Revenue Budget 2023/24 - Update No 3
Perth and Kinross Council · 31 January 2024
Back to Finance and Resources Committee — 31 January 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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PERTH & KINROSS COUNCIL FINANCE & RESOURCES COMMITTEE 31 JANUARY 2024 REVENUE BUDGET 2023/24 – UPDATE NO. 3 Report by Strategic Lead – Finance & Business Support (Report No. 24/40) 1. PURPOSE 1.1 This report provides an update on progress with the 2023/24 General Fund Revenue Budget based upon the October 2023 ledger, updated for any subsequent known material movements, and the projected financial position of the Housing Revenue Account. 1.2 The total net projected over spend on the 2023/24 General Fund Management Budget is £1.057 million (see Appendix 1). 2. RECOMMENDATIONS 2.1 The Committee is requested to: A. note the contents of the report. B. note the projected outturn for General Fund Services set out in Section 5 and Appendix 1 and 2. C. note the projected outturn for Corporate Budgets and Perth & Kinross Integration Joint Board set out in Section 6. D. note the funding update provided in Section 7. E. note the projected outturn for the Housing Revenue Account, which is summarised in Section 8 and Appendix 4. F. approve the adjustments to the 2023/24 Management Revenue Budget detailed in Sections 8, 9, 10 & 11 and Appendices 1, 2, 4, 5, 6 & 7. G. note the financial risks set out in Section 12 and Appendix 8. 3. STRUCTURE Section 4 Background Section 5 Revenue Monitoring – Service Budgets Section 6 Revenue Monitoring – Corporate Budgets Section 7 Revenue Monitoring – Funding Section 8 Revenue Monitoring – Other Updates Section 9 2023/24 Additional Funding
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Section 10 2023/24 Virements Section 11 2023/24 Movements in Reserves Section 12 Financial Risks Section 13 Conclusions 4. BACKGROUND 4.1 This report updates the Committee on progress with the 2023/24 Revenue Budget. Appendix 1 to this report summarises the current projected year end (outturn) position for each Service based upon the October 2023 ledger, updated for any subsequent known material movements. 4.2 The budget total reflected in Column 1 of Appendix 1 to this report is that approved by the Council in setting the 2023/24 Final Revenue Budget on 1 March 2023 (Report No. 23/72 refers). In addition, adjustments approved by the Council on 4 October 2023 (Report No. 26/268 refers), the Finance & Resources Committee on 26 April, 13 September and 22 November 2023 (Report Nos. 23/120, 23/242 and 23/315 refer) and Executive Sub-Committee of the Finance & Resources Committee on 24 July 2023 (Report No. 23/219 refers) are reflected in Appendix 1 (Column 2). 5. REVENUE MONITORING – SERVICE BUDGETS 5.1 The total net projected under spend on Service budgets, which is summarised in Section 1 of Appendix 1 to this report, is £341,000 which represents 0.1% of total net Service expenditure. 5.2 Details of variances against individual Service budgets are shown in Appendix 2 to this report with the most significant variances summarised below. 5.3 The management of Service over and under spends are considered throughout the financial year and may also form part of the Revenue Budget strategy for future years. 5.4 There remains a risk that the Council continues to experience increases in costs over the short to medium term that are higher than budgeted inflation levels. This is already being seen in the cost of the materials required by property and housing maintenance teams. Going forward, this may continue to have an impact on projected outturns and future years’ budgets. Education & Children’s Services 5.5 The projected outturn for Education & Children’s Services excluding Devolved School Management (DSM) and the Pupil Equity Fund (PEF) is currently anticipated to be £1.036 million or 0.4% less than budget – a movement of £861,000 on the position last reported to Committee. The individual elements contributing to this position are summarised in the following table and narrative.
