Agenda Document Pack - Council - 16/11/2023
Renfrewshire Council · 16 November 2023
Back to Council — 16 November 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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Notice of Special Meeting and Agenda Council Date Time Venue Thursday, 16 November 2023 09:30 Council Chambers (Renfrewshire), Council Headquarters, Renfrewshire House, Cotton Street, Paisley, PA1 1AN MARK CONAGHAN Head of Corporate Governance Membership Provost Lorraine Cameron (Convener): Councillor Iain Nicolson (Leader): Councillor Cathy McEwan (Depute Convener): Councillor Jacqueline Cameron (Depute Leader): Councillor Jennifer Adam: Councillor Fiona Airlie-Nicolson: Councillor Alison Ann- Dowling: Councillor Stephen Burns: Councillor Michelle Campbell: Councillor Graeme Clark: Councillor Carolann Davidson: Councillor Eddie Devine: Councillor Andy Doig: Councillor Audrey Doig: Councillor Chris Gilmour: Councillor Edward Grady: Councillor Gillian Graham: Councillor Neill Graham: Councillor John Gray: Councillor Anne Hannigan: Councillor John Hood: Councillor Lisa-Marie Hughes: Councillor Robert Innes: Councillor Alec Leishman: Councillor Bruce MacFarlane: Councillor James MacLaren: Councillor Kenny MacLaren: Councillor Mags MacLaren: Councillor Colin McCulloch: Councillor Janis McDonald: Councillor David McGonigle: Councillor Jamie McGuire: Councillor Marie McGurk: Councillor Iain McMillan: Councillor John McNaughtan: Councillor Kevin Montgomery: Councillor Sam Mullin: Councillor Will Mylet: Councillor Jim Paterson: Councillor Emma Rodden: Councillor John Shaw: Councillor Ben Smith: Councillor Andy Steel: Further Information This is a meeting which is open to members of the public. A copy of the agenda and reports for this meeting will be available for inspection prior to the meeting at the Customer Service Centre, Renfrewshire House, Cotton Street, Paisley and online at http://renfrewshire.cmis.uk.com/renfrewshire/CouncilandBoards.aspx For further information, please email democratic-services@renfrewshire.gov.uk Page 1 of 268
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Members of the Press and Public Members of the press and public wishing to attend the meeting should report to the customer service centre where they will be met and directed to the meeting. Webcasting of Council Meeting This meeting will be filmed for live or subsequent broadcast via the Council’s internet site – at the start of the meeting the Provost will confirm if all or part of the meeting is being filmed. Generally the public seating areas will not be filmed. The cameras focus on the main participants. If you have any queries regarding this please contact Committee Services on democratic-services@renfrewshire.gov.uk. To find the webcast please navigate to: https://renfrewshire.public- i.tv/core/portal/home and select the meeting from the calendar. Apologies Apologies from members. Declarations of Interest and Transparency Statements Members are asked to declare an interest or make a transparency statement in any item(s) on the agenda and to provide a brief explanation of the nature of the interest or the transparency statement. Page 2 of 268
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1 Annual Audit Report 2022/23 - Renfrewshire Council Group Report by Director of Finance & Resources 5 - 100 2 Audited Annual Accounts 2022/23 - Renfrewshire Council Group Report by Director of Finance & Resources 101 - 226 3 Audit Report 2022/23 Coats Observatory Trust Report by Director of Finance & Resources 227 - 252 4 Audited Financial Statements 2022/23 Coats Observatory Trust Report by Director of Finance & Resources 253 - 268 Page 3 of 268
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1 ___________________________________________________________________ To: Council On: 16 November 2023 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Annual Audit Report 2022/23 - Renfrewshire Council Group ___________________________________________________________________ 1. Summary 1.1 Each year the Council’s appointed external auditors carry out an audit of the Council’s financial statements and provide an opinion as to whether those statements provide a true and fair view of the financial position of the Council and its income and expenditure for the year; and also whether they have been prepared in accordance with the Local Government (Scotland) Act 1973. 1.2 In accordance with International Auditing Standards (ISA260), the auditors are obliged to provide an annual report, which highlights matters that have arisen in the course of the audit. The attached Annual Audit Report from Azets outlines their findings from the audit of the 2022/23 Renfrewshire Council Group accounts. 1.3 In addition, the Council’s chief financial officer is obliged to provide a letter of representation to Azets, which outlines the assurances the Council provides to the external auditor with regards to the annual accounts. A draft of this letter is attached as an appendix to the Annual Audit Report. 1.4 Under the Local Authority Accounts (Scotland) Regulations 2014, the Council must meet to consider the Annual Accounts and aim to approve those accounts for signature no later than 30 September. 1.5 Azets officers will be in attendance at the meeting to present their reports. Item 1 Page 5 of 268
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2 ___________________________________________________________________ 2. Recommendations 2.1 The Council is asked to consider the attached Annual Audit Report from Azets and to approve the letter of representation. ___________________________________________________________________ Implications of the Report 1. Financial – The 2022/23 Annual Accounts demonstrate the Council continues to operate services within the resources available, and in line with the relevant legislation. They have been certified as providing a true and fair view of the financial position of the Council and its Group as at 31 March 2023. 2. HR & Organisational Development – none arising directly from this report 3. Community/Council Planning – none arising directly from this report 4. Legal – An audit opinion free from qualification demonstrates the Council’s compliance with the statutory accounting requirements set out in the Local Government (Scotland) Act 1973 and the Local Government in Scotland Act 2003. 5. Property/Assets – none arising directly from this report 6. Information Technology – none arising directly from this report 7. Equality & Human Rights – none arising directly from this report 8. Health & Safety – none arising directly from this report 9. Procurement – none arising directly from this report 10. Risk – none arising directly from this report 11. Privacy Impact – none arising directly from this report 12. Cosla Policy Position – none arising directly from this report 13. Climate Risk – none arising directly from this report ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 6 of 268
