on 1 April 2015. Events after the Reporting Period Events after the reporting period are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified: − those that provide evidence of conditions that existed at the end of the reporting period – the Annual Accounts are adjusted to reflect such events; − those that are indicative of conditions that arose after the reporting period – the Annual Accounts are not adjusted to reflect such events, but where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Events taking place after the date of authorisation for issue are not reflected in the Annual Accounts. 32 Perth & Kinross Council Annual Accounts 2022/23 Page 53 of 226
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Fair Value Measurement The Council measures some of its non-financial assets such as surplus assets and investment properties at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: a) in the principal market for the asset or liability, or b) in the absence of a principal market, in the most advantageous market for the asset or liability. The Council measures the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. When measuring the fair value of a non-financial asset, the Council takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Council uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Inputs to the valuation techniques in respect of assets and liabilities for which fair value is measured or disclosed in the Council’s financial statements are categorised within the fair value hierarchy, as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: unobservable inputs for the asset or liability. Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value and carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised. For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of a restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount respectively is deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain/loss over the term of the replacement loan. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. Financial Assets Financial assets are classified based upon a classification and measurement approach that reflects the business model for holding the financial assets and their cashflow characteristics. There are three main classes of financial assets measured at:- • amortised cost • fair value through profit or loss (FVPL), and • fair value through other comprehensive income (FVOCI) The Council’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest (i.e. where cash flows do not take the form of a basic debt instrument). Loans and receivables are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For deposits that the Council has made, this means that the amount 33 Perth & Kinross Council Annual Accounts 2022/23 Page 54 of 226
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presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the agreement. However, the Council has made loans to various organisations at less than market rates (soft loans). When a soft loan is made, a loss is recorded in the Comprehensive Income and Expenditure Statement (debited to the appropriate service) for the present value of the interest that will be foregone over the life of the instrument, resulting in a lower amortised cost than the outstanding principal. In subsequent years interest is credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement at a higher effective rate of interest than the rate receivable from the voluntary organisations, with the difference serving to increase the amortised cost of the loan in the Balance Sheet. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Any gains and losses that arise on the de-recognition of an asset are credited/debited to the Financing and Investment Income and Expenditure line in the year they incur in the Comprehensive Income and Expenditure Statement. Foreign Currency Where the Council enters into a transaction in foreign currency the transaction is converted into sterling at the exchange rate applicable on the date the transaction is effective. Going Concern The Head of Finance is responsible for making an annual assessment of whether it is appropriate to prepare the accounts on a going concern basis. In accordance with the Code of Practice on Local Authority Accounting in the United Kingdom, an authority’s financial statements shall be prepared on a going concern basis; that is, the accounts should be prepared on the assumption that the functions of the authority will continue in operational existence for at least twelve months from the date of approval of the financial statements and it can only be discontinued under statutory prescription. The Council has significant net assets, investments and cash and a track record of preparing a balanced budget which incorporates significant savings that are subsequently achieved. The Covid pandemic continues to have an impact on the finance and operations of the Council. The Council has put in place robust measures to ensure the continuing strong financial management of its activities which demonstrates its ability to continue as a going concern. Work continues to assess the impacts of the pandemic and the mitigating actions taken to return to a balanced budget. Taken together, the Head of Finance has determined that it remains appropriate to prepare the financial statements on a going concern basis. Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: − the Council will comply with the conditions attached to the payments; and − the grants or contributions will be received. Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attaching to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants/contributions) or Taxation and Non-Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Account. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure. Heritage Assets Heritage Assets are those assets that are intended to be preserved in trust for future generations because of their cultural, environmental or historical associations. Heritage Assets include museum and gallery collections and works of art. These assets are held by the Council in pursuit of its overall objectives in relation to the maintenance of the heritage. Since 1 April 2016 Culture Perth & Kinross has responsibility for the delivery and development of museum and library services in Perth and Kinross. The Trust manages the museum and gallery collections on behalf of the Council, however the Council will continue to be custodian of the collections. 34 Perth & Kinross Council Annual Accounts 2022/23 Page 55 of 226
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Tangible Heritage Assets The Council’s Heritage Assets are held in the Perth Museum & Gallery, Fergusson Gallery and Alyth Museum. The collections include Art, History and Natural History and are held in support of Council objectives i.e. to increase knowledge, understanding and appreciation of the local area and its history. Heritage Assets are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in relation to heritage assets as detailed below. The Council has embarked upon a revaluation programme for all collection items deemed to have significant value, these being mainly items within Fine and Applied Art collections. In recognition of the key qualitative characteristics of the financial statements, i.e. understandability, relevance, reliability and comparability, the Council has chosen to apply a £10,000 de-minimus level for which items will be recognised within the Balance Sheet. The exclusion of individual items having a value of less than £10,000 does not impact upon the characteristics of the financial statements and a summary of the main collections and applicable accounting treatment is as follows. Art Collection The Fine Art collection includes paintings and sketches in various mediums, and although international in scope, its greatest strength is in the holding of Scottish pictures. The collection seeks to retain a balance between the historical and the contemporary whilst continuing to develop the holdings of works of specifically local interest. The Applied Art collection has been acquired since 1785 through purchase, gift or bequest. It covers a wide variety of objects and materials, within which the collections of Perth silver and Perthshire glass are unsurpassed in terms of national importance. Subject to the de-minimus noted above, items donated or acquired are valued by the curators at point of acquisition; in addition, there is a five year rolling programme of valuation to ensure all significant items in the Art collection are valued. All valuations are undertaken by the curators having relevant knowledge and experience and with reference to appropriate commercial markets. Art collection items are held in the Council balance sheet at market value and are tested annually for impairment, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment. As the assets within the art collection are deemed to have indeterminate lives and a high residual value, the Council does not consider it appropriate to charge depreciation. History Collection The History collection includes social history, archaeology, arms & armour, costume, archives, coins, medals & stamps, photography and world cultures collections. These items cannot be readily and/or reliably valued due to their diverse nature. The cost of valuation would be disproportionate in terms of any benefit derived to the user of the financial statements and the History collection is consequently excluded from the Council Balance Sheet. Natural History Collection The Natural History collection includes zoology, botany and geology collections. No market exists for these items and collections and there is no comparable data to form the basis of valuation. The cost of obtaining valuations would be disproportionate in terms of any benefit derived to the user of the financial statements and Natural History collections are consequently excluded from the Council Balance Sheet. Heritage Assets – General The Council may dispose of heritage assets which have a doubtful provenance or are unsuitable for public display. The proceeds of such items are accounted for in accordance with the Council’s general provisions relating to the disposal of property, plant and equipment. Disposal proceeds are disclosed separately in the notes to the financial statements and are accounted for in accordance with statutory accounting requirements relating to capital expenditure and capital receipts. The promotion of other cultural events and programmes during the year makes it difficult to reliably estimate the percentage of the Art Collection on display for public viewing. All items not on display are held in secure storage and access is permitted to scholars and others for research purposes. The Culture Perth & Kinross Collections Management Framework provides guidance on the collection, disposal or lending of heritage assets. Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Internally generated assets are capitalised where it is demonstrable that the project is technically feasible and is intended to be completed (with adequate resources being available) and the Council will be able to generate future economic benefits or deliver service potential by being able to sell or use the asset. Expenditure is capitalised where it can be measured reliably as attributable to the asset and restricted to that incurred during the development phase (research expenditure is not capitalised). Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. 35 Perth & Kinross Council Annual Accounts 2022/23 Page 56 of 226
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Intangible assets are measured initially at cost. Amounts are only revalued where the fair value of the assets held by the Council can be determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and the Capital Receipts Reserve. Interests in Companies and Other Entities The Council has material interests in companies and other entities that have the nature of subsidiaries, associates and jointly controlled entities and require it to prepare group accounts. In the Council’s own single-entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. Inventories Inventories are included in the Balance Sheet at the lower of cost and net realisable value. Work in progress is valued at the cost of direct materials and labour plus attributable overheads based on the normal level of activity less any attributable losses. Investment Properties Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, being the price that would be received to sell such an asset in an orderly transaction between market participants at the measurement date. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account and the Capital Receipts Reserve. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. The Council as Lessee Operating Leases - Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). The Council as Lessor Operating Leases - Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. Overheads and Support Services The costs of overheads and support services are only charged to the Housing Revenue Account and charities in accordance with the total absorption costing principle. 36 Perth & Kinross Council Annual Accounts 2022/23 Page 57 of 226
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Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (e.g. repairs and maintenance) is charged as an expense when it is incurred. Measurement Assets are initially measured at cost, comprising: − the purchase price; − any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; − the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located where there is a legal or constructive obligation to do so. The Council does not capitalise borrowing costs incurred whilst assets are under construction. The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition will not increase the cash flows of the Council. In the latter case, the cost of the acquisition is the carrying amount of the asset. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Account. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases: − infrastructure and community assets – depreciated historical cost; − assets under construction – historical cost − dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH). The Council values these assets using the Beacon approach (Adjusted Vacant Possession) − other land and buildings – current value based on existing use value (EUV) for operational assets where there is an active market, or if there is no market based evidence of current value because of the specialist nature of the asset and/or the asset is rarely sold, depreciated replacement cost (DRC) using the instant build approach; − surplus assets – the current value measurement base is fair value, estimated at highest and best use from a market participant’s perspective; − all other assets – current value, determined by the amount that would be paid for the asset in its existing use (existing use value – EUV). Assets included in the Balance Sheet at current value are reviewed sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year-end, and subject to formal revaluation as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the surplus or deficit on the provision of services where they arise from the reversal of a loss previously charged to a service. Where decreases in value are identified, the revaluation loss is accounted for as follows: − where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); − where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for: − where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains); − where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. 37 Perth & Kinross Council Annual Accounts 2022/23 Page 58 of 226
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Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Disposals and Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously recognised losses. Depreciation is not charged on Assets Held for Sale. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Amounts received for a disposal are categorised as capital receipts. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can then only be used for new capital investment or set aside to reduce the Council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against council tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. freehold land and certain Community Assets) and assets that are not yet available for use (i.e. assets under construction). Leasehold properties over period of lease Roads and bridges 15-30 years Other infrastructure assets 10-30 years Vehicles, plant and equipment 3-15 years Council Buildings up to 50 years Council Dwellings 10-30 years Intangible Fixed Assets 3-5 years Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the General Fund. Private Finance Initiative (PFI) and Similar Contracts PFI and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes the Council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment. The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as property, plant and equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements: − fair value of the services received during the year – debited to the relevant service in the Comprehensive Income and Expenditure Statement; − finance cost – an interest charge on the outstanding Balance Sheet liability, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement; − contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement; − payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease); − lifecycle replacement costs – debited to the relevant service in the Comprehensive Income and Expenditure Statement. 38 Perth & Kinross Council Annual Accounts 2022/23 Page 59 of 226
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Provisions The Council is required to make provisions where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. Provision has been made for bad and doubtful debts in respect of Council Tax, Housing Rents and other items of income, where appropriate. In all cases the level of provision is based on experience and an assessment of the prospects of recovering the related debt. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the council becomes aware of the obligation, and measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the council settles the obligation. Reserves Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year against the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits and that do not represent usable resources for the Council – these reserves are explained in the relevant notes. Revenue Expenditure Funded from Capital under Statute Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset is charged as expenditure to the relevant Service in the Comprehensive Income and Expenditure Statement in the year. Where the Council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so that there is no impact on the level of council tax. VAT VAT payable is included as an expense only to the extent that it is not recoverable from His Majesty’s Revenue and Customs. VAT receivable is excluded from income. 2. Accounting Standards that have been issued but have not yet been adopted At the balance sheet date, the following new standards and amendments to existing standards have been published but not yet adopted by The Code: • Definition of Accounting Estimates (Amendments to IAS8) • Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS12) • Updating a Reference to the Conceptual Framework (Amendments to IFRS 3) • IFRS 16 Leases will require the Council as lessee to recognise leases on the Balance Sheet as right-of-use assets along with the corresponding lease liabilities, except for low value and short- term leases. CIPFA/LASAAC have deferred implementation of IFRS 16 for local government to 1 April 2024. 39 Perth & Kinross Council Annual Accounts 2022/23 Page 60 of 226
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3. Critical Judgements in Applying Accounting Policies In applying the accounting policies set out in Note 1, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. The critical judgements made in the Annual Accounts are: Group Entities The Council has an interest in a number of subsidiary and associate companies and trusts. The most significant of these companies in terms of the size of trading operations, shareholding and board representation and other factors have been assessed and where deemed material to the Council, are included in the Group Accounts. Full details of these interests are shown in Note 1 to the Group Accounts. Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. The Council has determined that all leased in sites are operating leases due to the short term nature of the agreements. The Council also leases out sites which predominately relate to ground leases for land which has an indeterminable life and these agreements are classified as operating leases. Note 1 to the Financial Statements provides further detail on the accounting treatment for the lease agreements. Public Sector Funding There is a high degree of uncertainty about future levels of funding for local government. However, the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision. Public Private Partnership (PPP) The Council is deemed to control the services provided under the agreement for the provision of educational establishments. The accounting policies for PPP schemes and similar arrangements have been applied and the assets under the contract are included within Property, Plant and Equipment on the Council’s Balance Sheet. Note 36 provides further details. 4. Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty The Annual Accounts contains estimated figures that are based on assumptions made by the Council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31 March 2023 for which there is a significant risk of material adjustment in the forthcoming financial year are in respect of the Council’s Net Pensions Asset / Liability, and the estimated useful lives and valuation of Property, Plant and Equipment. Net Pension Liability Uncertainty Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. This is further detailed in Note 18 to the Accounts which includes a table setting out the potential sensitivity of change in assumptions on the Pension Liability. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied. Effect if Actual Results Differ from Assumptions The effects on the net pension asset / liability of changes in individual assumptions can be measured. For instance, a 0.1% increase in the discount rate assumption would result in a reduction in the pension liability of £11.838 million. However, the assumptions interact in complex ways. During 2022/23, the Council’s actuaries advised that the net pension position had moved from a net liability of £55.995 million to a net surplus of £229.359 million, a movement of £285.354 million. However, by applying IAS 19 and the asset ceiling provision contained therein, the Council has recognised a pension liability of £20.917 million. Property, Plant & Equipment - Valuations Uncertainty Although markets are functioning and transaction volumes are at levels where there is sufficient evidence on which to base opinions on value, there remain uncertainties due to worldwide events such as the war in Ukraine which continue to influence pricing. The valuation reports provided by Royal Institution of Chartered Surveyors (RICS) valuers have been used to inform the measurement of non-current assets in these financial statements. 40 Perth & Kinross Council Annual Accounts 2022/23 Page 61 of 226
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Of the £750.438 million gross book value of Other Land & Buildings at 31 March 2023 and subject to valuation on a five year cycle, £629.355 million relates to specialised assets valued on a depreciated replacement cost basis. Here the valuer bases their assessment on the cost to the Council of replacing the service potential of the assets; the uncertainty relates to the estimated costs of, rather than the extent of, service potential to be replaced. Educational properties represent 75% of the gross book value of Other Land & Buildings. The Council has uplifted the estimated value for these sites by £74.222 million at 31 March 2023 in line with the movement in construction cost indices. The valuer has provided estimates for the range of uncertainty attached to the valuation of Council dwellings. The valuation of Council dwellings requires the use of an Adjustment Factor which is applied to the vacant possession value of the housing stock to arrive at the reported Existing Use Value – Social Housing (EUV-SH). The Adjustment Factor is based on the ratio of private and public sector rents and yields. Rental ratios are established from data provided by the Council and from Local Housing Allowances, HM Rent Service, RICS, and using information on private sector rents from research including local letting agents. Information on yields is derived from the RICS, Building Society and Chartered Surveyor firm publications, and government publications. Effect if Actual Results Differ from Assumptions A sensitivity analysis has been undertaken in respect of all properties valued on a depreciated replacement cost basis to determine the potential movement in value due to changes in price estimates. The sensitivity analysis includes several assumptions, including that the Gross Internal Area (GIA) of each site remains unchanged, and the building use and condition remains in line with the previous valuation. Values for educational properties have been uplifted by £74.222 million at 31 March 2023, and the estimated movement due to changes in price estimates for the remaining sites is £1.406 million. A sensitivity analysis has been undertaken by the valuer to examine the potential impact if the Adjustment Factor was increased or decreased by 5%, this being the tolerance listed within the valuation guidance published by the Ministry for Housing Communities and Local Government (MHCLG). The EUV–SH for the Council housing stock at 30 September 2019 is £294,573,740. A 5% increase or decrease to the Adjustment Factor would result in an increase or decrease of £34,893,830 (11.85%) to the value of the Council housing stock. 41 Perth & Kinross Council Annual Accounts 2022/23 Page 62 of 226
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5. Adjustments between Accounting Basis and Funding Basis under Regulations Usable Reserves General Housing Capital Capital Total 2021/22 Fund Revenue Receipts Grants Balance Account Reserve Unapplied £'000 £'000 £'000 £'000 £'000 £'000 Adjustments involving the Capital Adjustment Account Depreciation and impairment on non-current assets (37,455) (10,380) 0 0 (47,835) (44,033) Revaluation Losses on Property, Plant & Equipment (1,933) (151) 0 0 (2,084) (20,930) Reversal revaluation gains 13,270 1 0 0 13,271 15,232 Movements in Fair Value of Investment Properties 955 0 0 0 955 1,065 Amortisation of Intangible Assets (1,026) 0 0 0 (1,026) (888) Capital grants and contributions credited to the Comprehensive Income & Expenditure Statement 39442 3214 0 0 42,656 46,627 Amounts of non current assets written off on disposal as part of the gain/loss (38) (1,485) 0 0 (1,523) (918) Revenue Expenditure Funded by Capital Under Statute (838) 0 0 0 (838) 0 Items not debited or credited to the Comprehensive Income & Expenditure Statement Statutory provision for repayment of debt 11,691 3,999 0 0 15,690 14,344 Capital expenditure charged to the General Fund and HRA balances 3,003 3,388 0 0 6,391 4,758 Adjustments involving the Capital Receipts Reserve Transfer of sale proceeds credited as part of the gain/loss on disposal 98 951 (1,049) 0 0 0 Use of the Capital Receipts Reserve to finance new capital expenditure 0 0 1,360 0 1,360 992 Adjustments involving the Capital Grants Unapplied Account 0 0 0 0 0 2,643 Adjustments involving the Financial Instruments Adjustment Account 485 163 0 0 648 726 Adjustments involving the Pensions Reserve Employer's pensions contributions and direct payments to pensioners payable in the year 19,476 1,436 0 0 20,912 19,659 Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (45,111) (3,149) 0 0 (48,260) (55,182) Adjustments involving Short Term Accumulated Absences Account Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements (505) (16) 0 0 (521) (190) Total Adjustments 1,514 (2,029) 311 0 (204) (16,095) 42 Perth & Kinross Council Annual Accounts 2022/23 Page 63 of 226
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6. Expenditure and Funding Analysis - 2022/23 Net Net Expenditure Expenditure Adjustments in the charged to between the Comprehensive the General Funding and Income and Fund and HRA Accounting Expenditure Balances Basis Statement £000 £000 £000 Education & Children's Services 191,577 12,766 204,343 Health & Social Care 82,433 5,881 88,314 Communities 61,769 26,524 88,293 Corporate & Democratic Services 35,469 9,416 44,885 Chief Executives Service 2,498 396 2,894 Housing Revenue Account (7,064) 12,513 5,449 Valuation Joint Board 1,338 0 1,338 Non Distributed Costs 1,540 (1,540) 0 Cost of Services 369,560 65,956 435,516 Other Income and Expenditure (354,214) (58,033) (412,247) Deficit on Provision of Services 15,346 7,923 23,269 Opening General Fund and HRA Balance (89,182) Surplus on General Fund and HRA Balance in Year 15,346 Transfers from other Statutory Reserves 1,466 Closing General Fund and HRA Balance at 31 March 2023 (72,370) This note provides a reconciliation of the main adjustments to Net Expenditure Chargeable to the General Fund and HRA Balances to arrive at the amounts in the Comprehensive Income and Expenditure Statement. The relevant transfers between Reserves are explained in the Movement in Reserves Statement. Notes to the Expenditure and Funding Analysis - adjustments between funding and accounting basis Note A Note B Note C £ '000 £ '000 £ '000 £ '000 COUNCIL SERVICES Education & Children's Services 2,560 9,701 505 12,766 Health & Social Care 1,011 4,779 91 5,881 Communities 19,901 6,716 (93) 26,524 Corporate & Democratic Services 5,182 4,256 (22) 9,416 Chief Executives Service (2) 375 23 396 Housing Revenue Account 10,878 1,619 16 12,513 Non Distributed Costs 0 (1,540) 0 (1,540) Cost of Services 39,530 25,906 520 65,956 Other Operating Expenditure and Income 474 0 0 474 Financing and Investment Income and Expenditure (16,645) 1,442 (648) (15,851) Taxation and Non-Specific Grant Income (42,656) 0 0 (42,656) Other income and expenditure from the Expenditure and Funding Analysis (58,827) 1,442 (648) (58,033) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services (19,297) 27,348 (128) 7,923 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement amounts Adjustments for Capital Purposes Net change for the Pensions Adjustments Other Differences Total Adjustments 43 Perth & Kinross Council Annual Accounts 2022/23 Page 64 of 226
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Restated Net Net Expenditure Expenditure Adjustments in the charged to between the Comprehensive the General Funding and Income and Fund and HRA Accounting Expenditure Balances Basis Statement £000 £000 £000 Education & Children's Services 175,145 30,350 205,495 Health & Social Care 69,033 6,757 75,790 Communities 61,496 28,770 90,266 Corporate & Democratic Services 29,395 9,646 39,041 Chief Executives Service 2,253 0 2,253 Housing Revenue Account (8,107) 12,487 4,380 Valuation Joint Board 1,307 0 1,307 Non Distributed Costs 1,528 (1,528) 0 Cost of Services 332,050 86,482 418,532 Other Income and Expenditure (341,590) (60,317) (401,907) (Surplus) or Deficit on Provision of Services (9,540) 26,165 16,625 Opening General Fund and HRA Balance (75,489) Surplus on General Fund and HRA Balance in Year (9,540) Transfers to other Statutory Reserves (4,153) Closing General Fund and HRA Balance at 31 March 2022 (89,182) This note provides a reconciliation of the main adjustments to Net Expenditure Chargeable to the General Fund and HRA Balances to arrive at the amounts in the Comprehensive Income and Expenditure Statement. The relevant transfers between Reserves are explained in the Movement in Reserves Statement. Notes to the Expenditure and Funding Analysis - adjustments between funding and accounting basis Note A Note B Note C £ '000 £ '000 £ '000 £ '000 COUNCIL SERVICES Education & Children's Services 17,756 12,276 318 30,350 Health & Social Care 929 5,893 (65) 6,757 Communities 19,966 8,822 (18) 28,770 Corporate & Democratic Services 4,225 5,448 (27) 9,646 Housing Revenue Account 10,439 2,066 (18) 12,487 Non Distributed Costs 0 (1,528) 0 (1,528) Cost of Services 53,315 32,977 190 86,482 Other Operating Expenditure and Income (13) 0 0 (13) Financing and Investment Income and Expenditure (15,497) 2,546 (726) (13,677) Taxation and Non-Specific Grant Income (46,627) 0 0 (46,627) Other income and expenditure from the Expenditure and Funding Analysis (62,137) 2,546 (726) (60,317) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services (8,822) 35,523 (536) 26,165 Total Adjustments Expenditure and Funding Analysis - 2021/22 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement amounts Adjustments for Capital Purposes Net change for the Pensions Adjustments Other Differences 44 Perth & Kinross Council Annual Accounts 2022/23 Page 65 of 226
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Note 6 cont’d Explanation to the Expenditure and Funding Analysis Adjustments for Capital Purposes Note A Adjustments for Capital Purposes adds in depreciation and impairment and revaluation gains and losses in the services line, and for: • Other operating expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets. • Financing and investment income and expenditure – the statutory charges for capital financing and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices. • Taxation and non-specific grant income and expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those receivable in the year to those receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non Specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for conditions which were satisfied in the year. Net Change for the Pensions Adjustments Note B Net change for the removal of pension contributions and the addition of IAS 19 Employee Benefits pension related expenditure and income: • For services this represents the removal of the employer pension contributions made by the authority as allowed by statute and the replacement with current service costs and past service costs. • For Financing and investment income and expenditure – the net interest on the defined benefit liability is charged to the Comprehensive Income and Expenditure Statement Other Differences Note C Other differences between the amounts debited/credited to the Comprehensive Income and Expenditure Statement and amounts payable/receivable to be recognised under statute: • For Financing and investment income and expenditure the other differences column recognises adjustments to the General Fund for the timing differences for premiums and discounts and stepped interest rate loans • For services this represents the removal of the increase or decrease in the employee statutory adjustment account. 45 Perth & Kinross Council Annual Accounts 2022/23 Page 66 of 226
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7. Transfer (to)/from Earmarked Reserves The Reserves Strategy that the Council approved in March 2023 earmarked funding towards specific or known future commitments. The following table sets out the updated balances as at 31 March 2023 for these Earmarked Reserves taking cognisance of the final year-end position. £'000 £'000 £'000 Balance as at Transfers Balance as at 1 April 2022 (In)/Out 31 March 2023 Revenue Grants (19,531) 3,584 (15,947) Workforce Management (including transformation) (4,114) (5,416) (9,530) Developer Contributions: Commuted Sums & Infrastructure and Affordable Housing (4,966) (574) (5,540) Affordable Housing (Resources accrued from reduced Council Tax Discounts) (4,281) (72) (4,353) Covid-19 (18,343) 15,677 (2,666) Children and Young People's Residential Care (743) (1,396) (2,139) Non-Recurring Pressures c/f from 2022/23 0 (1,699) (1,699) Car Parking (1,579) 67 (1,512) Perth High School (1,555) 109 (1,446) Culture (934) (238) (1,172) Devolved School Management (DSM) (1,191) 469 (722) Decant schools (700) 0 (700) Financial Insecurity (638) (42) (680) School Counsellors (681) 125 (556) Works Maintenance (300) (100) (400) Bertha Park High School (454) 107 (347) Modern Apprentices/Graduate Trainees (434) 94 (340) Property Maintenance (305) 34 (271) Primary School at Bertha Park (270) 0 (270) Perth and Kinross Offer (477) 225 (252) PH2O (212) 0 (212) World Cycling Championships 0 (180) (180) Climate Change 0 (153) (153) Ventiliation Measures (437) 323 (114) Salix Fund (92) (21) (113) Local Action Partnerships (107) 17 (90) Community Investment Fund (38) (51) (89) Grounds Maintenance (135) 75 (60) Non-Recurring pressures c/f from 2021/22 (5,242) 5,242 0 Insurance Fund (1,000) 1,000 0 Local Government Elections (212) 212 0 Financial Assistance (196) 196 0 North Inch Golf (155) 155 0 Earmarked Balances (69,322) 17,769 (51,553) Purpose of Earmarked General Fund Balances Revenue Grants - these grants are being carried forward in reserves as the grant conditions have been met but the expenditure has not been fully incurred. Workforce Management (including transformation) – the majority of these resources are earmarked for workforce management and cultural change measures required to respond to future financial challenges. There continues to be an amount earmarked for projects which are still operational under the transformation programme. The application of these resources will be reported to the Finance & Resources Committee through the revenue monitoring process. Developer Contributions: Commuted Sums & Infrastructure and Affordable Housing - the Enterprise & Infrastructure Committee approved supplementary guidance on 3 September 2014 for developer contributions covering community greenspace, primary education, Auchterarder A9 junction improvements, affordable housing and transport infrastructure. These sums are held in the Council’s Reserves until they are applied to relevant schemes. The application of these resources will be reported to the Finance & Resources Committee through the revenue and capital monitoring process. Affordable Housing (Resources accrued from reduced Council Tax Discounts) - these reserves have been generated as a result of the Council’s policy on varying the level of council tax charged for long term empty properties and second homes. These resources can only be used for the provision of affordable housing. The application of these resources will be reported to the Finance & Resources Committee through the revenue monitoring process. Covid-19 – the Council approved the creation of the Covid-19 earmarked Reserve on 27 January 2021 (report 21/8 refers) to address the ongoing impact of Covid-19. Children and Young People’s Residential Care – these resources have been earmarked to be utilised in the provision of children’s social work services over the next 2 financial years in managing the impact of Covid-19 on higher levels of need and reduce the number of residential placements. Non-Recurring Pressures c/f from 2022/23 – the 2023/24 Revenue Budget includes non-recurring expenditure proposals which have been approved during the year at Finance & Resources Committee. Car Parking – this balance is the accumulated surplus at 31 March 2023 which is restricted in its application under the Road Traffic Regulation Act 1984. Any proposals to utilise these resources will require approval by the Finance & Resources Committee. Perth High School - these resources were earmarked as part of 2016/17 Revenue Monitoring Report 1 to the Strategic Policy and Resources Committee (Report No. 16/400 refers) for future maintenance works at Perth High School and is being phased over a number of years. 46 Perth & Kinross Council Annual Accounts 2022/23 Page 67 of 226
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Culture – there was £363,000 approved for developing the cultural offer from the final under spend in the 2018/19 Revenue Budget and reported to Strategic Policy & Resources Committee during the year. This has been further increased by in-year underspends. The application of these resources will be reported to the Finance & Resources Committee through the revenue monitoring process. Devolved School Management (DSM) – the amount shown is the accumulated sum available to be carried forward at 31 March 2023 under the approved scheme for managing these budgets. The purposes for which the earmarked amount can be used and the procedures for its management and control are detailed in the Council’s approved DSM scheme. Decant Schools – Revenue Budget Report 2021/22 No 4 to the Strategic Policy & Resources Committee on 2 February 2022 approved the earmarking of £300,000 of resources in respect of expenditure on temporary decant expenditure in terms of progressing the Education & Children’s Services capital programme. These resources were further increased in 2021/22. Financial Insecurity – the Council has underspent on funding received during 2022/23 for financial insecurity and proposes to earmark these resources to be utilised in 2023/24 and future years. School Counsellors – Revenue Budget 2020/21 Update No 2 to the Strategic Policy & Resources Committee approved the earmarking of resources received from the Scottish Government in respect of counselling in schools which are anticipated to be spent during 2023/24 due to the awarding of a 3 year contract (Report 20/225). Works Maintenance - The Council continues to earmark resources for future works maintenance. The application of these resources will be reported to the Finance & Resources Committee through the revenue monitoring process. Bertha Park High School – £649,000 of these resources were earmarked as part of the 2015/16 Revenue Monitoring Report 1 to the Strategic Policy & Resources Committee (report 15/395 refers) to equip the new secondary school at Bertha Park. This was further augmented in future years. These resources will continue to be utilised in future years as the pupil intake increases to equip further classrooms. Modern Apprentices/Graduate Trainees - the Strategic Policy and Resources Committee approved the transfer of any final under spend on modern apprentices and graduate trainees. The remaining resources will be utilised in future years. Property Maintenance – Revenue Budget Report No 3 to the Strategic Policy & Resources Committee on 21 November 2021 approved the earmarking of £250,000 resources in respect of property maintenance to be utilised in future years. This was increased by a further £55,000 in 2021/22. Primary School at Bertha Park – Revenue Budget Report 2021/22 No 4 to the Strategic Policy & Resources Committee on 2 February 2022 approved the earmarking of resources of £270,000 in respect of non-recurring set up costs of the new primary school at Bertha Park. Perth and Kinross Offer – The Strategic Policy and Resources Committee approved the transfer of £262,000 as part of Revenue Monitoring Report 3 to fund future expenditure on Perth and Kinross Offer (Report No 20/22). This was augmented by further underspends in Report 4 of £200,000 and a final year end underspend of £37,000. The application of these resources will be applied in future years. PH2O – The Strategic Policy and Resources Committee approved the transfer of £350,000 from a budget of £500,000 as part of 2019/20 Revenue Monitoring Report 3 to the Strategic Policy & Resources Committee to fund the future design and business operating model of the PH2O project (Report No 20/22 refers). This was augmented by a further underspend of £57,000. The balance of resources will be utilised in future years. World Cycling Championships – the Finance & Resources Committee in November 2022 approved the earmarking of £180,000 of reserves for the UCI Cycling World Championships in August 2023. These resources will be utilised in 2023/24. Climate Change – the Finance & Resources Committee in April 2023 approved the earmarking of resources for climate change activities due to a rephasing between years. Ventilation Measures – Revenue Budget Report 2021/22 No 4 to the Strategic Policy & Resources Committee on 2 February 2022 approved the earmarking of resources of £323,000 in respect of ventilation measures to fund works in future years which was further augmented. Salix Fund – this fund is a means of pooling resources together with savings achieved from the implementation of energy conservation and efficiency schemes to fund expenditure on further schemes of the same type. Local Action Partnership – these resources are the remaining balance originally approved in the 2017/18 Revenue Monitoring Report 3 by the Strategic Policy & Resources Committee and further augmented in future years. These resources are approved for payment to groups via application to one of the seven local action partnerships. Community Investment Fund – The Council earmarked £600,000 as part of the 2018/19 Revenue Budget and a further £600,000 was approved to be earmarked during 2019/20. These resources will be reported to the Finance & Resources Committee. The remaining balance of £38,000 continues to be earmarked. Grounds Maintenance – The Strategic Policy and Resources Committee approved the transfer of £225,000 as part of 2018/19 Revenue Monitoring Report 4 to fund road safety measures around the A9/A85 project. (Report No 19/110 refers). This will be utilised in 2023/24. Non-Recurring Pressures c/f from 2021/22 – the 2022/23 Revenue Budget included non-recurring expenditure of £5.242 million approved as part of the Council’s Revenue Budget 2022/23 and Reserves Strategy which was funded by the Council’s underspend in 2021/22 and was earmarked for this purpose. This was utilised in 2022/23. Insurance Fund – the Council’s Revenue Budget 2022/23 and Reserves Strategy approved a contribution to the Insurance Fund in 2022/23 following the next actuarial review covering the period to 31 March 2023. Local Government Elections – these resources are earmarked in reserves as a contribution to local elections. These resources were utilised in 2022/23. Financial Assistance – at its meeting on 9 February 2006 the Council approved the creation of a recurring budget to fund its anticipated contribution to the Mod and other events across Perth and Kinross. This was utilised in 2022/23. North Inch Golf – Revenue Budget Report 2021/22 No 4 to the Strategic Policy & Resources Committee on 2 February 2022 approved the earmarking of resources of £155,000 in respect of the new starter’s hut which was utilised in 2022/23. 47 Perth & Kinross Council Annual Accounts 2022/23 Page 68 of 226