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Function Projected Outturn Movement £’000 % £’000 Education Services Under spend (404) (0.9) (534) Children, Young People & Families Under spend (101) (0.4) (101) Business & Resource Services Under spend (75) (1.0) (44) Catering Services Under spend (456) (6.3) (182) TOTAL Under spend (1,036) (0.4) (861) 5.6 Within non devolved Education Services there is reduction in the net projected over spend of £534,000. This is primarily made up of movements in projected staff costs due to additional slippage and strikes (£667,000) together with other net projected under spends (£25,000) partially offset by movements in home to school transport projections (£158,000). 5.7 In Services for Children, Young People & Families there is an increase in the projected under spend of £101,000. This is made up of projected under spends on staff costs (£129,000) and additional income (£99,000) partially offset by increases in the cost of direct provision to service users (£127,000). 5.8 In Business & Resource Services there is an increase in the projected under spend of £44,000 due, primarily to updated staff cost projections. 5.9 In Catering Services, there is an increase in the projected under spend of £182,000 based on the latest projections on school meal uptake. 5.10 The Devolved School Management Scheme (DSM) is currently projected to under spend by £239,000 due to staff slippage and additional income, which represents 0.2% of the overall DSM budget. However, individual schools are experiencing challenges in delivering approved staff slippage targets. The budgets for the Devolved School Management scheme are allocated by financial year (April – March), whereas expenditure is incurred by academic year (August – June). 5.11 At this stage of the academic year, expenditure met from the Pupil Equity Fund (PEF) is projected to be £100,000 less than the allocation from the Scottish Government of £1.874 million. Schools are being instructed to use this year’s PEF by 31 March 2024. It is anticipated that the projected under spend on teacher and support costs of £100,000 will be carried forward to 2024/25 to meet commitments. The budgets for the Pupil Equity Fund scheme are allocated by financial year, whereas expenditure is incurred by academic year. Communities 5.12 The projected outturn for Communities is currently anticipated to be £623,000 or 0.8% more than budget - which represents a movement of £623,000 on the position last reported to Committee. This position is summarised in the following table and narrative.
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Function Projected Outturn Movement £’000 % £’000 Environmental & Consumer Services Over spend 938 2.5 798 Culture & Communities Over spend 115 0.9 (35) Planning & Development Over spend 45 (0.7) 115 Housing Over spend 45 0.5 - Business & Resources Under spend (520) 8.6 (255) TOTAL Over spend 623 0.8 623 5.13 In Environmental & Consumer Services there is an increase in the projected net over spend of £798,000. This is the net projected cost to the Council of the severe weather events that took place in October 2023. The gross cost is currently estimated to be £1.232 million and is it anticipated that £434,000 will be recovered under through the Bellwin Scheme with the balance funded from unearmarked Reserves. 5.14 In Culture & Communities the projected over spend has reduced by £35,000. 5.15 In Planning & Development there is a net increase in the projected over spend of £115,000 due, in the main, to updated projections in relation to Perth Harbour, commercial estates and electrical vehicle charging activity and additional legal costs associated with planning appeals. 5.16 Within Business & Resources there is an increase in the projected under spend of £255,000 due to additional staff slippage and income partially offset by IT licensing costs. Corporate & Democratic Services 5.17 The projected outturn for Corporate & Democratic Services is currently anticipated to be £60,000 or 0.1% more than budget – a movement of £67,000 from the position last reported to Committee. The main movements are summarised in the following table and narrative. Function Projected Outturn Movement £’000 % £’000 Legal & Governance Services Under spend (118) (2.7) (12) Finance Over spend 77 5.8 - Human Resources Under spend (68) (2.0) (45) IT & Revenues and Benefits Over spend 169 1.7 (10) TOTAL Over spend 60 0.1 (67) 5.18 Across the Service, staff cost and income projections have been updated resulting in a net reduction in the projected over spend of £67,000. Chief Executive Service 5.19 The projected outturn for the Chief Executive’s Service is currently anticipated to be £12,000 more than budget.