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OFFICIAL RenfrewshireCouncil 2022/23 Annual Audit Report to the Council and the Controller of Audit DRAFT November2023 Page 7 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 2 Table of Contents Key messages 3 Introduction 13 Annual accounts audit 15 Wider Scope 37 Appendices 73 Page 8 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 3 Key messages This report concludes our audit of Renfrewshire Council (the “Council”) for the year ended 31 March 2023. This section summarises the key findings and conclusions from our audit. Financial statements audit Audit opinion The annual accounts will be considered and approved by the full Council. Our independent auditor’s report is expected to be unqualified, subject to finalising our work on asset valuations and subsequent events confirmations. Key audit findings The Council has appropriate administrative processes in place to prepare the annual accounts and the supporting working papers. We have obtained adequate evidence in relation to the key audit risks identified in our audit plan. The accounting policies used to prepare the financial statements are considered appropriate. We are satisfied with the appropriateness of the accounting estimates and judgements used in the preparation of the financial statements. All material disclosures required by relevant legislation and applicable accounting standards have been made appropriately. Page 9 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 4 Audit adjustments We identified two material adjustments. The first is an adjustment of £258.3 million reducing the pension fund asset. This relates to a technical accounting adjustment to limit recognition of the pension asset to the Fund’s pension ‘asset ceiling’ in compliance with accounting standards and guidance published by Audit Scotland in July 2023. The second is a £20.6million adjustment and reduction to the value of property assets identified following a review of property valuation calculations which had incorrectly included void areas in valuations. The Council updated the financial statements for all the potential audit adjustments identified during the audit process. This decreased the total comprehensive income to £255.8 million. We also identified some minor disclosure and presentational adjustments during our audit, all of which have been reflected in the final set of financial statements. Accounting systems and internal controls We have applied a risk-based methodology to the audit. This approach requires us to document, evaluate and assess the Council’s processes and internal controls relating to the financial reporting process. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we include these in this report. We consider the control environment within the Council to be satisfactory. Wider scope audit Dargavel Primary school We have reviewed the Council’s response to the independent report on issues relevant to the building of Dargavel Primary School (the ‘Bowles Report’) and evaluated the Council’s plans and progress in implementing the recommendations contained in that report. The Bowles Report identified a number of historic significant failures in scrutiny, governance and working practices across a number of Council services in relation to the handling of the Dargavel Development. These failures led to the Council commissioning the developer of the Dargavel site (BAE Systems) to build a school with significantly fewer places than required by the scale of the development and the local area. The Council has accepted the Bowles Report recommendations and Page 10 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 5 acted quickly to develop a detailed action plan to take forward its response to those recommendations. A key outcome is that the Council is now required to build a new and unplanned school to meet the needs of primary school age pupils in Dargavel and will also be required to deliver a larger extension than originally planned to provide the required high school capacity. This will incur additional cost. The Council is currently estimating completion of the new primary school by August 2027. The initial capital cost of the new primary school is estimated at between £42million- 45million, with the capital cost of additional secondary school provision at c£30million, and the Developer required to contribute approximately half of the second element of the cost. The estimated net cost to the Council of £60million is expected to be met from borrowing, resulting in interest payments of c£4million per annum. The costs do not include the running costs of the new school which the Council estimates, on a net basis, will be c£0.5million per annum. These unplanned annual costs are incorporated into the Council’s medium term financial plan (MTFP) as they impact on budgets from the 2027 financial year. As noted below, the Council has included these additional costs in its MTFP which has identifies a budget gap of up to £50million between existing expenditure plans and available funding. We note that, once the issues relating to Dargavel School became apparent, the Council acted quickly to commission a full independent review (the Bowles Report) and has been open and transparent in publishing and communicating the outcomes from this review and in addressing the issues raised. In parallel to the independent review progressing, the Council’s focus has been to engage and communicate with the local communities impacted by the Dargavel School issue to address concerns and prioritise the education needs of local children. The Council has also been in negotiations with the Developer of the Dargavel site to secure the necessary land for building the new school and is establishing robust and accurate long-term projections of educational demand that is expected to emerge from Dargavel Village once completed, to inform key decisions. Our report includes a small number of recommendations for the Council to consider in strengthening its response to the Bowles Report findings, mainly in relation to the monitoring and measurement of progress in implementing some recommendations. Page 11 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 6 Wider scope themes Financial Management Financial management is concerned with financial capacity, sound budgetary processes and whether the control environment and internal controls are operating effectively. Auditor judgement Financial management remains challenging in the current funding and post-pandemic environment. The Council reported a revenue overspend of £7.5million in 2022/23 caused mainly by the impact of inflation on the cost of fuel and materials, and the effect of pay awards in increased staff costs. The Council was not able to fully deliver its capital programme spend and some projects in line with original plans due to the ongoing impact of COVID and complex nature of some of the projects. Capital projects with a value of c£42million (25% of the capital programme) had to be re-profiled in the year. The Council has appropriate financial monitoring arrangements in place and we have not identified any significant weaknesses in financial controls. Financial Sustainability Financial sustainability looks forward to the Auditor judgement Page 12 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 7 medium and longer term to consider whether the Board is planning effectively to continue to deliver its services and the way in which they should be delivered. The Council approved its 2023/24 revenue budget at its meeting in March 2023 and agreed a 6% increase in council tax and utilisation of non-recurring reserve funding of up to £12million to achieve a break-even position. The projected year end outturn is an overspend of £5.7million (or 1% of the budget). Medium term financial sustainability remains challenging as the Council is estimating a budget deficit of between £45million to £50million for the forecast period from 2023/24 and 2026/27. These already challenging savings targets now include c£4m cost per annum for the addition of costs required to service debt associated with the Dargavel Primary school issue. The Council has reported cost savings of over £170million since 2011 and further savings will be challenging to achieve without a detrimental impact on the services. The Council must now make difficult decisions on spending priorities if it is to remain financially sustainable. The Council has an ambitious £700 million capital programme in place over the next five years for both housing and non-housing programmes. Since the pandemic, the Council has not been able to fully deliver capital spend and some projects in line with original plans due to a number of market related factors, including the cost of materials, supply chain issues and availability of contractors. Given the scale of the Council’s ongoing programme this is likely to remain a continuing area of challenge. Page 13 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 8 Vision, Leadership and Governance Vision, Leadership and Governance is concerned with the effectiveness of scrutiny and governance arrangements, leadership and decision making, and transparent reporting of financial and performance information. Auditor judgement The Council approved a new Council Plan in September 2022, articulating its vision, priorities and strategic objectives. The Plan has five main strategic outcomes: Place, Economy, Fair, Green and Living our values. The Council operates an ‘Audit, Risk and Scrutiny Board’ which is chaired by an independent councillor. Our audit found some scope to better clarify the role of the Audit, Risk and Scrutiny Board within the Council’s overall scrutiny arrangements and we welcome the Council’s decision to undertake a review of its scrutiny and governance arrangements in the coming year. This will include an assessment of the effectiveness of the Audit, Risk and Scrutiny Board alongside the relevant CIPFA good practice guidance. The Council has approved and adopted a Local Code of Corporate Governance and complies with that Code. Page 14 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 9 Use of Resources to Improve Outcomes Audited bodies need to make best use of their resources to meet stated outcomes and improvement objectives, through effective planning and working with strategic partners and communities. This includes demonstrating economy, efficiency, and effectiveness through the use of financial and other resources and reporting performance against outcomes. Auditor judgement The Council continues to recover from the post pandemic environment with the pace of improvement impacted by a high inflation economy and a challenging local government funding settlement. The Council has generally good arrangements for performance management and operates a layered performance management framework aligned to its strategic objectives. Performance outcomes are available on the Council’s website, using a wide range of user friendly and easy to follow presentations, dashboards and narrative. The Council mostly met its key performance indicator targets in relation to people support, although performance declined relative to the prior year in some areas (e.g. children services), while other services (e.g. employment and support) reported improved performance outcomes. Care, buildings and road indicators recorded an overall decline in service performance. Best Value Appointed auditors have a duty to be satisfied that local government bodies have made proper arrangements to secure Best Value. We have considered the effectiveness of council leadership in developing new local strategic priorities following the elections in May 2022. Our key findings and conclusions are summarised below. Council leadership in developing new local strategic priorities Auditor judgement Page 15 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 10 Renfrewshire Council has a clear strategic ambition. The overall vision is for “Creating a fairer Renfrewshire built on innovation, wellbeing and opportunity”. The Council has an ambitious strategic plan which contains numerous actions to improve service delivery across the complex range of council services. Whilst this is commendable, proposed actions are not currently prioritised and it can be difficult to distinguish which of them represent key priorities or the relevant time and cost impact associated with delivering them. The Council activities to involve its citizens in decision making are wide ranging and community empowerment, wealth and wellbeing are reflected in the strategic priorities underpinning Council Plan. To support these priorities, the Council is continuing to actively seek to design operating models and services that strengthen the community voice and bring decision making more directly into local communities. In this context, the Council faces challenges to rebuild the trust and confidence of the local communities directly affected by the need to provide additional primary and secondary school places in Dargavel. The Council recognises this and has a good programme of active engagement with the impacted communities continuing to raise a number of concerns with the Council. The Council has set out a strong focus on the need to reduce inequalities and has refreshed its Community Plan to reflect this focus on addressing inequalities as part of the 'Fair' strategic outcome within the overall Council Plan. The Council demonstrates a clear commitment to those priorities through numerous initiatives to tackle inequality. We note that the Council has a clear commitment to tackling climate change, having declared a climate emergency in 2019. This commitment forms a stand-alone strategic outcome in the Council Plan (‘Green’) which closely links to the Council’s ‘Plan for Net Zero’ and ‘RenZero’. The Council’s Delivery Plans are also well established and aligned to financial, people and other key enabling plans. The Council has an appropriate governance framework in place to support member and officer working relationships. Our audit found Member and officer working relationships to be generally working well with a more collaborative approach to decision making being adopted. A Best Value review was undertaken on Renfrewshire Council in 2016/17. The Best Value Assurance Report (BVAR) includes recommendations to help the Council address the improvement areas identified during the audit. We have considered progress made by the Council in implementing the recommendations made in the BVAR. Our findings are summarised below. Page 16 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 11 Best value Assurance Report – follow up Auditor judgement The Council had eight recommendations and progressed against each. We note however that some of the recommendations are no longer relevant due to changed circumstances since the report was published. Our audit has confirmed that cross- party working arrangements have improved significantly, training has been provided to members at an appropriate level, governance arrangements at Renfrewshire Leisure (now OneRen) have been clarified and workforce strategies changed in response to new circumstances. The Council’s medium term financial strategy plays an important role in decision making and performance information is now published on the Council’s website. Page 17 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 12 Definition We use the following gradings to provide an overall assessment of the arrangements in place as they relate to the wider scope and best vale areas. The text provides a guide to the key criteria we use in the assessment, although not all of the criteria may exist in every case. There is a fundamental absence or failure of arrangements There is no evidence to support necessary improvement Substantial unmitigated risks affect achievement of corporate objectives. Arrangements are inadequate or ineffective Pace and depth of improvement is slow Significant unmitigated risks affect achievement of corporate objectives No major weaknesses in arrangements but scope for improvement exists Pace and depth of improvement are adequate Risks exist to achievement of operational objectives Effective and appropriate arrangements are in place Pace and depth of improvement are effective Risks to achievement of objectives are managed. Page 18 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 13 Introduction The annual audit comprises the audit of the financial statements and the wider-scope and Best Value audit responsibilities set out in the Code of Audit Practice. We outlined the scope of our audit in our External Audit Plan, which we presented to the Audit, Risk and Scrutiny Board at the outset of our audit. Subsequent to issuing the plan our risks remained the same, however we have updated our approach for the issues that have arisen since our plan was issued or when we have obtained further, more detailed knowledge, of a particular area of work as noted below. Responsibilities The Council is responsible for preparing its annual accounts, including financial statements which show a true and fair view, and for implementing appropriate internal control systems. The weaknesses or risks identified in this report are only those that have come to our attention during our normal audit work and may not be all that exist. Communication in this report of matters arising from the audit or of risks or weaknesses does not absolve management from its responsibility to address the issues raised and to maintain an adequate system of control. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on, the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose. We would like to thank all management and staff for their co-operation and assistance during our audit. Auditor independence International Standards on Auditing in the UK (ISAs (UK)) require us to communicate on a timely basis all facts and matters that may have a bearing on our independence. We confirm that we complied with the Financial Reporting Council’s (FRC) Ethical Standard. In our professional judgement, we remained independent, and our objectivity has not been compromised in any way. We set out in Appendix 1 our assessment and confirmation of independence. Adding value All of our clients quite rightly demand of us a positive contribution to meeting their ever-changing business needs. We add value by being constructive and forward Page 19 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 14 looking, by identifying areas of improvement and by recommending and encouraging good practice. In this way we aim to promote improved standards of governance, better management and decision making and more effective use of public money. Any comments you may have on the service we provide would be greatly appreciated. Comments can be reported directly to any member of your audit team. Openness and transparency This report will be published on Audit Scotland’s website www.audit-scotland.gov.uk. Page 20 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 15 Annual accounts audit The Council’s annual accounts are the principal means of accounting for the stewardship of its resources and its performance in the use of those resources. Our audit opinion Opinion Basis for opinion Conclusions Financial statements We conduct our audit in accordance with applicable law and International Standards on Auditing. Our findings / conclusions to inform our opinion are set out in this section of our annual report. The draft financial statements. Management commentary, remuneration report and corporate governance statement were considered by the Council and approved on 22 June 2023. We anticipate we will issue unqualified audit opinions. We identified two material adjustments during our audit of the financial statements, as set out in Appendix 2. Management agreed to amend the draft financial statements for all of the errors and presentational points we identified. We received the draft annual accounts in line with our audit timetable. Our thanks go to the Finance team for their assistance with our work. Page 21 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 16 Opinion Basis for opinion Conclusions Going concern basis of accounting In the public sector, when assessing whether the going concern basis of accounting is appropriate, the anticipated provision of services is more relevant to the assessment than the continued existence of a particular public body. We assess whether there are plans to discontinue or privatise the Council’s functions. Our wider scope audit work considers the financial sustainability of the Council. Our understanding of the legislative framework and activities undertaken by the Council provides us with sufficient assurance that the services provided by the Council will continue to operate for at least 12 months from the signing date. Our audit opinion is unqualified in this respect. Page 22 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 17 Opinion Basis for opinion Conclusions Opinions prescribed by the Accounts Commission: • Manage ment Comment ary • Corporat e Governa nce Statemen t • Remuner ation Report We plan and perform audit procedures to gain assurance that the management commentary, corporate governance statement and the audited part of the remuneration report are prepared in accordance with: • statutory guidance issued under the Local Government in Scotland Act 2003 (management Commentary); • the Delivering Good Governance in Local Government: Framework (corporate governance statement); and • the Local Authority Accounts (Scotland) Regulations 2014 (remuneration report) We have concluded that: • the information given in the management commentary is consistent with the financial statements and has been prepared in accordance with relevant statutory guidance; • the information given in the corporate governance statement is consistent with the financial statements and has been prepared in accordance with the Delivering Good Governance in Local Government: Framework; • the audited part of the Remuneration Report has been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Page 23 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 18 Opinion Basis for opinion Conclusions Matters reported by exception We are required to report on whether: • adequate accounting records have not been kept; or • the financial statements and the audited part of the remuneration report are not in agreement with the accounting records; or • we have not received all the information and explanations we require for our audit. We have no matters to report. An overview of the scope of our audit The scope of our audit was detailed in our External Audit Plan, which was presented to the Audit, Risk and Scrutiny Board in March 2023. The Plan explained that we follow a risk-based approach to our audit that reflects our overall assessment of the relevant risks that apply to the Council. This ensures that our audit focuses on the areas of highest risk (the significant risk areas). Planning is a continuous process, and our audit plan is subject to review during the course of the audit to take account of developments that arise. At the planning stage we identified the significant risks that had the greatest effect on our audit. Audit procedures were then designed to mitigate these risks. In our audit, we test and examine information using sampling and other audit techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain evidence through performing a review of the significant accounting systems, substantive procedures and detailed analytical procedures. Page 24 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 19 Significant risk areas and key audit matters Significant risks are defined by auditing standards as risks that, in the judgement of the auditor, require special audit consideration. In identifying risks, we consider the nature of the risk, the potential magnitude of misstatement, and its likelihood. Significant risks are those risks that have a higher risk of material misstatement. Audit procedures were designed to mitigate these risks. As required by the Code of Audit Practice and the planning guidance issued by Audit Scotland, we consider the significant risks for the audit that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the audit team (the ‘Key Audit Matters’), as detailed in the tables below. Our audit procedures relating to these matters were designed in the context of our audit of the annual accounts as a whole, and not to express an opinion on individual accounts or disclosures. Our opinion on the annual accounts is not modified with respect to any of the risks described below. Council’s significant risks at the financial statement level These risks are considered to have a pervasive impact on the financial statements as a whole and potentially affect many assertions for classes of transaction, account balances and disclosures. Management override of controls Significant risk description Management of any entity is in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Although the level of risk will vary from entity to entity, this risk is nevertheless present in all entities. Due to the unpredictable way in which such override could occur, it is a risk of material misstatement due to fraud and thus a significant risk on all audits. This was considered to be a significant risk and Key Audit Matter for the audit. Inherent risk of material misstatement: Very High Page 25 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 20 Management override of controls How the scope of our audit responded to the significant risk Key judgement There is the potential for management to use their judgement to influence the financial statements as well as the potential to override controls for specific transactions. Audit procedures • Documenting our