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8. Other Operating Expenditure / Income 2022/23 2021/22 £'000 £'000 Losses and (Gains) on the Disposal of Non Current Assets 474 (13) Share of Tayside Contracts surplus (331) (521) Total 143 (534) 9. Financing and Investment Income and Expenditure 2022/23 2021/22 £'000 £'000 Interest payable and similar charges 25,040 24,146 Pensions interest cost and expected return on pensions assets 1,442 2,546 Interest receivable and similar income (4,418) (1,032) Income in relation to investment properties and changes in their fair value (1,755) (2,056) Total 20,309 23,604 10. Taxation and Non-Specific Grant Income 2022/23 2021/22 £'000 £'000 Council Tax Income (92,860) (89,364) Non Domestic Rates (45,917) (34,655) Non Ring-fenced Government Grants (251,266) (254,331) Capital Grants and Contributions (42,656) (46,627) Total (432,699) (424,977) 11. Material Items of Income and Expense In 2022/23 the Council received additional grant funding of £8.669 million (£29.908 million in 2021/22) from the Scottish and UK Governments in relation to the Covid-19 pandemic and Cost of Living Crisis which was treated as agency income and expenditure and does not impact upon the figures in the Comprehensive Income and Expenditure Statement (see Note 15 for further details). The Council also received £10.73 million in 2021/22 from the Scottish Government in relation to the Covid-19 pandemic which was treated as principal and received as part of Non Ring-fenced Government Grants. 12. Premiums and Discounts on Debt Rescheduling Written Down The Code requires that any premiums or discounts arising from debt rescheduling should be written off in the year they were incurred, except in limited circumstances where they would qualify as a ‘modification’ of debt. During 2022/23, there were no such debt modifications. The net amount of premium and discount debited to the General Fund and HRA, including for transactions prior to 1 April 2007 (as permitted by statutory guidance), from the Financial Instruments Adjustment Account was £628,000 (2021/22 £707,000). 48 Perth & Kinross Council Annual Accounts 2022/23 Page 69 of 226
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13. General Grants, Bequests and Donations Perth & Kinross Council is represented on, exercises influence over and provides grants to a large number of outside bodies which provide services to the public, consistent with the Council’s statutory responsibilities. During 2022/23 a total of £19.381 million (2021/22 £16.467 million) was paid out in support of these organisations ranging from remission of hall rents of a few pounds to the contribution towards the operational and other costs of Live Active Leisure Limited of £4.815 million (2021/22 £4.863 million). Details of grants are shown below. 2022/23 2021/22 £'000 £'000 Service Level Agreements with Outside Organisations 4,762 4,375 Live Active Leisure Limited 4,815 4,863 Culture Perth & Kinross 3,219 3,175 Perth Theatre & Concert Hall Ltd 1,062 1,062 Commercial Property Regeneration Grants 644 309 Green Capital Recovery Fund 465 0 Warm Spaces Grant 420 0 Perth Money Advice Service 413 414 Community Investment Fund 355 566 Churches Action for the Homeless 317 262 Employability 303 23 Pitlochry Festival Theatre 220 220 Food Initiatives Grant 244 152 Open for Business 238 115 Perthshire Women's Aid 108 98 Perth & Kinross Heritage Trust 100 100 Support for Businesses 93 101 Vacant Property Grants 53 61 Perth & Kinross Countryside Trust 30 30 Other Miscellaneous Grants 1,520 541 19,381 16,467 14. Expenditure and Income Analysed by Nature The Council’s expenditure and income is analysed as follows: 2022/23 2021/22 Expenditure/Income £'000 £'000 Expenditure Employee benefits expenses 266,859 258,067 Other services expenses 267,115 244,709 Contribution to Integration Joint Board 79,034 65,458 Support service recharges 3,346 2,140 Depreciation, amortisation, impairment 45,082 58,073 Interest payments 25,040 24,146 Loss on the disposal of assets 474 0 Total Expenditure 686,950 652,593 Income Fees, charges and other service income 165,913 151,040 Interest and investment income 5,321 2,019 Taxation and Non-Specific Grant Income 432,699 424,977 Government grants and contributions 59,748 57,919 Gain on the disposal of assets 0 13 Total Income 663,681 635,968 Deficit on the Provision of Services 23,269 16,625 49 Perth & Kinross Council Annual Accounts 2022/23 Page 70 of 226
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15. Agency Services Agency arrangements operate in some Services where the Council undertakes work on behalf of other local authorities; Scottish Water; government; and other public bodies. The main items of income and related expenditure are shown below. 2022/23 2022/23 2021/22 2021/22 Income Expenditure Income Expenditure £'000 £'000 £'000 £'000 Education & Children's Services Provision of Pupil Support Assistants to other local authorities 183 183 216 216 Communities Receipts from other local authorities for cross boundary bus services 18 18 18 18 Corporate and Democratic Services Income from Scottish Water 445 445 445 445 Totals 646 646 679 679 2022/23 2022/23 2021/22 2021/22 Income Expenditure Income Expenditure £'000 £'000 £'000 £'000 Education & Children's Services Covid-related Grants to Partner Providers on behalf of Scottish Government 0 0 165 165 Covid-related Grants to Individuals on behalf of Scottish Government 0 0 462 462 Corporate and Democratic Services Covid-related Grants to Partner Providers on behalf of Scottish Government 0 0 1,821 1,821 Covid-related Grants to Businesses on behalf of Scottish Government: Strategic Framework Business Support Fund 0 0 18,653 18,653 Other 0 0 4,729 4,729 Covid-related and Cost of Living-related Grants to Individuals on behalf of Scottish & UK Governments: 8,654 8,654 3,787 3,787 Communities Hospitality & Leisure Top Up Funding 15 15 0 0 Health & Social Care Covid-related Grants to Individuals on behalf of Scottish Government: 0 0 291 291 8,669 8,669 29,908 29,908 The Council issued Covid-related and Cost of Living-related grants on behalf of both the Scottish and UK Governments during 2022/23 to the value of £8.669m (£29.908m in 2021/22). 50 Perth & Kinross Council Annual Accounts 2022/23 Page 71 of 226
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16. External Audit Costs In 2022/23 Perth & Kinross Council incurred the following fees relating to external audit services provided in accordance with the Code of Audit Practice: 2022/23 2021/22 £'000 £'000 External Audit Fees 330 302 17. Termination Benefits The Council terminated the contracts of eight employees in 2022/23, incurring liabilities of £68,000 (one employee in 2021/22, incurring liabilities of £2,000). 18. Post-Employment Benefits International Accounting Standard 19 ‘Employee Benefits’ (IAS 19) prescribes how pension costs and liabilities are to be disclosed in the financial statements. The standard requires employing organisations to account for post- employment benefits in the period in which they are committed to give them, even if the actual payment of these benefits will be many years in the future. The following notes are prepared in accordance with the code guidance on disclosure requirements in respect of IAS 19. Perth & Kinross Council participates in two different pension schemes, one for teaching staff and a separate scheme for all other employees. Pensions Schemes Accounted for as Defined Contribution Schemes Teachers Teachers employed by the Council are members of the Teachers’ Pension Scheme, administered by the Scottish Government. The Scheme provides teachers with specified benefits upon their retirement, and the Council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Scottish Government uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The Council is not able to identify its share of the underlying financial position and performance of the scheme with sufficient reliability for accounting purposes. For the purposes of the Annual Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2022/23, the Council paid £15.666 million to the Teachers’ Pensions scheme in respect of teachers’ retirement benefits, representing 23% of pensionable pay. The figures for 2021/22 were £15.085 million and 23%. There were no contributions remaining payable at the year-end. Additional payments relating to added year’s benefits, which the Council has inherited from predecessor authorities or awarded itself, together with related increases, amounted to £173,836 (2021/22 £184,293). Pension Schemes Accounted for as Defined Benefit Pension Schemes Local Government Pension Scheme The post-employment scheme for other employees, subject to certain qualifying criteria, is the Local Government Pension Scheme (LGPS) which is administered in this area by Dundee City Council in respect of all local authorities and admitted bodies in the former Tayside area. This is a multi-employer scheme in which it is possible for an employer to identify its share of the assets and liabilities on a consistent and reasonable basis. Employer’s liabilities can be evaluated directly by the Actuary at any time on membership data. Benefits • It is a Career Average Revalued Earnings scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level to balance the pension’s liability with investment assets. • The pension’s accrual rate guarantees a pension based on 1/49th of career average revalued earnings and years of pensionable service. There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. Pensions are increased annually in line with changes to the Pensions (Increases) Act 1971 and Section 59 of the Social Security Pensions Act 1975. 51 Perth & Kinross Council Annual Accounts 2022/23 Page 72 of 226
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Governance • The Tayside Pension Fund is operated under the regulatory framework for the LGPS in Scotland and the governance of the scheme is the responsibility of the Tayside Pension Fund Committee. This Committee is comprised solely of elected members of Dundee City Council. Employing authorities (including Perth & Kinross Council) are represented at the Tayside Pension Fund Representative Forum. • Policy is determined in accordance with the Local Government Pension Scheme (Scotland) Regulations. Management of the Fund’s investments is carried out by the Fund’s Investment Advisory Panel which selects and appoints a number of external investment managers/partners and monitors their investment performance. • Under the Regulations, employers fall into three categories, scheme employers (also known as scheduled bodies) such as Perth & Kinross Council, community admission bodies and transferee admission bodies. Admission agreements are generally assumed to be open-ended. However, either party can voluntarily terminate the admission agreement by giving an appropriate period of notice to the other parties. Any deficit arising from the cessation valuation will usually be levied on the departing admission body as a capital payment. Principal Risks • The principal risks to the scheme are the longevity assumptions, statutory changes to the scheme, changes to inflation, bond yields and the performance of the investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge the General Fund the amount due by statute as described in the accounting policy note. Discretionary Post-employment Benefits ▪ Discretionary post-retirement benefits on early retirements are an unfunded defined benefit arrangement, under which liabilities are recognised when an award is made. There are no plan assets built up to meet these pension liabilities. The contributions paid into the scheme by employees and member pension benefits are prescribed, for the period to which the accounts relate, by the Local Government Pensions Scheme (Scotland) Regulations 1998 as amended. Perth & Kinross Council’s contributions, as an employer, into the Tayside Pension Fund are subject to the advice of the Fund actuary. The Local Government Pension Scheme allows for the award of discretionary post-employment benefits upon early retirement. This is an unfunded defined benefit final arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet the pension’s liabilities, and cash has to be generated to meet actual pension’s payments as they eventually fall due. Guaranteed Minimum Pension (GMP) Equalisation As a result of the High Court’s Lloyds ruling on the equalisation of GMPs between genders, a number of pension schemes have made adjustments to accounting disclosures to reflect the effect this ruling has on the value of pension liabilities. It is our understanding that HM Treasury has confirmed that the judgement "does not impact on the current method used to achieve equalisation and indexation in public service pension schemes". On 23 March 2021, the Government published the outcome to its Guaranteed Minimum Pension Indexation consultation, concluding that all public service pension schemes, including the LGPS, will be directed to provide full indexation to members with a GMP reaching State Pension Age (SPA) beyond 5 April 2021. This is a permanent extension of the existing ‘interim solution’ that has applied to members with a GMP reaching SPA on or after 6 April 2016. The Council’s valuation assumption for GMP is that the Fund will pay limited increases for members that have reached SPA by 6 April 2016, with the Government providing the remainder of the inflationary increase. For members that reach SPA after this date, the Council has assumed that the Fund will be required to pay the entire inflationary increase. This assumption is consistent with the consultation outcome and the actuaries do not believe that it is necessary to make any adjustments to the value placed on the liabilities as a result of the above outcome. McCloud Judgement On 20 December 2018 the Court of Appeal ruled that transitional arrangements offered to some public sector pension scheme members amounted to unlawful age discrimination. On 13 May 2021 the Government issued a ministerial statement on the proposed remedy to be applied to LGPS benefits in response to the McCloud case which confirms that changes will be made to the LGPS Regulations to compensate members directly affected by the change to career average benefits from 1 April 2014. The regulations are expected to come into force on 1 October 2023. The actuary had included an allowance for the liabilities in the 2020 valuation and no further update is required. Career Average Revalued Earnings Scheme (CARE) The Local Government Pension Scheme changed from Final Salary to Career Average Revalued Earnings (CARE) on 1 April 2015, with a change of accrual rate from 1/60th to 1/49th. Employees who were previously paying into the Final Salary scheme were automatically transferred into the new CARE scheme on 1 April 2015. 52 Perth & Kinross Council Annual Accounts 2022/23 Page 73 of 226
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Transactions Relating to Post-Employment Benefits The Council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge the Council is required to make against Council Tax is based on the cash payable in the year, so the real cost of post- employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year. Local Government Pension Scheme 2022/23 2021/22 Comprehensive Income and Expenditure Statement £'000 £'000 Cost of Services - Service Cost 46,818 52,636 Financing and Investment Income and Expenditure - Net Interest on the Defined Liability 1,186 2,132 Administration Expenses 256 414 Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services 48,260 55,182 Remeasurement of the net defined benefit liability comprising: Expected return on pension fund assets in excess of interest 81,040 (36,421) Changes in financial assumptions (474,314) (50,896) Experience Loss on defined benefit obligation 80,572 2,455 Changes in effect of asset ceiling 250,276 0 Total Post Employment Benefit Credited to the Comprehensive Income & Expenditure Statement (62,426) (84,862) Movement in Reserves Statement - Reversal of net charges made to the surplus or deficit on the Provision of Services for post- employment benefits in accordance with the code (48,260) (55,182) IAS 19 limits the measurement of a net defined benefit asset to the lower of the surplus in the defined benefit plan and the asset ceiling. IAS 19 defines the asset ceiling as the present value of any economic benefits available in the form of reductions in future contributions to the plan. In accordance with International Financial Reporting Interpretations Committee - Interpretation 14 (IFRIC 14), the actuary has calculated the impact of the asset ceiling as £250.276 million. Therefore, a corresponding reduction has been applied to the defined benefit plan asset which results in a pension net liability of £20.917 million. Pensions Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit scheme is as follows: 31 March 2023 31 March 2022 £'000 £'000 Present Value of the Defined Benefit Obligation 781,379 1,114,919 Present Value of Unfunded Obligation 20,917 25,304 Closing Defined Benefit Obligation 802,296 1,140,223 Impact of asset ceiling 250,276 0 Fair Value of Pension Fund Assets (Bid Value) (1,031,655) (1,084,228) Net Liability in Balance Sheet 20,917 55,995 A reconciliation of Perth & Kinross Council’s share of the present value of Tayside Pension Fund’s defined benefit obligation (liabilities) is as follows: 31 March 2023 31 March 2022 £'000 £'000 Opening Defined Benefit Obligation 1,140,223 1,133,052 Current Service Cost 46,818 52,453 Interest Cost 29,383 22,304 Change in Financial Assumptions (474,314) (50,896) Experience Loss on Defined Benefit Obligation 80,572 2,455 Estimated Benefits Paid Net of Transfers In (25,805) (24,040) Past Service Costs (including Curtailments) 0 183 Contributions by Scheme Participants 6,972 6,531 Unfunded Pension Payments (1,553) (1,819) Closing Defined Benefit Obligation 802,296 1,140,223 53 Perth & Kinross Council Annual Accounts 2022/23 Page 74 of 226
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A reconciliation of the movements in Perth & Kinross Council’s share of the fair value of Tayside Pension Fund’s assets is as follows: 31 March 2023 31 March 2022 £'000 £'000 Opening Fair Value of Scheme Assets 1,084,228 1,027,718 Interest on Assets 28,197 20,172 Return on Assets Less Interest (81,040) 36,421 Administration Expenses (256) (414) Contributions by Employer Including Unfunded 20,912 19,659 Contributions by Scheme Participants 6,972 6,531 Estimated Benefits Paid Plus Unfunded Net of Transfers (Out)/In (27,358) (25,859) Closing Fair Value of Scheme Assets 1,031,655 1,084,228 31 March 2023 31 March 2022 £'000 £'000 Opening Impact of Asset Ceiling 0 0 Actuarial losses 250,276 0 Closing Impact of Asset Ceiling 250,276 0 Perth & Kinross Council’s share of Tayside Pension Fund’s assets at 31 March 2023 comprised: £'000 % £'000 % Equities 745,175 72% 767,767 71% Gilts 24,947 2% 51,052 5% Other Bonds 130,394 13% 129,435 12% Property 100,927 10% 118,232 11% Cash 28,419 3% 16,647 1% Alternatives 1,793 0% 1,095 0% Total 1,031,655 100% 1,084,228 100% 31 March 2023 31 March 2022 A further breakdown of the assets is as follows: Equities Consumer 7% 8% Manufacturing 2% 3% Energy and Utilities 3% 2% Financial Institutions 9% 8% Health and Care 7% 6% Information Technology 6% 8% Others 9% 10% 43% 45% Debt Securities Corporate Bonds 12% 13% UK Government Bonds 0% 1% Others 2% 0% 14% 14% Property UK Property 10% 11% 10% 11% Investment Fund Unit Trusts Equities 28% 26% Bonds 2% 2% 30% 28% Cash & Cash Equivalents 3% 2% Total 100% 100% 28 February 2023 28 February 2022 Basis for Estimating Assets and Liabilities Liabilities have been assessed on an actuarial basis using the projected unit credit method, an estimate of the pensions that will be payable in future years dependent on assumptions about mortality rates, salary levels, etc. Both the Local Government Pension Scheme and Discretionary Benefits liabilities have been assessed by Barnett Waddingham Public Sector Consulting, an independent firm of actuaries. Estimates for the Tayside Pension Fund are based on the latest full valuation of the scheme as at 31 March 2020. 54 Perth & Kinross Council Annual Accounts 2022/23 Page 75 of 226
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The principal assumptions used by the actuary have been: 2022/23 2021/22 Mortality Assumptions: Longevity at 65 for Current Pensioners: - Men 19.0 18.9 - Women 22.4 22.3 Longevity at 65 for Future Pensioners: - Men 20.4 20.3 - Women 23.9 23.9 Rate of Increase in Salaries 3.9% 4.2% Rate of Increase in Pensions 2.9% 3.2% Rate for Discounting Scheme Liabilities 4.8% 2.6% The liabilities show the underlying commitments that the Council has in the long run to pay post-employment (retirement) benefits. The net liability of £20.917 million has a substantial impact on the net worth of the Council as recorded in the Balance Sheet. However, statutory arrangements for funding the deficit mean that the financial position of the Council remains sound: − The deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees (i.e. before payments fall due) as assessed by the scheme actuary. − Finance is only required to be raised to cover discretionary benefits when the pensions are actually paid. The total contribution expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2024 is £19.529 million. Sensitivity Analysis The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the tables above. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the assumption analysed changes while all the other assumptions remain constant. The assumptions in longevity, for example, assume that life expectancy increases or decreases for men and women. In practice, this is unlikely to occur, and changes in some of the assumptions may be interrelated. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method. The methods and types of assumptions used in preparing the sensitivity analysis below did not change from those used in the previous period. £m £m £m £m £m Adjustment to discount rate +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £745.811 £790.458 £802.296 £814.420 £865.976 - Projected Service cost £18.542 £20.917 £21.557 £22.218 £25.079 Adjustment to long term salary increase +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £811.155 £804.039 £802.296 £800.566 £793.783 - Projected Service cost £21.626 £21.571 £21.557 £21.544 £21.488 Adjustment to pension increases and deferred revaluation +0.5% +0.1% 0% -0.1% -0.5% - Present value of total obligation £858.034 £812.891 £802.296 £791.961 £753.078 - Projected Service cost £25.177 £22.226 £21.557 £20.908 £18.445 £m £m £m Adjustment to mortality age rating assumption + 1 year None -1 year - Present value of total obligation £834.788 £802.296 £771.226 - Projected Service cost £22.386 £21.557 £20.753 55 Perth & Kinross Council Annual Accounts 2022/23 Page 76 of 226
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19. Related Parties The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. Scottish Government The Scottish Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. Council Tax bills). Grants received from government departments are set out in the subjective analysis in Note 14 on expenditure and income analysed by nature. Tayside Valuation Joint Board The Tayside Valuation Joint Board provides services on behalf of Perth & Kinross, Angus and Dundee Councils. The Council does not have any direct control or influence over the board and the amount payable to this body for valuation services and electoral registration services was £1.619 million (2021/22 £1.583 million). £1.338 million is disclosed in the Comprehensive Income and Expenditure Statement under Valuation Joint Board and £281,000 under Corporate and Democratic Services for electoral and registration services. Members Members of the Council have direct control over the Council’s financial and operating policies. The total of members’ allowances paid in 2022/23 is shown in the Remuneration Report. During 2022/23, two councillors had an interest in businesses from which the Council commissioned works and services to the value of £2,715 and £413 respectively. Contracts were entered into in full compliance with the Council’s standing orders and the Councillors’ Code of Conduct. In addition the Council makes revenue and capital payments to a large number of organisations on which Council members are represented. Chief Officers There are no significant related party transactions with Chief Officers of the Council. Live Active Leisure Ltd This organisation provides leisure services within the area served by the Council. A grant was provided in 2022/23 amounting to £4.815 million (2021/22 £4.863 million). It is a sole member Company with the Council as that member. Perth Theatre & Concert Hall Ltd This organisation operates Perth Concert Hall and Perth Theatre. A grant was provided in 2022/23 amounting to £1.062 million (2021/21 £1.062 million). It is a sole member Company with the Council as that member. Culture Perth & Kinross Ltd This organisation has operated libraries, museums and arts galleries in Perth & Kinross since 1 April 2016. A grant was provided in 2022/23 amounting to £3.219 million (2021/22 £3.175 million). It is a sole member Company with the Council as that member. Tayside Contracts Joint Committee This organisation provides roads maintenance; catering and cleaning services to the Council. Payments to Tayside Contracts in 2022/23 amounted to £33.443 million (2021/22 £33.851 million). The Joint Committee is administered and controlled by Dundee City, Angus and Perth & Kinross Councils. Health and Social Care Partnership This organisation is a joint venture between Perth & Kinross Council and Tayside Health Board and has since 1 April 2016 provided an integrated Health and Social Care service. Contributions to the Health & Social Care Partnership in 2022/23 amounted to £79.034 million (2021/22 £65.458 million) and income received from the Partnership for commissioned services was £94.310 million (2021/22 £87.105 million). The Council has a Creditor of £9.009 million due to the Health and Social Care Partnership as at 31 March 2023 (2021/22 £6.332 million). 56 Perth & Kinross Council Annual Accounts 2022/23 Page 77 of 226
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20. Leases Council as Lessee The Council operates a Lease Car Scheme which is available to eligible employees and lease rental payments are recovered from employees. The car leasing agreements are due to expire during the financial years 2023/24 to 2025/26. The Council has also acquired the use of a number of properties by entering into leasing arrangements. The majority of such properties are used for office accommodation and any capital works undertaken within these premises are written down over the shorter of the lease term or the useful life of the property. The future minimum lease payments due under non-cancellable leases in future years are: 2022/23 2021/22 £'000 £'000 Not later than one year 124 149 Later than one year and not later than five years 250 309 Later than five years 539 563 913 1,021 The expenditure charged to the Services lines in the Comprehensive Income and Expenditure Statement during the year in relation to these leases was: 2022/23 2021/22 £'000 £'000 Minimum lease payments 156 156 Sublease payments receivable (18) (17) 138 139 Council as Lessor The Council leases out property under operating leases at normal market rents with the following purpose: Land for the generation of rental income arising from its use; land and buildings, which include offices and shops, for the supply of suitable business accommodation to promote economic development or satisfy social needs, or to solely generate rental income for the Council. The total future minimum lease payments receivable under non-cancellable leases in future years are: 2022/23 2021/22 £'000 £'000 Not later than one year 1,358 1,321 Later than one year and not later than five years 4,309 4,600 Later than five years 47,835 49,029 53,502 54,950 The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. There were no material adjustments in respect of contingent rents during the years 2021/22 and 2022/23. 57 Perth & Kinross Council Annual Accounts 2022/23 Page 78 of 226
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21. Property, Plant and Equipment Movements on Fixed Assets 2022/23 in respect of Property, Plant & Equipment are shown below: Movements in 2022/23 Other Vehicles Community Sub Council Land & Plant & Assets Total Dwellings Buildings Equipment c/fwd £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2022 345,995 662,104 61,969 24,740 1,094,808 Additions 13,053 11,418 8,551 829 33,851 Revaluation increases recognised in the Revaluation Reserve 0 70,579 0 0 70,579 Revaluation decreases recognised in the Revaluation Reserve 0 (1,305) 0 0 (1,305) Revaluation increases recognised in the Surplus/Deficit on the Provision of Services 0 9,939 0 0 9,939 Revaluation decreases recognised in the Surplus/Deficit on the Provision of Services 0 (2,287) 0 0 (2,287) Derecognition - disposals (1,003) (10) (3,100) 0 (4,113) Asset reclassifications 1,716 0 0 0 1,716 Other Movements 0 0 0 0 0 As at 31 March 2023 359,761 750,438 67,420 25,569 1,203,188 Depreciation As at 1 April 2022 (27,829) (34,182) (38,142) (13,976) (114,129) Depreciation charge for 2022/23 (13,112) (17,336) (8,122) (1,219) (39,789) Depreciation written out to the Revaluation Reserve - revaluation gain 0 16,924 0 0 16,924 Depreciation written out to the Revaluation Reserve - revaluation loss 0 131 0 0 131 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation gain 0 3,333 0 0 3,333 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation loss 0 258 0 0 258 Derecognition - disposals 720 4 3,069 0 3,793 Asset reclassifications 0 0 0 0 0 As at 31 March 2023 (40,221) (30,868) (43,195) (15,195) (129,479) Net Book Value at 31 March 2023 319,540 719,570 24,225 10,374 1,073,709 58 Perth & Kinross Council Annual Accounts 2022/23 Page 79 of 226
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Property, Plant and Equipment cont'd Movements in 2022/23 Sub Surplus Assets Total PFI & DBFM total Assets Under PPE Assets Included b/fwd Construction in PPE £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2022 1,094,808 1,873 25,343 1,122,024 173,563 Additions 33,851 20 33,623 67,494 89 Revaluation increases recognised in the Revaluation Reserve 70,579 10 0 70,589 0 Revaluation decreases recognised in the Revaluation Reserve (1,305) (65) 0 (1,370) 0 Revaluation increases recognised in the Surplus/Deficit on the Provision of Services 9,939 0 0 9,939 0 Revaluation decreases recognised in the Surplus/Deficit on the Provision of Services (2,287) (55) 0 (2,342) 0 Derecognition - disposals (4,113) 0 (1,203) (5,316) 0 Asset reclassifications 1,716 0 (1,716) 0 0 Other Movements 0 0 0 0 0 As at 31 March 2023 1,203,188 1,783 56,047 1,261,018 173,652 Depreciation As at 1 April 2022 (114,129) 0 0 (114,129) (9,509) Depreciation charge for 2022/23 (39,789) 0 0 (39,789) (4,753) Depreciation written out to the Revaluation Reserve - revaluation gain 16,924 0 0 16,924 0 Depreciation written out to the Revaluation Reserve - revaluation loss 131 0 0 131 0 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation gain 3,333 0 0 3,333 0 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation loss 258 0 0 258 0 Derecognition - disposals 3,793 0 0 3,793 0 Asset reclassifications 0 0 0 0 0 As at 31 March 2023 (129,479) 0 0 (129,479) (14,262) Net Book Value at 31 March 2023 1,073,709 1,783 56,047 1,131,539 159,390 The reporting of book values for Infrastructure assets is amended following the issue of the Local Government Finance Circular 09/2022. The Finance Circular outlines historic issues for the consistent accounting treatment of derecognised infrastructure components and the reporting of book values by local authorities. A CIPFA task group is progressing a remedy and the CIPFA Code will be updated in due course. To satisfy the audit of the 2022/23 accounts, the following statutory overrides are provided in the Circular: - Statutory Override 1: For accounting periods commencing from 1 April 2021 until 31 March 2024 a local authority is not required to report the gross cost and accumulated depreciation for infrastructure assets. Statutory Override 2: For accounting periods commencing from 1 April 2010 until 31 March 2024 the carrying amount to be derecognised in respect of a replaced part of an infrastructure asset is to be taken to be and accounted for as a nil amount. No subsequent adjustment shall be made to the carrying amount of the asset with respect to that part. The Council has elected to adopt both statutory overrides. The total for all PPE in table below. £'000 Total PPE (above) 1,131,539 Infrastructure Assets 290,325 Total PPE at 31 March 2023 (including Infrastructure Assets) 1,421,864 59 Perth & Kinross Council Annual Accounts 2022/23 Page 80 of 226
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Property, Plant and Equipment cont'd Comparative Movements in 2021/22 Other Vehicles Community Sub Council Land & Plant & Assets Total Dwellings Buildings Equipment c/fwd £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2021 320,016 672,763 53,298 23,567 1,069,644 Additions 10,550 11,373 13,112 1,173 36,208 Revaluation increases recognised in the Revaluation Reserve 0 19,466 0 0 19,466 Revaluation decreases recognised in the Revaluation Reserve 0 (13,663) 0 0 (13,663) Revaluation increases recognised in the Surplus/Deficit on the Provision of Services 0 8,140 0 0 8,140 Revaluation decreases recognised in the Surplus/Deficit on the Provision of Services 0 (34,190) 0 0 (34,190) Derecognition - disposals (652) (350) (4,441) 0 (5,443) Asset reclassifications 16,081 (1,433) 0 0 14,648 Other Movements 0 (2) 0 0 (2) As at 31 March 2022 345,995 662,104 61,969 24,740 1,094,808 Depreciation As at 1 April 2021 (15,957) (54,403) (35,017) (12,746) (118,123) Depreciation charge for 2020/21 (12,484) (17,074) (7,447) (1,230) (38,235) Depreciation written out to the Revaluation Reserve - revaluation gain 0 14,032 0 0 14,032 Depreciation written out to the Revaluation Reserve - revaluation loss 0 2,474 0 0 2,474 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation gain 0 6,891 0 0 6,891 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation loss 0 13,432 0 0 13,432 Derecognition - disposals 612 17 4,322 0 4,951 Asset reclassifications 0 449 0 0 449 As at 31 March 2022 (27,829) (34,182) (38,142) (13,976) (114,129) Net Book Value at 31 March 2022 318,166 627,922 23,827 10,764 980,679 60 Perth & Kinross Council Annual Accounts 2022/23 Page 81 of 226
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Property, Plant and Equipment cont'd Comparative Movements in 2021/22 Sub Surplus Assets Total PFI Assets total Assets Under PPE Included b/fwd Construction in PPE £'000 £'000 £'000 £'000 £'000 Gross Book Value As at 1 April 2021 1,069,644 1,770 19,723 1,091,137 174,027 Additions 36,208 1 20,953 57,162 21 Revaluation increases recognised in the Revaluation Reserve 19,466 119 0 19,585 0 Revaluation decreases recognised in the Revaluation Reserve (13,663) 0 0 (13,663) 0 Revaluation increases recognised in the Surplus/Deficit on the Provision of Services 8,140 201 0 8,341 0 Revaluation decreases recognised in the Surplus/Deficit on the Provision of Services (34,190) (620) 0 (34,810) (485) Derecognition - disposals (5,443) (283) 0 (5,726) 0 Asset reclassifications 14,648 685 (15,333) 0 0 Other Movements (2) 0 0 (2) 0 As at 31 March 2022 1,094,808 1,873 25,343 1,122,024 173,563 Depreciation As at 1 April 2021 (118,123) 0 0 (118,123) (4,976) Depreciation charge for 2021/22 (38,235) 0 0 (38,235) (4,751) Depreciation written out to the Revaluation Reserve - revaluation gain 14,032 0 0 14,032 0 Depreciation written out to the Revaluation Reserve - revaluation loss 2,474 0 0 2,474 0 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation gain 6,891 449 0 7,340 218 Depreciation written out to the Surplus/Deficit on the Provision of Services - revaluation loss 13,432 0 0 13,432 0 Derecognition - disposals 4,951 0 0 4,951 0 Asset reclassifications 449 (449) 0 0 0 As at 31 March 2022 (114,129) 0 0 (114,129) (9,509) Net Book Value at 31 March 2022 980,679 1,873 25,343 1,007,895 164,054 The reporting of book values for Infrastructure assets is amended following the issue of the Local Government Finance Circular 09/2022. Infrastructure Assets are excluded from the table above. The total for all PPE assets is as follows: £'000 Total PPE (above) 1,007,895 Infrastructure Assets 247,686 Total PPE at 31 March 2022 (including Infrastructure Assets) 1,255,581 61 Perth & Kinross Council Annual Accounts 2022/23 Page 82 of 226
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Capital Commitments At 31 March 2023, the Council has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment in 2022/23 and future years budgeted to cost £249.781 million. Similar commitments at 31 March 2022 were £142.43 million. The total commitment is made up of the following: 2022/23 2021/22 £'000 £'000 Cultural Attractions 13,010 12,310 Education Projects 96,730 21,347 Roads & Bridges Improvement Schemes 133,703 101,203 Council Dwellings 821 2,653 Community Assets 3,869 3,869 Other Capital Projects 1,648 1,048 249,781 142,430 Education Projects include Perth High School and Riverside Primary School. Roads & Bridges Improvement Schemes includes the Cross Tay Link Road. Valuation of Assets Revaluations The Council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at its current value is revalued at least every five years. The Council commissioned a valuation for a selection of assets which was performed during the last quarter of financial year 2022/23. In addition, the Council’s internal valuers performed valuations for a number of assets, including investment properties, car parks, operational depots, skip sites and properties requiring revaluation due to redevelopment or a change of use, during the last quarter of financial year 2022/23. In applying the Royal Institution of Chartered Surveyors (RICS) Valuation Global Standards (‘Red Book’), the valuation reports include an explanatory note which provides an update on market conditions and confirms that markets are functioning again and there is adequate evidence on which to base an opinion of value. However, uncertainties do remain and there is the potential for markets to move rapidly in response to future changes in the control of Covid-19 and the effects of conflict in Eastern Europe. The valuation reports have been used to inform the measurement of non-current assets in these financial statements. The valuers have continued to exercise professional judgement in preparing the valuations and, therefore, this is the best information available to Council as at 31 March 2023 and can be relied upon. Note 4 – Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty provides additional information in respect of the potential movement in values for sites revalued on the basis of Depreciated Replacement Cost, and the £74.222 million movement in the table below. Surplus Assets are valued annually on a fair value basis. In terms of the fair value hierarchy, all Surplus Assets are valued at Level 2 and there were no transfers between Levels during the year. Other Surplus Council Land and Assets Total Dwellings Buildings £'000 £'000 £'000 £'000 Carried at historical cost 65,407 26,874 818 93,099 Values at current value as at: 31 March 2023 - estimated movement in prices 0 74,222 0 74,222 31 March 2023 0 52,515 725 53,240 31 March 2022 0 297,737 0 297,737 31 March 2021 0 208,818 240 209,058 31 March 2020 294,354 4,071 0 298,425 31 March 2019 0 86,201 0 86,201 Total Cost or Valuation 359,761 750,438 1,783 1,111,982 Changes in Estimates Other than the £74.222 million valuation adjustment to Other Land and Buildings, the Council has made no other material changes to accounting estimates for Property, Plant and Equipment in 2022/23. 62 Perth & Kinross Council Annual Accounts 2022/23 Page 83 of 226
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22. Heritage Assets Reconciliation of the carrying value of Heritage Assets held by the Council Art War Other Total Collection Memorials £'000 £'000 £'000 £'000 Cost or Valuation Balance at 1 April 2021 51,740 48 0 51,788 Additions 0 0 26 26 Balance at 31 March 2022 51,740 48 26 51,814 Cost or Valuation Balance at 1 April 2022 51,740 48 26 51,814 Balance at 31 March 2023 51,740 48 26 51,814 Art Collection The collection of Fine Art maintained and preserved by Culture Perth and Kinross, on behalf of Perth & Kinross Council is varied and includes oil paintings (approximately 1,225 items), watercolours (900), drawings (4,000), prints (1,500), and sculptures (150). The Fine Art collection also includes J D Fergusson and Margaret Morris archives which number approximately 30,000 items and include a number of significant works. The Art Collection also includes silver, glass, ceramics, furniture, Oriental materials, horology and metalwork; these are collectively identified as Applied Art. Curators within Culture Perth & Kinross carry out a five year rolling programme of valuation for items and collections having significant value. The last valuation took place in 2020/21 with the next revaluation scheduled for 2025/26. There were no significant additions to Heritage Assets in 2021/22 or 2022/23. Additions and Disposals of Heritage Assets There has been no significant addition, either by purchase or donation, to the Fine and Applied Art collection during the current and previous five financial years. The majority of the collections are held in perpetuity, or have disposal conditions attached, and consequently no Fine and Applied Art disposals have occurred during the current and previous five financial years. Fine and Applied Art The Fine Art collection owes its existence largely to the 1,926 bequests of local patrons Robert Hay Robertson and Robert Brough, although the first painting entered the collection as early as 1785. The collection is international in its scope and numbers over 4,000 items. It includes an interesting group of Italian ‘Old Masters’, a small but important group of 19th Century French works, a good group of 17th century Dutch and Flemish paintings and work by English artists including a small but highly important collection of natural history watercolours by Beatrix Potter. Its greatest strength however lies in its holding of Scottish pictures. These span the 16th to the 21st century and include such important works as Loch Katrine by Horatio McCulloch and D Y Cameron’s The Wilds of Assynt, as well as pictures with strong local connections. Amongst these are pictures by local artists, local topographical views and portraits of local individuals. The collection seeks to retain a balance between the historical and the contemporary aspects whilst continuing to develop the holdings of works of specifically local interest. In 1991 the collection was effectively doubled in size with the gifting of the J D Fergusson Art Foundation’s collection of artworks by the Scottish ‘Colourist’ John Duncan Fergusson (1874-1961) and its associated archive. This collection is housed at the Fergusson Gallery in Perth. The Applied Art collection has been acquired since 1785 through purchase, gift or bequest. It covers a wide variety of objects and materials, within which the collections of Perth silver and Perthshire glass are unsurpassed in terms of national importance. The ceramics collection contains significant collections of Staffordshire flat-back figures and Martinware studio pottery as well as a collection of studio pottery produced by potters native to or resident in the Perth & Kinross area. Other smaller collections include furniture, timepieces, oriental and other items. The promotion of other cultural events and programmes during the year makes it difficult to reliably estimate the percentage of the Art Collection on display for public viewing. However, all items are held in secure storage and access is permitted to scholars and others for research purposes. The museum collection also includes History and Natural History collections for which an amount of insurance cover has been obtained. These objects and collections, in most instances, are rare and irreplaceable and there is insufficient 63 Perth & Kinross Council Annual Accounts 2022/23 Page 84 of 226
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evidence on which to place a reliable estimate of value. There are in excess of 289,000 items within the History and Natural History collections and the cost of obtaining valuations would be disproportionate in terms of any benefit derived to the user of the financial statements. On this basis, the History and Natural History collections are, therefore, excluded from the carrying value of Heritage Assets held by the Council. The Culture Perth and Kinross Limited Collections Management Framework provides guidance on the collection, disposal or lending of heritage assets. 23. Investment Properties 2022/23 2021/22 £'000 £'000 Rental income from investment property (903) (987) Direct operating expenses arising from investment property 103 83 Balance at end of year (800) (904) The following table summarises the movement in the fair value of investment properties over the year: 2022/23 2021/22 £'000 £'000 Balance at start of year 14,060 13,140 Disposals 0 (145) Net gains from fair value adjustments 955 1,065 Balance at end of year 15,015 14,060 All of the Authority's investment properties are valued at Level 2 on the fair value hierarchy. Values as at 31 March 2022 and 31 March 2023 are as follows: 2022/23 2021/22 £'000 £'000 Recurring fair value measurements using: Industrial and Commercial Land 13,935 12,965 Shops and Offices 750 790 Other Investment Properties 330 305 Total Fair Value 15,015 14,060 Other Significant Observable Inputs (Level 2) Valuation Techniques used to Determine Level 2 and 3 Fair Values for Investment Properties Significant Observable Inputs – Level 2 The majority of the value of Industrial and Commercial Land relates to sites leased out on ground leases. Market data is available at national and local levels from sector specialists to provide the valuers with information, such as trends and rent yields, for the commercial and industrial markets. Local market activity for ground leases tends to follow national trends and valuations are undertaken using a discounted income approach. Ground leases are longer term arrangements and sites of this nature enjoy 100% occupancy levels; the rental income stream is known and market data for rent yields is available, all of which are observable input. As a result of the conditions of the ground lease agreement, there is no unobservable input. The valuation of investment land leased out on a ground lease therefore requires the use of observable market data and minimal, if any, unobservable data and is regarded as Level 2. Market data providing information on trends and rent yield is available from sector specialists for leased Shops and Offices. Local market data is used to assist the valuation process, and valuations are undertaken using the income approach, discounted using market rates to arrive at a net present value for the income stream. The valuer will also consider other factors, such as the age and condition of the property, when arriving at the final valuation. This requires judgement; however any unobservable input is not considered to be significant in terms of any adjustment to the fair value of the property. The valuation of the shops and offices is mainly representative of the available market data, and the valuation input is primarily based on observable data. Therefore the properties are categorised as Level 2. Other Investment Properties primarily relate to land held for development by the private sector, which will generate a receipt to the Council on disposal. Sites held for redevelopment are valued on the basis of the highest and best use of the site, taking into account adjacent and surrounding property, recent market activity, and development plan restrictions. The valuation of these sites is therefore based upon observable input, i.e. local market data, and as such will be regarded as Level 2. 64 Perth & Kinross Council Annual Accounts 2022/23 Page 85 of 226