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6. REVENUE MONITORING – CORPORATE BUDGETS 6.1 Included within Section 2 of Appendix 1 is an update on the Council’s Corporate budgets. More information on variances against individual budget headings are set out below. Perth & Kinross Integration Joint Board 6.2 In setting the 2023/24 final Revenue Budget, Perth & Kinross Integration Joint Board approved the use of Reserves to deliver a balanced position. However, the financial position of the IJB remains challenging due to health and social care continuing to face recruitment challenges, increasing client needs, uncertainty over funding and rising costs particularly within prescribing. 6.3 On 11 December 2023, the Audit & Performance Committee of the Perth & Kinross Integration Joint Board received a financial update for the Health & Social Care Partnership. At that time there was a projected over spend of £2.125 million which is set out in Appendix 3. Within the overall projected over spend, £1.283 million relates to social care. 6.4 In relation to non-devolved functions there is currently a projected under spend of £102,000 which is reflected in Appendix 1. Council Tax Reduction Scheme 6.5 The application of the Council Tax Reduction Scheme is a statutory function for the Council. The promotion and encouragement of take up is a key responsibility for the Council, particularly when households are facing significant pressures on the cost of living. 6.6 The level of expenditure incurred by the Council is dependent upon two main drivers, firstly, the average number of weekly caseload and, secondly, the average value of weekly entitlements. The following graph sets out both variables over the current and previous six financial years. The graph shows a clear increase in the average weekly entitlement whereas the average caseload has been more volatile but has returned to higher levels.
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6.7 In the current financial year, the Council is supporting approximately 8,500 households across Perth and Kinross with the Council Tax Reduction Scheme with an average award of £16.65 per week. This results in a projected over spend on the Council Tax Reduction Scheme of approximately £1.150 million which is reflected in Appendix 1. 7. REVENUE MONITORING – FUNDING 7.1 Further information on the Council’s funding is set out within Section 3 of Appendix 1. More information on variances against individual budget headings are set out below. Council Tax Income 7.2 The amount of income the Council will generate from Council Tax is dependent on two main factors, firstly collection levels and secondly, the number of Band D properties on the Valuation Roll. 7.3 Monitoring of Council Tax collection levels is carried out monthly. The following graph sets out collection performance to 31 December 2023 together with prior year comparative figures for the previous five financial years. 7.4 Between 2018/19 and 2022/23, the average collection figure to 31 December was 81.83%. The actual collection figure to 31 December 2023 was 81.49% which is a reduction of 0.34% compared to the five-year average, and a 0.51% reduction on the comparable position in 2022.
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7.5 Secondly, in setting the Council’s Revenue Budget, assumptions are made on increases in the number of Band D equivalent properties. The graph set out below suggests that actual growth levels are in line with budget assumptions. 7.6 Using the information on both in year and previous years collection rates, along with the growth in the number of band D equivalent properties, the level of Council Tax income is now projected to be £200,000 more than budget and this is reflected in Appendix 1.
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Non-Domestic Rates 7.7 The actual collection rate to 31 December 2023 was 79.98%, compared to 79.43% for the same period in 2022/23. 8. REVENUE MONITORING – OTHER UPDATES Impact on Arm’s Length External Organisations (ALEOs) 8.1 The Council continues to work closely with its three Arm’s Length External Organisations (ALEOs) – Live Active Leisure (LAL), Perth Theatre & Concert Hall (PTCH) and Culture Perth & Kinross (CPK) who make an important contribution to the Corporate Plan through the current Culture, Physical Activity and Sport Strategies approved by Council in May 2023. 8.2 To date, no significant financial issues have been identified relating to Culture Perth and Kinross or Perth Theatre & Concert Hall. 8.3 Live Active Leisure finished 2022/23 with a revenue deficit of £203,000. For 2023/24, LAL has a budgeted deficit of £630,000, which it expects to rise to £1.3 million in 2024/25. For 2023/24, LAL are funding the budgeted deficit from their Reserves and at this stage, there is no ask of the Council. The financial consequences of the severe weather in October 2023 are anticipated to be contained within the overall deficit for 2023/24. 8.4 LAL’s projected deficits in 2021/22 and 2022/23 did not materialise, which is positive. However, Council officers will work with LAL throughout the year on best/worst/mid-range projections to ensure that the Committee has more certainty about the likely year end position for 2023/24. This will be particularly important to support work on the ALEO budget positions and SLA awards for 2024/25 given the continuing financial challenges which face the Council. Housing Revenue Account 8.5 The Housing Revenue Account is currently projected to break even in the current financial year. The main elements are summarised below and set out in Appendix 4. 8.6 Across the Housing Revenue Account there is a net projected over spend of £187,000. The main reasons for these movements are updated staff cost projections which include the full year financial implications of the 2023/24 pay award and consultancy costs. 8.7 As a result of the variances identified above Capital Financed from Current Revenue will reduce by £187,000. 9. 2023/24 ADDITIONAL FUNDING 9.1 Since the 2023/24 Revenue Budget was updated on 22 November 2023 (Report No. 23/315 refers), the Council has been advised of additional funding for the current financial year from several sources. To ensure that the