understanding of the journals posting process and evaluating the design effectiveness of management controls over journals. • Analysing the journals listing and determining criteria for selecting high risk and / or unusual journals. • Testing high risk and / or unusual journals posted during the year and after the unaudited annual accounts stage back to supporting documentation for appropriateness, corroboration and appropriate approval in line with the Council’s journals policy. • Gaining an understanding of the accounting estimates and critical judgements made by management. We challenged key assumptions and considered the reasonableness and indicators of management bias which could result in material misstatement due to fraud. • Evaluating the rationale for any changes in accounting policies, estimates or significant unusual transactions. Key observations We did not identify any indication of management override of controls from our audit work. We did not identify any areas of bias in key judgements made by management. Key judgements were consistent with prior years. Page 26 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 21 Council’s significant risks at the assertion level for classes of transaction, account balances and disclosures Key risk area Fraud in revenue recognition Significant risk description Material misstatement due to fraudulent financial reporting relating to revenue recognition is a presumed inherent risk on every audit unless it can be rebutted. The presumption is that the Council could adopt accounting policies or recognise income in such a way as to lead to a material misstatement in the reported financial position. Given the financial pressures facing the public sector as a whole, there is an inherent fraud risk associated with the recording of income around the year end. In respect of council tax income, non-domestic rates, housing rents and non-ring fenced government grants, however, we do not consider the revenue recognition risk to be significant due to a lack of incentive and opportunity to manipulate these revenue streams. The risk of fraud in relation to revenue recognition is however present in all other revenue streams. On review of the income transactions during the fieldwork we have narrowed this risk to cut- off, rather than the full population, as this would be an area for potential fraud or manipulation. This was considered to be a significant risk and Key Audit Matter for the audit. Inherent risk of material misstatement: Revenue (occurrence / completeness): High How the scope of our audit responded to the significant risk Key judgements Given the financial pressures facing the public sector as a whole, there is an inherent fraud Page 27 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 22 Key risk area risk associated with the recording of income around the year end. Audit procedures • Evaluating the significant income streams and reviewing the controls in place over accounting for revenue. • Considering key areas of income and obtaining evidence that income is recorded in line with appropriate accounting policies and the policies have been consistently applied during the year. • Substantively testing a sample of income items. Key observations We have not identified any issues as a result of this testing. Fraud in non-pay expenditure Significant risk description As most public sector bodies are net expenditure bodies, the risk of fraud is also present in relation to expenditure. There is a risk that expenditure may be materially misstated in the financial statements. On review of the expenditure non-pay transactions during the fieldwork we have narrowed this risk to cut-off, rather than the full population, as this would be an area for potential fraud or manipulation. This was considered to be a significant risk and Key Audit Matter for the audit. Inherent risk of material misstatement: • Non-pay expenditure (occurrence / completeness): High • Accruals (existence / completeness): High Page 28 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 23 Key risk area How the scope of our audit responded to the significant risk Key judgements Given the financial pressures facing the public sector as a whole, there is an inherent fraud risk associated with the recording of accruals and expenditure around the year end. Audit procedures • Evaluating the significant non-pay expenditure streams and the design of the key controls in place over accounting for expenditure. • Considering key areas of expenditure and obtaining evidence that expenditure is recorded in line with appropriate accounting policies and the policies have been consistently applied during the year. • Testing accruals around the year end to consider if there is any indication of understatement of balances held through consideration of accounting estimates. Key observations We have not identified any issues as a result of this testing. Valuation of land and buildings and council dwellings (key accounting estimate) Significant risk description The Council held council dwellings with a net book value of £714.7 million and land and buildings with a net book value of £354.5 million at 31 March 2023. The Council revalue land and buildings and council dwelling on a five-year rolling basis. Council dwellings are valued by the District Valuer using the beacon method which aggregates the vacant possession value of each unit of housing stock based on the value of a beacon or sample property. A full revaluation exercise is completed every five Page 29 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 24 Key risk area years. In interim years the values of beacon properties are updated to reflect key factors including changes in rental prices. Other land and buildings are held at fair value and revalued as part of the five-year rolling programme. In addition, indices are applied to all assets held at Depreciated Replacement Cost (DRC) to reflect market changes within the year. Last year the Council processed an audit adjustment of £69.5million to correct the carrying amount of property, plant and equipment in relation the valuation of assets. While the Council uses the rolling programme of valuations, this process has not been sufficient to consider the impact of the economic environment and increasing building prices on the full portfolio of the Council’s assets. There is a significant degree of subjectivity in the measurement and valuation of investment property, land and buildings and council dwellings. This subjectivity and the material nature of the Council’s asset base represents an increased risk of misstatement in the financial statements. Inherent risk of material misstatement: Investment property, land & buildings and council dwellings (valuation): Very High How the scope of our audit responded to the significant risk Key judgements Councils are required to revalue investment properties annually and property, plant and equipment with sufficient regularity to ensure that the carrying amount does not differ materially from the current value at 31 March. Audit procedures • Evaluating management processes and assumptions for the calculation of the Page 30 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 25 Key risk area estimates, the instructions issued to their valuation experts and the scope of their work. • Evaluating the competence, capabilities and objectivity of management’s valuation expert. • Considering the basis on which the valuations were carried out and challenging the key assumptions applied. • Evaluating the information used by the valuer to ensure it was relevant and consistent with our understanding. • Ensuring revaluations made during the year were input correctly into the Council’s fixed asset register and the accounting treatment applied was in line with the financial reporting framework. • Testing a sample of valuations against documentation and assumptions used. Key observations Based on our analysis we have identified that a number of assets have been valued higher when compared to our expectations. As a result of our challenge and further investigation the Council has identified that for a limited number of properties incorrect floor areas were provided to the external