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Highest and Best Use of Investment Properties In estimating the fair value of the authority’s investment properties, the highest and best use of the properties is their current use. Valuation Techniques There has been no change in the valuation techniques used during the year for investment properties. Valuation Process for Investment Properties The fair value of the Council’s investment property is measured annually at each reporting date. All valuations are carried out internally, in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The Council’s valuation experts work closely with finance officers reporting directly to the Head of Finance on a regular basis regarding all valuation matters. The valuation reports have been used to inform the measurement of Investment properties in these financial statements. The valuers have continued to exercise professional judgement in preparing the valuation and, therefore, this is the best information available to Council as at 31 March 2023 and can be relied upon. 24. Intangible Assets The movement on Intangible Asset balances during the year is as follows: 2022/23 2021/22 Assets Assets £'000 £'000 Balance at start of year Gross carrying amount 3,643 2,965 Accumulated amortisation (1,969) (2,644) Net carrying amount at start of year 1,674 321 Additions: Purchases 315 2,241 Disposals: Gross Carrying Amount 0 (1,563) Disposals: Accumulated Amortisation 0 1,563 Amortisation for the period (1,026) (888) Net carrying amount at end of year 963 1,674 Comprising: Gross carrying amounts 3,958 3,643 Accumulated amortisation (2,995) (1,969) 963 1,674 Intangible Assets include the cost of software licences and bespoke software solutions deemed to provide future benefit to the Council. These items have been included and amortised over their perceived useful life. 65 Perth & Kinross Council Annual Accounts 2022/23 Page 86 of 226
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25. Assets Held for Sale 2022/23 2021/22 2022/23 2021/22 £'000 £'000 £'000 £'000 Balance outstanding at start of year 273 126 403 550 Other movements 0 147 0 (147) Balance outstanding at year end 273 273 403 403 Current Non Current 26. Long Term Debtors 2022/23 2021/22 £'000 £'000 Other Entities & Individuals 541 613 Total 541 613 27. Inventories Consumables & Maintenance Materials 2022/23 2021/22 £'000 £'000 Balance outstanding at start of year 578 525 Purchases 3,617 3,559 Recognised as an expense in the year (3,754) (3,507) Written off balances 0 1 Balance outstanding at end of year 441 578 28. Debtors 2022/23 2022/23 2021/22 2021/22 £'000 £'000 £'000 £'000 Gross Net Gross Net Scottish Government 19,193 17,433 Central Government 10,448 6,350 Other Local Authorities 774 1,743 NHS Bodies 3,421 1,416 Public Corps & Trading funds 0 99 Other Entities & Individuals 18,080 17,399 less Impairment (9,483) (9,321) 8,597 8,078 Trade 7,063 7,333 less Impairment (1,192) (1,032) 5,871 6,301 Council Tax 19,458 20,302 less Impairment (15,743) (15,670) 3,715 4,632 Total 52,019 46,052 66 Perth & Kinross Council Annual Accounts 2022/23 Page 87 of 226
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29. Creditors 2022/23 2021/22 £'000 £'000 Scottish Government (3,905) (4,458) Central Government (7,702) (6,544) Other Local Authorities (7,937) (4,051) NHS Bodies (1,450) (306) Public Corporations and Trading Funds (9) (603) Other Entities and Individuals (34,354) (26,979) Trade Creditors (40,747) (30,629) Total (96,104) (73,570) 30. Provisions Other than Bad and Doubtful Debts Self-Insured/Uninsured Losses The Insurance Fund makes provision for losses arising from Property, Employers’ Liability, Public Liability, Motor, Fidelity Guarantee, Computer, Engineering and Travel/Personal Accident claims. The provision provides for an estimate of all liabilities likely to be incurred by the Council in respect of self-insured and uninsured losses in respect of incidents that have arisen prior to 1 April 2023. Compensation Payments The Council has made provision for a number of potential compensation claims arising from significant capital projects within the Council’s capital programme. Commercial Rent The Council manages the rental leases for a number of commercial properties. The Council had previously made provision for rent refunds due to the downturn in the economic climate affecting retail trading performance. The provision at 31 March 2023 is to meet any potential liability for the years 2021/22 and 2022/23. Self Insured/ Compensation Commercial Total Uninsured Payments Rent Losses £'000 £'000 £'000 £'000 Balance as at 1 April 2022 2,713 4,110 40 6,863 Additional provisions made in 2022/23 649 29 20 698 Amounts used in 2022/23 (755) (1,179) (20) (1,954) Balance as at 31 March 2023 2,607 2,960 40 5,607 Balance Sheet Disclosure: Less than 12 months 275 0 20 295 Over 12 months 2,332 2,960 20 5,312 2,607 2,960 40 5,607 31. Usable Reserves Movements in the Council’s Usable Reserves are detailed in the Movement in Reserves Statement and notes 5 and 6. 32. Unusable Reserves 2022/23 2021/22 £'000 £'000 Revaluation Reserve (411,175) (332,433) Capital Adjustments Account (400,119) (372,978) Financial Instruments Adjustment Account 17,002 17,650 Pensions Reserve 20,917 55,995 Employee Statutory Adjustment Account 8,524 8,003 Total Unusable Reserves (764,851) (623,763) 67 Perth & Kinross Council Annual Accounts 2022/23 Page 88 of 226
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Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are: − re-valued downwards or impaired and the gains are lost; − used in the provision of services and the gains are consumed through depreciation; or − disposed of and the gains are realised. The Reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. 2022/23 2021/22 £'000 £'000 Balance at 1 April (332,433) (317,769) Upward revaluation of assets (87,513) (33,616) Downward revaluation of assets and impairment losses not charged to the (Surplus)/Deficit on the Provision of Services 1,239 11,189 (418,707) (340,196) Difference between fair value depreciation and historical cost depreciation 7,408 7,454 Accumulated gains on assets sold or scrapped written out to the Capital Adjustment Account 124 309 Balance at 31 March (411,175) (332,433) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. The Account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the Council. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 5 provides details of the source of all the transactions posted to the Account, apart from those involving the Revaluation Reserve. 2022/23 2021/22 £'000 £'000 Balance at 1 April (372,978) (353,777) Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement Charges for depreciation and impairment of non current assets 47,835 44,033 Revaluation (gains)/losses on Property, Plant and Equipment (11,187) 5,698 Amortisation of intangible assets 1,026 888 Revenue expenditure funded from capital under statute 838 0 Amounts of non current assets written off on disposal as part of the gain/loss 1,523 918 (332,943) (302,240) Adjusting amounts written out of the Revaluation Reserve (124) (309) (333,067) (302,549) Capital financing applied in the year: Use of the Capital Receipts Reserve to finance new capital expenditure (1,360) (992) Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement (42,656) (46,627) Application of grants to capital financing from the Capital Grants Unapplied Account 0 (2,643) Statutory provision for the financing of capital investment charged against the General Fund and HRA balances (15,690) (14,344) Capital expenditure charged against the general fund and HRA balances (6,391) (4,758) (399,164) (371,913) Movements in the fair value of the Investment Properties (955) (1,065) Balance at 31 March (400,119) (372,978) 68 Perth & Kinross Council Annual Accounts 2022/23 Page 89 of 226
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Financial Instruments Adjustment Account The Financial Instruments Adjustment Account (FIAA) is used to hold the losses or gains arising on the early redemption of loans per statutory provisions, as well as the historic timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments. These statutory provisions allow for annual charges to be made in accordance with the original amortisation schedules which existed at the time the provisions were introduced. The Council uses the Account to manage the balance of premiums and discounts which existed at 31 March 2007 which arose on the early redemption of loans. Any premiums or discounts incurred or received after this date are also held in this Account. These are subsequently charged to the General Fund and Housing Revenue Account (HRA) in accordance with statutory provisions, and so spreading the burden on Council Tax and Housing Rents. The Council also uses the FIAA to hold the difference in interest charges which arose on stepped interest rate loans. These had low interest rates in the early years before “stepping up” to a higher interest rate. Interest on such loans is now required to be charged consistently over the life of the loan using the Effective Interest Rate Method. The difference in the cumulative charges to 31 March 2007 under this new method was debited to the FIAA and will be charged to the General Fund and the HRA over the life of the loans under the statutory provisions. Accordingly, the balance on the FIAA as at 31 March 2023 in respect of the above provisions will be charged to the General Fund and HRA over the next 45 years. The movements on the FIAA during the year are shown below: 2022/23 2021/22 £'000 £'000 Balance at 1 April 17,650 18,376 Proportion of discounts incurred in previous financial years credited against the General Fund & HRA Balance in accordance with statutory requirements in the year 4 4 Proportion of premiums incurred in previous financial years charged against the General Fund & HRA Balance in accordance with statutory requirements in the year (632) (711) Difference on restatement of Stepped Interest Rate Loans (20) (19) Balance at 31 March 17,002 17,650 Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post- employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post- employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pensions funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pensions Reserve therefore shows a substantial shortfall between the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid. 2022/23 2021/22 £'000 £'000 Balance at 1 April 55,995 105,334 Actuarial Losses on Pensions Assets and Liabilities (312,702) (84,862) Reversal of Items Relating to Retirement Benefits Debited or Credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement 48,260 55,182 Employer's Pensions Contributions and Direct Payments to Pensioners Payable in the Year (20,912) (19,659) Impact of asset ceiling 250,276 0 Balance at 31 March 20,917 55,995 69 Perth & Kinross Council Annual Accounts 2022/23 Page 90 of 226
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Employee Statutory Adjustment Account The Employee Statutory Adjustment Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account. 2022/23 2021/22 £'000 £'000 Balance at 1 April 8,003 7,813 Cancellation of accrual made at the end of the preceding year (8,003) (7,813) Amounts accrued at the end of the current year 8,524 8,003 Balance at 31 March 8,524 8,003 33. Impairment Losses Movements in the value of properties during the year were mainly due to the revaluation of car parks, operation depots and skip sites, and various individual operational buildings such as industrial units and shops. Investment properties were also revalued during 2022/23. All losses arising have been assessed as a revaluation loss rather than a loss attributed to deterioration in the anticipated level of the performance of the properties. 34. Grants The Council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2022/23. 2022/23 2021/22 £'000 £'000 Credited to Taxation and Non Specific Grant Income Scottish Government 19,855 37,607 Scottish Government Bodies & Directorates 20,000 7,232 Developer Contributions 811 1,006 Other Third Party Contributions 1,990 782 42,656 46,627 Credited to Services Scottish Government 32,676 34,836 Scottish Government Bodies & Directorates 178 329 Sport Scotland 399 413 Other Third Party Contributions 9,110 4,280 42,363 39,858 The Council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned. The balance at the year-end is as follows: 2022/23 2021/22 £'000 £'000 Revenue Grants - Received in Advance Scottish Government 1,583 0 Scottish Government - Covid-19 funding for businesses 294 960 Scottish Government - Town Centre Fund 0 26 Other grants and contributions 982 330 Balance at 31 March 2,859 1,316 70 Perth & Kinross Council Annual Accounts 2022/23 Page 91 of 226
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35. Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under PFI/PPP/DBFM contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the Council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the Council that has yet to be financed. The CFR is analysed below. 2022/23 2021/22 £'000 £'000 Capital Financing Requirements b/fwd 618,390 596,919 Capital Expenditure Property, Plant & Equipment 125,585 88,600 Intangible Assets 315 2,241 Revenue Expenditure funded from Capital 2,625 3,567 128,525 94,408 746,915 691,327 Sources of Finance Capital Receipts (1,363) (995) Government Grants and Contributions (44,437) (52,840) Revenue Contributions (6,391) (4,758) Loans Fund Principal Repayments (15,690) (14,344) (67,881) (72,937) Closing Capital Financing Requirement c/fwd 679,034 618,390 Movement 60,644 21,471 Analysed as: Increase in need to borrow 66,508 26,493 Net assets acquired under PPP contract (5,864) (5,022) 60,644 21,471 36. Public Finance Initiatives and Similar Contracts The Council has an obligation for 25 years commencing September 2000 in respect of a unitary charge payment to be made for office accommodation and a car park. The unitary charge for 2022/23 for the office accommodation was £2.499 million (2021/22 £2.435 million). The unitary charge for 2022/23 for the car park was £325,000 (2021/22 £382,000). Future agreed payments will increase in line with inflation. The unitary charge payments for 2023/24 for the office accommodation will be £2.91 million and for the car park is £380,000. The project agreement for provision of the facilities included the transfer of four Council properties to the operator in exchange for reduced annual payments over the life of the agreement. At the end of this project these assets do not revert back to the Council. The Council has an obligation for six school campuses in a Public Private Partnership with Axiom Education (Perth and Kinross) Ltd. North Inch Primary was brought into operation in 2011/12. Breadalbane Campus at Aberfeldy was completed in 2010/11 and the campuses at Blairgowrie, Perth South, Kinross, Crieff and the Roman Catholic School Campus were brought into operation during 2009/10. The Council will make unitary charge payments until the contract ends in 2042, at which time the campuses will be handed back to the Council at no cost. The estimated capital value of the scheme is £127.687 million. The unitary charge for 2022/23 for the campuses operating in the year was £18.910 million (2021/22 £17.684 million). Future agreed payments will increase in line with inflation. The unitary charge payments for 2023/24 for all school campuses will be £21.666 million. During 2019/20 the Council incurred an obligation for Bertha Park High School with the asset and liability recognised in the Annual Accounts. The unitary charge for 2022/23 was £3.139 million (2021/22 £3.057 million). Future agreed payments will increase in line with inflation. The unitary charge for 2023/24 for Bertha Park will be £3.223 million. 71 Perth & Kinross Council Annual Accounts 2022/23 Page 92 of 226
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Movements in Fixed Assets under Public Private Partnerships during the year were: 2022/23 2021/22 £'000 £'000 Net Book Value at 1 April 2022 164,054 169,051 Additions 89 21 Revaluations 0 (485) Depreciation (4,753) (4,751) Depreciation write back 0 218 Net Book Value at 31 March 2023 159,390 164,054 Movements in Public Private Partnership Liabilities during the year were: 2022/23 2021/22 £'000 £'000 Liabilities at 1 April 2022 127,191 132,213 Amounts repaid in year (5,864) (5,022) Liabilities at 31 March 2023 121,327 127,191 Disclosed in the Balance Sheet as: Long Term Liabilities 115,040 121,326 Creditors 6,287 5,865 Liabilities at 31 March 2023 121,327 127,191 Future Public Private Partnership liabilities due to be met: Repayment Interest Service Lifecycle Contingent TOTAL of liability Charges Maintenance Rentals £'000 £'000 £'000 £'000 £'000 £'000 Due within one year 6,287 5,978 7,893 2,332 3,522 26,012 Due in 2 to 5 years 19,669 19,988 31,313 14,908 14,849 100,727 Due in 6 to 10 years 25,571 19,837 42,093 19,892 25,124 132,517 Due in 11 to 15 years 34,848 12,989 48,014 17,157 35,454 148,462 Due in 16 to 20 years 32,052 4,324 38,672 15,899 29,943 120,890 Due in 21 to 25 years 2,900 151 696 901 162 4,810 Total 121,327 63,267 168,681 71,089 109,054 533,418 These figures are based on the actual cash amount estimated to be payable and not on prices at 31 March 2023. 37. Authorisation of Annual Accounts The Unaudited Annual Accounts were authorised for issue by the Head of Finance on 26 June 2023 and the Audited Accounts were authorised for issue on 11 December 2023. Events taking place after this date are not reflected in the financial statements or notes. Where events taking place before this date provided information about conditions existing at 31 March 2023, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. 72 Perth & Kinross Council Annual Accounts 2022/23 Page 93 of 226
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38. Contingent Liabilities The Council has made provision for insurance claims where appropriate and has an Insurance Fund to manage insurable risks. There is also a contingent liability in respect of potential insurance claims incurred but not reported which cannot be forecast with any certainty. There is a contingent liability relating to Municipal Mutual Insurance (MMI), who were the insurers for Tayside Regional Council (TRC). Following a Supreme Court judgement in November 2012 a scheme of arrangement has been put in place where MMI will seek to recover, from the scheme members or successors, 25% (and increase from 15% applied after April 2016) of all claims paid out since 1993 on policies taken out by TRC (less an overall total reduction of £50,000). Perth & Kinross Council is one of the successor bodies of TRC. The Limitation (Childhood Abuse) (Scotland) Act 2017 came into force on 4 October 2017 and removed the time limit on raising civil court actions relating to childhood abuse. The Council has received a small number of claims, however, it is not possible to determine with any certainty whether there is any liability at this time until the claims are fully investigated. In addition, it is not possible to estimate the potential financial effect in respect of future claims the Council may receive due to a number of uncertainties. This includes the number of claims which may arise and the extent of compensation which could arise. Additionally, the extent of re-imbursement which might arise from historic or current insurance policies cannot currently be assessed. The Council may also receive claims in respect of Educational provision. The national historic abuse redress scheme launched in 2022. There is now a risk that the remaining assets of the TRC Insurance Fund will not be sufficient to meet all future liabilities due to the long time horizon for certain types of claims. The Council has a number of contracts for the upgrade and redevelopment of buildings and infrastructure. Claims relating to compensation for works and land purchases for projects are currently being negotiated or refuted. The Council operates services from a number of properties that it does not own. In the future there may be a liability in respect of property costs to reinstate buildings to their original specification and design. The Council has a potential liability in respect of financial guarantees for the Tayside Pension Fund in respect of Scheduled Bodies and Admitted Bodies should they cease to exist, withdraw from the Pension Scheme or otherwise become unable to continue covering any unfunded liabilities. These bodies include Tayside and Central Scotland Transport Partnership, Live Active Leisure Ltd, Perth Theatre & Concert Hall Limited, Perth & Kinross Countryside Trust, Perth & Kinross Society for the Blind, Perth Citizens’ Advice Bureau and Culture Perth & Kinross. In addition the Council has a potential liability in respect of pensions for the Convention of Scottish Local Authorities (COSLA) should the organisation cease to exist. The Council may also have a liability pertaining to a recent court decision for both itself and a Joint Committee. The UK Government is undertaking a consultation on amendments following this along with other legal cases which will impact on both the liability and the period that it may cover. Following the issue of the Reinforced Autoclaved Aerated Concrete (RAAC) safety alert in 2019, the Council previously carried out a review of existing building condition information which was followed up with non-invasive visual inspections where required. No buildings were identified as containing RAAC at that time. A subsequent inspection identified one site with RAAC, which has been remediated. The Council has a robust Building Condition Survey programme in place which comprises a 5-year rolling survey programme and also includes an annual review of survey data to monitor any changes in asset condition. Remedial works may be required if RAAC is found in any Council property, the financial impact of this is unknown at this time. 73 Perth & Kinross Council Annual Accounts 2022/23 Page 94 of 226
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39. Financial Instruments Accounting regulations require the ‘financial instruments’ (investment, lending and borrowing of the Council) shown on the balance sheet to be further analysed into various defined categories. The investments, lending and borrowing disclosed in the balance sheet are made up of the following categories of ‘financial instruments’. 31 March 2023 31 March 2022 31 March 2023 31 March 2022 31 March 2023 31 March 2022 £'000 £'000 £'000 £'000 £'000 £'000 Borrowings Financial liabilities at amortised cost 599,351 604,507 12,114 14,754 611,465 619,261 Total borrowings 599,351 604,507 12,114 14,754 611,465 619,261 Investments Loans and receivables 481 580 173,451 248,070 173,932 248,650 Total investments 481 580 173,451 248,070 173,932 248,650 Long-Term Current Total Lender Option Borrower Option (LOBO) borrowings of £44.351 million have been included in long term borrowing as at 31 March 2023 but have a call date in the next 12 months. The above long term figures are based on the 2016 Code which requires that in undertaking Effective Interest Rate (EIR) calculations, the maturity period for a LOBO is taken as being the contractual period to maturity. Financial Instruments Gains / Losses The gains and losses recognised in the Comprehensive Income and Expenditure Account in relation to financial instruments are as follows: Financial Liabilities Financial Assets Liabilities measured at amortised cost Loans and receivables Total 2022/23 Total 2021/22 £'000 £'000 £'000 £'000 Interest expense 18,366 0 18,366 15,416 Interest payable and similar charges 18,366 0 18,366 15,416 Interest income 0 (4,866) (4,866) (1,078) Interest and investment income 0 (4,866) (4,866) (1,078) Losses on revaluation (23) (4) (27) (6) Surplus arising on revaluation of financial assets (23) (4) (27) (6) Net loss/(gain) for the year 18,343 (4,870) 13,473 14,332 Fair Value of Liabilities Carried at Amortised Cost The fair value of each class of financial assets and liabilities which are carried in the balance sheet as at 31 March 2023 at amortised cost is disclosed below. Methods and Assumptions in valuation technique: The fair value of an instrument is determined by calculating the Net Present Value (NPV) of future cash flows, which provides an estimate of the value of payments in the future in today’s terms. The discount rate used in the NPV calculation is the rate applicable in the market on the date of valuation for an instrument with the same structure, terms and remaining duration. For debt, this will be the new borrowing rate since premature repayment rates include a margin which represents the lender's profit as a result of rescheduling the loan; this is not included in the fair value calculation since any motivation other than securing a fair price should be ignored. In addition, lenders do not have the ability to force the Council to repay debt early. The rates quoted in this valuation were obtained by the Council’s treasury management consultants from the market on 31 March 2023, using bid prices where applicable. 74 Perth & Kinross Council Annual Accounts 2022/23 Page 95 of 226
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The calculations are made with the following assumptions: • For Public Works Loans Board (PWLB) debt, the discount rates used are the rates for new borrowing as per rate sheet number 127/23. • For other market debt and investments the discount rates used are the rates available for an instrument with the same terms from a comparable lender. • Interpolation techniques have been used between available rates where the exact maturity period was not available. • No early repayment or impairment is recognised. • Fair values have been calculated for all instruments in the portfolio, but only those which are materially different from the carrying value have been disclosed. The fair values are calculated as follows: Carrying amount Fair value Carrying amount Fair value £'000 £'000 £'000 £'000 Public Works Loans Board (PWLB) 562,576 354,921 570,651 560,605 Lender Option Borrower Option (LOBO) 44,351 42,427 44,371 62,310 Short term borrowing 2,099 2,099 1,935 2,756 Other (Special Loans) 2,303 2,303 2,171 2,172 Other Market Loans 136 136 133 134 Financial Liabilities 611,465 401,886 619,261 627,977 31 March 2023 31 March 2022 The Fair value is significantly less than the carrying amount because the majority of the Council’s long-term portfolio of loans are fixed rate loans where the interest rate payable is lower than the rates available for similar loans at the balance sheet date. The difference between the carrying amount and the fair value therefore represents the discount the Council would receive from the lender in the event these loans were to be repaid at that date. For comparison, if the Council were to have repaid all the loans to the PWLB on the balance sheet date, a total of £427 million would have been payable after applying the PWLB’s premature redemption rates applicable on that date. This is higher than the Fair Value shown in the table above, as the PWLB premature redemption rates include an additional profit margin over their comparative new borrowing rates. Fair Value of Assets Carried at Amortised Cost Carrying amount Fair value Carrying amount Fair value £'000 £'000 £'000 £'000 Cash (including petty cash) 17,663 17,663 38,437 38,443 Deposits with Banks and Building Societies 155,339 155,339 209,301 208,037 Mortgages 236 236 279 282 Loans to Others 694 694 633 633 Financial Assets 173,932 173,932 248,650 247,395 31 March 2023 31 March 2022 Nature and Extent of Risks Arising from Financial Instruments The Council’s management of treasury risks is intended to minimise the Council’s exposure to the unpredictability of financial markets and to protect the financial resources available to fund services. The Council has fully adopted CIPFA’s Code of Treasury Management Practices and has written principles for overall risk management as well as written policies and procedures covering specific areas such as credit risk, liquidity risk and market risk. (i) Credit Risk Credit risk arises from the short-term lending of surplus funds to banks, building societies, Money Market Funds and other local authorities as well as credit exposures to the Council’s customers. It is the policy of the Council to place deposits only with a limited number of high quality banks, building societies and Money Market Funds whose credit rating, together with other market information, is independently assessed as sufficiently secure by the Council’s treasury advisers and to restrict lending to a prudent maximum amount and duration for each institution. Under the terms of the Council’s approved Treasury policy, only the highest rated banks and financial institutions are used. Accordingly, the expected credit loss on such deposits is deemed negligible, and no expected credit loss provision has been provided in the Income & Expenditure account for 2022/23 (2021/22 nil) on the grounds of immateriality. Applying historic default rates for the counterparties used by the Council as at 31 March 2023 shows the expected credit loss to be less than 0.02% to 0.04% of the principal sums deposited, whilst the actual historic default experienced by the Council is nil. Further, there is no information to indicate that this position has changed since the balance sheet date. 75 Perth & Kinross Council Annual Accounts 2022/23 Page 96 of 226
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The following analysis summarises the Council’s potential maximum exposure to credit risk, based on past experience and current market conditions. Amounts at 31 March 2023 Historical experience of default Historical experience adjusted for market conditions as at 31 March 2023 Estimated maximum exposure to default and uncollectability £'000 % % £'000 Deposits with banks and other financial institutions 176,014 0 0 0 Loans to Others 930 0 0 0 Debtors 17,607 7.9 7.9 1,391 Total 194,551 - - 1,391 The Council’s overall exposure to credit risk in relation to its deposits in banks and other financial institutions of £176.0m above cannot be assessed generally, as the risk of non-payment of the principle sums or interest is specific to each individual institution. Experience indicates that any such non-payment is rare, and there is no evidence that any risk of default existed at 31 March 2023. The repayment profile of these deposits, including loans to others, is shown below: 31 March 2023 31 March 2022 £'000 £'000 Less than three months 71,598 68,100 Three to six months 64,280 79,108 Six months to one year 40,136 105,155 Total 176,014 252,363 Loans to Others The Council initiates a legal charge on property where, for example, clients require assistance with payment of care fees, but cannot pay immediately until such time as their property is sold. The carrying value of the total amount outstanding as at 31 March 2023 in this category is £694,000 and experience of default is minimal. The Council has granted mortgages for essential property repairs in shared ownership properties as well as secured loans to property owners to bring their properties back into use for affordable rent under the Empty Home Loans Fund (EHLF) scheme. The total amount outstanding as at 31 March 2023 is £236,000 with no experience of default. The total amount of Loans to Others of £930,000 can be analysed as follows: 31 March 2023 31 March 2022 £'000 £'000 Less than three months 70 82 Three to six months 70 83 Six months to one year 141 166 More than one year 649 581 Total 930 912 Debtors The Council does not generally allow credit for customers, such that £15.863m of the £17.607m balance is past its due date for payment. 31 March 2023 31 March 2022 £'000 £'000 Less than three months 12,299 5,618 Three to six months 427 224 Six months to one year 1,213 1,189 More than one year 1,924 2,206 Total 15,863 9,237 (ii) Liquidity Risk The Council has access to borrowings from the money markets to cover day to day cashflow needs, as well as borrowing from the Public Works Loans Board or money markets for longer term funding requirements. As a result there is no significant risk that the Council will be unable to raise finance to meet its commitments under financial instruments. The Council manages its portfolio in conjunction with interest rate forecasts to reduce the risk of a large proportion of its borrowing maturing at a time of higher interest rates, and so reduce the financial impact of re-financing at an unfavourable time. In addition, the monitoring of interest rate movements for the identification of debt rescheduling opportunities to amend the maturity profile, as well as achieving savings in interest charges, is undertaken on a continuous basis to further mitigate any refinancing risks. 76 Perth & Kinross Council Annual Accounts 2022/23 Page 97 of 226
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The maturity structure of financial liabilities is as follows (at nominal value): Loans outstanding On 31 March 2023 On 31 March 2022 £'000 £'000 Public Works Loans Board 560,000 568,000 Market debt 43,340 43,340 Temporary borrowing 2,060 1,933 Local bonds 2,294 2,169 Bank Overdraft 3,067 4,662 Total 610,761 620,104 Less than 1 year 12,561 16,764 Between 1 and 2 years 13,000 5,140 Between 2 and 5 years 20,000 23,000 Between 5 and 10 years 17,500 27,500 Between 10 and 15 years 5,000 5,000 More than 15 years 542,700 542,700 Total 610,761 620,104 In the more than 15 years category there are £43.2 million of LOBO borrowings which have a call date in the next 12 months. (iii) Market Risk Interest rate risk The Council is exposed to interest rate risk in two different ways: the first being the uncertainty of interest paid/received on variable rate instruments and the second being the effect of fluctuations in interest rates on the fair value of an instrument. The current interest rate risk for the council is summarised below: • Reductions in interest rates will affect interest earned on variable rate investments, and reduces income credited to the Comprehensive Income and Expenditure Statement. There would only be a small reduction in the interest payable on variable rate borrowing. • Increases in interest rates will affect interest paid on variable rate borrowings, and increases interest expense charged to the Comprehensive Income and Expenditure Statement, but offset by increased investment returns. • The fair value of fixed rate financial assets will fall if interest rates rise. This will not impact on the balance sheet for assets held at amortised cost, but will impact on the disclosure note for fair value. It would have a negative effect on the balance sheet for any assets held at fair value in the balance sheet, which would also be reflected in the Comprehensive Income & Expenditure Statement. However, no such assets at fair value were held by the Council as at 31 March 2023. • The fair value of fixed rate financial liabilities will rise if interest rates fall. This will not impact on the balance sheet for liabilities held at amortised cost, but will impact on the disclosure note for fair value. The Council has a number of strategies for managing interest rate risk. The policy is to keep a maximum of 35% of its borrowings in variable rate loans. During periods of falling interest rates, and where economic circumstances make it favourable, fixed rate loans may be repaid early to limit exposure to higher costs, whilst fixed deposits may be undertaken for longer periods (within policy and counterparty limits). The treasury management team has an active strategy for assessing interest rate exposure that feeds into the setting of the annual budget and which is used to update the budget throughout the year. This allows any favourable or adverse changes to be accommodated. The analysis will also advise whether new borrowing taken out is fixed or variable. According to this assessment strategy, at 31 March 2023, if interest rates had been 1% higher with all other variables held constant, the financial effect would be: £'000 Increase in interest payable on variable rate borrowings 506 Increase in interest receivable on variable rate investments (1,495) Impact on Comprehensive Income and Expenditure Statement (989) Share of overall impact credited to the HRA (246) The impact of a 1% fall in interest rates would have been an estimated cost of £1,495,000 to the Council as a result of a reduction in investment income, whilst it would be unlikely that the lenders of the market loans borrowed would pass on the reduction in rates payable. However, there would be a reduction of £74,000 payable on other loans. Therefore, the net cost of a 1% fall in interest rates would be £1,421,000, of which £354,000 would be debited to the HRA. 77 Perth & Kinross Council Annual Accounts 2022/23 Page 98 of 226
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Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies and thus has no exposure to loss arising from movements in exchange rates. Price Risk The Council does not invest in equities, however, does invest in other tradable instruments but with the intention of holding them until their maturity date. Therefore, the Council does not actively trade in such instruments, and is therefore not exposed to gains or losses on movements in their price. 40. Devolved School Management (DSM) Schools The accumulated balance on the General Fund at 31 March 2023 includes net surplus funds of £722,000 (31 March 2022 £1,191,000) in respect of schools participating in the Devolved School Management scheme. There are no schools carrying forward deficits. These surpluses are earmarked in 2022/23 for the individual schools concerned. There is Pupil Equity Funding from the Scottish Government of £140,000 which is being carried forward to 2023/24 for schools within the Council’s earmarked general fund balances. 41. Operating Activities The cash flows for operating activities include the following items: 2022/23 2021/22 £'000 £'000 Interest received (2,831) (1,443) Interest paid 26,434 25,548 23,603 24,105 42. Investing Activities 2022/23 2021/22 £'000 £'000 Purchase of property, plant and equipment, investment property and intangible assets (120,483) (93,363) Purchase of short-term and long-term investments (205,839) (184,301) Proceeds from the sale of of property, plant and equipment, investment property and intangible assets 1,047 1,019 Proceeds of short-term and long-term investments 259,801 181,692 Other receipts for investing activities 42,656 46,627 (22,818) (48,326) 43. Financing Activities 2022/23 2021/22 £'000 £'000 Cash receipts of short and long-term borrowing 29,697 124,076 Cash payments for the reduction of the outstanding liabilities relating to finance leases and on balance sheet PFI contracts (5,864) (5,022) Repayments of short and long-term borrowing (37,056) (95,493) Net cash flows from financing activities (13,223) 23,561 78 Perth & Kinross Council Annual Accounts 2022/23 Page 99 of 226
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44. Cash and Cash Equivalents The balance of cash and cash equivalents is made up of the following elements: 2022/23 2021/22 £'000 £'000 Cash held 55 37 Bank current accounts (3,067) (4,662) Short-term deposits with banks and building societies 3,651 43,062 Short-term deposits with Local Authorities 14,017 0 Short-term deposits with other organisations 3,007 0 Total cash and cash equivalents 17,663 38,437 45. Trust Funds Perth & Kinross Council administers a number of Charitable Funds of varying sizes. The Income and Expenditure Account and Balance Sheet are detailed on page 88. These funds include Educational Trusts and other trusts which are primarily for the residents of Perth and Kinross. An exercise is currently being undertaken to amalgamate many of the non-educational trusts in order for the funds to be more readily accessible. The Perth & Kinross Educational Trust gives financial assistance towards scholarships, second or subsequent degrees, mature students and further education. Assistance is also provided to schools for sports facilities and special equipment, promoting visual arts and education in music and drama. There are also preferences for certain beneficiaries usually named schools for prizes etc. Also, within the Perth & Kinross Educational Trust there are eight individual endowments for maintaining, furnishing and equipping school buildings. The other charitable trusts purposes include providing financial assistance in different areas of Perth and Kinross. 31 March 2023 31 March 2022 £'000 £'000 Educational Trust - Financial Assistance Net assets 983 1,026 Net Incoming/(Outgoing) Resources before other recognised gains and losses 10 8 Educational Trust - Endowments Net assets 49 50 Other Charitable Trusts Net assets 2,429 2,534 Net Incoming Resources before other recognised gains and losses 3 604 TOTAL Net Assets 3,461 3,610 TOTAL Net Incoming Resources before other recognised gains and losses 13 612 Detailed Accounts for the Charities are available from the Head of Finance, 2 High Street, Perth, PH1 5PH by contacting chxfinance@pkc.gov.uk or phoning 01738 475000. 46. The Statutory Loans Fund Loans Fund accounting is governed by The Local Authority (Capital Financing and Accounting) (Scotland) Regulations 2016, which came into force on 1 April 2016. These regulations outline the way the Loans Fund is operated in relation to the repayment period and method that capital advances (expenditure) are repaid (charged) on an annual basis. The Loans Fund is an internal fund operated by the Council to manage the amortisation of capital expenditure (capital advances) over the life of the various assets being funded by borrowing, and also to manage the external borrowing raised to finance the capital expenditure. Whilst both elements of the Loans Fund operate independently of each other, because they are based on the same capital plans, they will broadly be consistent to each other over the long term. However, significant differences may arise over the short-term. This may include, for example, delaying external borrowing due to unfavourable prevailing interest rates, where the Council’s daily cashflow remains positive, or where the Council has significant levels of Reserves. 79 Perth & Kinross Council Annual Accounts 2022/23 Page 100 of 226
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The annuity repayment method is used for all internal capital advances through the Loans Fund. The Council also defers the repayment of Loans Fund advances until the asset being funded is completed and operational. The Council repays/amortises the capital advances over the life of the asset being funded, up to a maximum of 50 years. Therefore, the total number of years may exceed 50 years from the year the capital expenditure was incurred where the total expenditure on an asset is spread over two or more years before the asset becomes operational. The value of Loans Fund advances outstanding at 31 March 2023 is £557.778 million. This is made up as follows: Advances Debt Repaid New Advances Advances 1 April 2022 Transferred 2022/23 2022/23 31 March 2023 £'000 £'000 £'000 £'000 £'000 General Fund 320,156 (3,109) 62,773 379,820 Prudential Borrowing 45,835 (232) (2,718) 2,446 45,331 Sub Total 365,991 (232) (5,827) 65,219 425,151 HRA 125,279 232 (3,999) 11,115 132,627 Total 491,270 0 (9,826) 76,334 557,778 The estimated future repayments of these advances is summarised in the table below: General Prudential Sub Total: Housing Total Fund Borrowing General Revenue Fund Account £'000 £'000 £'000 £'000 £'000 Within 1 Year 4,580 2,861 7,441 3,253 10,694 Between 1 and 2 Years 3,991 2,658 6,649 2,941 9,590 Between 2 and 5 Years 8,146 5,960 14,106 8,022 22,128 Between 5 and 10 Years 789 5,397 6,186 22,874 29,060 Between 10 and 15 Years 8,204 4,374 12,578 20,436 33,014 Between 15 and 20 Years 17,642 3,498 21,140 9,131 30,271 Between 20 and 25 Years 27,034 3,703 30,737 3,940 34,677 More than 25 Years 309,434 16,880 326,314 62,030 388,344 Total 379,820 45,331 425,151 132,627 557,778 Comparison of the capital advances above with capital debt of £603.2 million shows that the Council’s borrowing is around £45.4 million higher than immediate requirements as at 31 March 2023. This reflects the strategy adopted in the last 3 years of undertaking new borrowing at historic low rates in order to fund the large Capital Financing Requirement over the next few years. This strategy reduces the risks of funding this requirement in future years as interest rates rise and provides budget certainty for future interest rates at a low level. The latest approved General Fund (Composite) Capital Budget and Housing Investment Programme includes the amount of capital expenditure to be funded by borrowing (i.e. new Loans Fund advances) in each of the next 5 years as follows: General Housing Total Fund Investment Programme £'000 £'000 £'000 2023/24 151,420 18,367 169,787 2024/25 175,187 11,935 187,122 2025/26 93,069 13,271 106,340 2026/27 46,776 16,524 63,300 2027/28 25,377 16,292 41,669 Total 491,829 76,389 568,218 All the above Loans Fund repayments have been included in the Loan Charge estimates within the approved Medium- Term Financial Plans, and therefore remain affordable under the current Loan Charge Budget strategy. 80 Perth & Kinross Council Annual Accounts 2022/23 Page 101 of 226
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2021/22 £'000 £'000 £'000 £'000 Income (29,152) Dwelling Rents (30,334) 630 less Voids 587 (29,747) (578) Non-Dwelling Rents (578) 47 less Voids 41 (537) (1,032) Other Income (1,110) (30,085) Total Income (31,394) Expenditure 6,816 Repairs & Maintenance 7,638 14,587 Supervision & Management 15,229 12,586 Depreciation, impairment and revaluation losses on non current assets 13,427 79 Movement in the Impairment of Debtors (118) 397 Other expenditure 667 34,465 Total Expenditure 36,843 4,380 Net Expenditure for HRA Services as included in the Comprehensive Income and Expenditure Statement 5,449 304 HRA services' share of Corporate and Democratic Core 318 4,684 Net Expenditure for HRA Services 5,767 HRA share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement: (50) (Gain) / Loss on sale of HRA Non-Current Assets 534 3,698 Interest payable and similar charges 3,356 (11) Interest and investment income (136) 165 Net Interest on the net defined benefit liability 94 (3,339) Capital Grants and Contributions Receivable (3,214) 5,147 Deficit for the year on HRA services 6,401 HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT 2022/23 The Housing Revenue Account (HRA) Income and Expenditure Statement shows the economic cost in the year of providing housing services in accordance with generally accepted accounting practices, rather than the amount to be funded from rents and government grants. Councils charge rents to cover expenditure in accordance with the legislative framework which may be different from the accounting cost. The increase or decrease in the year, on the basis on which rents are raised, is shown in the Statement of Movements on the Housing Revenue Account Balance. 81 Perth & Kinross Council Annual Accounts 2022/23 Page 102 of 226