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2023/24 Management Budget continues to reflect the operational requirements of the Council, several adjustments are required, which are summarised below and included in Appendix 1 and Appendix 5. Scottish Government – Revenue Support Grant: • Pay – £4.191 million (all Services) • Psychology – £6,000 (Education & Children’s Services) (ECS) • Teacher’s Induction Scheme –£149,000 (ECS) • Temporary Accommodation Pressures – £36,000 (Communities) • Ukraine Resettlement Scheme – £84,000 (Communities) • Storm Babet – £9,000 (Communities) • Self-Directed Support – £6,000 (Health) 9.2 The Scottish Government has advised that the increase in funding identified above of £4.481 million will be made through a redetermination of the Council’s Revenue Support Grant. It is therefore necessary to adjust budgets for Education & Children’s Services, Communities, Corporate & Democratic Services, Health & Social Care and Revenue Support Grant. 9.3 ACTION: The Committee is asked to approve the adjustments set out at paragraph 9.2 which is reflected in Appendix 1 (Column 3) to this report. Scottish Government Ring Fenced Grant 9.4 The Scottish Government has advised that the final amount allocated for Pupil Equity Funding will be £3,930 greater than previously advised. It is therefore necessary to adjust both the budget for Education & Children’s Services and Ring-Fenced Grants. 9.5 ACTION: The Committee is asked to approve the adjustment set out at paragraph 9.4 above. These adjustments are reflected in Appendix 1 (Column 3) to this report. Other Funding 9.6 Other funding amounting to £1.381 million will be paid outside the Revenue Support Grant mechanism as Other Grant income and is, therefore, cost neutral in terms of the budget summary. Details of this funding is set out in Appendix 5. 9.7 ACTION: The Committee is asked to note the receipt of £1.381 million of additional resources, with this funding being reflected within Education & Children’s Services and Communities as additional grant income. The current projected outturn assumes that all these additional resources will be fully expended in 2023/24 or carried forward under the terms of the grant award.
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10. 2023/24 VIREMENTS Contribution to/from Capital Fund 10.1 In line with the strategy for managing the Council’s Capital Programme over the medium term, it is recommended that the eventual over or under spend on Capital Financing Costs and Interest on Revenue Balances be transferred from or to the Capital Fund. 10.2 The latest monitoring indicates a projected reduction in capital financing costs (loan charges) of £119,000 based on the latest treasury management activity and a reduction in income of £235,000 from interest on revenue balances due to updated interest rate projections. This will result in a net reduction in the Contribution to the Capital Fund of £116,000 in the current financial year. 10.3 ACTION: The Committee is requested to approve the virement of £119,000 from the Capital Financing Costs (Loan Charges) Budget and £235,000 from Interest on Revenue Balances with a corresponding reduction in the projected Contribution to the Capital Fund. These adjustments have been reflected in Appendix 1 (Column 4) to this report. 10.4 At 31 March 2023, the audited 2022/23 Annual Accounts included a Capital Fund balance of £26.343 million. The Capital Fund is currently projected to peak in 2024/25 at approximately £33.609 million, before gradually reducing until fully utilised in 2038/39. 11. 2023/24 MOVEMENTS IN RESERVES 11.1 Included at Appendix 6 is an update on the Council’s General Fund Reserves. The appendix includes the following: • Earmarked and unearmarked Reserves at 31 March 2023 (per audited Annual Accounts). • previously approved contributions to and from earmarked Reserves in 2023/24, 2024/25 and 2025/26. • The impact of proposals within this report on earmarked Reserves. • Known commitments against earmarked Reserves. • The impact of the latest revenue monitoring on the level of unearmarked Reserves. 11.2 The earmarked Reserves are brigaded under three headings as follows: i. Balances held under statute / regulation – these earmarked Reserves are prescribed under legislation and the Council has limited discretion in how they are applied. ii. Balances held for specific (previously approved) purposes – the purpose of these earmarked Reserves has been previously approved by Council in either the Reserves Strategy or Annual Accounts iii. Balances held for other purposes – the creation of these earmarked Reserves has been approved by Council, but not specific proposals.