valuer. Once corrected it resulted in an audit adjustment of £20.6million to reduce the value of properties. We requested further information on the Council’s exposure to potential risk in relation to Reinforced Autoclaved Aerated Concrete (RAAC) being used in the construction of public buildings with a potentially significant impact on asset impairment. The Council has already visually assessed all schools with no occurrence of RAAC identified. Of 205 other buildings, 28 have been identified Page 31 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 26 Key risk area as requiring further visual inspection for the presence or absence of RAAC materials. At the point of preparing this draft the Council was not aware of any basis of impairment of RAAC assets on the council’s estate. Valuation of defined benefit pension asset (key accounting estimate) Significant risk description An actuarial estimate of the pension fund asset/liability is calculated on an annual basis under IAS 19 and on a triennial funding basis by an independent firm of actuaries with specialist knowledge and experience. The estimates are based on the most up to date membership data held by the pension fund and have regard to local factors such as mortality rates and expected pay rises with other assumptions around inflation when calculating the liabilities. There is a risk that the assumptions used are not appropriate. Inherent risk of material misstatement: Defined benefit pension asset (valuation): High How the scope of our audit responded to the significant risk Key judgements A significant level of estimation is required in order to determine the valuation of pension assets/liabilities. Small changes in the key assumptions (including discount rates, inflation and mortality rates) can have a material impact on the pension asset/liability. Audit procedures • Evaluating management processes and assumptions for the calculation of the estimates, the instructions issued to their actuarial experts and the scope of their work. • Evaluating the competence, capabilities and objectivity of management’s actuarial expert. Page 32 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 27 Key risk area • Considering the basis on which the valuation was carried out and challenging the key assumptions applied. • Evaluating the information provided to the actuary for the purposes of their calculation of the IAS 19 estimate to ensure it was complete and consistent with our understanding. • Ensuring pension valuation movements made during the year were input correctly into the general ledger and financial statements and that the accounting treatment applied was in line with the financial reporting framework. Key observations The IAS 19 actuarial report for the Council identifies a pension surplus (or pension asset) of £434.1 million. This is a significant change to the prior year’s pension liability of £55.2 million and is mainly driven by a significant increase in discount rate assumption between the years. The discount rate as of 31 March 2023 was 4.75% and decreases the value of future pension obligations substantially which, when combined with no significant movement in the value of pension investments, results in a pension surplus outcome. Accounting standards require the Council to review the pension surplus and only recognise the lower of the surplus or an ‘asset ceiling’. A detailed technical guidance note on how to calculate the pension asset ceiling was issued by Audit Scotland early in July 2023. Limiting the recorded pension asset to the asset ceiling value of £175.9 million, resulted in a £258.3 million audit adjustment processed in the accounts. We are satisfied that we have obtained reasonable assurance over the disclosures in Page 33 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 28 Key risk area the financial statements relating to the pension asset. Financial instruments: fair value measurement (key accounting estimate) Significant risk description The Council maintains significant debt and investment portfolios. The Council measures its financial instruments at fair value or amortised cost or, where no reliable measurement exists, measured at cost. Fair values are categorised by their level in the fair value hierarchy: • Level 1 – fair value is derived from quoted prices in active markets for identical assets or liabilities • Level 2 – fair value is calculated from inputs other than quoted prices that are observable for the asset or liability • Level 3 – fair value is determined using unobservable inputs For level 1 and level 2; the Council’s valuations are supported by independent expert advice. For level 3, there is the potential for management to use their judgement to influence the financial statements. Inherent risk of material misstatement: Investments and borrowings (valuation): High How the scope of our audit responded to the significant risk Key judgements For level 1 and level 2; the Council’s valuations are supported by independent expert advice. For level 3, there is the potential for management to use their judgement to influence the financial statements. Audit procedures Page 34 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 29 Key risk area • Evaluating and reviewing the controls in place over accounting for financial instruments. • Considering the Council’s material financial instruments and obtaining evidence that these have been appropriately valued at 31 March 2023 including challenging fair value classification. • Review of management experts and external investment managers. • Review of the disclosures within the annual accounts to ensure they are consistent with supporting information. Key observations The Council has relatively non-complex financial instruments and borrowings in place. We have concluded that the valuation of PFI schemes and other investments and borrowings are free from material misstatement. Provision for doubtful debts (key accounting estimate) Significant risk description The Council in its annual accounts provides for doubtful debts over sundry debtors and housing rent arrears. Page 35 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 30 Key risk area How the scope of our audit responded to the significant risk Key judgements There is a significant degree of subjectivity in the measurement and valuation of provisions for doubtful debts. This subjectivity represents an increased risk of misstatement in the financial statements. Audit procedures • Obtaining the breakdown of provisions and assessing the reasonableness of management’s judgements as well as challenging the appropriateness of any assumptions used. • Performing substantive testing on provisions for doubtful debts where values and balances are derived by valuation and estimation. Key observations Our work in this area has not identified any issues. Group and the Council materiality Materiality is an expression of the relative significance of a matter in the context of the financial statements as a whole. A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditor’s report. The assessment of what is material is a matter of professional judgement and is affected by our assessment of the risk profile the Council and the needs of users. We review our assessment of materiality throughout the audit. Whilst our audit procedures are designed to identify misstatements which are material to our audit opinion, we also report to the Council and management any uncorrected misstatements of lower value errors to the extent that our audit identifies these. Our initial assessment of materiality for the group financial statements was £8.4 million and the Council’s financial statements was £8.4 million. On receipt of the unaudited financial statements, we reassessed materiality and updated it to £8.9 million and £8.8 million for the group and the Council accordingly. We consider that our updated assessment has remained appropriate throughout our audit. Page 36 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 31 Group £million Council £million Overall materiality for the financial statements 8.9 8.8 Performance materiality 6.7 6.6 Trivial threshold 0.250 0.250 Materiality Our assessment is made with reference to the group