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2021/22 2022/23 2022/23 £'000 £'000 £'000 (3,006) Balance on the HRA at the end of the Previous Year (3,282) 5,147 Deficit for the year on the HRA Income and Expenditure Account 6,401 (2,995) Adjustments to Usable reserves permitted by Statute (2,897) (2,228) (2,029) (76) Net Decrease/(increase) before Transfers to or from Reserves 1,475 (200) Transfer from Reserves (840) (276) Movement in Year on the HRA 635 (3,282) Balance on the HRA at the end of the Current Year (2,647) Note to the Statement of Movement on the HRA Balance 2021/22 2022/23 2022/23 £'000 £'000 £'000 50 Gain/(Loss) on sale of HRA Non-current assets (534) (9,591) Depreciation and impairment of non current assets (10,530) Capital Grants and Contributions credited to the Comprehensive Income and Expenditure 3,339 Statement 3,214 18 Adjustments involving Short Term Accumulated Absences Account (16) Reversal of items relating to retirement benefits credited to the Comprehensive Income (3,574) and Expenditure Statement (3,149) (9,758) (11,015) 1,343 1,436 year 187 Adjustments involving the Financial Instruments Adjustment Account 163 3,653 Statutory provision for the repayment of debt 3,999 2,347 Capital expenditure charged to the HRA balances 3,388 7,530 8,986 (2,228) (2,029) STATEMENT OF MOVEMENTS ON THE HOUSING REVENUE ACCOUNT BALANCE Net additional amount required by statute to be (credited) to the HRA Balance for the year Employer's pension contributions and direct payments to pensioners payable in the Adjustments between Accounting Basis and Funding Basis Under Statute Items included in the HRA Income and Expenditure Account but excluded from the movement on HRA Balance for the year Items not included in the HRA Income and Expenditure Account but included in the movement on HRA Balance for the year The Statement of Movement on the Housing Revenue Account balance reconciles the Housing Revenue Account to the HRA balance, an earmarked element of the Council’s General Fund Balance. 82 Perth & Kinross Council Annual Accounts 2022/23 Page 103 of 226
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THE ACCOMPANYING NOTES TO THE HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT 1. Housing Stock at 31 March 2023 No. of Dwellings No. of Dwellings 31 March 2023 31 March 2022 Sheltered accommodation 285 285 Detached/Semi-Detached/Terraced 3,744 3,804 High Rise Flats 143 141 Tenement Flats/Other Flats/Maisonettes 3,788 3,665 Total 7,960 7,895 2. Rent Arrears at 31 March 2023 Gross Arrears Gross Arrears 31 March 2023 31 March 2022 £'000 % of Income £'000 % of Income Houses 3,217 10.6 3,072 10.5 Other Subjects 52 9.0 59 10.2 Totals 3,269 10.6 3,131 10.5 3. Impairment of Debtors impairment in 2021/22. In 2022/23 an impairment of £1,842,020 has been provided in the Balance Sheet, a reduction of £117,564 from the 83 Perth & Kinross Council Annual Accounts 2022/23 Page 104 of 226
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2021/22 2022/23 £'000 £'000 £'000 109,359 Gross Charge 113,489 (3,490) Deduct - Exemptions (3,688) (174) Disabled Relief (182) (8,026) Discounts and Reductions (8,350) (6,807) Council Tax Reduction Scheme (6,966) 90,862 Net Council Tax 94,303 Deduct - (7) Ministry of Defence Properties (7) 7 Contribution Received 7 0 (1,376) Provision for Bad and Doubtful Debts (1,045) 89,486 Total Council Tax Income 93,258 (122) Adjustments for prior years for Council Tax and Community Charge (398) 89,364 Total Council Tax / Community Charge Income to Comprehensive I&E Statement 92,860 COUNCIL TAX INCOME ACCOUNT The Council Tax Income Account shows the gross income raised from Council Taxes levied and deductions made under statute. The resultant net income is transferred to the Comprehensive Income and Expenditure Statement of the Council. 84 Perth & Kinross Council Annual Accounts 2022/23 Page 105 of 226
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THE ACCOMPANYING NOTES TO THE COUNCIL TAX INCOME ACCOUNT 1. CALCULATION OF THE COUNCIL TAX BASE AT 31 MARCH 2023 2022/23 2021/22 A B C D E F G H TOTAL TOTAL No. of Properties 8,747 15,008 12,863 11,674 12,101 8,183 6,606 702 75,884 74,969 Exemptions (756) (733) (499) (318) (265) (117) (84) (19) (2,791) (2,562) Disabled Relief 76 5 16 25 (29) 1 (88) (6) 0 0 Discounts (1,416) (2,022) (1,468) (1,174) (932) (488) (313) (57) (7,870) (7,763) Effective No. of Properties 6,651 12,258 10,912 10,207 10,875 7,579 6,121 620 65,223 64,644 Ratio 240/360 280/360 320/360 360/360 473/360 585/360 705/360 882/360 Band D Equivalents 4,430 9,534 9,700 10,207 14,289 12,316 11,987 1,519 73,982 73,188 Contributions in lieu 7 7 TOTAL 73,989 73,195 Provision for non-payment at 2.0% (2021/22 3.5%) (1,480) (2,562) COUNCIL TAX BASE 72,509 70,633 2. THE COUNCIL TAX CHARGE Fraction 2022/23 2021/22 Valuation of Actual Actual Band band D Charge Charge A 240/360 £900.67 £878.67 B 280/360 £1,050.78 £1,025.11 C 320/360 £1,200.89 £1,171.56 D 360/360 £1,351.00 £1,318.00 E 473/360 £1,775.06 £1,731.71 F 585/360 £2,195.38 £2,141.75 G 705/360 £2,645.71 £2,581.08 H 882/360 £3,309.95 £3,229.10Over £212,000 £0 - £27,000 £27,001 - £35,000 £45,001 - £58,000 £35,001 - £45,000 £106,001 - £212,000 £80,001 - £106,000 £58,001 - £80,000 Range The valuation bands, the fractions used in calculating the Council Tax payable for each valuation band and the actual charges determined for 2022/23 are set out below: Each property is placed in one of eight valuation bands (A-H) in accordance with their value as at 1 April 1991. The Council Tax charge levied for each property is calculated in proportion to the Council Tax charge for a band D property by applying fractions. A discount of 25% is given where there are fewer than two residents of a property. Discounts of 10% are awarded for second homes and long term empty dwellings. Some unoccupied dwellings may receive discount of 50%. Persons in detention, students, mentally handicapped people and certain others are disregarded for Council Tax purposes. Reductions in Council Tax are also granted for disabled people. The Council Tax is based on the value of a domestic property together with a personal element which takes into account the number and circumstances of that property's occupants. Property Valuation 85 Perth & Kinross Council Annual Accounts 2022/23 Page 106 of 226
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2021/22 £'000 £'000 £'000 80,188 Gross Rate Levied 81,902 Deduct: (2,646) Rate Rebates (2,682) (38,065) Reliefs, Charities etc. (21,664) (423) Provision for Bad and Doubtful Debts (256) (24,602) Adjustments to Previous Years: (38) Gross Rate Levied (1,202) 172 Transitional Surcharge/Relief 0 (2,964) Reliefs, Charities etc. (291) 91 Impairment for Bad and Doubtful Debts and Abatements (154) (1,647) 36,315 Net Non-Domestic Rate Income- 55,653 (36,524) Contribution to National Non-Domestic Rate Pool (55,877) 34,864 Contribution from National Non-Domestic Rate Pool 46,141 (1,660) Net contribution to National Non-Domestic Rate Pool (9,736) 34,655 Total Non-Domestic Rate Income to Comprehensive Income 45,917 and Expenditure Statement 206 Discretionary Relief funded by the Council 224 2022/23 NON-DOMESTIC RATE INCOME ACCOUNT The Non-Domestic Rate Account is an agent's statement that reflects the statutory obligation for billing authorities to maintain a separate Non-Domestic Rate Account. The statement shows the gross income from the rates and deductions made under statute. The net income is paid to the Scottish Government as a contribution to the national Non-Domestic Rate pool. 86 Perth & Kinross Council Annual Accounts 2022/23 Page 107 of 226
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THE ACCOMPANYNG NOTES TO THE NON-DOMESTIC RATE INCOME ACCOUNT 1. NON-DOMESTIC RATES 2. RATEABLE SUBJECTS AND VALUES Rateable Rateable No. of Value No. of Value Subjects £'000 Subjects £'000 at 1 April 2021 at 1 April 2021 at 1 April 2022 at 1 April 2022 1,689 36,207 Shops 1,699 36,564 86 1,747 Public Houses 85 1,741 1,084 13,845 Offices (including banks) 1,096 13,843 234 13,161 Hotels etc. 227 12,708 1,740 24,142 Industrial Subjects etc. 1,781 24,353 1,898 11,654 Leisure, Entertainment, Caravans etc. 1,950 11,842 155 5,099 Garages and Petrol Stations 151 4,822 57 1,329 Cultural 59 1,352 1,365 2,662 Sporting Subjects 1,362 2,663 117 15,393 Education and Training 118 15,273 415 7,781 Public Service Subjects 420 7,795 1 0 Communications 1 0 21 368 Quarries, Mines etc. 22 331 2 3,412 Petrochemical 2 3,412 242 1,687 Religious 240 1,654 115 6,479 Health, Medical 117 6,390 723 1,966 Other 728 1,988 63 3,197 Care Facilities 64 3,347 34 114 Advertising 30 98 92 10,823 Undertaking 92 10,568 10,133 161,066 Total 10,244 160,744 Non-Domestic Rates Income is set and pooled nationally but generated and collected locally by Scottish Local Authorities. It is distributed back to those local authorities through a distribution formula agreed with COSLA as part of the local government finance settlement, therefore it bears no direct relationship to the amounts collected by those authorities. The rate poundage set by the Scottish Government for 2022/23 was 49.8p (2021/22 - 49.0p). The Small Business Bonus Scheme, introduced from 1 April 2008, provides relief to businesses based on their combined rateable value. From 1 April 2014 the combined rateable value threshold has been set at £35,000 with relief available on all individual properties with a rateable value of £18,000 or less. Subject to eligibility, this provides relief of either 25% or 100%. Awards totalling almost £11.5 million were provided to businesses within the Perth and Kinross area in 2022/23. A supplement of 1.3p was charged on properties with a rateable value of between £51,001 and £95,000 and a supplement of 2.6p was charged on properties with a rateable value exceeding £95,000 to contribute towards the additional cost of the Small Business Bonus scheme. (unchanged from 2021/22). 87 Perth & Kinross Council Annual Accounts 2022/23 Page 108 of 226
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CHARITABLE TRUSTS The Council administers Perth & Kinross Educational Trust and various other Charitable Trusts and Endowments. The figures below summarise the aggregate income and expenditure for the year and the assets and liabilities at 31 March 2023. 2022/23 2022/23 2021/22 £'000 £'000 £'000 INCOMING RESOURCES Incoming resources from generated funds: Income from donations and legacies 0 600 Investment income 146 127 Total Incoming Resources 146 727 RESOURCES EXPENDED Costs of generating funds: Investment management costs 16 16 Charitable activities 103 81 Governance costs 14 14 Reorganisation of trusts 0 4 Total Resources Expended 133 115 Net Incoming Resources Before Other Recognised Gains & Losses 13 612 OTHER RECOGNISED GAINS Gain/(Losses) on Investment assets (162) 56 Net Movement in Funds for the Year (149) 668 RECONCILIATION OF FUNDS Total Funds Brought Forward 3,610 2,942 TOTAL FUNDS CARRIED FORWARD 3,461 3,610 31 March 2023 31 March 2023 31 March 2022 £'000 £'000 £'000 FIXED ASSETS Tangible Assets 80 80 Investments 3,083 3,261 CURRENT ASSETS Debtors 28 3 Investments - Amounts due by Perth & Kinross Council Loans Fund 288 276 316 279 LIABILITIES Creditors: amounts falling due within one year (18) (10) NET CURRENT ASSETS 298 269 NET ASSETS 3,461 3,610 TOTAL FUNDS 3,461 3,610 INCOME AND EXPENDITURE ACCOUNT FOR YEAR TO 31 MARCH 2023 BALANCE SHEET AS AT 31 MARCH 2023 Notes to Charitable Trusts 1. The market value of Investments at 31 March 2023 was £3.083 million (31 March 2022 £3.261 million). 2. The unaudited accounts were issued on 26 June 2023 and the audited accounts were authorised for issue on 11 December 2023. Stewart MacKenzie CPFA Head of Finance Date: 88 Perth & Kinross Council Annual Accounts 2022/23 Page 109 of 226
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COMMON GOOD The Council administers the Common Good Accounts for ten former burghs within Perth and Kinross. The figures below summarise the aggregate income and expenditure for the year and detail the Assets and Liabilities at 31 March 2023. 2022/23 2022/23 2021/22 £'000 £'000 £'000 EXPENDITURE Grants to Voluntary Organisations 110 61 Christmas Lighting 73 17 Property Costs 0 25 Supplies & Services 21 21 204 124 INCOME Rents, Fees, Charges etc. 311 275 Interest on Loans 39 5 Other 3 1 353 281 OPERATING SURPLUS FOR THE YEAR 149 157 Surplus Brought Forward 2,109 1,952 Accumulated Surplus at 31 March 2023 2,258 2,109 INCOME AND EXPENDITURE STATEMENT FOR YEAR TO 31 MARCH 2023 31 March 2023 31 March 2023 31 March 2022 £'000 £'000 £'000 FIXED ASSETS Property, Plant & Equipment 5,383 5,188 CURRENT ASSETS Debtors 9 6 Investments 2,219 2,057 Cash & Cash Equivalents 453 448 2,681 2,511 CURRENT LIABILITIES Creditors and Accruals (134) (117) NET CURRENT ASSETS 2,547 2,394 TOTAL NET ASSETS 7,930 7,582 RESERVES Revenue 2,258 2,109 Capital 477 477 Revaluation Reserve 5,195 4,996 7,930 7,582 BALANCE SHEET AS AT 31 MARCH 2023 The unaudited accounts were issued on 26 June 2023 and the audited accounts were authorised for issue on 11 December 2023. Stewart Mackenzie CPFA Head of Finance Date: 89 Perth & Kinross Council Annual Accounts 2022/23 Page 110 of 226
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THE ACCOMPANYING NOTES TO THE COMMON GOOD ACCOUNTS 1. The use of common good assets is accounted for on a risk and rewards based approach. The Council General Fund or Housing Revenue Account will meet the day-to-day operating costs of the property, and any repairs or improvement works required to the property, in return for the use of the common good asset for the delivery of Council services. No rent for the use of the property is payable to the Common Good Fund on the basis that the Fund benefits from the Council expenditure incurred in maintaining and upgrading the sites. No expenditure is charged to the Common Good Fund for the Council expertise in managing the assets. In respect of common good sites that are leased out to a party external to the Council, the tenant will bear the responsibility for the upkeep of the property. The Common Good Fund is, therefore, credited with the annual rental income arising from the lease agreement. 2. Depreciation Depreciation on Common Good Funds is charged on buildings, based on current value less residual value over the remaining useful life of the property. The buildings have a life expectancy of over 50 years and depreciation has been charged on a straight line basis over that period. 3. Common Good Reserve Funds The movements in the individual Common Good Funds Revenue Reserves are summarised below: Balance at Income Expenditure Balance at FUND 1 April 22 2022/23 2022/23 31 March 23 £'000 £'000 £'000 £'000 Perth City 1,473 317 190 1,600 Aberfeldy 124 2 1 125 Abernethy 1 0 0 1 Alyth 20 0 0 20 Auchterarder 294 27 12 309 Blairgowrie 20 0 0 20 Crieff 13 2 0 15 Kinross 157 5 1 161 Pitlochry 7 0 0 7 TOTAL 2,109 353 204 2,258 Coupar Angus Common Good Fund has a nil balance for both years. 4. Common Good Fixed Assets The Community Empowerment (Scotland) Act 2015 requires the Council to establish and maintain a list of property which is held as part of the Common Good. The review of property titles to facilitate the publication of the list has been completed, and following a period of public consultation, the findings are now available on the Perth & Kinross Council Citizen Space website at Draft Common Good Land Register. The review of moveable Common Good property has commenced and is expected to complete in 2024/25. 90 Perth & Kinross Council Annual Accounts 2022/23 Page 111 of 226
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Authority's General Housing Capital Insurance Capital Capital Total Unusable TOTAL Authority's share of TOTAL Fund Revenue Fund Fund Receipts Grants Usable Reserves Authority share of associates Reserves Balance Account Reserve Unapplied Reserves Reserves subsidiaries & joint ventures £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2021 (72,483) (3,006) (27,944) (2,392) (2,529) (2,730) (111,084) (540,023) (651,107) (6,548) (8,935) (666,590) Movement in reserves during 2021/22 Total Comprehensive Income and Expenditure 11,478 5,147 0 0 0 0 16,625 (107,289) (90,664) (4,097) (16,280) (111,041) Adjustments from income & expenditure charged under the accounting basis to the funding basis (4,459) (2,995) 0 0 0 0 (7,454) 7,454 0 0 0 0 Adjustments from income & expenditure charged under the accounting basis to the funding basis (16,483) (2,228) 0 0 (27) 2,643 (16,095) 16,095 0 0 0 0 (Increase)/Decrease in 2021/22 (9,464) (76) 0 0 (27) 2,643 (6,924) (83,740) (90,664) (4,097) (16,280) (111,041) Transfers to/(from) Other Statutory Reserves (3,953) (200) 3,127 1,026 0 0 0 0 0 0 0 0 Balance at 31 March 2022 carried forward (85,900) (3,282) (24,817) (1,366) (2,556) (87) (118,008) (623,763) (741,771) (10,645) (25,215) (777,631) Movement in reserves during 2022/23 Total Comprehensive Income and Expenditure 16,868 6,401 0 0 0 0 23,269 (148,700) (125,431) (8,509) 5,090 (128,850) Adjustments to Usable Reserves permitted by accounting standards (4,511) (2,897) 0 0 0 0 (7,408) 7,408 0 0 0 0 Adjustments from income & expenditure charged under the accounting basis to the funding basis 1,514 (2,029) 0 0 311 0 (204) 204 0 0 0 0 (Increase) or Decrease in 2022/23 13,871 1,475 0 0 311 0 15,657 (141,088) (125,431) (8,509) 5,090 (128,850) Transfers to/(from) Other Statutory Reserves 2,306 (840) (1,526) 60 0 0 0 0 0 0 0 0 Balance at 31 March 2023 carried forward (69,723) (2,647) (26,343) (1,306) (2,245) (87) (102,351) (764,851) (867,202) (19,154) (20,125) (906,481) GROUP MOVEMENT IN RESERVES STATEMENT 91 Perth & Kinross Council Annual Accounts 2022/23 Page 112 of 226
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Restated 2021/22 Net Note Gross Income Net Expenditure Expenditure Expenditure £'000 £'000 £'000 £'000 SERVICES 205,495 Education & Children's Services 232,396 (28,053) 204,343 75,790 Health & Social Care 195,655 (107,341) 88,314 91,094 Communities 135,288 (43,565) 91,723 39,041 Corporate & Democratic Services 68,812 (23,927) 44,885 2,253 Chief Executives Service 2,896 (2) 2,894 4,380 Housing Revenue Account 36,843 (31,394) 5,449 1,307 Valuation Joint Board 1,338 0 1,338 (485) Charitable Trusts 133 0 133 (152) Common Good 204 (314) (110) 418,723 COST OF SERVICES 673,565 (234,596) 438,969 (534) Other Operating Expenditure / Income 474 (331) 143 23,402 Financing and Investment Income and Expendtiure 4 26,585 (6,371) 20,214 (424,977) Taxation and Non-Specific Grant Income 0 (432,699) (432,699) 16,614 Deficit on Provision of Services 700,624 (673,997) 26,627 (5,156) Share of the (Surplus)/Deficit on the provision of services by Associates and Joint Ventures 9,790 11,458 Group Deficit 36,417 (22,983) Surplus on revaluation of non current assets (86,473) (89,838) Remeasurement of the net defined benefit liability (74,297) 64 Other gains and losses 9 (9,742) Share of the other comprehensive income and expenditure of Associates and Joint Ventures (4,506) (122,499) Other Comprehensive Income and Expenditure (165,267) (111,041) Total Comprehensive Income and Expenditure (128,850) 2022/23 GROUP COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT 92 Perth & Kinross Council Annual Accounts 2022/23 Page 113 of 226
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31 March 2022 Notes 31 March 2023 £'000 £'000 1,271,035 Property, Plant & Equipment 1,437,497 51,814 Heritage Assets 51,814 14,060 Investment Property 15,015 1,674 Intangible Assets 963 403 Assets Held for Sale 403 0 Long Term Investments 5 3,083 16,625 Investment in Joint Venture 8,805 613 Long Term Debtors 541 1,356,224 Long Term Assets 1,518,121 214,619 Short Term Investments 5 157,558 273 Assets Held for Sale 273 637 Inventories 508 48,275 Short Term Debtors 6 54,212 50,012 Cash and Cash Equivalents 27,517 313,816 Current Assets 240,068 Cash and Cash Equivalents (14,754) Short Term Borrowing (12,114) (76,700) Short Term Creditors 7 (98,608) (3,904) Provisions (295) (95,358) Current Liabilities (111,017) (2,959) Provisions (5,312) (604,507) Long Term Borrowing (599,351) (2,602) Liabilities in associates and joint ventures (71) (186,983) Other Long Term Liabilities (135,957) (797,051) Long Term Liabilities (740,691) 777,631 NET ASSETS 906,481 118,008 Usable Reserves 102,351 623,763 Unusable Reserves 764,851 24,668 Group Reserves 27,888 11,192 Charitable and Common Good Reserves 11,391 777,631 TOTAL RESERVES 906,481 The Unaudited Annual Accounts were issued on 26 June 2023 and the Audited Annual Accounts were authorised for issue on 11 December 2023. The accompanying notes form an integral part of these financial statements. Stewart MacKenzie CPFA Head of Finance Date: GROUP BALANCE SHEET 93 Perth & Kinross Council Annual Accounts 2022/23 Page 114 of 226
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2021/22 Notes 2022/23 £'000 £'000 (16,614) Deficit on the provision of services (26,627) 100,529 Adjustments to net surplus or deficit on the provision of services for non cash movements 85,234 (47,236) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (44,143) 36,679 Net cash flows from Operating Activities 14,464 (47,801) Investing Activities 10 (23,696) 23,561 Financing Activities 11 (13,263) 12,439 Net increase/(decrease) in cash and cash equivalents (22,495) 37,573 Cash and cash equivalents at the beginning of the reporting period 50,012 50,012 Cash and cash equivalents at the end of the reporting period 27,517 GROUP CASH FLOW STATEMENT 94 Perth & Kinross Council Annual Accounts 2022/23 Page 115 of 226
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2021/22 2022/23 £'000 £'000 16,625 Deficit on the single entity Comprehensive Income & Expenditure Statement 23,269 for the year Add: (825) ● Managed Funds - Charitable Trusts & Common Good 0 (9,674) ● Joint Venture 8,208 4,520 ● Associates 1,583 812 ● Subsidiaries 3,357 11,458 Deficit for the year on the Group Comprehensive Income & Expenditure Statement 36,417 RECONCILIATION OF THE SINGLE ENTITY DEFICIT FOR THE YEAR TO THE GROUP DEFICIT 95 Perth & Kinross Council Annual Accounts 2022/23 Page 116 of 226
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NOTES TO THE GROUP ACCOUNTS 1. Combining Entities The results of Tayside Valuation Board which is jointly administered with Dundee City and Angus Councils have been included in the Group Accounts. The Council is exempt from including the Board as a subsidiary as the Scottish Government exercises a dominant influence on the Board evidenced particularly by its ability to reconstitute or abolish statutory bodies or otherwise influence their operating and financial policies. A number of Councillors have voting rights on the Board. The Council has an obligation to contribute to the Joint Board losses or deficits and the ability to exercise significant influence over it. The Joint Board has therefore been incorporated in the Group Accounts under the equity method of Accounting for Associates. For the purpose of consolidation and incorporation within the Group Accounts recognition has been made of the Council’s interest which is based on its share of the contributions made to the Tayside Valuation Board, which in 2022/23 was 42.68% (2021/22 42.58%). The accounting period for the Board is the year to 31 March 2023 and the Board Statements of Accounts presents fairly its individual financial position. The individual accounts relating to Tayside Valuation Joint Board are published separately and can be obtained from the Director of Corporate Services, Dundee City Council, Dundee House, 50 North Lindsay Street, Dundee, DD1 1QE. In addition, the Council has also included Live Active Leisure Ltd., Perth Theatre & Concert Hall Ltd. and Culture Perth & Kinross Ltd. as subsidiaries within its Group Accounts in accordance with IAS 27 Consolidated and Separate Financial Statements, and in particular SIC 12 Consolidation – Special Purpose Entities. These organisations deliver services on behalf of the Council and the Council therefore obtains benefit from their operations. In addition, service delivery is managed through Service Level Agreements specific to the service provision required from the organisations by the Council. Live Active Leisure Ltd., Perth Theatre & Concert Hall Ltd. and Culture Perth & Kinross Ltd. are governed by company and charitable trust regulation. For the purpose of consolidation and incorporation within the Group Accounts it has been assumed that the Council’s interest in these organisations is 100% due to the nature of Council control and direction over their operations. Live Active Leisure Ltd., Perth Theatre & Concert Hall Ltd. and Culture Perth & Kinross Ltd. are arm’s length companies with sole member status with the Council being the sole member in each company. The individual accounts relating to these organisations are published separately, and can be obtained from the following addresses:- Live Active Leisure Ltd. Caledonia House, Hay Street, Perth, PH1 5HS. Perth Theatre & Concert Hall Ltd. Perth Concert Hall, Mill Street, Perth, PH1 5HZ. Culture Perth & Kinross Ltd. A K Bell Library, 2-8 York Place, Perth, PH2 8EP The income, expenditure, assets and liabilities of the Charitable Trusts which are administered and controlled by the Council have also been included as a managed fund. The nature of the assets of the managed fund are heritable property, investments and debtors. The assets are not the property of Perth & Kinross Council and are subject to charitable trust regulations. The Income and Expenditure Account of the Charitable Trusts is detailed on page 88 of the Annual Accounts. The income, expenditure, assets and liabilities of the Common Good Accounts which are administered and controlled by the Council have also been included as a managed fund. The nature of the assets of the managed fund are heritable property, investments and debtors. The assets are the property of Perth & Kinross Council and are subject to the Accounting Code of Practice. The Income and Expenditure Account of the Common Good is detailed on page 89 of the Annual Accounts. Perth & Kinross Council’s share of the assets and liabilities of Tayside Contracts Joint Committee, which is jointly administered and controlled with Dundee City Council and Angus Council, has been included in the Group Accounts using the equity method for an associate due to the Council having significant influence rather than joint control over the entity. The Council’s investment in Tayside Contracts for 2022/23 is 34% (2021/22 39.9%). Copies of Tayside Contracts Joint Committee’s individual accounts are published separately, and can be obtained from Tayside Contracts, 1 Soutar Street, Dundee, DD3 8SS. Perth and Kinross Integration Joint Board (IJB) is the statutory body established to integrate health and social care services between the Council and NHS Tayside. The IJB Board consists of eight voting members, four of whom are Perth & Kinross councillors. The Council can therefore exercise joint control over the arrangement and the IJB has been consolidated into the Council Group accounts as a joint venture using the equity method and a percentage share of 50%. Copies of the Perth and Kinross Integration Joint Board individual accounts are published separately and can be obtained from the Interim Chief Financial Officer, Perth and Kinross Integration Joint Board, 2 High Street, Perth, PH1 5PH. Tayside and Central Scotland Transport Partnership (TACTRAN) is a statutory body established under the Transport (Scotland) Act 2005. The partnership covers Angus, Dundee City, Perth and Kinross and Stirling Council areas. The results of TACTRAN have been excluded from Perth & Kinross Council’s Group accounts on the grounds of materiality. 96 Perth & Kinross Council Annual Accounts 2022/23 Page 117 of 226
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2. Nature of Combination The Council inherited its interest in the Tayside Valuation Board following the reorganisation of local government in 1996. It is considered that the Council’s interest was obtained on an acquisition basis. However, as no consideration was given, no goodwill requires to be accounted for. 3. Financial Impact of Consolidation and Going Concern The effect of inclusion of the Subsidiaries and Associates listed above in the Group Balance Sheet is to increase both reserves and net assets by £39.279 million (2021/22 £35.860 million increase). All Subsidiaries and the Associate have prepared their accounts on a ‘going concern’ basis. The Council’s Group Accounts have been prepared on a ‘going concern’ basis as there is no reason to suggest that future funding will not continue. Apart from the disclosures made in the Notes to the Group Accounts there were no material amounts or details in relation to associates or managed funds. 4. Group Comprehensive Income & Expenditure Statement – Financing and Investment Income & Expenditure 2022/23 2021/22 £'000 £'000 Council Financing and Investment Income & Expenditure 20,309 23,604 Subsidiaries (71) (70) Charitable Trusts 15 (127) Common Good (39) (5) Total Group CI&ES Financing and Investment Income & Expenditure 20,214 23,402 5. Group Balance Sheet – Investments (Long and short term) 2022/23 2021/22 £'000 £'000 Council Investments 155,339 209,301 Charitable Trusts Investments 3,083 3,261 Common Good Investments 2,219 2,057 Total Group Investments 160,641 214,619 6. Group Balance Sheet – Short term Debtors (net of provisions) 2022/23 2021/22 £'000 £'000 Net Debtors Balance - Note 28 to the Financial Statements 52,019 46,052 Subsidiary Debtors 2,156 2,214 Charitable Trust Debtors 316 279 Inter-company elimination (288) (276) Common Good Debtors 462 454 Inter-company elimination (453) (448) Total Group Debtors 54,212 48,275 97 Perth & Kinross Council Annual Accounts 2022/23 Page 118 of 226
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7. Group Balance Sheet – Short term Creditors 2022/23 2021/22 £'000 £'000 Net Creditors Balance - Note 29 to the Financial Statements (96,104) (73,570) Charitable Trust Creditors (18) (10) Inter-company elimination 288 276 Common Good Creditors (134) (117) Inter-company elimination 453 448 (95,515) (72,973) Subsidiary Creditors (3,093) (3,727) Total Group Creditors (98,608) (76,700) 8. Group Balance Sheet - Pension Liability 2022/23 2021/22 £'000 £'000 Net Pensions Liability at 31 March - Note 18 to the Financial Statements (20,917) (55,995) Subsidiaries 0 (9,661) Group Pension Liability at 31 March (20,917) (65,656) 9. Group Cash Flow Statement There has been no impact on the Group Cash Flow Statement from the inclusion of the Tayside Valuation Joint Board, Tayside Contracts Joint Committee, or the Perth & Kinross Integration Joint Board. Cash transactions between the Joint Boards and the Council are already included within the Council’s Cash Flow Statement and there were no dividend transactions. The impact of the inclusion of Live Active Leisure Ltd., Perth Theatre & Concert Hall Ltd. and Culture Perth & Kinross Ltd. within the Group Cash Flow Statement is to increase the movement in the net cash position by £9.854 million (2021/22, increase of £11.575 million). A cash increase of £6.303 million represents the Council’s 100% share of Live Active Leisure Ltd., a cash increase of £1.596 million represents the Council’s 100% share of Perth Theatre & Concert Hall Ltd and a cash increase of £1.955 million represents the Council’s 100% share of Culture Perth & Kinross Ltd. 10. Group Cash Flow – Investing Activities 2022/23 2021/22 £'000 £'000 Council Investing Activities (22,818) (48,326) Subsidiaries (878) 525 (23,696) (47,801) 11. Group Cash Flow – Financing Activities 2022/23 2021/22 £'000 £'000 Council Financing Activities (13,223) 23,561 Subsidiaries (40) 0 (13,263) 23,561 98 Perth & Kinross Council Annual Accounts 2022/23 Page 119 of 226
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REMUNERATION REPORT 1. Introduction The Local Authority Accounts (Scotland) Amendment Regulations 2011 (SSI No. 2011/64) require local authorities in Scotland to prepare a Remuneration Report as part of their annual statutory accounts. The disclosures within this report have been prepared in accordance with guidance issued by the Scottish Government on 13 May 2011 in Local Government Finance Circular No 8/2011 (subsequently updated). This guidance prescribes the content and format of the information presented within the Remuneration Report and specifies that remuneration disclosures are to be based upon taxable expenses and benefits. The disclosures are set out in accordance with proper accounting practice as prescribed by the Code of Practice on Local Authority Accounting in the UK and include prior year comparative figures. 2. Audit of Remuneration Report The Remuneration Report is a statement in its own right rather than a note to the accounts and certain disclosures within the report are subject to audit. All information disclosed in Tables 1 to 7 in this Remuneration Report has been audited by the Council’s appointed auditor Audit Scotland. The other sections of the Remuneration Report have been reviewed by Audit Scotland to ensure that they are consistent with the financial statements. 3. Remuneration of Senior Councillors 3.1 The remuneration of Councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI No. 2007/183). The Regulations provide for the grading of Councillors for the purposes of remuneration arrangements, as either, the Leader of the Council, the Civic Head (Provost), Senior Councillors or Councillors. The Leader of the Council and the Civic Head cannot be the same person for the purposes of payment of remuneration. A Senior Councillor is a Councillor who holds a significant position of responsibility in the Council’s political management structure. 3.2 When determining the level of remuneration for Councillors the Scottish Ministers considered the recommendations of the former Scottish Local Authority Remuneration Committee (SLARC). SLARC was an advisory Non-Departmental Public Body set up in 2005 to advise Scottish Ministers on the remuneration, allowances and expenses incurred by local authority councillors. The Committee was stood down in February 2013. It should be noted however, that SLARC is now being reconvened to undertake a one-off independent review of Councillor Remuneration to ensure terms and conditions reflect the responsibilities of a modern-day Councillor. 3.3 The Regulations set out the salary that is to be paid to the Leader of the Council in accordance with bandings also set out in the Regulations. The Regulations also permit the Council to remunerate one Civic Head, which in the case of Perth & Kinross Council is the Provost and set out the maximum salary that may be paid to that Civic Head. For 2022/23 the maximum salary for the Leader of Perth & Kinross Council is £39,148 and the Council has agreed that the Civic Head be paid 75% of the salary of the Leader, which for 2022/23 is a maximum of £29,361. The actual amounts for 2022/23 are lower due to the election of a new Council on 6 May 2022 and the resulting delay in appointments to the new Council until 25 May 2022. Please refer to Table 1. 3.4 In addition to the Leader of the Council and Civic Head, Regulations also set out the maximum number of senior councillors the Council may have; the maximum yearly amount that may be paid to a senior councillor (75% of the total yearly amount payable to the Leader of the Council) and the maximum yearly amount payable by the Council for all senior councillors. Perth & Kinross Council may have a maximum of 14 senior councillors with a maximum salary of £29,361 and a maximum yearly amount payable for all senior councillors of £342,524 in 2022/23 (excluding the Council Leader, Civic Head, Conveners and Vice Conveners of Joint Boards). The Council is able to exercise local flexibility in the determination of the precise number of senior councillors and their salary within these maximum limits. 3.5 The Regulations also set out the remuneration payable to councillors with the responsibility of a Convener or a Vice- Convener of a Joint Board such as Tayside Valuation Joint Board. The Regulations require the remuneration to be paid by the Council of which the Convener or Vice-Convener is a member. Joint Board Conveners and Vice-Conveners are considered to be senior councillors for remuneration disclosure purposes. In financial year 2022/23, one councillor from Perth & Kinross Council served as Convener or Vice Convener of a Joint Board. 3.6 Prior to the Local Government Elections in May 2022, there were 11 senior councillors, and post-election there were 13 senior councillors and a Vice-Convener of a Joint Board. Details are provided in Table 1. Together with the Leaders of the Council and the Provosts, the total remuneration including taxable expenses paid to these Councillors was £399,209. The individual amounts payable to the Leaders of the Council, the Provosts, senior councillors of Perth & Kinross Council and the Vice-Convener of a Joint Board in 2022/23 are set out in Table 1. The Regulations also permit the Council to pay contributions or other payments as required to the Local Government Pension Scheme in respect of those Councillors who elect to become councillor members of the pension scheme. 99 Perth & Kinross Council Annual Accounts 2022/23 Page 120 of 226
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Table 1: Remuneration of Senior Councillors, Conveners and Vice-Conveners of Joint Boards for Financial Year 2022/23 Name and Post Title Salary, Fees & Allowances 2022/23 £ Total Remuneration 2022/23 £ Total Remuneration 2021/2022 £ FROM 25 MAY 2022 TO 31 MARCH 2023 (Note 1) Grant Laing Council Leader Leader of the Largest Opposition Group (01/04/2022 – 04/05/2022) 35,853 35,853 24,992 Xander McDade Provost (Civic Head) 25,031 25,031 n/a Peter Barrett Convener Licensing Board (from 04/07/2022) 17,841 17,841 n/a Bob Brawn Convener Local Review Body Convener Housing & Communities Committee (01/04/2022 – 04/05/2022) 22,939 22,939 24,992 Dave Cuthbert Vice-Convener Tayside Valuation Joint Board (from 20/06/2022) 18,134 18,134 n/a Stuart Donaldson Convener Finance & Resources Committee 23,018 23,018 n/a Eric Drysdale Deputy Leader Convener Audit Committee (01/04/2022 – 04/05/2022) 25,497 25,497 24,992 John Duff Leader of Largest Opposition Party Convener Strategic Policy & Resources Committee (01/04/2022 – 04/05/2022) 25,497 25,497 14,716 David Illingworth Convener Audit & Risk Committee 23,018 23,018 n/a Ian Massie Convener Planning & Placemaking Committee 23,018 23,018 n/a Tom McEwan Convener Housing & Social Wellbeing Committee 23,018 23,018 n/a Andrew Parrott Convener Environment, Infrastructure & Economic Development Committee 23,018 23,018 n/a John Rebbeck Convener Learning & Families Committee 23,018 23,018 n/a Colin Stewart Convener Scrutiny & Performance Committee 23,018 23,018 n/a Richard Watters Convener Climate Change & Sustainability Committee 23,018 23,018 n/a Michael Williamson Convener Licensing Committee 20,460 20,460 n/a FROM 1 APRIL 2022 TO 4 MAY 2022 D Murray Lyle Council Leader 3,691 3,691 37,213 Dennis Melloy Provost (Civic Head) 2,769 2,769 27,910 Chris Ahern Convener Licensing Committee 2,479 2,479 24,992 Kathleen Baird Convener Licensing Board 2,479 2,479 24,992 Angus Forbes Convener Environment & Infrastructure Committee 2,479 2,479 24,992 Rosalind McCall Convener Planning & Development Management Committee 2,479 2,479 24,992 Sheila McCole Convener Scrutiny Committee 2,479 2,479 24,992 Caroline Shiers Convener Lifelong Learning Committee 2,479 2,479 24,992 100 Perth & Kinross Council Annual Accounts 2022/23 Page 121 of 226
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Name and Post Title Salary, Fees & Allowances 2022/23 £ Total Remuneration 2022/23 £ Total Remuneration 2021/2022 £ Lewis Simpson Convener Local Review Body 2,479 2,479 24,992 TOTAL 399,209 399,209 329,759 Notes: (1) As noted in paragraph 3.3, senior councillors were not in position for a full year due to Council elections on 5th May 2022. The 2022/23 full year equivalent salaries are - Council Leader £39,148, Provost £29,361, senior councillors £27,000 or £24,000 dependent on the level of workload associated with their duties. The Vice Convener of the Tayside Valuation Joint Board receives a full-time equivalent salary of £23,244 based upon the statutory instrument. (2) The remuneration details of councillors who held senior roles both before and after the May 2022 election are noted in the list of senior councillors from 25 May 2022 to 31 March 2023. (3) After adjusting for the salaries of the Leaders of the Council and the Civic Heads (Provosts), the total salaries paid to Senior Councillors in 2022/23 was £334,344 which compares with the maximum under Regulations of £342,524. 3.7 The arrangements for political decision-making structures within Perth & Kinross Council as at 31 March 2023, which encompassed the salaries of all elected members including the Council Leader, Civic Head and Senior Councillors, were agreed at the meeting of the Council on 25 May 2022 (Report No. 22/110 refers) and are available on the Council’s website. 3.8 The Council paid the following salaries and expenses to all Councillors (including those listed in Table 1 above) in financial year 2022/23: Table 2: Remuneration Paid to Councillors 1 April 2022 to 31 March 2023 2022/23 2021/22 (restated) Type of Remuneration £ £ Salaries 893,775 839,745 Allowances & Expenses 28,754 16,435 Note 1 Total 922,529 856,180 Note 1: Allowances & Expenses for 2021/22 was incorrectly disclosed in the 2021/22 Audited Annual Accounts as NIL. 3.9 The annual return of Councillors’ salaries and expenses for 2022/23 is available for any member of the public to view at Culture Perth & Kinross Ltd. libraries and Council local area offices during normal working hours and is also available on the Council’s website at Councillors Expenses. 4. Remuneration of Senior Employees 4.1 The Council is required to publish the remuneration of senior employees as defined by the disclosure regulations. Senior employees are defined with reference to their management authority; to the political restriction placed upon their post under section 2(1) (a), (b) or (c) of the Local Government Housing Act 1989 and with reference to their reporting relationship to the Council’s ‘Head of Paid Service’ or Chief Executive. The disclosure requirements also include any employee whose annual remuneration is £150,000 or more. No employee of Perth & Kinross Council was remunerated at this level in 2022/23. 4.2 The application of the disclosure regulations in relation to the management structure of Perth & Kinross Council defines the following post-holders as senior employees in 2022/23: ▪ The Chief Executive as the statutory head of paid service. ▪ The Executive Director of Education & Children’s Services as the Council’s chief education officer, the Head of Legal & Governance Services as the Council’s statutory monitoring officer; the Head of Finance as the Council’s proper officer for financial administration and the Chief Officer of the Perth & Kinross Health & Social Care Partnership as the Council’s statutory Chief Social Work Officer. ▪ The Executive Director of Communities, the Chief Operating Officer, the Executive Lead - Strategic Planning and Transformation and the Chief Officer of the Perth & Kinross Health & Social Care Partnership, are officers who are directly accountable to the Council’s head of paid service and/or are directly accountable to the Council or any committee or sub-committee. 101 Perth & Kinross Council Annual Accounts 2022/23 Page 122 of 226
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4.3 The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services sets the salaries for the Chief Executives of Scottish local authorities. 4.4 The remuneration of senior employees of Perth & Kinross Council and its subsidiaries for 2022/23 is detailed in Table 3 below: Table 3: Remuneration of Senior Employees of the Council and its Subsidiaries for Financial Year 2022/23 (Job titles as at 31 March 2023) Notes: (1) The substantive salary for the Chief Executive is laid down in COSLA Circular CO/152. The Chief Executive’s remuneration in 2022/23 included a fee of £2,265.20 for acting as Returning Officer for the Local Government Election 5 May 2022. (2) Salary, fees and allowances include a Returning Officer Fee of £2,215.25 (final payment) for the Scottish Parliament Election 6 May 2021. (3) Full Year Equivalent salary, fees & allowances for the post of Executive Lead – Strategic Planning & Transformation was £103,796. (4) There were no payments of compensation for loss of office during the year. 4.5 Election fees are included with senior employee salaries. No other taxable benefits or bonuses were received by the above-named senior employees of Perth & Kinross Council in 2022/23. Name and Post Title Salary, Fees & Allowances 2022/23 £ Total Remuneration 2022/23 £ Total Remuneration 2021/22 £ Thomas Glen Chief Executive (Note 1) 148,054 148,054 57,853 Sheena Devlin Executive Director of Education & Children’s Services and Chief Education Officer 127,956 127,956 122,221 Karen Donaldson Chief Operating Officer 118,068 118,068 113,082 Stewart MacKenzie Head of Finance 97,458 97,458 93,552 Clare Mailer Executive Lead – Strategic Planning & Transformation (from 18/07/2022) (Note 3) 73,126 73,126 n/a Jacqueline Pepper Chief Officer, Perth & Kinross Health & Social Care Partnership and Chief Social Work Officer 127,786 127,786 100,887 Barbara Renton Executive Director of Communities (Note 2) 130,631 130,631 138,445 Gordon Paterson Chief Officer, Perth & Kinross Health & Social Care Partnership (to 06/03/2022) n/a n/a 113,523 Lisa Simpson Head of Legal & Governance Services 101,816 101,816 97,842 Paul Cromwell Live Active Leisure – Chief Executive 81,152 81,152 78,534 Helen Smout Culture Perth & Kinross Limited – Chief Executive 66,391 66,391 64,458 Nick Williams Perth Theatre & Concert Hall Limited – Chief Executive 70,902 70,902 70,394 TOTAL 1,143,340 1,143,340 1,050,791 102 Perth & Kinross Council Annual Accounts 2022/23 Page 123 of 226
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5. General Disclosure of Remuneration by Pay Band 5.1 In accordance with the disclosure regulations, Table 4 below details the number of Perth & Kinross Council employees (including teachers) whose annual remuneration in 2022/23 was £50,000 or more, including senior employees subject to individual disclosure in section 4 of this report. The information is presented, as required, in bandings of £5,000. Table 4: Remuneration of Employees by Pay Band for 2022/23 £50,000-£54,999 233 170 £55,000-£59,999 88 87 £60,000-£64,999 61 43 £65,000-£69,999 41 24 £70,000-£74,999 15 7 £75,000-£79,999 0 5 £80,000-£84,999 7 4 £85,000-£89,999 3 12 £90,000-£94,999 11 2 £95,000-£99,999 2 2 £100,000-£104,999 2 1 £110,000-£114,999 0 2 £115,000-£119,999 1 0 £120,000-£124,999 0 1 £125,000-£129,999 3 0 £130,000-£134,999 0 1 £145,000-£149,999 1 0 Total 468 361 2022/23 2021/22 Remuneration Bands Number of Employees Notes: The current Chief Executive’s remuneration is included in the above table range £145,000 to £149,999. Due to commencing part-way through the 2021/22 financial year, this was previously returned under banding £55,000 - £59,000. Movement in the numbers are mainly due to implementation of a pay award for SJC (Single Status Employees) and Chief Officers. Due to the delay in concluding the teachers and associated professionals 2022/23 pay award, an increase in remuneration was not applied until April 2023, therefore the information set out in Table 4 above is based on actual earnings in 2022/23. The increase in numbers are mainly due to 78 single status staff being included in the £50,000 - £54,999 following the application of the 2022/23 pay award. Table 5: The number of Exit Packages with Total Cost per band and Total Cost of Compulsory and Other Redundancies (a) Exit package cost band (including special payments) (b) Number of compulsory redundancies (c) Number of other departures agreed (d) Total number of exit packages by cost band (b) + (c) (e) Total cost of exit packages in each band 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 £’000 2021/22 £’000 £0 - £20,000 2 0 5 1 7 1 46 2 £20,001 - £40,000 0 0 1 0 1 0 22 0 Total 2 0 6 1 8 1 68 2 5.2 The costs included within Table 5 are all non-recurring and include payments to individual officers and to the relevant Pension Fund. 5.3 All of the individual exit packages included within Table 5 have been subject to a full business case or legal agreement outlining the implications for the Council or are related to officers who have temporary contracts, and their contract has ceased but they are entitled to a redundancy payment due to their length of employment. In terms of the financial assessment for each business case, the maximum payback period is up to five years. The departure of individuals has delivered significant recurring savings to the Council in the past and also facilitated the delivery of an ambitious and challenging transformation / modernisation programme. 6. Remuneration by Subsidiary Bodies of Perth & Kinross Council 6.1 Councillors and senior employees of Perth & Kinross Council serve as board members, officials and technical advisors to subsidiary bodies of the Council. In 2022/23, the Head of Legal & Governance Services served as a proper officer to the 103 Perth & Kinross Council Annual Accounts 2022/23 Page 124 of 226