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11.3 Proposals involving earmarked Reserves under i. and ii. above will be advised to Committee in summary as Council either has limited discretion or previously approved their application. Proposals to apply earmarked Reserves under iii. above will include more detail for elected member consideration. Balances Held for Specific (Previously Approved) Purposes 11.4 These earmarked Reserves have previously been approved by elected members in their consideration of the Reserves Strategy or Annual Accounts. The proposals listed below transfer funding to earmarked Reserves to be applied in future years. • Working Smarter - £115,000 • Revenue Maintenance - £67,000 • Workforce Management (including Transformation) - £410,000 11.5 Approval is also sought to draw down up to £60,000 from the Culture earmarked Reserve to purchase fixtures and fittings that will support the delivery of the café within Perth Museum. 11.6 Furthermore, approval is sought to apply resources of up to £170,000 from the Culture earmarked Reserve in 2024/25 to meet upfront costs of operating the Perth Museum café until 30 September 2024. It is anticipated that this will be repaid by Culture Perth and Kinross from future revenues. 11.7 ACTION: the Committee is asked to approve the application of up to £230,000 from the Culture earmarked Reserve to fund upfront costs relating to the opening of Perth Museum. The adjustment for 2023/24 is reflected in Appendix 1 and for 2024/25 will be reflected in the Reserves Strategy considered by Council on 28 February 2024. 11.8 In addition, in setting the 2023/24 Revenue Budget in March 2023 the Council Approved Expenditure to fund several specific initiatives. For a variety of reasons including consultation and capacity issues, there has been slippage in the delivery of a few of these projects that may result in the expenditure not being incurred in the current financial year. Projects totalling £530,000 are set out at Appendix 7. 11.9 Should the Committee confirm that that the projects remain a priority for the Council then the balances set out in Appendix 7 will be transferred to an earmarked Reserve to ensure that the funding is in place to ensure delivery. The final outturn for individual projects may change before the end of the financial year. Therefore, by agreeing the projects within Appendix 7, the Committee is confirming that the initiative remains a priority and that the final under spend will be earmarked within Reserves. 11.10 Should any of the projects no longer be a priority, the projected under spend would be available to support the financial management of the Council in both current and future financial years.
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11.11 ACTION: The Committee is asked to confirm that the projects listed in Appendix 7 remain a priority and that the final under spends, currently projected at £530,000 are transferred to an earmarked Reserve to ensure delivery. Unearmarked Reserves 11.12 The 2023/24 SJC pay negotiations have now concluded with payments being made to staff in November and December 2023. Part of the funding of these 2023/24 SJC negotiations was a contribution from Councils. For Perth & Kinross Council this means a contribution from unearmarked Reserves of approximately £1.036 million in the current financial year which is reflected in Appendix 1. This contribution from unearmarked Reserves may reduce when the local government finance order is published in March 2024, and this will be reflected in the next revenue monitoring report. This will become a recurring funded pressure going forward and be included in the 2024/25 Provisional Revenue Budget that the Council will be asked to approve on 28 February 2024. 11.13 ACTION: The Committee is asked to apply £1.036 million from unearmarked Reserves to fund the 2023/24 SJC pay award. This adjustment is reflected in Appendix 1. 11.14 Subject to approval of the proposals included within this report and recognising the known commitments, the level of earmarked Reserves will reduce to £29.757 million and the level of unearmarked Reserves will reduce to £14.017 million or 3.1%. 12. FINANCIAL RISKS 12.1 In preparing the Council's 2023/24 Revenue Monitoring, officers have considered the key strategic, operational and financial risks facing the Council over this period. Whilst the risks may be managed in the current financial year, there is the potential for there to be an impact in the future. 12.2 To alleviate the impact these risks may have if they occur, a number of general risk mitigation factors are utilised by the Council which include detailed budget monitoring carried out by Services and having general fund balances available to meet unforeseen expenditure. 12.3 Financial risks previously identified are summarised in Appendix 8. 13. CONCLUSION 13.1 Based on the October 2023 ledger, a projected over spend of £1.057 million has been identified in the current financial year. 13.2 This level of projected over spend and contributions from unearmarked Reserves included within this and previous reports will result in a reduction in the level of unearmarked Reserves to £14.017 million or 3.1%.