and Council’s gross expenditure. We consider this to be the principal consideration for the users of the annual accounts when assessing financial performance of the Council and its group. Our assessment of materiality equates to approximately 1% of gross expenditure as disclosed in the 2022/23 unaudited annual accounts. In performing our audit, we apply a lower level of materiality to Remuneration Report. Our materiality was set at £5,000. We perform audit procedures on all transactions, or groups of transactions, and balances that exceed our materiality levels set. We perform a greater level of testing on the areas deemed to be at significant risk of material misstatement. Performance materiality Performance materiality is the working level of materiality used throughout the audit. We use performance materiality to determine the nature, timing and extent of audit procedures carried out. Performance materiality is set at a value less than overall materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of the uncorrected and undetected misstatements exceed overall materiality. Trivial misstatements Trivial misstatements are matters that are clearly inconsequential, whether taken individually or in aggregate and whether judged by any quantitative or qualitative criteria. Page 37 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 32 Common Good Funds materiality Our initial assessment of materiality for the Paisley Common Good Fund financial statements was £0.140 million. On receipt of the unaudited financial statements, we reassessed materiality and updated it to £0.120 million. Our initial assessment of materiality for the Renfrew Common Good Fund financial statements was £0.690 million. On receipt of the unaudited financial statements, we reassessed materiality and updated it to £0.670 million. Our initial assessment of the Johnstone Common Good Fund materiality remained unchanged from the planning stage. We consider that our updated assessments have remained appropriate throughout our audit. Overall materiality (£) Performance materiality (£) Trivial threshold (£) Paisley £120,000 £90,000 £5,000 Johnstone £1,040 £780 £52 Renfrew £670,000 £502,500 £33,500 Overall materiality: our assessment is based on approximately 2% of net assets. We consider this benchmark to be the principal consideration for the users of the financial statements when assessing the performance of each fund. Performance materiality: Using our professional judgement we have calculated performance materiality at approximately 75% of overall materiality. Trivial threshold: 5% of overall materiality for the financial statements. Group audit The Council prepares group financial statements in addition to its own financial statements, as required by the CIPFA Code, as there are material differences between the Council and group figures. The Council’s group structure is detailed within the annual accounts. As group auditors under ISA (UK) 600 we are required to obtain sufficient appropriate audit evidence regarding the financial information of the components and regarding the consolidation process to express an opinion on whether the group financial statements are prepared, in all material respects, in accordance with the Page 38 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 33 applicable financial reporting framework. The following table sets out the components within the group. Component Significant Level of response required Renfrewshire Leisure Ltd (OneRen) No Analytical Common Good Funds No Analytical Paisley Museum Reimagined Ltd No Analytical Park Lane Developments (Renfrewshire) LLP No Analytical Coats Observatory Trust No Analytical Strathclyde Partnership for Transport No Analytical Strathclyde Concessionary Travel Scheme Joint Committee No Analytical Renfrewshire Valuation Joint Board No Analytical Renfrewshire Health and Social Care Integration Joint Board No Analytical Comprehensive – the component is of such significance to the group as a whole that an audit of the component’s financial statements is required for group reporting purposes. Analytical - the component is not significant to the group and audit risks can be addressed sufficiently by applying analytical procedures at the group level. We revisited our planning group scope assessment, following receipt of the unaudited accounts and our assessment remained the same. As part of our audit, we reviewed the consolidation entries made within the group accounts, confirmed those entries back to the financial statements of the group bodies and evaluated any significant adjustments made to align the accounting policies or the different year end dates. Overall, we concluded that the results of the group bodies had been appropriately consolidated into the Council’s audited group accounts. Our analytical procedures have not highlighted any significant material issues in the Group accounts. Page 39 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 34 Renfrewshire Trust Funds Coats Observatory Trust Fund The Charities Accounts (Scotland) Regulations 2006 outline the accounting and auditing requirements for charitable bodies. The Regulations require an auditor to prepare a report to the charity trustees where an audit is required by any other enactment. The Council’s charitable trust is covered by the requirements of section 106 of the Local Government (Scotland) Act 1973 and consequently require a full audit. Each registered charitable trust has required a full audit since 2013/14. There is one registered charity preparing its accounts on a receipts and payments basis – Coats Observatory Trust Fund. This is subject to separate Audit Report. Audit differences We identified a small number of errors in the draft financial statements during our audit. These are set out in more detail in Appendix 2. Management agreed to amend the financial statements for all the errors we identified. The overall impact of the adjustments made on the financial statements of the Council was: • Nil impact on the deficit on the provision of services • £411.3 million reduction of total comprehensive income • £431.9 million reduction to net assets. We also identified disclosure and presentational adjustments during our audit which have been reflected in the final set of financial statements and are disclosed in Appendix 2. Internal controls As part of our work we considered internal controls relevant to the preparation of the financial statements such that we were able to design appropriate audit procedures. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we report these to the Council. These matters are limited to those which we have concluded are of sufficient importance to merit being reported. We did not identify any significant control weaknesses during our audit. Follow up of prior year recommendations Page 40 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 35 We followed up on progress in implementing actions raised by the predecessor auditor in the prior year as they relate to the audit of the financial statements. Full details of our findings are included in Appendix 3. Other communications Accounting policies, presentation and disclosures Our work included a review of the adequacy of disclosures in the financial statements and consideration of the appropriateness of the accounting policies adopted by the Council. The accounting policies, which are disclosed in the financial statements, are in line with the CIPFA LASAAC Code of Practice and are considered appropriate. The accounting policies used in preparing the financial statements are unchanged from the previous year. There are no significant financial statements disclosures that we consider should be brought to your attention. All the disclosures required by relevant legislation and applicable accounting standards have been made appropriately. Overall, we found the disclosed accounting policies, and the overall disclosures and presentation to be appropriate. Fraud and suspected fraud We have previously discussed the risk of fraud with management and the Audit, Risk and Scrutiny Board. Internal Audit is providing regular updates to the Board on any fraud related investigations. We have not been made aware of any