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Tayside and Central Scotland Transport Partnership (TACTRAN). No remuneration was paid to councillors or senior employees of Perth & Kinross Council by subsidiary bodies of the Council in 2022/23. 7. Disclosure of Pension Benefits 7.1 The disclosure regulations require the separate disclosure of accrued pension benefits for senior councillors and senior employees of Perth & Kinross Council. Pension Benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS). Councillors have only been eligible to join this scheme since May 2007. 7.2 Councillor’s pension benefits are based on career average pay. The councillor’s pay for each year or part year ending 31 March (other than the pay in the final year commencing 1 April) is increased by the increase in the cost of living as measured by the appropriate index between the end of that year and the last day of the month in which their membership of the scheme ends. The total of the revalued pay is then divided by the period of membership to calculate the career average pay. This is the value used to calculate the pension benefits. 7.3 From 1 April 2015 a career average scheme was implemented for local government employees. This means that pension is built up based on the pensionable pay for each year. The benefit is added to the employee’s pension account plus inflation increases. The scheme’s normal retirement age for both councillors and employees will vary dependant on age and length of pensionable service. 7.4 From 1 April 2009 a tiered contribution scheme was introduced with contributions from scheme members being based on how much pay falls into each tier. Prior to 2009 contribution rates were set at 6% for all non-manual employees. Tiered Pension Contribution Rates for Local Government Pension Scheme Members in 2022/23 Actual Pensionable pay Contribution Rate 2022/23 On earnings up to and including £23,000 5.5% On earnings above £23,001 and up to £28,100 7.25% On earnings above £28,101 and up to £38,600 8.5% On earnings above £38,601 and up to £51,400 9.5% On earnings above £51,401 12% 7.5 Pensionable Pay includes salary, plus any contractual elements of pay such as shift payment, night working payment, standby and the monetary value of any accommodation or other allowances in kind pertaining to employment. 7.6 Under the scheme there is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. The pension is built up based on pensionable pay in the year with an accrual rate of 1/49th added to the pension account. (Prior to 2015 the accrual rate was 1/60th of final pensionable salary and years of pensionable service. Prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service). 7.7 The value of accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a pension on their retirement without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation. The pension figures shown relate to the benefits that the person has accrued as a consequence of their local government service, and not just their current appointment. 7.8 Pension Entitlements of Senior Councillors The pension entitlements of senior councillors of Perth & Kinross Council for the year to 31 March 2023 are shown in Table 6 below, together with the contribution made by the Council to each senior councillor’s pension during the year. 104 Perth & Kinross Council Annual Accounts 2022/23 Page 125 of 226
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Table 6: Pension Entitlements of Senior Councillors for Financial Year 2022/23 Name and Post Title In-year pension contributions (Note 2) Accrued Pension Benefits (Note 3) 2022/23 £ 2021/22 £ as at 31/03/2023 £’000 as at 31/03/2022 £’000 Difference £’000 SENIOR COUNCILLOR BETWEEN 25 MAY 2022 AND 31 MARCH 2023 (Note 1) Grant Laing Council Leader Leader of the Largest Opposition Group (01.04.22 – 04.05.22) 6,268 4,249 Pension Lump Sum 5 0 4 0 1 0 Xander McDade Provost (Civic Head) 4,742 n/a Pension Lump Sum 2 0 n/a n/a n/a n/a Peter Barrett Convener Licensing Board (from 04/07/2022) 3,888 n/a Pension Lump Sum 7 2 n/a n/a n/a n/a Bob Brawn Convener Local Review Board Convener Housing & Communities Committee (01/04/2022 – 04/05/2022) 4,073 4,249 Pension Lump Sum 3 0 2 0 1 0 Dave Cuthbert Vice-Convener Tayside Valuation Joint Board 3,493 n/a Pension Lump Sum 0 0 n/a n/a n/a n/a Stuart Donaldson Convener Finance & Resources Committee 4,400 n/a Pension Lump Sum 3 0 n/a n/a n/a n/a Eric Drysdale Deputy Leader Convener Audit Committee (01/04/2022 – 04/05/2022) 4,508 4,249 Pension Lump Sum 3 0 2 0 1 0 John Duff Leader of Largest Opposition Party Convener Strategic Policy & Resources Committee (01/04/2022 – 04/05/2022) 4,508 3,807 Pension Lump Sum 2 0 2 0 0 0 David Illingworth Convener Audit & Risk Committee 4,400 n/a Pension Lump Sum 2 0 n/a n/a n/a n/a Ian Massie Convener Planning & Placemaking Committee 4,400 n/a Pension Lump Sum 1 0 n/a n/a n/a n/a Tom McEwan Convener Housing & Social Wellbeing Committee 4,400 n/a Pension Lump Sum 2 0 n/a n/a n/a n/a Andrew Parrott Convener Environment, Infrastructure and Economic Development Committee 4,400 n/a Pension Lump Sum 3 0 n/a n/a n/a n/a John Rebbeck Convener Learnings & Families Committee 4,400 n/a Pension Lump Sum 2 0 n/a n/a n/a n/a Colin Stewart Convener Scrutiny & Performance Committee 4,400 n/a Pension Lump Sum 3 0 n/a n/a n/a n/a Richard Watters Convener Climate Change & Sustainability Committee 4,400 n/a Pension Lump Sum 2 0 n/a n/a n/a n/a Michael Williamson Convener Licensing Committee 3,965 n/a Pension Lump Sum 4 0 n/a n/a n/a n/a SENIOR COUNCILLOR BETWEEN 1 APRIL 2022 AND 4 MAY 2022 Murray Lyle Council Leader (Note 4) 628 6,326 Pension Lump Sum 9 2 8 2 1 0 Dennis Melloy Provost (Civic Head) n/a 338 Pension Lump Sum n/a n/a 9 2 n/a n/a Chris Ahern Convener Licensing Committee 3,431 4,249 Pension Lump Sum 3 0 2 0 1 0 Kathleen Baird Convener Licensing Board (Note 4) 421 4,249 Pension Lump Sum 4 0 4 0 0 0 105 Perth & Kinross Council Annual Accounts 2022/23 Page 126 of 226
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Name and Post Title In-year pension contributions (Note 2) Accrued Pension Benefits (Note 3) 2022/23 £ 2021/22 £ as at 31/03/2023 £’000 as at 31/03/2022 £’000 Difference £’000 Angus Forbes Convener Environment & Infrastructure Committee 3,431 4,249 Pension Lump Sum 3 0 2 0 1 0 Rosalind McCall Convener Planning & Development Management Committee 421 4,249 Pension Lump Sum 2 0 2 0 0 0 Sheila McCole Convener Scrutiny Committee 3.431 4,249 Pension Lump Sum 3 0 2 0 1 0 Caroline Shiers Convener Lifelong Learning Committee 3,431 4,249 Pension Lump Sum 7 2 6 2 1 0 Lewis Simpson Convener Local Review Body (Note 4) 421 4,249 Pension Lump Sum 5 32 7 2 -2 30 TOTAL 86,260 52,961 Notes: (1) The remuneration details of councillors who held senior roles both before and after the May 2022 election are noted in the list of senior councillors from 25 May 2022 to 31 March 2023. (2) The in-year employer pension contributions shown are based on all pensionable earnings for financial year 2022/23, not just current appointments. (3) The pension benefits shown relate to the benefits that the individual has accrued as a consequence of their total local government service, including any service with a Council subsidiary body, and not just their current appointment. Councillors have only been eligible to join the Local Government Pension Scheme since May 2007. Former Provost Dennis Melloy left the scheme 26 April 2021. (4) Pension commenced 05/05/2022 which includes payment of retirement grant (where applicable). 7.9 Pension Entitlements of Senior Employees The pension entitlements of senior employees of Perth & Kinross Council and its subsidiaries for the year to 31 March 2023 are shown in Table 7 below, together with the contribution made by the Council to each senior employee’s pension during the year. Table 7: Pension Entitlements of Senior Employees of the Council and its Subsidiaries for Financial Year 2022/23 (Post titles as at 31 March 2023) Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2022/23 £ 2021/22 £ as at 31/03/2023 £’000 as at 31/03/2022 £’000 Difference £’000 Thomas Glen Chief Executive 25,169 9,835 Pension Lump Sum 4 0 1 0 3 0 Sheena Devlin Executive Director of Education & Children’s Services and Chief Education Officer 21,724 20,723 Pension Lump Sum 72 122 66 116 6 6 Karen Donaldson Chief Operating Officer 20,004 19,087 Pension Lump Sum 58 95 53 90 5 5 Stewart MacKenzie Head of Finance 16,568 15,813 Pension Lump Sum 48 68 44 65 4 3 Clare Mailer Executive Lead Strategic Plan & Transformation (from 18/07/2022) 17,599 n/a Pension Lump Sum 43 55 n/a n/a n/a n/a Jacqueline Pepper Chief Officer, Perth & Kinross Health & Social Care Partnership and Chief Social Work Officer 21,724 17,066 Pension Lump Sum 44 33 36 26 8 7 Barbara Renton Executive Director of Communities 21,724 22,688 Pension Lump Sum 35 9 32 9 3 0 Gordon Paterson Chief Officer, Perth & Kinross Health & Social Care Partnership (to 06/03/2022) n/a 19,299 Pension Lump Sum n/a n/a 59 103 n/a n/a 106 Perth & Kinross Council Annual Accounts 2022/23 Page 127 of 226
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Name and Post Title In-year pension contributions (Note 1) Accrued Pension Benefits (Note 2) 2022/23 £ 2021/22 £ as at 31/03/2023 £’000 as at 31/03/2022 £’000 Difference £’000 Lisa Simpson Head of Legal & Governance Services 17,256 16,468 Pension Lump Sum 16 0 13 0 3 0 Paul Cromwell Live Active Leisure – Chief Executive 13,796 13,351 Pension Lump Sum 24 12 21 12 3 0 Helen Smout Culture Perth & Kinross Limited - Chief Executive 11,287 10,958 Pension Lump Sum 25 24 23 23 2 1 Nick Williams Perth Theatre & Concert Hall Limited – Chief Executive 12,053 11,542 Pension Lump Sum 5 0 3 0 2 0 TOTAL 198,904 176,830 Notes: (1) The in-year employer pension contributions shown are based on all pensionable earnings for financial year 2022/23, not just the current appointment. (2) Accrued pension benefits include total benefits accumulated during all membership of the Local Government Pension Scheme and not just service in their current role. 8. Trade Union (Facility Time Publication Requirements) Regulations 2017 8.1 The Council is required to report from 1 April 2017 a range of information on facility time made available to its employees who are trade union representatives. This link provides the information: Trade Union Statutory Return 2022/23 Signed: Thomas Glen Councillor Grant Laing Chief Executive Leader of the Council Perth & Kinross Council Date: Perth & Kinross Council Date: 107 Perth & Kinross Council Annual Accounts 2022/23 Page 128 of 226
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GLOSSARY ACCOUNTING PERIOD The period of time covered by the accounts, normally a period of twelve months commencing on 1 April. The end of the accounting period is the Balance Sheet date. ACCRUALS Sums included in the final accounts to recognise revenue and capital income and expenditure earned or incurred in the financial year, but for which actual payment had not been received or made as at 31 March. BEACON METHOD (ADJUSTED VACANT POSSESSION METHOD) Based on the (vacant possession) market value of the asset which is the adjusted to reflect the assets’ use for social housing with a sitting tenant. CAA Capital Adjustment Account CAPITAL EXPENDITURE Expenditure on the acquisition of a fixed asset, which will be used in providing services beyond the current accounting period, or expenditure which adds to and not merely maintains the value of an existing fixed asset. CAPITAL FINANCING Funds raised to pay for capital expenditure. There are various methods of financing capital expenditure including borrowing, leasing, direct revenue financing, usable capital receipts, capital grants, capital contributions, revenue reserves and earmarked reserves. CAPITAL RECEIPT The proceeds from the disposal of land or other fixed assets. Proportions of capital receipts can be used to finance new capital expenditure, within rules set down by the Government but they cannot be used to finance revenue expenditure. CONTINGENT LIABILITY A contingent liability is either: − A possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the Council’s control; or − A present obligation arising from past events where it is not probable that a transfer of economic benefits will be required, or the amount of the obligation cannot be measured with sufficient reliability. CORPORATE & DEMOCRATIC CORE The corporate and democratic core comprises all the activities that local authorities engage in specifically because they are elected, multi-purpose authorities. The cost of these activities are thus over and above those which would be incurred by a series of independent single purpose, nominated bodies managing the same services. There is therefore no logical basis for apportioning these costs to services. CREDITOR Amount owed by the Council for work done, goods received or services rendered within the accounting period, but for which payment has not been made by the Council by the end of that accounting period. CRR Capital Receipts Reserve CURRENT VALUE The measurement of operational assets used for the delivery of Council services. Property, plant and equipment is measured on the basis of service potential using existing use value for assets where an active market exists, existing use value-social housing for operational Council dwellings or depreciated replacement cost for assets where there is no market and/or the asset is specialised. DBFM Design Build Finance Maintain - A Non-Profit Distribution (NPD) model to Design, Build, Finance, and Maintain infrastructure which requires the private sector to take a fixed rate of return. The DBFM agreement provides the Council with the right to receive services in return for an annual payment (unitary charge) which comprises the costs of construction, finance, and maintenance, and for the provision of any agreed additional services, for the duration of the agreement. DEBTOR Amount owed to the Council for works done, goods received or services rendered within the accounting period, but for which payment has not been received by the Council by the end of that period. EXISTING USE VALUE FOR SOCIAL HOUSING (EUV-SH) Is the estimated amount for which a property should exchange on the date of valuation, between a willing buyer and a willing seller in an arm’s length transaction. 108 Perth & Kinross Council Annual Accounts 2022/23 Page 129 of 226
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FAIR VALUE Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FIAA Financial Instruments Adjustment Account IMPAIRMENT A reduction in the value of a fixed asset to below its carrying amount on the Balance Sheet. MATERIALITY The concept that the Annual Accounts should include all amounts which, if omitted, or mis-stated, could be expected to lead to a distortion of the financial statements and ultimately mislead a user of the accounts. NET BOOK VALUE The amount at which fixed assets are included in the Balance Sheet, i.e. their historical costs or current value less the cumulative amounts provided for depreciation. NON-DISTRIBUTED COSTS These are overheads which cannot be directly allocated to a specific area of activity and as such are not apportioned to services. PPE Property, Plant & Equipment PRIOR YEAR ADJUSTMENT Material adjustments applicable to previous years arising from changes in accounting policies or from the correction of fundamental errors. This does not include normal recurring corrections or adjustments of accounting estimates made in prior years. PROVISION An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur but the amounts or dates of when they will arise are uncertain. PUBLIC WORKS LOAN BOARD (PWLB) An agency of HM Treasury, which provides loans mainly for capital purposes of one year or more to authorities at interest rates of up to 2% above those at which the UK Government can itself borrow at. REVENUE EXPENDITURE The day-to-day expenses of providing services. 109 Perth & Kinross Council Annual Accounts 2022/23 Page 130 of 226
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Corporate & Democratic Services Chief Operating Officer Karen Donaldson Brian Howarth Audit Director Audit Scotland 4th Floor 8 Nelson Mandela Place Glasgow G2 1BT Finance Division Head of Service Stewart MacKenzie 2 High Street, PERTH, PH1 5PH Tel 01738 475500 Contact Mr Stewart MacKenzie www.pkc.gov.uk Our ref SMACK/AOB/KD Your ref Date Dear Brian Perth & Kinross Council Annual Accounts 2022/23 1. This representation letter is provided about your audit of the annual accounts of Perth & Kinross Council and its group (hereafter referred to as Perth & Kinross Council) for the year ended 31 March 2023 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view in accordance with the financial reporting framework, and for expressing other opinions on the remuneration report, management commentary and annual governance statement. 2. I confirm to the best of my knowledge and belief and having made appropriate enquiries of the Chief Executive and Executive Leadership Team, the following representations given to you in connection with your audit of Perth & Kinross Council’s annual accounts for the year ended 31 March 2023. General 3. Perth & Kinross Council and I have fulfilled our statutory responsibilities for the preparation of the 2022/23 annual accounts. All the accounting records, documentation and other matters which I am aware are relevant to the preparation of the annual accounts have been made available to you for the purposes of your audit. All transactions undertaken by Perth & Kinross Council have been recorded in the accounting records and are properly reflected in the financial statements. 4. I confirm that the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. I am not aware of any uncorrected misstatements other than those reported by you. Delayed Office Opening for Employee Training This office will be closed from 8.45 am - 11.00 am on the first Thursday of each month. 5 Page 131 of 226
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Financial Reporting Framework 5. The annual accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (the Code) and the requirements of the Local Government (Scotland) Act 1973, the Local Government in Scotland Act 2003 and The Local Authority Accounts (Scotland) Regulations 2014. 6. In accordance with the 2014 regulations, I have ensured that the financial statements give a true and fair view of the financial position of the Perth & Kinross Council and its group at 31 March 2023 and the transactions for 2022/23. Accounting Policies & Estimates 7. All significant accounting policies applied are as shown in the notes to the financial statements. The accounting policies are determined by the Code where applicable. Where the Code does not specifically apply, I have used judgement in developing and applying an accounting policy that results in information that is relevant and reliable. All accounting policies applied are appropriate to Perth & Kinross Council circumstances and have been consistently applied. 8. The significant assumptions used in making accounting estimates are reasonable and properly reflected in the financial statements. Judgements used in making estimates have been based on the latest available, reliable information. Estimates have been revised where there are changes in the circumstances on which the original estimate was based or as a result of new information or experience. Going Concern Basis of Accounting 9. I have assessed Perth and Kinross Council’s ability to continue to use the going concern basis of accounting and have concluded that it is appropriate. I am not aware of any material uncertainties that may cast significant doubt on Perth & Kinross Council’s ability to continue as a going concern. Assets 10. Where a rolling programme of asset valuations has been used, I have satisfied myself that the carrying amount of assets at 31 March 2023 does not differ materially from that which would be determined if a revaluation had been carried out at that date. 11. I carried out an assessment at 31 March 2023 as to whether there is any indication that an asset may be impaired and have recognised any impairment losses identified. 12. I have provided you with all information of which I am aware regarding any valuation exercises carried out after 31 March 2023. 13. There are no plans or intentions that are likely to affect the carrying value or classification of the assets recognised within the financial statements. Page 132 of 226
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14. Owned assets are free from any lien, encumbrance or charge except as disclosed in the financial statements. Liabilities 15. All liabilities at 31 March 2023 of which I am aware have been recognised in the annual accounts. 16. Provisions have been recognised in the financial statements for all liabilities of uncertain timing or amount at 31 March 2023 of which I am aware where the conditions specified in the Code have been met. The amount recognised as a provision is the best estimate of the expenditure likely to be required to settle the obligation at 31 March 2023. Where the effect of the time value of money is material, the amount of the provision has been discounted to the present value of the expected payments. 17. The accrual recognised in the financial statements for holiday untaken by 31 March 2023 has been estimated on a reasonable basis. 18. The pension assumptions made by the actuary in the IAS 19 report for Perth & Kinross Council have been reviewed and I confirm that they are consistent with management's own view. 19. There are no plans or intentions that are likely to affect the carrying value or classification of the liabilities recognised in the financial statements. Contingent liabilities 20. There are no significant contingent liabilities, other than those disclosed in Note 38 to the financial statements, arising either under formal agreement or through formal undertakings requiring disclosure in the accounts. All known contingent liabilities have been fully and properly disclosed, including any outstanding legal claims which have not been provided under the Code and IAS 37. Fraud 21. I have provided you with all information in relation to: • my assessment of the risk that the financial statements may be materially misstated because of fraud • any allegations of fraud or suspected fraud affecting the financial statements • fraud or suspected fraud that I am aware of involving management, employees who have a significant role in internal control, or others that could have a material effect on the financial statements. Page 133 of 226
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Laws and Regulations 22. I have disclosed to you all known instances of non-compliance or suspected non- compliance with laws and regulations whose effects should be considered when preparing financial statements. Related Party Transactions 23. All material transactions with related parties have been appropriately accounted for and disclosed in the financial statements in accordance with the Code. I have made available to you the identity of all Perth & Kinross Council’s related parties and all the related party relationships and transactions of which I am aware. Remuneration Report 24. The Remuneration Report has been prepared in accordance with the Local Authority Accounts (Scotland) Amendment Regulations 2014, and all required information of which I am aware has been provided to you. Management commentary 25. I confirm that the Management Commentary has been prepared in accordance with the statutory guidance and the information is consistent with the financial statements. Corporate Governance 26. I confirm that Perth & Kinross Council has undertaken a review of the system of internal control during 2022/23 to establish the extent to which it complies with proper practices set out in the Delivering Good Governance in Local Government: Framework 2016. I have disclosed to you all deficiencies in internal control identified from this review or of which I am otherwise aware. 27. I confirm that the Annual Governance Statement has been prepared in accordance with the Delivering Good Governance in Local Government: Framework 2016 and the information is consistent with the financial statements. There have been no changes in the corporate governance arrangements or issues identified, since 31 March 2023, which require to be reflected. Group Accounts 28. I have identified all the other entities in which Perth & Kinross Council has a material interest and have classified and accounted for them in accordance with the Code. Any significant issues with the financial statements of group entities, including any qualified audit opinions, have been advised to you. Page 134 of 226
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Common Good Fund 29. I confirm, to the best of my ability, that all material common good assets have been identified and correctly accounted for within the common good fund financial statements and where appropriate, common good assets in use by the council have been assessed and accounted for in line with IAS 17. Events Subsequent to the Date of the Balance Sheet 30. All events subsequent to 31 March 2023 for which the Code requires adjustment or disclosure have been adjusted or disclosed. Yours sincerely Stewart MacKenzie Head of Finance / Section 95 Officer Page 135 of 226
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Prepared for the Members of Perth & Kinross Council and the Controller of Audit 11 December 2023 Perth & Kinross Council DRAFT 2022/23 Annual Audit Report 5 Page 137 of 226
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Contents | 2 Contents Key messages 3 Introduction 4 1. Audit of 2022/23 annual accounts 5 2. Financial management 18 3. Financial sustainability 22 4. Other wider scope audit work 27 Appendix. Action plan 2022/23 31 Page 138 of 226
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Key messages | 3 Key messages Audit of 2022/23 annual accounts 1 Audit opinions on Perth & Kinross Council’s 2022/23 Annual Accounts and the connected charities’ 2022/23 financial statements are unmodified. Financial management and sustainability 2 The Council’s budget setting and financial management arrangements operated effectively during 2022/23. 3 The budget included a planned draw on reserves of £32.3 million and the actual outturn was £16.1 million less than this. 4 There are clear links to Corporate Plan priorities within the Medium-Term Financial Plan and cumulative funding gaps of up to £192 million are projected over the next six years. 5 One of the Council’s major capital projects has been paused due to inflationary cost pressures and the Council is developing an asset management strategy. Other wider scope audit work 6 The Council continues to have a clear vision and a transformation and change strategy that is extensive and ambitious. 7 Reporting of performance has improved although further work is required to monitor actions against previous BV recommendations. Page 139 of 226
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Introduction | 4 Introduction 1. This report summarises the findings from the 2022/23 annual audit of Perth & Kinross Council (the Council) and will be published on Audit Scotland’s website: www.audit-scotland.gov.uk. 2. The scope of the audit was set out in an annual audit plan presented to the March meeting of the Audit and Risk Committee. This annual audit report comprises significant matters arising from the audit of Perth & Kinross Council’s 2022/23 Annual Accounts and conclusions on the wider scope areas, as set out in the Code of Audit Practice 2021. 3. We would like to thank elected members, management and staff, particularly those in finance, for their co-operation and assistance and we look forward to continuing to work together constructively over the five-year appointment. Adding value through the audit 4. We aim to help the Council promote improved standards of governance, better management and decision-making and more effective use of resources. We do this by sharing intelligence and good practice, by identifying and providing insight on significant risks, and making clear recommendations for improvement. Responsibilities and reporting 5. Perth & Kinross Council has responsibility for ensuring the proper financial stewardship of public funds. This includes preparing annual accounts that are in accordance with proper accounting practices. Perth & Kinross Council is also responsible for compliance with legislation and establishing appropriate arrangements for governance and propriety. 6. The responsibilities of the independent auditor are established by the Local Government (Scotland) Act 1973, the Code of Audit Practice 2021, and supplementary guidance and International Standards on Auditing in the UK. 7. This report contains an agreed action plan at the Appendix setting out specific recommendations, responsible officers and dates for implementation. Weaknesses or risks identified in this report are only those which have come to our attention during our normal audit work and may not be all that exist. Communicating these does not absolve management of its responsibility to address the issues we raise and from maintaining adequate systems of control. Auditor Independence 8. We confirm that we comply with the Financial Reporting Council’s Ethical Standard and that we have not undertaken any non-audit related services. We are not aware of any relationships that could compromise our objectivity or our independence. Page 140 of 226
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1. Audit of 2022/23 annual accounts | 5 1. Audit of 2022/23 annual accounts Public bodies are required to prepare annual accounts comprising financial statements and other related reports. These are the principal means of accounting for the stewardship public funds. Audit opinions on Perth & Kinross Council’s 2022/23 Annual Accounts and the statement of accounts of the connected charities are unmodified. Audit opinions on the annual accounts are unmodified 9. The independent auditor’s report included the following audit opinions on the annual accounts: • the financial statements give a true and fair view and were properly prepared in accordance with the financial reporting framework • the audited part of the remuneration report was prepared in accordance with the financial reporting framework • the management commentary and annual governance statement were consistent with the financial statements and properly prepared in accordance with the applicable requirements. The accounts were certified on 11 December 2023, later than planned due to the availability of audit resources 10. We received the unaudited annual accounts on 26 June 2023, in line with the agreed audit timetable. The accounts presented for audit were of a good standard and officers provided good support to the audit team during the audit. 11. The 2022/23 annual accounts were certified on 11 December 2023 which is later than planned due to the availability of audit resources. We are working hard to return to pre-Covid reporting timescales for all of our audits over this current appointment period, but there are a number of challenges to achieving this including the need to maintain quality standards and the wellbeing of audit staff. Our audit approach and testing was informed by the overall materiality level of £14 million 12. The concept of materiality is applied by auditors to determine whether misstatements identified during the audit could reasonably be expected to influence the economic decisions of users of the financial statements, and impact the opinion set out in the independent auditor’s report. Auditors set a Page 141 of 226
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1. Audit of 2022/23 annual accounts | 6 monetary threshold when considering materiality, although some issues may be considered material by their nature. It is ultimately a matter of the auditor’s professional judgement. 13. Our initial assessment of materiality was carried out during the planning phase of the audit and was based on the financial results reported in the audited 2021/22 annual accounts. These materiality levels were reported in our annual audit plan to the March 2023 meeting of the Audit and Risk Committee. 14. On receipt of the unaudited 2022/23 annual accounts we reconsidered our materiality levels based on the financial results for the year ended 31 March 2023, and decided to amend our planned amounts to reflect the increase in gross expenditure. Materiality amounts are detailed in Exhibit 1. Exhibit 1 Materiality values Materiality level Council Group Overall materiality £14.0 million £14.2 million Performance materiality £8.4 million £8.5 million Reporting threshold £0.250 million £0.250 million Source: Audit Scotland 15. Performance materiality is used by auditors when undertaking work on individual areas of the financial statements. It is a lower materiality threshold, set to reduce the probability of aggregated misstatements exceeding overall materiality. Performance materiality was set at 60 percent of overall materiality, reflecting the scale of previous year’s adjustments, the extent of estimation in the accounts and the planned testing in proportion to the scale of the organisation. Our audit identified and addressed the risks of material misstatement 16. Exhibit 2 sets out the significant and non-significant risks of material misstatement to the financial statements. It also summarises the further audit procedures we performed during the year to obtain assurances over these risks and the conclusions from the work completed. Page 142 of 226
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1. Audit of 2022/23 annual accounts | 7 Exhibit 2 Significant and non-significant risks of material misstatement Nature of risk Audit response Conclusion Significant risks of material misstatement 1. Risk of material misstatement due to fraud caused by management override of controls As stated in International Standard on Auditing (UK) 240, management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. Assess the design and implementation of controls over journal entry processing. Make enquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries and other adjustments. Test journals at the year-end and post-closing entries and focus on significant risk areas. Consider the need to test journal entries and other adjustments during the period. Evaluate significant transactions outside the normal course of business. Assess any changes to the methods and underlying assumptions used to prepare accounting estimates compared to the prior year. Substantively test income and expenditure transactions around the year-end to confirm they are accounted for in the correct financial year. Test accounting accruals and prepayments focusing on significant risk areas. The completion of the assurance procedures did not identify any evidence of management override of controls. 2. Estimation in the valuation of council dwellings The Council’s housing stock was last revalued in Examine management’s assessment of fair value of council dwellings not subject to full revaluation in 2022/23. We will critically assess if this is based on expert valuer’s opinion/ and assess the We reviewed and critically assessed management's assessment of the movement in council dwelling valuations based on average house prices in Perth and Kinross. Page 143 of 226
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1. Audit of 2022/23 annual accounts | 8 Nature of risk Audit response Conclusion 2019/20 by the District Valuer Service (DVS). Valuations are based on specialist assumptions including the discount factor to apply for social housing. Changes in these assumptions can result in material changes to valuations. There has been limited adjustment to the valuation of council dwellings since the 2019/20 valuation exercise. There is a risk that the carrying amount in the accounts at 31 March 2023 does not appropriately reflect movements and changes in assumptions since the last revaluation. appropriateness of any assumptions. If undertaken, we will review the information provided to the external valuer and complete a walkthrough of the valuation process for council dwellings to obtain an understanding of the process, including the methodologies and assumptions applied. Test the reconciliation between the financial ledger and the property asset register and any valuation reports to check asset valuations and useful lives. We performed our own analysis using buy-back data and derived an auditor's estimate range based on this information. The carrying value of council dwellings at 31 March 2023 sits within this range therefore no adjustment was made in the accounts. We are holding separate discussions with the Council to agree a way forward to regularly review (and, if necessary, adjust) the carrying value of council dwellings in the years between formal valuations. These will include how the Council obtains the valuer’s input to these reviews. Recommendation 1 3. Estimation in the valuation of other land and buildings (OLB) There is a significant degree of subjectivity in the valuation of other land and buildings. Valuations are based on specialist assumptions and changes in these can result in material changes to valuations. OLB are revalued on a five-year rolling basis. Values may change between periodic valuations and recently have resulted in increases of between 3 and 6 percent each year. OLB are valued at 1 April and there is a risk of material movement Review the information provided to the external valuer to assess for completeness. Evaluate the competence, capabilities, and objectivity of the professional valuer. Complete a walkthrough of the valuation process for OLB to obtain an understanding of the process, including the methodologies and assumptions applied. Review reports from the valuer to confirm overall asset valuation. Obtain an understanding of management’s involvement in the valuation process for OLB to assess if appropriate oversight has occurred. Examine management’s assessment of fair value of OLB assets not revalued in Shops, depots, tips and car parks were subject to a full valuation process in 2022/23. The date of valuation is 1 April or 1 August. We reviewed and tested the outcome of the valuation process and did not identify any material issues. The unaudited accounts did not include a current value assessment at 31 March 2023, as this was not considered material by management. However audit review of schools and PFI campuses identified these had moved by a material amount since the last formal valuation. This resulted in an adjustment being applied to increase the carrying value of other land and buildings in the audited financial statements by £90 million. Page 144 of 226
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1. Audit of 2022/23 annual accounts | 9 Nature of risk Audit response Conclusion between the date of valuation and the balance sheet date. It is important that the Council undertakes fair value assessments to ensure the financial statements accurately reflect the carrying value of the land and buildings at 31 March 2023. 2022/23. We will critically assess if this is based on expert valuer’s opinion/ and assess the appropriateness of any assumptions. Test the reconciliation between the financial ledger and the property asset register and any valuation report to check asset valuations and useful lives. There is no impact on the General Fund. Refer to Item 1 in Exhibit 3. Our work also identified a control weakness in this area, as the Council does not prepare a reconciliation between the financial ledger and the fixed asset register or between the valuation report and the asset register. We compared the valuer report with the asset register and did not identify any material omissions. Recommendation 2 4. Changes to core financial systems The Council is implementing a new cash management system during the 2022/23, with a ‘go-live’ date very close to the year-end. There has also been a significant upgrade to the main financial ledger system during the year. Information required for the financial systems is at risk of material error if the system does not operate as planned, or inadequate control processes are in place to ensure the integrity of data transfer between old and new systems. Review and assess the adequacy of controls put in place by management to ensure the integrity of data transfer between systems Perform checks on the completeness and accuracy of opening balances transferred to the new system Ensure early bank reconciliations are prepared following the introduction of the new system, asses the volume of reconciling items compared to the previous system and test any significant reconciling items. Cash management system (Pay360): Our audit confirmed the new system was a migration to a cloud-based version of the previous system, rather than a full replacement. Only historic data was migrated, and controls and exception reports were generated and checked to ensure there was no missing data. We did not identify any issues with the controls put in place by management to ensure a seamless transition between systems. Integra upgrade: The upgrade only changed the overlying software structure, the underlying data were unaltered. Officers produced a trial balance before and after the upgrade. This was checked to ensure the new system was reading and interpreting the data consistently. We did not identify any issues with the controls put in place by management to ensure the integrity of ledger Page 145 of 226
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1. Audit of 2022/23 annual accounts | 10 Nature of risk Audit response Conclusion data before and after the upgrade. Other non-significant risks of material misstatement 5. Estimation in the valuation of pension assets and liabilities Actuarial estimates are a complex combination of liabilities over significant future periods based on life expectancy, CPI growth and discounting (based on corporate bond rates). Assets are based on an individual employer body’s share of assets at the last triennial valuation. Roll forward adjustments are provided to members data and to asset valuations. There is a risk that small changes in the assumptions used can lead to large changes in the resulting valuations resulting in material misstatement in the annual accounts. Assess the scope, independence and competence of the professionals engaged in providing estimates for pensions. Review the appropriateness of actuarial assumptions and results including comparison with other councils and the pension fund as a whole. Establish officers’ arrangements for ensuring the reasonableness of professional estimations and the accuracy of information provided to the actuary by the Council. A review of other councils’ actuarial reports identified that Tayside Pension Fund had an unusually high assessment of pension assets under IFRIC14. The inferred value of the asset was 11 times the Council’s annual employer contribution. The actuarial method used to determine this value was considered, and we identified that the valuation of costs and contributions were assessed over very different timeframes. A revised IAS19 actuarial report was obtained, and the annual accounts were amended to reflect the revised valuation. Refer to Items 2 and 3 in Exhibit 3. 6. Estimation in PFI/DBFM models The Council has acquired assets under PFI and DBFM contracts with a fair value of £164 million at 31 March 2022. The accounts also include amounts due to contractors under these contracts totalling £127 million. Unitary charge payments to contractors require to be divided into the service and construction elements Obtain financial models and assess them for reasonableness, based on whether they have been updated to reflect current unitary charges. Determine management’s processes for updating the models to reflect the future impact of recent changes in RPI/CPI, based on the requirements of the original contract indexation terms. Confirm the impact of the financial flexibilities on the We did not identify any material errors in the liability attributable to PFI/DBFM assets. The Council is not implementing the financial flexibility set out in finance circular 10/2022 until the 2023/24 financial year. Our planned audit work in this area was therefore not carried out and will be reconsidered when planning our 2023/24 audit procedures. Page 146 of 226
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1. Audit of 2022/23 annual accounts | 11 Nature of risk Audit response Conclusion using estimation techniques. In addition, the Council has agreed to adopt the financial flexibilities set out in finance circular 10/2022 within its 2022/23 accounts. There is a risk of misstatement in the associated liability if inappropriate assumptions have been made, particularly given recent changes to RPI/CPI and associated indices. PFI and DBFM loans fund repayments. We report significant findings from the audit 17. Under International Standard on Auditing (UK) 260 we communicate significant findings from the audit including our view about the qualitative aspects of the body’s accounting practices. 18. The significant findings are summarised in Exhibit 3. Our audit also identified other presentation and disclosure issues which were discussed with management. These were all adjusted in the audited annual accounts, and none were significant enough to require to be separately reported under ISA260. Exhibit 3 Significant findings and key matters from the audit of the annual accounts Issue Resolution 1. Valuation of other land and buildings The carrying amount of an item of property, plant and equipment should reflect its current value. However, the Code of Practice on Local Authority Accounting (the Code) does not explicitly require an annual revaluation. Instead, revaluations are required to be made with sufficient regularity to ensure that the carrying amount does not differ materially from the current value. The Code permits a maximum interval of five years between valuations but that is only appropriate where the change in value in the intervening period is not significant. Therefore, more frequent valuations are required for assets that experience significant annual changes in value. The unaudited annual accounts reported an overall carrying value for Other Land and Buildings (OLB) of £629 million, which included The audited financial statements have been adjusted to reflect current valuations of land and buildings. Recommendation 1 Page 147 of 226