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13.3 The financial position of the Council and its partners and ALEOs remains challenging and regular updates will be provided to the Council and the Finance & Resources Committee as the position develops. APPROVED Name Designation Date Stewart Mackenzie Head of Finance 23 January 2024 Karen Donaldson Chief Operating Officer 23 January 2024 Clare Mailer Director – Strategy, People & Resources 23 January 2024
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ANNEX 1. IMPLICATIONS, ASSESSMENTS, CONSULTATION AND COMMUNICATION Strategic Implications Yes / None Community Plan / Single Outcome Agreement None Corporate Plan Yes Resource Implications Financial Yes Workforce Yes Asset Management (land, property, IST) Yes Assessments Equality Impact Assessment Yes Strategic Environmental Assessment Yes Sustainability (community, economic, environmental) Yes Legal and Governance None Risk None Consultation Internal Yes External None Communication Communications Plan None 1. Strategic Implications Corporate Plan 1.1 The Council’s Corporate Plan 2022 – 2027 lays out seven outcome focussed strategic objectives which provide clear strategic direction, inform decisions at a corporate and service level and shape resources allocation. They are as follows: • Tackling poverty • Tackling climate change and supporting sustainable places • Growing a sustainable and inclusive local economy • Enabling our children and young people to achieve their full potential • Protecting and caring for our most vulnerable people • Supporting and promoting physical and mental wellbeing • Placing communities at the heart of how we work 1.2 This report relates to all these objectives. 2. Resource Implications Financial 2.1 There are no direct financial implications arising from this report other than those reported within the body of the main report.
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Workforce 2.2 There are no direct workforce implications arising from this report other than those reported within the body of the main report. Asset Management (land, property, IT) 2.3 There are no direct asset management implications arising from this report other than those reported within the body of the main report. 3. Assessments Equality Impact Assessment 3.1 Under the Equality Act 2010, the Council is required to eliminate discrimination, advance equality of opportunity, and foster good relations between equality groups. Carrying out Equality Impact Assessments for plans and policies allows the Council to demonstrate that it is meeting these duties. 3.2 The information contained within this report has been considered under the Corporate Equalities Impact Assessment process (EqIA) and has been assessed as not relevant for the purposes of EqIA. Strategic Environmental Assessment 3.3 The Environmental Assessment (Scotland) Act 2005 places a duty on the Council to identify and assess the environmental consequences of its proposals. 3.4 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. Sustainability 3.5 Under the provisions of the Local Government in Scotland Act 2003 the Council must discharge its duties in a way which contributes to the achievement of sustainable development. In terms of the Climate Change Act, the Council has a general duty to demonstrate its commitment to sustainability and the community, environmental and economic impacts of its actions. 3.6 The information contained within this report has been considered under the Act. However, no action is required as the Act does not apply to the matters presented in this report. 4. Consultation Internal 4.1 The Executive Leadership Team have been consulted in the preparation of this report.
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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 – 2023/24 Management Budget • Appendix 2 – General Fund 2023/24 Projected Outturn – Service Analysis • Appendix 3 – Health & Social Care Partnership • Appendix 4 – Housing Revenue Account 2023/24 Projected Outturn • Appendix 5 – Other Fundings • Appendix 6 – General Fund Balances • Appendix 7 – Council Approved Expenditure • Appendix 8 – Financial Risks