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1. Audit of 2022/23 annual accounts | 12 Issue Resolution £51 million of shops, depots, tips and car parks revalued fully during 2022/23. Some elements of OLB had not been valued for up to 4 years. This is in accordance with the Council’s accounting policy. Part way through the previous appointment round, and at the request of the previous auditor, the Council introduced a process for monitoring land and property asset valuation movements. This covered OLB assets valued on a depreciated replacement cost (DRC) basis to identify whether revisions are required to the planned rolling revaluation programme and to undertake additional revaluations of any asset categories. Historically, this has not resulted in any adjustments to the carrying value of other land and buildings due to the movement not being deemed material, by management, in the context of PPE as a whole. We discussed this view with the Council over the course of the 2022/23 audit. The review undertaken by the Council identified that the potential movement in gross book value (GBV) of other land and buildings could be understated by as much as £76 million. The Council did consider this to be material as it represented a 5 percent movement in the carrying value of PPE (worth £1.3 billion in the unaudited accounts). The bulk of the movement was in PFI campuses and schools, and the Council proposed to bring forward the revaluation of these assets to 2023/24. The calculated movement was more than 5 times our audit materiality threshold of £14m and represented a 12 percent movement in the value of OLB. We were therefore unable to accept the Council’s proposal to resolve this in 2023/24. We requested that an adjustment be processed for the audited accounts. It was agreed to apply the adjustment to PFI campuses (£43 million), primary schools (£16 million) and secondary schools (£15 million), as movements in other categories of OLB were immaterial. The Council agreed to make the requested amendments including writing back accumulated depreciation of £16 million. 2. Valuation of pension asset The 2022/23 unaudited annual accounts included a pension asset of £229 million. The pension accounting standard (IAS 19) limits any pension asset to the lower of the surplus and what is described as an asset ceiling. The asset ceiling is defined as the present value of any economic benefits available in the form of refunds from the pension fund or reductions in future contributions to the fund. Further guidance on calculating the asset ceiling is provided in IFRIC 14. It refers to the impact of a ‘minimum funding requirement’ which stipulates a minimum amount of contributions that must be paid over a given period. The existence of a minimum The actuary provided a revised IFRIC14 calculation that reflected a pension asset ceiling calculation based on an assessment of all future service costs and contributions. The audited financial statements have been adjusted to reflect a pension asset of zero for the Council’s funded Page 148 of 226
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1. Audit of 2022/23 annual accounts | 13 Issue Resolution funding requirement limits the ability of a body to reduce future contributions. Where there is a minimum funding requirement for contributions relating to future service, IFRIC 14 explains that the asset ceiling is the present value of the future service cost less the present value of the minimum funding requirement contributions. Where the present value of the minimum funding requirement contributions exceeds the future service cost, IFRIC 14 advises that no asset should be recognised. Our review of the methodology used by the Council’s actuary identified that the calculation of the asset ceiling had only considered the minimum funding requirement contributions up to the date of the next triennial valuation, rather than all future service costs and contributions. As a result the pension asset was overstated in the unaudited annual accounts. obligations, and a pension liability of £21 million for its unfunded obligations, for which the IFRIC 14 calculation does not apply. 3. Group bodies pension assets As explained at Item 2 above, the Council’s pension asset was overstated in the unaudited annual accounts due to the calculation methodology used by the actuary. As the same methodology was used to calculate the pension assets for the Tayside Valuation Joint Board (TVJB), Live Active Leisure Limited (LAL), Culture Perth and Kinross (CPK), Perth Theatre and Concert Hall (PT), and Tayside Contracts Joint Committee (TCJC) then these were also overstated in their unaudited annual accounts. LAL, CPK and PT are consolidated within the Council’s group financial statements as subsidiaries. The LAL, CPK and PT 2022/23 unaudited accounts included pension assets valued at £8.5 million, £3.5 million and £1.9 million respectively. If this was recalculated by the actuary using the revised methodology described at Item 2 above, then we would expect the asset for the funded element to reduce to zero for each of these. Therefore, there was a £14 million error in the pension asset figure in the group balance sheet in the Council’s unaudited annual accounts. TCJC and TVJB are consolidated within the Council’s group financial statements as associates with Perth & Kinross Council consolidating a 34 per cent share of TCJC’s year-end reserves balances and a 42.68 per cent share of TVJB’s. The TCJC unaudited accounts included a pension asset valued at £55 million, with the Council consolidating a £18 million share within the group balance sheet. The TVJB unaudited accounts included a pension asset valued at £5.2 million, with the Council consolidating a £2.2 million share within the group balance sheet. A recalculation by the Management amended the group accounts to correct the overstatement of its subsidiaries’ (LAL, CPK and PT) pension assets and its share of its associates’ (TCJC and TVJB) pension assets. Page 149 of 226
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1. Audit of 2022/23 annual accounts | 14 Issue Resolution actuary using the revised methodology described at Item 2 also reduced these pension assets to zero. The revised TCJC accounts also reflect a pension liability for unfunded benefits of £2m, of which £0.6m is to be consolidated by the Council. The revised TVJB accounts reflect a pension liability for unfunded benefits of £0.2m, of which £0.1m is to be consolidated by the Council. Therefore, there was an £21 million error in the pension asset figure in the group balance sheet in the Council’s unaudited annual accounts. 4. Misclassification of investments in group accounts The accounts of the Connected Charities include £3.1 million of long-term investments which were incorrectly classified as short- term in the group accounts. The audited financial statements have been amended to correct this misclassification of investments. 5. Valuation of Common Good Assets We verified a sample of significant Common Good asset valuations to supporting documentation and identified that the Common Good balance sheet in the unaudited accounts had been prepared using draft valuation information obtained from the Council’s Valuer rather than final valuation information. This resulted in one asset being subject to a downward valuation of £0.565 million in the unaudited accounts when the final valuation reduction was only £0.005 million. Non-current assets in the Common Good accounts were, therefore, understated by £0.560 million. The audited financial statements have been adjusted to reflect the current value of Common Good assets. 6. Errors in debtor and creditor balances The Council collects monies owed to Scottish Water for water and sewerage charges via its council tax charging service. These amounts do not appear in the Council’s accounts, as they are collected under an agency arrangement. Due to an error in compiling the workings for the Council Tax debtors and creditors, the Scottish Water debtor and creditor were not fully eliminated. The Council Tax debtor and creditor figures were overstated by £1.4 million as a result. There was no net impact on the balance sheet. Our audit testing of grant income identified an over-accrual of £0.3 million within Cost of Services due to an error in the calculation of the amount still to be received at the year end. Short-term debtors were overstated by the same amount. We reviewed the remaining balance of debtors related to grant income and were satisfied there The audited financial statements have been adjusted to correct the overstatements in debtors, creditors and grant income. Page 150 of 226
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1. Audit of 2022/23 annual accounts | 15 Issue Resolution was no risk of material misstatement in the remaining population. No further audit testing was carried out. 7. Miscoding of investment property revaluation gains £0.955 million of investment property revaluation gains were incorrectly credited against gross expenditure in the finance and investment income line of the CIES, rather than being credited to gross income. There was no impact on the net expenditure figure. The audited financial statements have been adjusted to correct the miscoding. 8. Cost of living payment incorrectly treated as principal The Council administered the £150 cost of living award on behalf of the Scottish Government as detailed in Finance Circular 2/2022 which should have been treated as an agency arrangement. We found that the Council Tax Income Account had treated this as a new council tax deduction (£6.6 million) called 'Cost of Living Allowance', with the associated funding recognised as income. Management does not agree with our view that the cost-of-living award should be treated as agency but have amended the treatment in the audited accounts. Source: Audit Scotland Total misstatements identified during the audit were £381 million and these have been adjusted 19. It is our responsibility to request that all misstatements, other than those below our reporting threshold, are corrected, although the final decision on making the correction lies with those charged with governance. 20. Total misstatements identified were £381 million which exceeds our performance materiality threshold. We considered whether further audit procedures were required and reviewed the nature and causes of these misstatements, which mainly related to non-current asset valuation adjustments and the reassessment of the IAS19 pension asset (£375 million relates to Items 1-3 in Exhibit 3). We have concluded that most arose from issues that have been isolated and identified in their entirety and do not indicate further systemic error. We considered whether other misstatements presented material risks of misstatement in the relevant account area and concluded they did not. 21. There are no unadjusted misstatements to report. Clearer linkages are needed between the financial statements and the underlying records used in their preparation 22. ISA (UK) 315 Identifying and Assessing the Risks of Material Misstatement was revised in July 2020 and places increased emphasis on the requirement for auditors to consider the risks arising from the use of IT. Where audited bodies make use of end-user computing to adapt the trial balance to prepare the financial statements, auditors must ensure that the flow of information from the trial balance to the financial statements is complete and accurate. Page 151 of 226
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1. Audit of 2022/23 annual accounts | 16 23. The Council use a mixture of ‘crystal’ reports, exported from the ledger system, and Excel spreadsheets to transform the trial balance into a series of working papers which are then combined to create the financial statements. There is limited cross referencing or linking between the working papers. This makes it difficult to prove the link between the financial statements, working papers and ledger data, and has implications for accuracy as well as audit efficiency. 24. A significant amount of manual input is required by officers in preparing the accounts working papers. Whilst we only identified one error arising from this process (Exhibit 3, Item 6), there is a risk of material misstatement if manually typed figures are entered incorrectly. Recommendation 3 Management should review processes for generating the financial statements, providing clear cross references and links between (and within) working papers, and the source data used to create them. The Management Commentary is well presented 25. The Management Commentary contained within the 2022/23 annual accounts is well presented, easy to read and provides clear linkages between the amounts disclosed in the Management Commentary and those elsewhere within the accounts. We noted, however, there is scope to further enhance readability through reducing the volume of variance analysis disclosures. We also note that there is an expectation that bodies will, in future, report on climate change within their Management Commentary. Our audit opinion on the connected charities’ financial statements is unmodified 26. The Council prepares connected charity accounts for six trusts registered as Scottish charities, with net assets of £2.3 million. The preparation and audit of financial statements of registered charities is regulated by the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006. 27. At the audit planning stage we identified one significant risk of material misstatement in relation to the audit of the connected charities. As stated in International Standard on Auditing (UK) 240, management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. 28. We undertook audit procedures designed to provide an appropriate level of assurance over the transactions relating to the connected charities and did not identify any material misstatements due to management override of controls. As a result, our audit opinion on the connected charities’ financial statements is unmodified. Page 152 of 226
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1. Audit of 2022/23 annual accounts | 17 Good progress was made on prior year recommendations 29. The Council has made good progress in implementing the audit recommendations identified by the previous external auditor. Three of the five brought forward recommendations are complete with the remainder outstanding, one of which has not yet reached its implementation date. For actions not yet fully implemented, revised responses and timescales have been agreed with management, and are set out in the Appendix. Page 153 of 226
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2. Financial management | 18 2. Financial management Financial management means having sound budgetary processes, and the ability to understand the financial environment and whether internal controls are operating effectively. The Council’s budget setting and financial management arrangements operated effectively during 2022/23. The 2022/23 general services budget included a planned draw on reserves of £32.3 million and the actual outturn was £16.1 million less than this. The Council’s financial management operated effectively during 2022/23. The final general services budget included a planned draw on reserves of £32.3 million 30. The Council has a well-established budget setting process that supports councillors to develop and scrutinise savings plans and understand the impact of proposed service changes. 31. In February 2022, the Council approved its 2022/23 general services net revenue budget at £417.6 million. Subsequent adjustments throughout the year resulted in a revised net budget at the year-end of £449.2 million. This was based on raising council tax by 2.5 percent and a planned contribution from reserves of £32.3 million. The actual draw on reserves (excluding HRA) was £16.1 million less than budget 32. The Council spent a total of £433.1 million on the provision of general fund services in 2022/23, £16.1 million less than anticipated resulting in a lower than planned draw on reserves (£16.2 million). This was mainly due to additional income and underspends across general services. The most significant underspends are detailed in Exhibit 4. Page 154 of 226
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2. Financial management | 19 Exhibit 4 Summary of most significant underspends against budget Service area Main reasons for underspend / additional income Communities £9.9 million underspend Mainly attributable to grant funding of approximately £7.6 million which was unspent and carried forward to spend on initiatives in 2023/24 Education and Children’s Services £5.6 million underspend Due to various underspends in business and resources, nursery, primary, secondary and additional needs schools – mainly due to staff vacancies . Source: Perth & Kinross Council 2022/23 Annual Accounts and revenue monitoring reports to Finance & Resources Committee Housing Revenue Account balance reduced by £0.6 million during 2022/23 due to the planned use of Covid reserves 33. The Council is required by legislation to maintain a separate housing revenue account and to ensure that rents are set at a level which will at least cover the costs of its social housing provision. Rent levels are therefore a direct consequence of the budget set for the year. In January 2022 the Council approved a 3 percent increase in the average weekly rent levels for tenants for 2022/23. The rent level set reflected the income required to fund the annual HRA budget of £32.8 million. 34. The 30-year HRA Business Plan is updated each year to reflect the budgets, rent strategies and current economic climate. The HRA budget is approved by the Housing and Communities Committee (renamed to the Housing and Social Wellbeing committee following the local government elections in May 2022). 35. The HRA balance reduced by £0.6 million during 2022/23 due to the planned use of Covid reserves resulting in a balance of £2.6 million as at 31 March 2023. The Council has taken advantage of low borrowing rates in previous years 36. The Capital Financing Requirement identifies the borrowing required to support the Council’s capital investment plans. Actual borrowing may differ from CFR if, for example, the Council decides to borrow early to take advantage of low interest rates on new borrowing. Any difference is managed within working capital, and this may mean the Council invests in short term investments. 37. The Council’s capital debt (£724 million) exceeded its Capital Financing Requirement (CFR) (£679 million) by £45 million as at 31 March 2023. The Council did not take out any new long-term borrowing in 2022/23 and so the ratio of borrowing to CFR reduced to 106.7 percent in 2022/23 from 119.4 percent last year. As at 31 March 2023 the Council held £155 million of short- term investments as part of its treasury management approach. Page 155 of 226
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2. Financial management | 20 Key financial controls generally operated effectively during 2022/23 38. As required by Audit Scotland’s Code of Audit Practice, as part of our audit we identified and evaluated the key internal controls in the accounting systems. Our objective was to gain assurance that it has systems of recording and processing transactions which provide a sound basis for the preparation of the financial statements. 39. We concluded that the key controls in the main financial systems were generally operating as specified. However, we did identify one control that could be strengthened (see Error! Reference source not found.5 for details). We a dapted our approach to auditing the existence of employees within Education and Children’s services to reflect the control weakness identified. Exhibit 5 We identified one control that could be strengthened Audit finding Additional audit procedures and recommendation 1. Establishment checks – Education and Children Services The Council undertakes an annual employee validation exercise. Responses to the October 2022 exercise were received from all services, except for Education and Children. We contacted line managers of a sample of employees within Education and Children’s Services and asked them to confirm the existence, job titles, and working hours of the employees. No issues were identified. We also increased our testing of changes to payroll data for Education and Children's Services’ employees. No issues were identified. Recommendation 4 Internal audit provided reasonable assurance on the Council’s framework of governance, risk management and control 40. We considered internal audit’s annual report, presented to the August 2023 Audit and Risk Committee, as part of our review of the Annual Governance Statement included within the 2022/23 annual accounts. This included internal audit’s opinion that reasonable assurance can be placed upon the adequacy and effectiveness of the Council’s framework of governance, risk management and control for the year to 31 March 2023. Page 156 of 226
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2. Financial management | 21 Procurement regulations were not followed when the value of a contract for agency workers was exceeded by 50% 41. Internal audit reviewed the controls over the management of the contract for agency workers within the Communities Service in 2023. This work concluded that limited assurance could be placed on the management of this contract. In particular, the report noted that the Service Manager was unaware of the Council’s procurement regulations which require contracts to be retendered when a contract exceeds its value by 50%. We have been advised that this contract is to be retendered in December 2023 and that the contract strategy will include a more realistic contract value. The report included two additional recommendations to improve contract management, both of which have been accepted by management. Standards of conduct and arrangements for the prevention and detection of fraud and error are appropriate 42. The Council has a range of established procedures for preventing and detecting fraud and irregularity including a whistleblowing policy, fraud and corruption policy and codes of conduct for councillors and officers. We assessed these arrangements to ensure that they were appropriate and that documents are readily available to staff and regularly reviewed to ensure they remain relevant and current. Overall, we concluded that the Council’s arrangements are appropriate. Good progress has been made in following up data matches identified by NFI 43. The National Fraud Initiative (NFI) in Scotland is a counter-fraud exercise coordinated by Audit Scotland which aims to prevent and detect fraud. It uses computerised techniques to compare information about individuals held by different public bodies, and on different financial systems, to identify 'matches' that might suggest the existence of fraud or irregularity. 44. The current NFI exercise runs over 2022/23 and 2023/24 and participating bodies began to receive matches for investigation in January 2023. These matches are categorised by risk and all recommended matches, plus any further matches based on findings, should be investigated. 45. The Council has participated in the initiative for a number of years and has well-established processes in place for investigating the data matches identified by the NFI and reporting the results to the Audit and Risk Committee. Good progress has been made by the Council in investigating the matches from the current NFI exercise and the results of this will be reported to the Audit and Risk Committee during 2023/24. Page 157 of 226
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3. Financial sustainability | 22 3. Financial sustainability Financial Sustainability means being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. The 2023/24 budget included a planned use of reserves of £27 million, but subsequent updates increased this to £42 million. There are clear links to Corporate Plan priorities within the Medium-Term Financial Plan and cumulative funding gaps of up to £192 million are projected over the next six years. One of the Council’s major capital projects has been paused due to inflationary cost pressures and the Council is developing an asset management strategy. The Council’s general fund balance decreased to £70 million at 31 March 2023, with £52 million earmarked for future spending 46. As shown in Exhibit 6, the level of usable reserves held by Perth & Kinross Council decreased by £16 million during 2022/23, from £118 million at 31 March 2022 to £102 million at 31 March 2023. The general fund balance, which forms part of total usable reserves, decreased by £16 million during 2022/23. 47. £52 million (74%) of this general fund balance has been earmarked by the Council for specific areas of future spending including: £16 million of expenditure to be funded from Revenue Grants, £9.5 million for expenditure on workforce management including transformation, £5.5 million of expenditure on infrastructure and affordable housing funded from developers’ contributions and £4.4 million on affordable housing funded from council tax on second homes. 48. The unallocated general fund balance at 31 March 2023 was £18.2 million which is in line with the Council’s reserves strategy of holding between 2% and 4% of its net revenue budget as uncommitted reserves. Page 158 of 226
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3. Financial sustainability | 23 Exhibit 6 Perth & Kinross Council usable reserves Reserve 31 March 2021 (£m) 31 March 2022 (£m) 31 March 2023 (£m) General fund – uncommitted 8.2 16.6 18.2 General fund – committed 64.3 69.3 51.6 Total General fund balance 72.5 85.9 69.8 Housing Revenue Account 3.0 3.3 2.6 Insurance fund 2.4 1.4 1.3 Capital grants unapplied account 2.7 0.1 0.1 Capital fund (including Capital Receipts Reserve) 30.5 27.3 28.6 Total usable reserves 111.1 118.0 102.4 Source: Perth & Kinross Council Annual Accounts The 2023/24 budget included a planned use of reserves of £27 million, but subsequent updates increased this to £42 million 49. On 1 March 2023, the Council approved its 2023/24 general services revenue budget. Budgeted net expenditure of £450.5 million was approved after inclusion of budget pressures totalling £17.7 million and deduction of savings totalling £6 million. The Council used the following measures to balance its budget: • increase Council Tax by 3.9% or £3.8 million. • use of service concessions fiscal flexibility of £17 million. • use of reserves, including earmarked reserves, of £9.9 million. 50. The Council has subsequently updated its 2023/24 budget to reflect additional budget pressures (£1.7 million), increased expenditure funded from additional government grant (£9.4 million), the impact of the 2022/23 outturn (£9.2 million) and additional expenditure to be funded from earmarked reserves (£3.9 million). The revised budget totals £474.7 million, of which £41.7 million will be funded from reserves. 51. The approved budget reflected the results of the budget consultation survey with savings proposals being included in almost all service areas that participants indicated were of lowest priority for investment. This included Council-run events, Customer Service Centre efficiencies, and Council-owned buildings. Page 159 of 226
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3. Financial sustainability | 24 Budget reports indicate an overspend of £1.6 million (0.3 percent) against 2023/24 budget 52. The latest budget monitoring report (as at 31 August 2023) notes that the Council is projecting a small overspend of £1.6 million (0.3 percent) against its budget). The Council approved a 2.2 percent increase in rent levels for 2023/24 53. In January 2023 the Council approved a 2.2 percent increase in the average weekly rent levels for tenants for 2023/24. The rent level set reflected the income required to fund the annual HRA budget of £33.8 million. 54. The approved budget included an allowance for public sector pay increases of 3 percent for 2023/24 and a further 2 percent for the shortfall from 2022/23 as the prior year HRA budget was set based an assumed pay uplift of 3% rather than the eventual pay award agreed of 5%. There are clear links to Corporate Plan priorities within the Medium-Term Financial Plan 55. The Council approved a Financial Strategy in June 2022 which set out the scale of the financial challenges facing the Council over the short to medium term. These include real-term reductions in funding, significant cost increases due to inflation and an increasing demand for services. These result in a recurring funding gap which has been funded from reserves for a number of years. 56. The Council acknowledges that this is unsustainable and that it needs to take corrective action to return to a position of long-term financial sustainability. It aims to do this through a number of strategies including its Transformation and Change Strategy but recognises transformation alone will not be sufficient to address the funding gap so budget cuts and service reductions will still be required. 57. The Financial Strategy aims to provide the link between the Council’s long- term strategic objectives and its financial capacity but does not make specific reference to the Corporate Plan approved in December 2022. We have been advised that it was written this way so that it would be sustainable and transcend multiple plans. The Council’s expenditure pressures, and savings proposals are clearly linked to Corporate Plan priorities within the Medium-Term Financial Plan and the three-year budget paper. Cumulative funding gaps of up to £192 million are projected over the next six years. 58. The Financial Strategy is supported by the updated Medium-Term Financial Plan, approved in October 2023, covering the six years to 31 March 2030. It The plan considers a range of key financial variables that impact on the Council’s financial planning including funding levels, inflation and pay awards. These are grouped together under three scenarios: optimistic, mid-range and Page 160 of 226
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3. Financial sustainability | 25 pessimistic and show that the Council needs to make cumulative budget reductions of between £7.6 million and £192 million by 31 March 2030. 59. The level of financial challenge varies between years with the Council currently projecting budget gaps of £27.6 million in 2024/25, £11.5 million in 2025/26 and £12 million in 2026/27 based on the mid-range scenario. The report notes that there are significant variances between the optimistic and pessimistic scenarios for pay inflation (£35 million), non-staff inflation (£53 million) and Scottish Government funding (£36 million). The Council’s capital investment programme totals £702 million over the next five years 60. The approved capital programme for 2023/24 to 2027/28 is £702 million, split between £614 million of general fund projects and £88 million of housing revenue account projects, with expenditure of £219 million (£199 million general fund projects and £20 million HRA projects) scheduled for 2023/24. One of the Council’s major capital projects has been paused due to inflationary cost pressures 61. The Council estimates that inflationary pressures increased the forecast cost of its future capital programme by £34 million during 2022/23. As a result, the capital programme previously approved by members was no longer affordable. In response, the Council agreed to pause development and delivery of one of its major capital projects (PH2O) which was originally estimated at £90 million in February 2023. This project, a combined leisure facility for Perth, is being developed using a Passivhaus design (to ensure the building meets the highest standards in sustainable construction and energy efficiency). Most recent estimates are that this project will cost in excess of £110 million to deliver. The estimated operating costs for the new facility have also been impacted by the rising energy and maintenance costs. The future of this project will be reviewed as part of the Council’s review of its Corporate Asset Management Strategy. The Council is developing an asset management strategy 62. The Council’s transformation programme identifies the need to develop a corporate asset management strategy and review its estate to generate savings through reducing the number and size of buildings. A revised Corporate Asset Management strategy and plan is currently being drafted and is scheduled to be presented to the Council in December 2023. This will include a high-level 30- Year Investment Plan providing a breakdown of estimated long-term investment requirements for the existing asset base and will inform long-term financial planning. Page 161 of 226
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3. Financial sustainability | 26 Visual inspections of all schools identified one that contained RAAC which has since been replaced with alternative materials 63. Reinforced autoclaved aerated concrete (RAAC) is a lightweight construction material that was used in the construction of some public buildings like schools and hospitals between the 1950s and 1990s. It was used mostly in flat roofing, but also in some pitched roofs, floors and walls. 64. The Council has completed visual inspections of all its schools and is on target to complete visual inspections across its entire estate by the end of the calendar year. The Council will follow-up with more detailed inspections of properties where RAAC is identified as being present. 65. To date, one secondary school (Perth Grammar) has been found to contain this form of concrete. Remedial action to remove the RAAC and replace it with alternative material was undertaken during the summer holidays and so did not impact on the delivery of educational services. Page 162 of 226
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4. Other wider scope audit work | 27 4. Other wider scope audit work During 2022/23 our other wider scope audit work included a Best Value thematic review of leadership and priorities, and consideration of the Council’s performance management and reporting arrangements, governance, and its use of resources to improve outcomes. The Council continues to have a clear vision and a transformation and change strategy that is extensive and ambitious. Reporting of performance has improved although further work is required to monitor actions against previous BV recommendations. Best Value audit work is now fully integrated within our annual audit work 66. Councils have a statutory duty to make arrangements to secure continuous improvement in the performance of their functions. Expectations are laid out in the Best Value Revised Statutory Guidance 2020. 67. Over the previous external audit appointment period (2016/17-2021/22), each of the 32 councils in Scotland were the subject of a separate Best Value Assurance Report (BVAR) published by the Accounts Commission. The Perth & Kinross Council BVAR was published in August 2019. 68. Under the Code of Audit Practice 2021, the audit of Best Value in councils is now fully integrated within our annual audit work. Best Value at the Council will be assessed comprehensively over the period of the audit appointment and will include an annual evaluation of the Council’s approach to demonstrating improvement in its services and public performance reporting. We will also follow up findings reported previously on Best Value to assess the pace and depth of improvement. 69. As part of the new reporting arrangements, the Controller of Audit will report to the Accounts Commission on the Council’s performance in meeting its Best Value duties at least once every five years. The first year of the programme will be from October 2023 to August 2024 and will cover the councils listed in Exhibit 7. Page 163 of 226
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4. Other wider scope audit work | 28 Exhibit 7 Schedule of Controller of Audit reports to the Accounts Commission for 2023 and 2024 South Ayrshire Council (October 2023) Dundee City Council (November 2023) Dumfries & Galloway Council (December 2023) Orkney Islands Council (January 2024) West Dunbartonshire Council (February 2024) Clackmannanshire Council (May 2024) Moray Council (June 2024) Falkirk Council (August 2024) Source: Audit Scotland The Council continues to have a clear vision and a transformation and change strategy that is extensive and ambitious. Reporting of performance has improved although further work is required to monitor actions against previous BV recommendations 70. For 2022/23 the Accounts Commission directed auditors to report on the effectiveness of the Council’s leadership and the development of the Council’s strategic priorities. In carrying out the thematic work auditors considered the following questions: • How clear is the new Council vision and its priorities? • How effectively have the views of citizens and communities been reflected in the priorities and decisions taken by the Council? • How effectively do the Council priorities reflect the need to reduce inequalities and climate change? • How good are the delivery plans and is there alignment of financial, workforce, asset and digital plans with the Council’s priorities? 71. Our report on the Best Value Thematic Review 2022/23 will be considered by the Audit and Risk Committee in December 2023. It includes findings from our review of performance reporting arrangements and analysis of recent performance data and an update on the areas covered by the recommendations in the BVAR. The key messages in the report highlighted the following: (1) The Council’s leadership continues to set out a clear vision and priorities in the revised Corporate Plan. Each Plan priority has a series of actions which are being monitored through performance indicators, but targets have not been set in all of these, with many of these to be determined when appropriate strategies are revised. (2) Performance Reporting has been revised in August 2023 following approval of the new Corporate Plan and provides a good overview of performance. A Corporate Delivery Improvement Plan has been introduced which sets out improvements for the year ahead. Page 164 of 226
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4. Other wider scope audit work | 29 (3) Based on Local Government Benchmarking Framework data, Perth & Kinross Council’s performance has improved since 2018/19, but its relative ranking compared to other councils has deteriorated. This includes grading of care service inspections. (4) The Council is working with its community planning partners to reduce inequalities through delivery of the Community Plan, which was developed with the revised Corporate Plan. (5) The previous BV identified that the Council could do more to involve communities in strategic planning. We found that it was committed to community engagement and had built on experiences during Covid-19. (6) The Council’s Transformation and Change Strategy 2022/23-2027/28 is extensive and ambitious. A council-wide workforce plan exists but lacks context and detail and an asset management strategy is being developed. (7) We note that there was no formal reporting to committee of progress against the previous BV recommendations, and that reporting to management on progress has not been completed since June 2021. There has been slow progress in implementing some of these actions, with Covid-19 and revisions to Corporate Plans affecting this. 72. The report also included two recommendations for improvement which are replicated in the Appendix of this report along with the Council’s planned response, responsible officers and dates for implementation. The Council demonstrates full compliance with the SPI direction for 2022/23 73. The Accounts Commission issued a new Statutory Performance Information Direction in December 2021 which applies for the three years from 2022/23. It requires a council to report its: • performance in improving local public services (including those provided with its partners and communities), and progress against agreed desired outcomes (SPI 1). The Commission expects this reporting to allow comparison both over time and with other similar bodies (drawing on Local Government Benchmarking Framework and/or other benchmarking activities) • own assessment and audit, scrutiny and inspection body assessments of how it is performing against its duty of Best Value, and how it has responded to these assessments (SPI 2). 74. We reviewed performance against the SPI direction in our BV thematic report this year and have concluded that the Council has fully complied with the Direction. The Corporate Annual Performance Report provides a balanced overview of performance and Perth and Kinross Performs provides an accessible analysis which allows the public to determine performance. Page 165 of 226
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4. Other wider scope audit work | 30 Governance arrangements are appropriate and support effective scrutiny, challenge and informed decision-making 75. We reviewed the Council’s governance arrangements during the course of the year and concluded that they are appropriate and support effective scrutiny, challenge and informed decision-making. The Council is open and transparent 76. The Council continues to be open and transparent, with all agendas, reports and minutes published on the Council website. In addition, there is livestreaming of Council meetings. 77. The Council’s website allows the public access to a wide range of information including the register of councillors’ interests, current consultations and service performance data. In addition, the home page provides links to useful information, including how to access benefits and advice. 78. The Council makes its annual accounts available on its website. These include a management commentary which adequately explains the Council’s financial performance for the year. Council targets for carbon reduction are clear but the impact has not yet been reflected in financial planning or reporting 79. The Council recognised a climate emergency in June 2019 and set a target to decarbonise operations in-line with Scottish Government targets. These include a commitment to achieving a 75 per cent reduction in emissions by 2030 and reaching net zero by no later than 2045. 80. A Climate Change and Sustainability Committee has been set up to ensure that the Council's plans, programmes and strategies deliver on its obligations and duties towards Climate Change, sustainable development, and biodiversity. An annual performance report will be provided to the Committee to update on progress made on the Council’s Climate Change Strategy and Action Plan. 81. The Council has yet to fully cost the Climate Strategy and Action Plan but has been clear that funding will be the most significant challenge to becoming net zero, "given the current absence of further external funding sources, the achievement of net zero will not be possible, at the required pace". Early indications are that the cost of adaptation and mitigation for buildings, fleet and infrastructure will be around £1 billion. Page 166 of 226
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Appendix. Action plan 2022/23 | 31 Appendix. Action plan 2022/23 2022/23 recommendations Issue/risk Recommendation Agreed management action/timing 1. Non-current asset valuations Our review identified that as a result of the Council’s policy to revalue assets every five years there is a risk that the valuation of major asset classes (e.g. council dwellings, and other land and buildings) may have changed materially since their last full valuation. There is a risk that non-current asset carrying values are significantly different to the current value. We recommend that the Council reviews its approach to the rolling programme of asset valuations and refines its process for considering the current valuation of assets (OLB and Housing) not subject to a full valuation process at each year end. The current process for other land and buildings is highly detailed and labour intensive and could benefit from simplification. Officers have agreed to meet with audit to review arrangements for asset valuations and those not included in the rolling programme to provide a robust position for the 2023/24 accounts. Responsible officer: Corporate Accounting Manager Agreed date: 31 December 2024 2. Completeness of non- current assets The Council does not prepare a reconciliation between the financial ledger and the fixed asset register or between the valuation report and the asset register. We compared the valuer’s report with the asset register and did not identify any material omissions. There is a risk that all revalued assets are not included in the annual accounts. We recommend that the Council prepares a reconciliation between the financial ledger, asset register and valuer’s report as part of the working papers package in future years. Officers will reconcile the financial ledger at 1 April annually and reconcile the valuer’s report to asset register as part of the working papers. Responsible officer: Corporate Accounting Manager Agreed date: 30 June 2024 3. Working papers A significant amount of manual input is required by officers in preparing the accounts working papers. Management should review processes for generating the financial statements, providing clear cross references and links between (and within) working papers, and the Officers will meet with auditors to review the simplification of working papers to improve audit efficiency. Responsible officer: Corporate Accounting Manager Page 167 of 226
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Appendix. Action plan 2022/23 | 32 Issue/risk Recommendation Agreed management action/timing There is a risk of material misstatement if manually typed figures are entered incorrectly. source data used to create them. Agreed date: 31 January 2024 4. Establishment checks The Council undertakes an annual employee validation exercise. Responses to the October 2022 exercise were received from all services, except for Education and Children Services. There is a risk that changes to terms and conditions have not been correctly reflected on the payroll system. Establishment checks are an important anti-fraud control and are carried out annually. Management within services should ensure they respond in timely fashion to the request for confirmation. Officers will ensure that all returns not completed are highlighted to appropriate line managers for action. Any outstanding returns post December will be escalated to Strategic Lead Finance & Business Support for action. Responsible officer: Corporate HR Manger Agreed date: 31 December 2023 Recommendations from Best Value Thematic Review 2022/23 Issue/risk Recommendation Agreed management action/timing BV1. Workforce planning The Council should revise the workforce plan. This should set out the challenges facing the Council workforce; data in terms of workforce numbers, deployment, age profile; and risks and actions in individual employment groups. A detailed People and Culture Plan will be taken to the Finance and Resources Committee by June 2024. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 June 2024 BV2. Best Value Reporting The Council should implement a process for routinely reporting Best Value action plan progress to committee. An annual update will be provided through the Corporate Annual Performance Report which is reported to the Scrutiny and Performance Committee and the Council in September. This will also sit on our website as part of the supporting information which is accessible to the public. In addition, we will report six monthly to the Executive Leadership Team. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 September 2024 Page 168 of 226
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Appendix. Action plan 2022/23 | 33 Follow-up of prior year recommendations Issue Recommendation Progress during 2022/23 PY1. Significant capital projects It is recommended that there is continued review and scrutiny of planned capital projects in general. This should include consideration against corporate asset strategies, strategic priorities and include public consultation and identification or risks. This is particularly important during the current economic climate, increased construction inflation and wider economic uncertainty. Responsible officer: Executive Director - Communities Agreed date: by December 2022 Complete As part of the capital monitoring process, the Finance & Resources Committee receive quarterly updates on significant capital projects. PY2. Componentisation of infrastructure assets The Council needs to revise its processes for the recording and componentisation of Infrastructure assets before March 2024 in order to comply with the requirements of the Code in advance of expiry of the statutory override. It is likely that this issue will be considered by the sector as a whole. Responsible officer: Chief Accountant Agreed date: 31 March 2024 Outstanding Not yet due for implementation. PY3. Timing of bank reconciliations It is a key anti-fraud control for bank balances to be fully reconciled and reviewed on a regular basis. It is recommended that management ensures the timely review of all bank account reconciliations. Responsible officer: Chief Accountant Agreed date: 30 September 2022 Complete Our audit did not identify any instances where bank reconciliations had not been completed and reviewed in an appropriate timeframe. PY4. Capital commitment disclosure We recommend that management should enhance the assessment of capital commitments recorded in the accounts to include checks on whether a legal/contractual commitment existed as at the end of the year. Complete Our audit did not identify any issues with the capital commitment disclosures in the 2022/23 accounts. Page 169 of 226
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Appendix. Action plan 2022/23 | 34 Issue Recommendation Progress during 2022/23 Responsible officer: Chief Accountant Agreed date: 31 March 2023 PY5. Valuation of Heritage assets (b/f from 2020/21) We recommend that the Council ensures that recognition and valuation of heritage assets is set out in a clear and concise manner, explaining the key decisions and judgements made in forming a conclusion. Responsible officer: Chief Accountant Agreed date: 30 June 2022 Outstanding Our audit identified some inconsistencies in the accounting policy disclosed for the valuation of Heritage assets between Notes 1 and 22. These inconsistencies were resolved for the audited accounts. We noted that whilst the Culture, Perth and Kinross curators complete an annual review of heritage assets for possible impairment, the outcome of this review for 2022/23 was not obtained by the Council until requested by audit. Whilst there were no material findings, we agree that the Council needs to be clearer on what its policy is for recognising and valuing heritage assets. Revised response: A comprehensive update to Heritage Asset values included in the Council’s Balance Sheet was completed in 2020/21. Culture Perth & Kinross curators are contacted annually to ensure there are no significant additions to the Fine & Applied Art collection, and there has been no loss or damage to individual items within the collection. The existing policy for Accounting for Heritage Assets will be reviewed during 2024/25 to ensure it remains fit for purpose. Page 170 of 226
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Appendix. Action plan 2022/23 | 35 Issue Recommendation Progress during 2022/23 Responsible officer: Corporate Accounting Manager Agreed date: 31 March 2025 Page 171 of 226
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Appendix. Action plan 2022/23 | 36 Perth & Kinross Council DRAFT 2022/23 Annual Audit Report Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk Page 172 of 226
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AUDIT & RISK COMMITTEE 11 DECEMBER 2023 INTERNAL AUDIT FOLLOW UP Report by Chief Internal Auditor (Report No 23/364) 1. PURPOSE 1.1 This report presents a current summary of Internal Audit’s ‘follow up’ work relating to actions due for completion up to October 2023. 2. RECOMMENDATION 2.1 It is recommended that the Committee notes the current position in respect of the agreed actions arising from Internal Audit’s work. 3. STRUCTURE OF REPORT 3.1 This report is structured over the following sections: • Section 4: Background • Section 5: Follow Up Outcomes 4. BACKGROUND 4.1 The Public Sector Internal Audit Standards (PSIAS) require the Chief Internal Auditor to establish a follow-up process to monitor and ensure that management actions have been effectively implemented. 4.2 Internal Audit request evidence from Services which confirms that actions have been implemented and, therefore, controls have been improved. 5. FOLLOW UP OUTCOMES 5.1 There were 4 actions due to be completed up to October 2023. Three actions have been completed, with one having a revised completion date, as detailed in the Appendix. Author Name Designation Contact Details Jackie Clark Chief Internal Auditor InternalAudit@pkc.gov.uk 6 Page 173 of 226
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Appendix 1 Actions with a completion date up to October 2023 which have yet to be completed Finding Action Action owner & Service Date(s) Current status Internal Audit Opinion A21-05 Tay Cities Region Deal Action Point 2 Importance: Medium Audit Committee Date: June 2023 Dundee City Council has previously undertaken an audit and the outcomes were shared with PKC Internal Audit during this review. A further high-level review of progress of projects and compliance with grant offer guidance is underway at present and the outcome will also be shared. A summary of their findings from the former was shared with the TCRD Joint Committee as well as their own Council Committee. Consideration should be given to making these assurances available to relevant officers, elected members via an appropriate Committee in Perth & Kinross The Service Manager will ascertain what assurance reports are provided regarding the Tay Cities Region Deal and ensure that the outcomes are shared with relevant officers and elected members in Perth & Kinross Council as part of the annual reporting process A Seggie, Economic Development Manager October 2023 Mar 2024 The Annual Report is being drafted and will references assurance reports which are available. This report is due to be considered in March 2024. Satisfactory 6 Page 175 of 226
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AUDIT & RISK COMMITTEE 11 DECEMBER 2023 INTERNAL AUDIT UPDATE Report by Chief Internal Auditor (Report No 23/365) 1. PURPOSE 1.1 This report presents a summary of Internal Audit’s work undertaken as part of the Internal Audit Plans for 2022/23 and 2023/24. 2. RECOMMENDATION 2.1 It is recommended that the Committee notes progress with Internal Audit activity. 3. STRUCTURE OF REPORT 3.1 This report is structured over the following sections: • Section 4: Background • Section 5: Progress Update • Appendix 4. BACKGROUND 4.1 The Public Sector Internal Audit Standards (PSIAS) require that the Chief Internal Auditor reports periodically to the Audit Committee on internal audit activity and on performance relative to the approved plan. 4.2 Work has continued on assignments from Perth & Kinross Council’s Internal Audit Plans. In addition, work has continued to be undertaken in connection with the Internal Audit provision for Perth & Kinross’ Integration Joint Board. 4.3 Work has continued to support the 2022/23 National Fraud Initiative exercise, with supporting Services to identify main contacts to undertake the investigation and to provide training where relevant. Services have made good progress reviewing and investigating their matches. Outcomes from this will be reported once all matched have been reviewed and investigations into all datasets have been completed. 5. PROGRESS UPDATE 5.1 Appendix 1 shows the status of audits arising from the Internal Audit Plans. 7 Page 177 of 226
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5.2 Internal Audit is currently involved with further areas of unplanned investigatory work. If any control issues arise as a result of these, reports will be presented to the Audit & Risk Committee. 5.3 One additional assignment that Internal Audit has undertaken concerned reviewing processes and performance for the Assessment & Charging Team, currently located within the Health & Social Care Partnership. This involvement was as a result of a request from the Chief Officer to support her to gain a full understanding of improvement actions required. As this assignment arose from a direct request, no detailed report will be presented to the Audit & Risk Committee. The outcomes, which include the development of an action plan to improve, will be taken into consideration when future Internal Audit Plans are considered by the Chief Internal Auditor for presentation to this Committee. Authors Name Designation Contact Details Jackie Clark Chief Internal Auditor InternalAudit@pkc.gov.uk APPENDICES • Appendix 1 Internal Audit Activity Page 178 of 226
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Appendix 1 INTERNAL AUDIT UPDATE Internal Audit Activity Audit No. Title Lead Service(s) Status as at November 2023 Audit Committee 2022/23 A22-02 Climate Change Communities Report in draft March 2024 A22-03 Partnership Working All Report in draft March 2024 A22-05 Community Engagement Communities Ongoing March 2024 A22-06 Information Assets Corporate & Democratic Services Completed December 2023 2023/24 A23-01 Food Health & Safety Communities Completed September 2023 A23-02 Mosaic Corporate / HSCP / ECS Ongoing June 2024 A23-03 Local Employability Partnership Communities March 2024 A23-04 Child Poverty Communities June 2024 A23-05 Business Continuity All Services June 2024 A23-06 Fuel Communities Ongoing March 2024 7 Page 179 of 226
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PERTH & KINROSS COUNCIL AUDIT & RISK COMMITTEE 11 December 2023 BEST VALUE THEMATIC REVIEW Report by the Director (Strategy, People and Resources) (Report No. 23/366) 1. PURPOSE 1.1 This report sets out the findings and two recommendations for improvement contained in the Perth and Kinross Council’s Best Value Thematic Review Report 2022/23. It also provides a response and details actions that will be progressed in respect of the recommendations. 2. RECOMMENDATIONS 2.1 It is recommended that the Committee: • Notes the contents of Audit Scotland’s Best Value Thematic Review Report. • Notes that updates on progress against improvements will be reported through the Council’s Annual Performance report. 3. STRUCTURE OF THE REPORT 3.1 This report includes the following sections: • Section 4 - Background • Section 5 - Best Value Thematic Review key messages and recommendations • Section 6 - Conclusions 4. BACKGROUND 4.1 The statutory duty of Best Value was introduced in the Local Government in Scotland Act 2003. In 2020, new Best Value Statutory Guidance was published, centred around seven new themes. The Best Value themes are: o vision and leadership o governance and accountability o effective use of resources o partnership and collaborative working o working with communities o sustainable development o fairness and equality 8 Page 181 of 226
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4.2 Between 2017 and 2021 all 32 councils had a Best Value Assurance Report. However, at the end of 2022, Audit Scotland announced that auditors will be reporting annually to the Accounts Commission on specific themes, which they hope will facilitate the exchange of ideas and performance data, as well as offering a detailed analysis of a specific aspect of the work of all councils. 4.3 Another part of the new approach is a requirement for the Controller of Audit to report on every council across the audit appointment round, covering the period October 2023 to August 2027. While previously Best Value Assurance Reports were based on a separate piece of audit work, this new approach consists of brief Controller of Audit reports accompanied by and reflecting on published annual audit reports. 4.4 This is the first Best Value Thematic Review which has been completed under the new audit process. The focus for 2022/23 has been vision and leadership for all local authorities, as directed by the Commission. 5. BEST VALUE THEMATIC REVIEW KEY MESSAGES AND RECOMMENDATIONS 5.1 In carrying out the work auditors have considered the following questions: a. How clear is the new Council vision and its priorities? b. How is performance managed and how is the Council is performing? c. How effectively have the views of citizens and communities been reflected in the priorities and decisions taken by the Council? d. How effectively do the Council priorities reflect the need to reduce inequalities and climate change? e. How good are the delivery plans and is there alignment of financial, workforce, asset and digital plans with the Council’s priorities? f. Overall, how effective has the leadership (political and officer) been in setting clear priorities and a sustainable approach to delivering them? 5.2 The report includes an update on the areas covered by recommendations in the Best Value Assurance Report published in August 2019, it outlines a number of key messages and highlights only two recommendations. 5.3 The key messages outlined within the report are detailed below: • The Council’s leadership continues to set out a clear vision and priorities in the revised Corporate Plan. Each Plan priority has a series of actions which are being monitored through performance indicators, but targets have not been set in all of these, with many of these to be determined when appropriate strategies are revised. • Performance reporting has been revised in August 2023 following the revised Corporate Plan and provides a good overview of performance. A Corporate Delivery Improvement Plan has been introduced which sets out improvements for the year ahead. • Based on Local Government Benchmarking Framework data, Perth & Kinross Council’s performance has improved since 2018/19, but its relative ranking compared to other councils has deteriorated. This includes grading of care service inspections. Page 182 of 226
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• The Council is working with its community planning partners to reduce inequalities through delivery of the Community Plan, which was developed with the revised Corporate Plan. • The previous BV identified that the Council could do more to involve communities in strategic planning. We found that it was committed to community engagement and had built on experiences during Covid-19. • The Council’s Transformation and Change Strategy 2022/23-2027/28 is extensive and ambitious. A council-wide workforce plan exists but lacks context and detail and an asset management strategy is being developed. • We note that there was no formal reporting to committee of progress against the previous BV recommendations, and that reporting to management on progress has not been completed since June 2021. There has been slow progress in implementing some of these actions, with Covid-19 and revisions to Corporate Plans affecting this. 5.4 Other highlights from the report include: • The Corporate Plan clearly sets out the Council’s priorities and is both appropriate and focussed. It is consistent with the community plan and consultation involved a range of partners and was well communicated and was featured in the Government in Scotland Overview 2023 report as a case study. • There is effective collaborative working between members and officers and there has been a recent review of management structure. • It notes that overall, the Council’s performance has improved, and that performance reporting is refocussed at a strategic level and aligned with the Corporate Plan. It highlights that online access to data is good and the Council demonstrates full compliance with the new Statutory Performance Information direction. • It notes the Council’s commitment to Community Empowerment and progress in this regard, with steady progress with asset transfers to community groups. • It also notes that removing inequality and addressing the climate emergency are clear priorities for the Council. Council targets on carbon reduction are clear and there is a climate change and sustainability committee. Equality impact assessment and Fairer Scotland assessments are completed, and an anti-poverty taskforce has devised a plan to help deal with the cost-of-living crisis. 5.5 An improvement action plan is included in the appendix of the Audit Scotland report. This sets out audit recommendations in two key areas. Council officers accept both of these recommendations and have identified how these will be implemented. Page 183 of 226
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Recommendation Improvement action Responsible officer/ target completion date The Council should revise the workforce plan. This should set out the challenges facing the council workforce; data in terms of workforce numbers, deployment, age profile; and risks and actions in individual employment groups. A detailed People and Culture Plan will be taken to the Finance and Resources Committee by June 2024. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 June 2024 The Council should implement a process for routinely reporting Best Value action plan progress to committee. An annual update will be provided through the Corporate Annual Performance Report which is reported to the Scrutiny and Performance Committee and the Council in September. This will also sit on our website as part of the supporting information which is accessible to the public. In addition, we will report six monthly to the Executive Leadership Team. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date:30 September 2024 5.6 Audit Scotland have acknowledged the delays in their reporting this year, and work was undertaken to provide additional context and evidence in several areas of the report to better reflect our position. We will continue to liaise with Audit Scotland on some of these areas for future reporting. The planned focus for audit in 2023/24 will include workforce planning. 6. CONCLUSIONS 6.1 Progress against the recommendations will be reported to Council via the annual performance report. Work to develop a revised workforce plan which supports the Leadership Review and the Transformation & Change Programme is already underway with plans to report this to Finance & Resources Committee in June 2024. Author Name Designation Contact Details Louisa Dott Corporate Performance Team Leader LJDott@pkc.gov.uk Page 184 of 226
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Approved Name Designation Date Clare Mailer Director (Strategy, People and Resources) 1 December 2023 Page 185 of 226
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ANNEX 1. IMPLICATIIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan None Resource Implications Financial None Workforce None Asset Management (land, property, IST) None Assessments Equality Impact Assessment None Strategic Environmental Assessment None Sustainability (community, economic, environmental) None Legal and Governance None Risk None Consultation Internal Yes External None Communication Communications Plan None 1. Strategic Implications Community Plan/Single Outcome Agreement 1.1 There are no direct implications arising from this report. Corporate Plan 1.2 There are no direct implications arising from this report. 2. Resource Implications Financial 2.1 There are no financial implications arising from this report. Workforce 2.2 There are no direct workforce implications arising from this report. Asset Management (land, property, IT) 2.3 There are no asset management implications arising from this report. Page 186 of 226
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3. Assessments Equality Impact Assessment 3.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. The Equality Impact Assessment undertaken in relation to this report can be viewed clicking here. 3.2 This section should reflect that the proposals have been considered under the Corporate Equalities Impact Assessment process (EqIA) with the following outcome: i.Assessed as not relevant for the purposes of EqIA Strategic Environmental Assessment 3.3 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.4 This section should reflect that the proposals have been considered under the Act and no further action is required as it does not qualify as a PPS as defined by the Act and is therefore exempt. Sustainability 3.5 Under the provisions of the Local Government in Scotland Act 2003 the Council has to discharge its duties in a way which contributes to the achievement of sustainable development. Under the Climate Change (Scotland) Act 2009 the Council also has a duty relating to climate change and, in exercising its functions must act: • in the way best calculated to delivery of the Act’s emissions reduction targets; • in the way best calculated to deliver any statutory adaptation programmes; and • in a way that it considers most sustainable. 3.6 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Legal and Governance 3.7 Not applicable. Page 187 of 226
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Risk 3.8 Not applicable. 4. Consultation Internal 4.1 The Executive Leadership Team were consulted during preparation of this report. External 4.2 Not applicable. 5. Communication 5.1 Not applicable. 2. BACKGROUND PAPERS 2.1 Audit Scotland’s Best Value Thematic Review Page 188 of 226
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Prepared by Audit Scotland 11 December 2023 Perth & Kinross Council Best Value Thematic Review 2022/23 8 Page 189 of 226
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Perth & Kinross Council | 2 Contents Key messages 3 Scope of the audit 4 Section 1: Council vision and priorities 5 Section 2: Performance 9 Section 3: Citizen and community engagement 15 Section 4: Reducing inequalities and tackling climate change 19 Section 5: Alignment of delivery plans 23 Section 6: Leadership 28 Section 7: Progress on recommendations 30 Appendix 36 Page 190 of 226
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Key messages | 3 Key messages 1 The Council’s leadership continues to set out a clear vision and priorities in the revised Corporate Plan. Each Plan priority has a series of actions which are being monitored through performance indicators, but targets have not been set in all of these, with many of these to be determined when appropriate strategies are revised. 2 Performance Reporting has been revised in August 2023 following the revised Corporate Plan and provides a good overview of performance. A Corporate Delivery Improvement Plan has been introduced which sets out improvements for the year ahead. 3 Based on Local Government Benchmarking Framework data, Perth & Kinross Council’s performance has improved since 2018/19, but its relative ranking compared to other councils has deteriorated. This includes grading of care service inspections. 4 The Council is working with its community planning partners to reduce inequalities through delivery of the Community Plan, which was developed with the revised Corporate Plan. 5 The previous BV identified that the Council could do more to involve communities in strategic planning. We found that it was committed to community engagement and had built on experiences during Covid-19. 6 The Council’s Transformation and Change Strategy 2022/23-2027/28 is extensive and ambitious. A council-wide workforce plan exists but lacks context and detail and an asset management strategy is being developed. 7 We note that there was no formal reporting to committee of progress against the previous BV recommendations, and that reporting to management on progress has not been completed since June 2021. There has been slow progress in implementing some of these actions, with Covid-19 and revisions to Corporate Plans affecting this. Page 191 of 226
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Scope of the audit | 4 Scope of the audit 1. This report covers the thematic aspect of the Best Value audit requirements. The Commission has directed auditors to report on the effectiveness of the leadership of the development of the Council’s strategic priorities. 2. In carrying out the work auditors have considered the following questions: • How clear is the new Council vision and its priorities? • How is performance managed and how the Council is performing? • How effectively have the views of citizens and communities been reflected in the priorities and decisions taken by the Council? • How effectively do the Council priorities reflect the need to reduce inequalities and climate change? • How good are the delivery plans and is there alignment of financial, workforce, asset and digital plans with the Council’s priorities? • Overall, how effective has the leadership (political and officer) been in setting clear priorities and a sustainable approach to delivering them? 3. This report includes an update on the areas covered by recommendations in the Best Value Assurance Report (BVAR) published in August 2019. 4. An improvement action plan is included at the Appendix 5. of this report. This sets out audit recommendations in key areas, and the Council’s planned response including responsible officers and dates for implementation. 6. The coverage of the work is in line with the expectations of Councils for the seven Best Value themes set out in the Local Government in Scotland Act 2003, Best Value Statutory Guidance 2020. Page 192 of 226
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Section 1: Council vision and priorities | 5 Section 1: Council vision and priorities The previous Best Value review identified that the Council had clear strategic objectives. 7. The Best Value report for Perth & Kinross Council was published in August 2019, prior to the impact of the Covid-19 pandemic. The Report concluded that “the Council has clear strategic objectives which have remained stable over a period of time and are supported by effective leadership”. The 2022 Community Plan recognises the main challenges. 8. The local outcome improvement plan (LOIP), or Community Plan 2022-2032, was revised in 2022 by the Community Planning Partnership (CPP). A self- assessment of the CPP commenced in May 2023 and will result in the development of a CPP Improvement Plan. 9. The LOIP focuses on four key area-wide actions, with specific locality-based action in two areas: Coupar Angus and Crieff South. The area-wide actions cover: • Reducing Poverty. • Physical and Mental Wellbeing. • Digital Participation. • Skills, Learning, Development and Employability. 10. The Plan identifies the main challenges facing Perth and Kinross. 11. Population and poverty. Perth and Kinross has an older population than Scotland as a whole and a third of households (36 per cent) face considerable economic challenges. For example, a quarter of households live in fuel poverty due to rurality and other factors and 12 percent of families in Perth and Kinross are living in houses where energy efficiency is poor. 12. Access to services. Access to key services (measured by travel time to those services) is poor. In Perth and Kinross, there are 37 data zones classed in the 10 percent most access-deprived category in Scotland, including Rannoch and Aberfeldy, which is the most access deprived data zone in the whole of Scotland. These 37 data zones represent 21 percent of the population of the Council. Page 193 of 226
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Section 1: Council vision and priorities | 6 13. Health and Wellbeing. People living in Perth and Kinross typically report higher levels of satisfaction with their community than the Scottish average. Levels of life expectancy and mortality are better in Perth and Kinross than the national average and the incidences of hospitalisation with conditions such as coronary heart disease, chronic obstructive pulmonary disease and cancer are lower. However, the Scottish Household Survey indicates an increasing proportion of adults with a long-term physical or mental health condition, which at 42 percent is above the national figure of 30 percent (2018). 14. Mental wellbeing and service provision in Tayside was subject to an independent inquiry, which highlighted issues around trust and respect between, and among, service users and providers. Perth and Kinross Health and Social Care Partnership is leading on the Perth and Kinross response to the inquiry report and its recommendations. 15. Digital access. Many households across Perth and Kinross lack one of the three aspects of digital participation: connectivity, technology and capacity. Superfast Broadband in Perth and Kinross was available in 88 percent of all premises in the area, which ranks 25th out of all local authority areas in Scotland. 79 percent of the geographical area of Perth and Kinross had 4G signal outdoors from at least one mobile network provider: this is one of the lowest levels of geographical coverage in Scotland. 16. Skills and employment. In 2021 Perth and Kinross achieved broadly similar academic achievements for school-leavers, compared to Scotland as a whole. Ongoing economic challenges and a continued focus on community empowerment means that there is an even greater need for adult and community learning. The increasing numbers of asylum seekers and refugees in Perth and Kinross also increases the need for ESOL (English for Speakers of Other Languages) and other linked opportunities. 17. The hospitality, tourism, care and agricultural sectors are all experiencing workforce shortages. The reliance on lower skilled work is reflected in gross weekly earnings. In December 2021, the average pay for an individual who works in Perth and Kinross was £575, compared to £622 for Scotland as a whole. Weekly earnings have been lower than the Scottish average for 8 out of the last 10 years. The Corporate Plan clearly sets out the Council’s priorities and is both appropriate and focused. 18. The Council’s website includes the latest Council Plan: Corporate Plan 2022/23 to 2027/28. The Council has a clear vision "where everyone can live life well, free from poverty and inequality”. The Plan identifies seven key priorities. These priorities are based around improving the lives of citizens. The priorities are: • Tackling poverty. • In partnership with communities. • Physical and mental wellbeing. Page 194 of 226
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Section 1: Council vision and priorities | 7 • Children and young people. • Tackling climate change. • Vulnerable people. • Stronger and greener economy. The Corporate Plan is consistent with the Community Plan. 19. Challenges have not been explicitly restated in the Council’s revised Corporate Plan in 2022, but the Council has recognised that the Covid-19 pandemic and the cost-of-living crisis resulted in additional challenges, affecting levels of poverty and the equalities gap. We consider that the Community Plan (Local Outcome Improvement Plan) and the Council’s Corporate Plan are consistent, even though the “read across” between the two documents is not clear, with digital participation, and overall IT ambitions being far less conspicuous in the Corporate Plan than the LOIP or as reported in the previous Best Value report (paragraph 86). The overall objectives between the two plans are different (Exhibit 1). Exhibit 1 The main objectives of the Community Plan and the Corporate Plan are different. Community Plan objectives Corporate Plan objectives Reducing Poverty – Year 1 Tackling poverty Physical and Mental Wellbeing Actions – Year 1 Supporting and promoting physical and mental wellbeing Digital Participation Actions – Year 1 Skills, Learning, Development and Employability Actions – Year 1 Developing a resilient, stronger and greener local economy Locality Partnership Working Working in partnership with communities Tackling climate change and supporting sustainable places Enabling our children and young people to achieve their full potential Protecting and caring for our most vulnerable people Sources: Perth and Kinross Community Plan: Local Outcomes Improvement Plan 2022 to 2032 (pkc.gov.uk) and Corporate Plan Introduction - Perth and Kinross Council (pkc.gov.uk) Page 195 of 226
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Section 1: Council vision and priorities | 8 Consultation included citizens, community planning partners and staff and the Plan was well-communicated. 20. The Council considered viewpoints from communities, elected members, partner organisations and staff about what is important for Perth and Kinross in the design of the Corporate Plan. This included in-person events and online consultations. The Council received feedback from over 1,000 people on the priorities. 76 percent of people responding online agreed with the vision and the vast majority agreed with the seven priorities. 21. Based on this feedback, the Council made changes to the wording of several priorities and outcomes and included a graphic of the priorities instead of a list. This consultation process was included as a case study in the Local Government in Scotland Overview 2023. The Council undertook a communications exercise to ensure staff, elected members and citizens were aware of the Plan. This included presentations, discussions, briefing papers/blogs and intranet announcements. Page 196 of 226
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Section 2: Performance | 9 Section 2: Performance The Best Value review in 2019 identified that outcomes for the community were improving. 22. The previous Best Value report contained a comparison on national performance indicators. This showed Perth & Kinross Council’s performance “generally improved between 2013/14 and 2017/18, but the Council’s performance relative to all Scottish councils fell slightly over the same period”. 23. The Report noted that “business management improvement plan (BMIP) processes existed”, but that “reasons for performance falling below the set target and associated improvement actions were less clear”. The Council could make more explicit the linkages between underperforming service performance indicators and the associated actions in the BMIPs. 24. The Report also found that “overall annual performance reporting to elected members and the public should be more transparent, more balanced and clearer about progress towards strategic objectives. When reviewing the Council’s Annual Performance Report, it was difficult to judge how well the Council performs overall.” Performance reporting has been aligned with the new Corporate Plan and addressed weaknesses in previous reporting. 25. In December 2022, the Council approved a new Corporate Plan for 2022/23-2027/28. 26. Performance indicators now focus on the Plan’s seven main priorities. The Corporate Annual Performance Report (APR) for 2022/23 contains 53 identified performance indicators. The Executive Summary provides an overall snapshot of Council performance and what has improved and deteriorated compared to last year. 27. Services’ Annual Performance Reports underpin the Annual Performance Report, and these are also available on the Council’s website: “PK Performs”. The Council’s new performance framework focuses less on LGBF data. 28. The performance framework which accompanies the new Corporate Plan identifies 53 key indicators against the seven priorities. Out of the total of 53, 12 of these indicators align to the Local Government Benchmarking Framework (LGBF) with more focus on other data sources including local data and data from the Health and Care Partnership. However, a LGBF briefing is provided to members each year. Page 197 of 226
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Section 2: Performance | 10 The Council has still to develop targets for some performance indicators. 29. Each plan priority has a series of actions which are being monitored through multiple performance indicators. The number of actions for a priority range from two to four with performance indicators varying from six to ten. The indicators recognise whether the Council can “inform”, “influence” or “control” the performance measure. 30. There are some areas where performance indicator targets have not been set, with many of these to be determined when appropriate strategies are revised. Overall performance is reported to committee and is being refocused at a strategic level. 31. The Annual Performance Report is considered at the Scrutiny and Performance Committee, typically in September each year and also at full Council. 32. The Business Management Improvement Plan (BMIP) for the coming year and Annual Service Performance Reports for the previous year are presented to the appropriate service committee. For example, the Environment, Infrastructure and Economic Development Committee considered the relevant 2022/23 BMIP and 2021/22 Performance reports in June 2022. 33. In May 2023 an elected member briefing note indicated that the Council is changing the way it reports performance to committees and “moving to an approach whereby performance and improvement information are reported at an organisation / strategic level". 34. The aim of this new approach is to better reflect the new Corporate Plan priorities and common areas of work across services, rather than focusing on individual service-based performance. As well as the Corporate Annual Performance Report a Corporate Delivery Improvement Plan has been introduced which sets out improvements for the year ahead. On-line access to performance data is good. 35. Performance reports are available and easily found on the Council’s website. The Council’s website has an online performance area “PK Performs”. This details how the Council is performing against the Corporate Plan for 2022- 2027 as well as the Annual Performance Reports. Perth & Kinross Council’s performance has improved since 2018/19. 36. There are 88 Local Government Benchmarking Framework (LGBF) indicators relevant to Perth and Kinross that can be used to compare annual performance. 21 are cost indicators and the remaining 67 indicators measure (non-cost) performance. Of these 67, 12 had no comparative data. Of the remaining 55, a comparison since 2018/19 shows that 23 of these indicators Page 198 of 226
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Section 2: Performance | 11 improved by 5 per cent or more and 13 indicators deteriorated by 5 per cent or more with the remaining 19 indicators remaining relatively unchanged (Exhibit ). Exhibit 2 Comparison of 55 LGBF indicators from 2018/19 to 2021/22 23 indicators have improved by more than 5 per cent Source: LGBF benchmarking data 37. The key areas where performance improved included: • Children Services indicator 7 - The percentage of Pupils from Deprived Areas Gaining 5+ Awards at Level 6 (SIMD) increased by 67 percent from 12 to 20 percent. The national average is 23 percent. • Children Services indicator 6 - The percentage of Pupils from Deprived Areas Gaining 5+ Awards at Level 5 (SIMD) increased by 40 percent from 35 to 49 percent. The national average is 52 percent. • Economic Development and Planning indicator 9 - Town Vacancy Rates reduced by 66 percent from 8 to 3 percent. The national average is 11 percent. 38. The areas of deterioration include: • Housing indicator 3 - The percentage of council dwellings meeting Scottish Housing Standards reduced by 52 percent from 97 to 47 percent. The national average is 69 percent. • Housing indicator 2 - The percentage of rent due in the year that was lost due to voids increased from 0.9 to 1.3 percent. The national average is 1.6 percent. 39. At a national level, significant changes were experienced with rent voids (housing indicator 2), but the other major changes in Perth and Kinross were more unique. The improvements in educational attainment are a consequence of the focus of the Council on education: “Enabling our children and young people to achieve their full potential”. 23 -13 -15 -10 -5 0 5 10 15 20 25 DECLINED >5% IMPROVED >5% Page 199 of 226
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Section 2: Performance | 12 Performance compared to other councils has deteriorated. 40. An overall comparison of LGBF performance to the other 31 councils across Scotland shows a reduction in the number of indicators where Perth and Kinross features in the top two quartiles (Exhibit 3). Over the period 2018/19 to 2021/22, the percentage of indicators in the top two quartiles decreased from 60 to 52 percent. A total of 51 indicators are included in this comparison, as four indicators don’t have data for 2019/20. Exhibit 3 LGBF data comparison across all 32 Scottish councils The Council’s relative performance has been decreasing with 52 per cent of indicators in the top two quartiles in 2021/22. Source: Audit Scotland analysis of LGBF data. 41. Changes over the four years include improved rankings for: • Proportion of Scottish Welfare Fund budget spent. The Council moved up from 24th to 3rd. • Proportion of operational buildings that are suitable for their current use. The Council moved up from 20th to 5th. • Average number of days taken to complete non-emergency repairs. The Council moved up from 20th to 8th. 42. Areas where the Council’s ranking moved down include: • Street cleanliness score. The Council moved down from 3rd to 26th. Short-term resourcing issues, redeployment of staff to higher priority Page 200 of 226
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Section 2: Performance | 13 areas, such as on-street refuse collection, and slippage targets have all contributed to this. However, public satisfaction with street cleanliness is still high. • The proportion of pupils entering positive destinations. The Council moved down from 3rd to 24th. • The proportion of care services graded 'good' (4) or better in Care Inspectorate inspections. The Council moved down from 7th to 25th. The Council notes that “there was a significant decline (12 percentage points) between 2020/21 and 2021/22 and concluded that this may be linked to people's experience during the Covid-19 pandemic which saw services often delivered in different ways due to restrictions. In some instances, services had to be closed completely”. The Council undertakes a Best Value assessment. 43. The previous BVAR Report found that “The Council undertakes self- evaluation and is receptive to third-party evaluation and inspection, but that its self-evaluation could be more explicit about improvement plans”. 44. The Council prepares a Best Value Themes Report annually and this covers assessment of progress on overall areas of: • Vision and leadership. • Governance and accountability. • Effective use of resources. • Partnership and collaborative working. • Working with communities. • Sustainability. • Fairness and equality. 45. The Themes Report identified many of the developments in planning that this report references, it also includes performance indicators on staff sickness absence, gender pay gap and asset condition. 46. Self-evaluation at service level was not evident in the Best Value Themes Report, although the Transformation and Change Strategy 2022/23 – 2027/28 has examples of review activity in many areas. Annual performance reports and BMIP reports contain actions and commitments which demonstrate considered improvement at a service level. Page 201 of 226
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Section 2: Performance | 14 The Council demonstrates full compliance with the SPI Direction for 2022/23. 47. The Accounts Commission issued a new Statutory Performance Information Direction in December 2021 which applies for the three years from 2022/23. It requires a Council to report its: • performance in improving local public services (including those provided with its partners and communities), and progress against agreed desired outcomes (SPI 1). The Commission expects this reporting to allow comparison both over time and with other similar bodies (drawing on Local Government Benchmarking Framework and/or other benchmarking activities) • own assessment and audit, scrutiny and inspection body assessments of how it is performing against its duty of Best Value, and how it has responded to these assessments (SPI 2). 48. On the basis of the preceding paragraphs, we believe that the Council has fully complied with the Direction. The Corporate Annual Performance Report provides a balanced overview of performance and Perth and Kinross Performs provides an accessible analysis which allows the public to determine performance. Page 202 of 226
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Section 3: Citizen and community engagement | 15 Section 3: Citizen and community engagement The previous Best Value review identified that the Council could do more to involve communities in strategic planning. 49. The previous Best Value Report identified that “there are good examples of community engagement at service level, but the Council could do more to involve communities earlier in strategic planning discussions and demonstrate the outcome of engagement. The Council is aware that it needs to do more to embed community empowerment in the way the Council and its communities work together”. Community empowerment is a key principle in the new Corporate Pla. 50. The new Corporate Plan includes priorities with linked actions. Working in partnership is one of the seven priorities (paragraph 17). The key actions include: • Establishing locality multidisciplinary teams working with community planning partners and residents to identify and address local solutions to local needs. • Developing and expanding the approach to working with communities to identify local actions and priorities and deliver on these together. • Delivering internal cultural change programme ensuring all staff contribute to our commitment to engage with and be accessible and responsive to our residents and communities. 51. The Council is committed to engaging with communities and empowering them to make a difference in their own area. It has a dedicated webpage with details on multiple ways to get involved. The Council has involved the local community in decision making. 52. The Council has seven Action Partnerships. These comprise community representatives, local councillors and representatives of different services that operate in that local area. Each Action Partnership has a Local Action Plan which identifies the key issues and inequalities within that area and the key actions that the members wish to take to deal with them. Page 203 of 226
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Section 3: Citizen and community engagement | 16 53. The community participation requests scheme allows people and groups to request to participate in a process to improve an outcome for their community. No requests were received in 2021/22. This has been identified as being underutilised and an improvement action has been set. 54. The Perth and Kinross Offer is an approach based on the ambition that everyone in Perth and Kinross has something to offer and looks to harness the excellent work undertaken during the pandemic. The aim is to provide “a one- Council approach implemented by multidisciplinary teams involving strong partnerships”. It is a “whole community approach with support and services centred around needs, where communities and staff are empowered to innovate and provide solutions that offer greater sustainability and ownership”. Examples of the offer include: • Health and Wellbeing café - the aim was to create an informal way to provide support, advice and connections to services for people with care needs and their family, friends, and carers. The initiative took advantage of an offer from a Perth city centre café to offer social care staff use of the building one afternoon a week. The staff team embraced the chance, and this became the weekly Health and Wellbeing Café. • Housing “think yes” fund - the aim was to empower staff working directly with vulnerable tenants to identify and fund direct solutions to issues which may have otherwise led to a breakdown in tenancies. The “think yes” fund allocated a pot of money in each housing locality. Staff were given the freedom and flexibility to use the fund to assist tenants in a variety of situations, which would help them meet their tenancy obligations. Fifty-four tenants were helped who might otherwise have defaulted on their rent or given up their tenancy for other reasons. 55. The Consultation Hub provides residents of Perth and Kinross with an opportunity to get involved in decisions made by the Council and its partner organisations that affect their communities. Future actions are informed by the responses. The consultations cover a range of areas. Recent examples include: • Invergowrie Natural Flood Management Study • Victory Park, Bridge of Earn – Consultation • Rent Setting 2023–24 - Your Rent, Your Say, Your Priorities • Perth and Kinross Local Housing Strategy for 2022-27 56. The Kinross Local Area Committee is piloting a new approach to localised decision making and improving local outcomes. A workshop to evaluate progress and impact took place in early August 2023. 57. The local community in Kinloch Rannoch is currently discussing establishing a community-based Care at Home service with the Health and Social Care Partnership. Page 204 of 226
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Section 3: Citizen and community engagement | 17 There is steady progress with asset transfers to community groups. 58. In 2022/23, the Council received 14 expressions of interest under the Community Empowerment (Scotland) Act 2015, with 9 cases remaining live. It is anticipated that 4 of the expressions of interest received will develop into full Community Asset Transfer requests in 2023/24. Participatory budgeting represents 0.3 percent of the Council budget or £0.4 million. 59. The Community Investment Fund (CIF) has made £1.6 million available since 2018/19 for funding for new community led projects and initiatives to help improve equalities across Perth and Kinross, with priorities determined by local people and communities through the Local Action Partnerships (LAP) and Ward Panels. 60. COSLA and the Scottish Government developed a framework agreement that at least 1 percent of local government budgets should be subject to participatory budgeting by the end of 2021. The investment fund has now been awarded for 2022/23 with a budget of £0.4 million and total applications of £0.8 million. The budget represents 0.3 percent of the annual gross expenditure of the Council. Some examples of where the fund has been invested include: • £2,200 to Inchture and Kinnaird Parish Church for a warm spaces project • £2,000 to Blairgowrie & District Seniors Outings for a cost-of-living and mobility project • £4,568 to Remake Scotland for a Repairs Cafe 61. The Local Action Partnerships are developing a Participatory Budgeting exercise in 2023/24 to develop and deliver actions to address climate change in local communities. Covid-19 mitigation and recovery were the focus for the first year of the revised Community Learning and Development Plan. 62. The Perth and Kinross Learning and Development Plan 2021-2024 was developed during the Covid-19 pandemic. As the Plan progresses the Council intends to review it yearly and continue to focus on mitigating the impact of Covid-19. 63. It seeks to continue to embrace the new ways of working developed during the pandemic. This includes relying less on buildings, being less bureaucratic, changing the rules on who makes decisions, working more closely with the community to support people in need and working faster to get people the help they need in time. Page 205 of 226
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Section 3: Citizen and community engagement | 18 64. The Covid-19 pandemic demonstrated the ability of local groups to organise themselves to support the most vulnerable people in their communities and the willingness of people to volunteer informally to support the emergency response. The Council is attempting to ensure this momentum continues by launching grant schemes through the Local Action Partnerships. For example, Eastern Perthshire LAP has provided £13,473 to community groups across the three ward areas. These grants have ranged from upgrades to community assets, such as sheds and halls to funding for family learning activities. 65. Some of these changes will be supported through the Perth and Kinross Offer. As well as giving staff the opportunity to be more flexible there is also a requirement for elected members to work to facilitate solutions to community problems and to work collaboratively. Examples of this include: • Supporting Community Food Groups - The aim was to address issues of food insecurity and food poverty caused by lockdown, self-isolation, and restrictions in place at the start of the pandemic on an area basis. Community groups across Perth and Kinross mobilised quickly at the start of the pandemic to respond to local issues around access to food and there was practical support in the communities where it was most needed. While the restrictions of the pandemic have eased, the need for these groups has continued. • Visitor Rangers - The aim was to support responsible tourism as staycations soared during the pandemic. Welcoming people to Perth and Kinross safely and with consideration for residents and the environment. A team of Visitor Rangers covered the tourism hotspot areas. There was a public communication campaign and online resources to provide clear information ahead of and during the tourist season to support a safe and welcoming experience in Perth and Kinross. Communities reported that the presence of the Rangers made a welcome difference by helping educate visitors, as well as helping to make residents feel safe. Page 206 of 226
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Section 4: Reducing inequalities and tackling climate change | 19 Section 4: Reducing inequalities and tackling climate change The previous Best Value review identified that an approach to inequality was being developed. 66. The previous Best Value Report found that “A place-based approach to tackling inequality is being embedded through the seven local action partnerships made up of community, elected and stakeholder representatives” and that equality and fairness were key aspects of the Perth and Kinross Offer. Removing inequality and addressing the climate emergency are clear priorities for the Council. 67. Of the Council’s seven strategic priorities, one addresses climate change directly “Tackling climate change” and four of them reflect the equality agenda: • In partnership with communities • Tackling Poverty • Vulnerable people • Children and young people. 68. The Council has recognised that the cost-of-living crisis and the pandemic have meant the equalities gap is widening. With an increased demand for services at a time when there are reductions in resources, the Council has learnt from the pandemic that working together with communities works best to deliver priorities. The Council works with a range of different partner organisations to deliver their equalities programme. 69. The Local Outcomes Improvement Plan focuses on inequalities which are stubborn and require new collaborative approaches. It has five strategic priorities which includes Poverty and Physical and Mental Health. 70. Each strategic priority is supported by a range of outcomes. These outcomes have a series of actions, and the Plan identifies how the impact will be assessed, but there are no actual targets set. The Local Outcomes Improvement Plan sets out what the Community Planning Partnership will do, and the Perth and Kinross Offer is designed to show how it will work within the Council. Page 207 of 226
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Section 4: Reducing inequalities and tackling climate change | 20 71. There are seven Local Action Partnerships (LAPs) across Perth and Kinross. The LAPs are responsible for developing a Locality Plan targeted on key inequalities, within the wider CPP strategic priorities. 72. The Council’s approach to supporting local community planning is being reviewed as part of the Transformation and Change Programme. A report is due to be considered by the Council in February 2024. A poverty taskforce has devised a plan to help deal with the cost-of-living crisis. 73. In October 2022, a Poverty Taskforce was created which is looking at ways to mitigate causes of poverty. They have undertaken several initiatives since their creation and have a dedicated project officer from August 2023 to support their work. 74. The Council has devised a seven-point plan to help deal with the ongoing cost-of-living crisis. Measures include: • Target financial packages of support to help households in Perth and Kinross that need it most. • Help residents to manage and pay their bills through the provision of information and advice on benefits, money, and debt to those who risk not being able to meet their basic needs. • Support residents with energy efficiency measures which result in lower bills. • Help people to access emergency and community food so that they need not go hungry. • Identify and support the most vulnerable residents to ensure they keep warm and well-nourished. • Find out what local communities need and build their capacity to deliver local services and reach out to residents to ensure their basic needs are met. • Co-ordinate with partner organisations across the private, public and third sector to maximise the impact of our collective efforts to keep our residents warm and well-nourished and ensure their basic needs are met. Equality impact assessments and Fairer Scotland assessments are completed. 75. The Council uses an integrated Impact Assessment Tool, and this creates an Equality and Fairness Impact Assessment (EFIA). An EFIA is carried out at the start of any development of a new or revised policy. Page 208 of 226
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Section 4: Reducing inequalities and tackling climate change | 21 76. The results of impact assessments allow services to highlight any barriers or discrimination that may affect people using services and identify ways to mitigate this. The Council publishes a copy of the impact assessment on its website. Human rights are part of the Equality and Fairness impact assessments. 77. The Council engages with equality groups and communities through the Equalities Strategic forum, Community Equalities Advisory Group or more specific networks if required. The latest equality performance report available online from the Council covers 2020-2021. 78. As required under the Specific Equality Duty Regulations (Scotland) 2012, the Council reports its progress on equality by publishing a Mainstreaming Equalities Report setting out aims and outcomes for meeting equalities commitments. The Council published its Mainstreaming Equality Report 2021- 25 which set out 16 outcomes, banded under four equality aims: • Perth and Kinross is a safe, welcoming and accessible area. • Perth and Kinross visibly celebrates equality and diversity. • We will keep our community informed and engage with them about our services, opportunities and support available to them. • We will increase people’s awareness of equality and diversity. 79. The Council publishes a performance report providing details of how it has achieved these outcomes through a mix of case studies and infographics. The last performance report was for 2020/21 which was prior to the new outcomes agreed in April 2021. There has not been a further performance report published since 2020/21, despite the Council committing to publishing a performance report annually. Council targets on carbon reduction are clear. 80. The Council recognised a climate emergency in June 2019 and set a target to decarbonise operations in-line with a 1.5oC trajectory and Scottish Government targets. These include a commitment to achieving a 75 percent reduction in emissions by 2030 and reaching net zero by no later than 2045. 81. The Climate Change Strategy and Action Plan (2021) has six overarching principles: • Achieving net zero aligned with the Paris Agreement and the Scottish Government Targets, with the ambition of achieving them sooner. • Building a more resilient Perth and Kinross. • Ensuring climate change action is fair and the transition to a green economy benefits all. Page 209 of 226
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Section 4: Reducing inequalities and tackling climate change | 22 • Enhancing biodiversity. • Engaging young people and empowering them to take action against climate change. • Empowering business and communities to take climate action in line with the Perth and Kinross Offer. 82. Each priority has several strategic commitments to support it including: • Deliver action across priority themes of transport, buildings and energy, waste and the circular economy, business and industry, land use, climate resilience and engagement & education. • Undertake an annual review of climate action plan and adapt as required. • Mainstream climate resilience into all Perth & Kinross Council asset reviews and decisions. • Encourage and support children and young people to have their say on influencing the climate change response including by supporting their participation in the Climate Commission and Citizens Panels. • Act as an enabler to community-based climate action. There is a climate change and sustainability committee. 83. The Perth and Kinross Climate Change Commission (PKCCC) was formed in May 2022 and had their first meeting in July 2022. The Commission is an independent active leadership and support network for cross-sector collaboration and action on climate change. The new Climate Change Committee will ensure that the Council's plans, programmes and strategies deliver on its obligations and duties towards Climate Change, sustainable development, and biodiversity. 84. An annual performance report will be provided to the Committee to update on progress made on the Strategy and Action Plan. The impact of carbon reduction has not yet been reflected in financial planning or reporting. 85. The Council has not yet been able to fully cost the Climate Strategy and Action Plan but has been clear that funding will be the most significant challenge to becoming net zero, "given the current absence of further external funding sources, the achievement of net zero will not be possible, at the required pace". 86. The Council has assessed that the cost of adaptation and mitigation for buildings, fleet and infrastructure will be around £1 billion. Page 210 of 226
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Section 5: Alignment of delivery plans | 23 Section 5: Alignment of delivery plans The previous Best Value review identified that the Council had a workforce, digital and a medium-term financial plan. 87. The previous Best Value Report identified that the Council: • had a workforce plan covering the period 2018-2021 and its framework for managing workforce change and the “job families” approach have been designed to develop a flexible workforce. • had a Digital Strategy 2016-2020 that contained the expected elements but did not fully reflect the Council’s ambition to become the most digitally innovative Council in Scotland. • had a five-year medium-term financial plan (MTFP) and a ten-year provisional composite capital budget, but that the Council should consider developing a longer-term financial plan for the five to ten-year period. A new Strategic Investment and Improvement Board was being created. The Council is moving away from service planning and refocusing on corporate planning and reporting. 88. As noted in paragraph 32, the Council is changing the way it reports performance to committees and “moving to an approach whereby performance and improvement information are reported at an organisation / strategic level.” As part of this new approach, the Council has agreed to remove the requirement for Service Annual Performance Reports and Business Management Improvement Plans from 2023/24. 89. The aim of this new approach is to better reflect the new Corporate Plan priorities and common areas of work across services, rather than focusing on individual service-based performance. The Council has a transformation programme that is extensive and ambitious. 90. The Council’s Transformation and Change Strategy 2022/23-2027/28 is extensive and ambitious and covers all aspects of the Council under four main aims: • Transforming our customer’s experience. • Transforming the shape and structure of our organisation. Page 211 of 226
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Section 5: Alignment of delivery plans | 24 • Transforming our systems and processes. • Transforming our spending and response to demand. 91. The transformation plans are grouped under three headings (People and Place, Our Organisation and Partners) and include the following projects: • Review of community engagement activity - Internally and externally. Proposals for alignment of approach, co-ordination of activity and use of data and intelligence. • Decarbonisation - Delivery of the Council’s Climate Action Plan that will lead to the fair transition to a net zero and resilient Perth and Kinross Council estate and Perth & Kinross Council area. • Older People – Perth and Kinross Health and Social Care Partnership (PKHSCP / the Integrated Joint Board) will deliver an approved strategic plan to change and improve care and support for a growing population of older people and their carers. Through a whole system/collaborative approach early intervention will be enhanced through self-management; avoiding admissions to hospital and keeping people at home; and integrating pathways of care across Primary, Secondary and Community. • Tayside Wide Mental Health Service Transformation - PKHSCP will co- ordinate the strategic planning and transformation of mental health services across Tayside. Together across the three HSCPs, NHS Tayside and the three Local Authorities and with people living with mental health conditions, their families and carers and our staff, strive to build high quality mental health services that meet people’s needs. • Leadership Review - Introduce more flexible leadership arrangements and through transformation will introduce new modern, flexible models of service delivery. • Consolidation - A consolidation of organisational services to identify gaps and areas of duplication, consolidating activities to improve efficiency, consistency and quality of service delivery. • One Public Estate (School Estate) - A review of all estate (with partners) to reduce buildings and identify opportunities for co-location with partner organisations. • Culture and leisure – ALEOs - A review of ALEOs and the culture and leisure activities across Perth and Kinross to ensure the most effective model of operation. Maximising opportunities for services to be as commercially efficient as possible. Page 212 of 226
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Section 5: Alignment of delivery plans | 25 There are clear links to Corporate Plan priorities within the Medium-Term Financial Plan 92. The Council approved a Financial Strategy in June 2022 which set out the scale of the financial challenges facing the Council over the short to medium term. These include real term reductions in funding, significant cost increases due to inflation and an increasing demand for services. These result in a recurring funding gap which has been funded from reserves for a number of years. 93. The Council acknowledges that this is unsustainable and that it needs to take corrective action to return to a position of long-term financial sustainability. It aims to do this through a number of strategies including its Transformation and Change Strategy but recognises transformation alone will not be sufficient to address the funding gap so budget cuts and service reductions will still be required. 94. The Financial Strategy aims to provide the link between the Council’s long- term strategic objectives and its financial capacity but does not make specific reference to the Corporate Plan approved in December 2022. We have been advised that it was written this way so that it would be sustainable and transcend multiple plans. The Council’s expenditure pressures, and savings proposals are clearly linked to Corporate Plan priorities within the Medium-Term Financial Plan and the three-year budget paper Cumulative funding gaps of up to £192 million are projected over the next six years. 95. The Financial Strategy is supported by the updated Medium-Term Financial Plan, approved in October 2023, covering the six years to 31 March 2030. The plan considers a range of key financial variables that impact on the Council’s financial planning including funding levels, inflation and pay awards. These are grouped together under three scenarios: optimistic, mid-range and pessimistic and show that the Council needs to make cumulative budget reductions of between £7.6 million and £192 million by 31 March 2030. The Council originally planned to use £27 million of reserves to fund its 2023/24 budget but subsequent updates have increased this to £42 million. 96. On 1 March 2023, the Council approved its 2023/24 general services revenue budget. Budgeted net expenditure of £450.5 million was approved after inclusion of budget pressures totalling £17.7 million and deduction of savings totalling £6 million. The Council used the following measures to balance its budget: • increase Council Tax by 3.9% equating to £3.8 million. • use of service concessions fiscal flexibility equating to £17 million. • use of reserves totalling £9.9 million. Page 213 of 226
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Section 5: Alignment of delivery plans | 26 97. The Council has subsequently updated its 2023/24 budget to reflect additional budget pressures (£1.7 million), increased expenditure funded from additional government grant (£9.4 million), the impact of the 2022/23 outturn (£9.2 million) and additional expenditure to be funded from earmarked reserves (£3.9 million). The revised budget totals £474.7 million, of which £41.7 million will be funded from reserves 98. The latest budget monitoring report (as at 31 August 2023) notes that the Council is projecting a small overspend of £1.6 million (0.3 percent) against its budget). A Council-wide workforce plan exists but lacks context and details. 99. The Council has a workforce plan: Corporate Workforce Plan 2021-23. There is no information in the plan about the challenges facing the Council workforce, or any data in terms of workforce numbers, deployment, age profile, or risks in individual employment groups. The Plan sets out the Council’s ambitions around three themes: • Building in Agility – During the pandemic it has been, and will continue to be, critical to have the ability to move resources to areas with the greatest need, often at short notice, and utilise the many skills and talents across the organisation to make a meaningful difference. Flexible and remote working is here to stay. Focusing on simplified governance and decision-making has empowered staff to work and make decisions more independently. • Evolving Our Talent – Knowing our people and their values, skills, experience, and aspirations will enable us to retain, develop and mobilise our talent across the organisation. This will also help to identify any skills gaps so that we can focus on developing our own staff using effective succession planning or recruiting to these areas and creating a pipeline of future talent. • Refreshing Our Employment Offer – Inspiring a future generation of public servants as well as our own staff who may also be looking for a change in career or to take on a leadership role. Continuing to develop technology and find digital solutions to apply, interview and induct employees is essential in this new era of work. 100. 18 priority actions have been identified in the Plan. The Council is developing a “Managing Workforce Change Strategy” as part of its transformation programme. Page 214 of 226
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Section 5: Alignment of delivery plans | 27 Recommendation 1 The Council should revise the workforce plan. This should set out the challenges facing the Council workforce; data in terms of workforce numbers, deployment, age profile; and risks and actions in individual employment groups. The Council is developing an asset management strategy. 101. The transformation programme identifies that one of the projects is the “development of corporate asset management strategy and a review of “one public estate” including the school estate – including savings available through reducing the number and size of buildings.” A revised Corporate Asset Management strategy and plan is currently being drafted and is scheduled to be presented to the Council in December 2023. Included in this will be a high level 30 Year Investment Plan: this will provide a breakdown of estimated long-term investment requirements for the existing asset base and will inform long-term financial planning. The Council has a digital strategy which supports its change programme and Corporate Plan. 102. An Executive Leaders short-life working group was created in 2022 to refresh the Digital Strategy. In-person and virtual workshops were created and included the extended leadership team (ELT), the transformation and change team, all service senior management teams and elected members. 103. The refreshed Digital Strategy 2023-2027 (Digital Perth and Kinross) and Delivery Plan were approved at the Finance & Resource Committee on 1 February 2023. The Strategy aligns with the Council’s Transformation and Change programme and supports the delivery of the Corporate Plan. 104. The strategy demonstrates the level of ambition for using digital, information and technology over the next 5 years and includes digital ambitions which align with the Corporate Plan, Financial Strategy and Transformation and Change Programme. The strategy is supported by the Digital Strategy Delivery Plan, which was shared at the Council’s Digital Board and more widely with leaders, business owners and decision-makers. 105. Senior managers, wider staff and the Digital Board provided constructive assistance in identifying key themes. The activity is continuing with sessions planned at the Leadership Forum and Senior Management Teams, to ensure resources are prioritised appropriately to meet new and emerging demand. Progress is being monitored quarterly at the Digital Board and annually at the Finance and Resources Committee. The key themes include: • Better use of technology and the internet of things to monitor care needs/delivery and managing housing stock. • Creating more of a ‘one council’ joined-up approach. • Targeting support to those at risk of digital exclusion. • Using data gathered to improve service design and delivery. Page 215 of 226
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Section 6: Leadership | 28 Section 6: Leadership The previous Best Value review identified that there is strong member and officer leadership. 106. The previous Best Value Report concluded that “there is strong member and officer leadership together with appropriate levels of challenge and scrutiny. The Council operates in a transparent manner and has effective member development and training arrangements. The current review of the Council’s governance structure should consider simplifying the decision-making model.” Following the May 2022 local government elections, the Council now has a SNP minority administration. 107. In May 2022, local government elections were held across Scotland. 40 councillors were elected to represent the 12 wards of Perth & Kinross Council. The Council is now led by a SNP minority administration, which replaced the previous Conservative and Liberal Democrat coalition administration. 108. At the Council meeting held in May 2022, the Council agreed to retain the existing committee structure, with a number of minor changes to the names of seven committees to ensure these were aligned to the functions they performed, alongside a change to the number of members sitting on several committees. A new committee, Climate Change and Sustainability Committee was also created. Following these changes, the Council currently operates with a total of 22 sub-committees, ten of which administer common good funds. There has been a recent review of the management structure. 109. The Chief Executive took up post in November 2021 and is currently supported by the Executive Leadership Team (ELT). In June 2023, a change to the Executive and Strategic Leadership Structure was approved. The new structure will see a reduction in the ELT from five posts to three and will now include a Chief Officer of Health and Social Care; Director of Strategy, People and Resources; and Director of Economy, Place and Learning. There will also be a reduction in the number of Heads of Service, reducing from 13 to 11 Strategic Lead posts. There is effective collaborative working between members and officers. 110. Based on our observation of committee meetings we are satisfied that there remains effective collaborative working arrangements between members and with officers. Page 216 of 226
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Section 6: Leadership | 29 111. It is also clear that there is a good degree of co-operation and consensus between members on the vision and priorities for the Council. Members continue to have a clear focus on working in the interests of residents. 112. There is good communication between elected members and senior management through Leaders’ meetings, Convenors’ meetings, Member Officer Working Groups and all-member briefings were appropriate. There are no significant issues identified with capacity and skills of senior officers or with the skills and development of members. 113. After the May 2022 local government elections, the Council ran an induction programme for new and returning elected members to ensure they accessed the relevant information and training they needed to fulfil their role. 114. The Organisational Development Plan 2020-23 includes a workstream on “Elected Member Development Plan” which aims “to ensure a consistent and structured framework is in place for Elected Member development”. It proposes that individual development plans are created for Elected Members which will be reinforced with specific and general learning opportunities. 115. There is also a workstream in the Organisational Development Plan dedicated to “Developing Leaders” which is “not about managing others but about managing challenges.” This workstream is open to all staff at any level. Page 217 of 226
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Section 7: Progress on recommendations | 30 Section 7: Progress on recommendations The Council has made slow progress on recommendations reported in the 2019 BVAR. 116. The previous Best Value Report commended the continuing steady improvement of the Council since the first Best Value audit in 2008. The report noted the Council’s clear strategic objectives and effective leadership had provided the basis for improvement. The report also commended the Council for the potential step change presented by the ‘Perth and Kinross Offer’, an approach setting out how the Council will improve in partnership with citizens and communities. 117. The report noted that the Council should use its approaches to self- evaluation and performance management to demonstrate better where it intends to improve and how it is progressing against its objectives. It also noted the Council’s ambition to become the most digitally innovative in Scotland, with the Council updating its digital strategy. 118. We note that there was no formal reporting to committee of progress against the 2019 Best Value recommendations and that reporting to management on progress has not been completed since June 2021. Recommendation 2 The Council should implement a process for routinely reporting Best Value action plan progress to committee. 119. The previous auditor (KPMG) did not include a summary of BV progress in either the 2020/21 or 2021/22 Annual Audit Reports. We obtained some information from them as part of our handover arrangements, but this did not include clear judgements on the status of each recommendation, so we have considered KPMG comments and completed our own assessment of progress. 120. Exhibit 4 summarises our assessment of progress against each of the 8 recommendations. This shows that progress has been slow, with six recommendations now considered as complete, with further actions planned to complete the remaining two actions. However we note that Covid-19 pandemic and the development of a new Corporate Plan affected the progress in some areas. Page 218 of 226
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Section 7: Progress on recommendations | 31 Exhibit 4 Progress on 2019 Best Value Recommendations BVAR Recommendation Summary of progress It is important that the Council maintains the pace of development of the Perth and Kinross Offer as part of the framework and timeline it is currently developing KPMG: “The Offer continues to progress positively, will need to keep up with the pace expected of a project of this importance and size, particularly following changes in Council leadership and elected members. The offer framework was approved by Council in December 2021. Since our previous report on the Offer, progress has continued despite the ongoing pressures and challenges of increasing inflation, the cost-of-living crisis and wider economic uncertainty. Following the change in Council leadership and elected members, the Offer will require continued focus and consideration in order to be successful.” Completed The Perth and Kinross Offer Framework was approved at the Council meeting on 15 December 2021. The Framework sets out the plan for taking forward the principles and aims of the Offer over a 5-year period (2022 to 2027), including a timeline of key milestones”. (Paragraph 53) Following completion of its updated maturity assessment the Council should revise its digital strategy in line with its ambition KPMG “The Council’s digital strategy spanned 2016-20, and progress was reported as being made to complete a revision which is scheduled for release during 2021. The ICT Transformation Board previously oversaw digital development, however, as part of the revision, the Board has been renamed to the Digital Board, with changed terms of reference and membership to improve oversight and challenge. As part of the revision, three separate audits have been carried out to inform developments, including from Audit Scotland and the Local Government Digital Office. The digital strategy 2023-27 was set out in a report to Finance and Resources Committee 1 February 2023.” Completed The Digital Strategy 2023-2027 and Delivery Plan were approved at the Finance and Resources Committee on 1 February 2023. The Strategy aligns with the Council’s Transformation and Change programme and supports the delivery of the Corporate Plan. (Paragraphs 101-104) As part of the ongoing governance review the Council should consider simplifying KPMG “The Scheme of Administration and Standing Orders were both updated during 2021 to reflect the modern ways of working in line with the Council’s ongoing review of governance Page 219 of 226
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Section 7: Progress on recommendations | 32 arrangements to improve decision- making arrangements. A hybrid meeting structure was adopted by the Council following the lifting of Covid-19 restrictions. The Council has good governance arrangements, with sufficient scrutiny offered from Council members through the Scrutiny and Performance Committee, and from an internal audit service that is sufficiently independent from finance and service delivery.” Completed In June 2023, a change to the Executive and Strategic Leadership Structure was approved. The new structure will see a reduction in the ELT from five posts to three and will now include a Chief Officer of Health and Social Care; Director of Strategy, People and Resources; and Director of Economy, Place and Learning. There will also be a reduction in the number of Heads of Service, reducing from 13 to 11 Strategic Lead posts. (Paragraph 108) The Council should consistently demonstrate how it uses performance management and performance reporting to drive continuous improvement KPMG “The Council prepared its annual Planning Performance Framework, which is a national monitoring tool scrutinised by Scottish Ministers. The main purpose of this tool is to demonstrate how, as a planning authority the Council are working towards achieving a high-quality planning service. This includes both forward and backward consideration of performance, and steps to improve. The report clearly shows the performance against targets, whether delivered, or on target. The report made clear the planned service improvements for 2020-21 and discusses the intended outcomes. Specific actions were taken in respect of education and children’s services.” Completed The latest (20221/23) Corporate Annual Performance Report provides an overall summary of data on Council performance and what has improved and deteriorated compared to last year. There are areas where performance indicator targets have not yet been set and these will be determined as appropriate strategies are revisited. A Corporate Delivery Improvement Plan has been introduced which sets out improvements for the year ahead. The Council is changing the way it reports performance to committees and “moving to an approach whereby performance and improvement information are reported at an organisation / strategic level.” (Paragraphs 30-33 and 87-88) It also needs to make public performance reporting more transparent, clear and balanced. The Annual Performance Report KPMG “As a result of the recommendation from the BVAR, the APR was redeveloped to improve transparency and balanced reporting. This included improved narrative describing the indicator, how it is measured, what influences performance. Furthermore, the Page 220 of 226
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Section 7: Progress on recommendations | 33 should include ambitious targets and be clear about the reasons for underperformance and planned improvement actions performance over time, and against target are key inclusions which improve the transparency of the report. The Council opted to remove the trend analysis which indicates a deterioration, or improvement of indicators. In our view, considering the continued impact of COVID-19 during the 2022 financial year, the decision to remove the trend analysis continues to be appropriate for this year, and reflects the Council’s transparency on performance.” Completed Our own review of the 2022/23 Corporate APR identified that there was an overall summary of performance which was balanced and contained targets for improvement. (Paragraphs 30-33) The Council should build on its strong financial management and consider developing a longer- term financial plan covering a five to ten- year period as part of its modernisation agenda KPMG “We consider that the approach to financial management, including budget setting and monitoring is appropriate with clear supporting governance arrangements. The Council demonstrates good practice, in a local authority context, through regular financial reporting. We continue to highlight the good practice of budget flexibility, which encourages the Council to plan longer term.” “In November 2021, the Council considered a revised six-year plan for 2022-2028. The Council have built on existing strong financial management and have developed financial models to demonstrate long term planning. In addition to revenue long-term forecasting, the Council developed a thirty-year capital Investment Blueprint for the Future (“the Blueprint”) plan which was presented on 6 October 2021.” “We consider the development of a six-year plan to be an appropriate response to longer term financial planning. However, in light of the recent global pandemic as well as wider economic uncertainty, the need to develop further long-term financial planning beyond six years is further highlighted. The revised Corporate Plan 2022/23 – 2027/28 sets out the vision and corporate objectives of the Council, aligned with its values. The Financial strategy details the challenges faced by the Council and the various actions to be taken for the financial sustainability of the Council.” Outstanding The Council has set provisional revenue budgets for 2024/25 and 2025/26 and has a Medium-Term Financial Plan. A review of strategic planning and resource management activity is underway. (Paragraph 94) The ongoing review of the community planning partnership should be wide- ranging and include the effectiveness of KPMG “The community planning partnership board needs to take a more active role in leading partnership working and strategic direction. Community empowerment is not yet fully embedded in the way the Council and its communities work. The Perth and Kinross Offer is a new approach that aims to empower communities and give them more influence over what matters to Page 221 of 226
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Section 7: Progress on recommendations | 34 the board, outcome delivery groups and the local action partnerships them. As part of the Council’s response to equality it continues to have conversations with local communities which as at April 2021 included some key community driven actions. In addition, the Council is required to produce its local outcomes improvement plan, and this uses local challenges and intelligence to identify key inequalities. These are predominantly identified as poverty, mental and physical well-being, skills, learning and development, employment and digital participation.” Outstanding A revised Community Plan was approved by the CPP Board in September 2022. The Council is reviewing and updating its approach to community engagement and empowerment as part of the Transformation and Change Programme including how the Council and wider CPP discharges its duties around local community planning. A self-assessment of the CPP commenced in May 2023 and will result in the development of a CPP Improvement Plan. (Paragraphs 7-16) The Council should improve how it involves communities. This includes earlier involvement in strategic planning processes, more involvement in budgeting processes, and better promotion of the Community Empowerment (Scotland) Act 2015 and providing appropriate resource to support the requirements of the Act KPMG “As part of the five-year Transformation and Change strategy, meaningful engagement and communication are key. Engagement with the local community has been identified as a key focus to address service delivery and meet the needs of the local community. Communication and effective dialogue with staff, communities, public, private and sector partners has been identified as key to help strengthen the Council’s understanding of delivery needs and how to allocate resources.” “The Offer framework, including Communications and Engagement Plan was considered and approved by Council in December 2021. The Offer is a key way the Council plans to engage with and involve communities and an update is provided above.” “The Council has continued to use its Consultation Hub as a way of engagement with communities and its stakeholders. The 2020-21 budget consultation is an example of how the Council continues to expand opportunities to engage with communities, which includes a number of other consultations on businesses and the effect of Covid-19, and review of audit social work and social care contributions policy. However we continued to make further recommendations.” Completed The Community Plan and Corporate Plan were developed in consultation with communities, and this approach was included as a case study within the Local Government in Scotland Overview 2023. Working in partnership is one of the seven priorities in the Corporate Plan 2022-27. The Perth and Kinross Offer is a “whole community approach with support and services centred around needs, where communities and staff are empowered to innovate and provide solutions that offer greater sustainability and Page 222 of 226
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Section 7: Progress on recommendations | 35 ownership. The Council provided examples of how this worked, and it continues to embrace the new ways of working developed during the pandemic. This includes relying less on buildings, being less bureaucratic, changing the rules on who makes decisions, working more closely with the community to support people in need and working faster to get people the help they need in time. There is a dedicated webpage with information on community asset transfers and participation requests. (Paragraphs 19-20 and 51-56) Source: Audit Scotland Page 223 of 226
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Appendix | 36 Appendix Improvement Action Plan Issue/risk Recommendation Agreed management action/timing 1. Workforce Planning The Council has a workforce plan, but it lacks context and detail. The Council should revise the workforce plan. This should set out the challenges facing the council workforce; data in terms of workforce numbers, deployment, age profile; and risks and actions in individual employment groups. A detailed People and Culture Plan will be taken to the Finance and Resources Committee by June 2024. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 June 2024 2. Best Value Reporting The Council has made slow progress on recommendations reported in the 2019 Best Value Assurance Report. The Council should implement a process for routinely reporting Best Value action plan progress to committee. An annual update will be provided through the Corporate Annual Performance Report which is reported to the Scrutiny and Performance Committee and the Council in September. This will also sit on our website as part of the supporting information which is accessible to the public. In addition, we will report six monthly to the Executive Leadership Team. Responsible Officer: Strategic Lead – Strategic Planning, People and Performance Target date: 30 September 2024 Page 224 of 226
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Appendix | 37 Perth and Kinross CouncilBest Value Thematic Review 2022/23 Best Value Thematic Review 2022/23 Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk AS.4.0 Page 225 of 226
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