additional incidents in the period nor have any incidents come to our attention as a result of our audit testing. Our work as auditor is not intended to identify any instances of fraud of a non- material nature and should not be relied upon for this purpose. Non-compliance with laws and regulations As part of our standard audit testing, we have reviewed the laws and regulations impacting the Council. There are no indications from this work of any significant incidences of non-compliance or material breaches of laws and regulations. Written representations We requested written representations from management, and these were approved at the same time as the financial statements were approved by the Audit, Risk and Scrutiny Board, signed by the director of finance and resources, and provided to us before we completed our audit and issued our auditor’s report. Related parties We are not aware of any related party transactions which have not been disclosed. Page 41 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 36 Confirmations from third parties All requested third party confirmations have been received. Page 42 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 37 Wider Scope Dargavel Primary School Our external audit plan highlighted our intention to monitor the Council’s response to the “Independent Review of the Council’s assessment of the demand for education for Dargavel Village, secured in Section 75 Agreements with BAE Systems” (the ‘Bowles Report’) published in June 2023. The Council commissioned the Bowles Report following completion of the building of a new primary school in Dargavel last year which was found to have been built with significantly less capacity than required for the catchment area – about one third of the size required. The Council has worked on possible solutions to address the issue which had been caused by an error in estimating pupil numbers at the outset of the project. The cost to address this error for the Council will be significant and is currently estimated at up to £75 million in gross capital costs for building a second primary school in Dargavel and building a larger than planned secondary school extension to accommodate the increased need for pupil places. These costs are expected to be met from new borrowing and will add c£4million per annum in additional revenue costs to meet interest payments. The net running costs associated with operating the new schools will be at least £0.5million per year. The additional revenue costs of c£4million for borrowing interest cost have been factored into the Council’s medium term financial plans as they will mainly take effect from when the new school is built which is currently projected to be by August 2027. We note in context that the Council’s existing medium term financial plan highlights the need to make savings of as much as £50million for the period to the 2026-2027 financial year. The revenue costs associated with the Dargavel issues identified above added to that already challenging savings target and will need to be incorporated into the Council’s medium term financial plans in due course. We summarise the independent examiners review work below, together with our assessment of the Council’s response and actions to date. Our work has been informed by a range of meetings with Council officers and examination of a wide range of available documentation. We have noted throughout our work the openness and transparency with which the Council have approached this difficult and challenging issue and we would like to thank the Council for their support during our audit. Independent examiner’s report – the Bowles Report Page 43 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 38 The Council commissioned the Bowles Report to provide an independent assessment of the circumstances which led to the significant error in school capacity planning for Dargavel School. The Report was published and presented at the June 2023 full Council’s meeting. The review was undertaken by a former local government director and chief executive with experience of leading major independence investigations. The Bowles Report made a number of recommendations and we summarise its key findings below. We note that the remit of the report was limited to a review of the Dargavel Development and should not be regarded as indicative of how the Council manages major capital programmes or projects. The independent examiner identified a number of the contributory factors: • A failure of leadership in the education service. • Limited corporate oversight of the project. • Lack of clarity about the size of the development. • A complete and repeated failure to test data for reasonableness. • Ignoring conflicting data. • Not either understanding or planning to manage the risk associated with this large development. • Focussing on capacity problems at Bishopton Primary School. • Ignoring emerging problems when agreeing to a 2 form entry primary school in 2018, which increased the capacity of the planned Dargavel school by about 100 places. • A failure to recognise the growing school capacity problem until May 2022. • A failure to take any concerns expressed by others seriously. The report notes that all of the senior officers involved in the Dargavel development are no longer employed by the Council. We note that some of those officers have moved to senior positions with other local authorities. The school was built as a part of Section 75 agreement with BAE Systems and linked to housing regeneration development in the area of Dargavel. Section 75 refers to a type of agreement by which a developer agrees to contribute to the additional public costs associated with delivery of any new housing development, including costs associated with schools, health, roads and other infrastructure. The early agreement between the Council and BAE Systems was for a maximum of 2,500 houses and a new primary school with capacity for 340 pupils. The revised 2018 planning consent increased the development to c.4,000 houses and a primary school requirement for 430 pupils. Page 44 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 39 When the school opened in January 2022, and with the development of just over 2,200 houses, it became apparent that pupil registrations were exceeding estimates raising concerns over the overall school capacity. Additional work by the Council to create a robust long-term estimate of pupil numbers (further confirmed by more detailed projections from the Council’s consultants - Edge Analytics) identified a need for a primary school capacity of 1,100 pupils and high likelihood of breaching the existing 430 capacity in the 2023/24 school intake requiring c.60% more pupil spaces in the short term. The Council’s Education and Children’s Services Policy Board agreed an interim solution to instal 6 new modular classrooms, which were delivered on time, before the end of August 2023 to address immediate capacity issues. The current long-term estimates for the required primary school pupil places in Dargavel are projected to peak between 1,100-1,500 and reduce over the long term towards the end of the 2030 decade to a settled level as the development matures. These estimates have been subsequently confirmed by the Council’s consultants Edge Analytics. The range of estimated projections reflects a number of risk-based scenarios and sensitivity analysis identified as part of the additional work undertaken by the Council and Edge Analytics recognising that there are multiple factors that can impact and influence the actual pupil demand that will ultimately emerge over time. The work undertaken by the Council to establish robust estimates of demand for pupil places in Dargavel addresses a key recommendation identified by the Bowles Report: • The initial Section 75 agreement from 2009 estimated that demand for school places was based on an adjacent area of Bishopton. However, Bishopton is a mature area with low pupil demand, while new housing (i.e. Dargavel) tends to attract more young families yielding higher numbers of pupils for pre-school and primary age groups. Data from other sources, like NHS expected demand, which contradicted the estimates, was either not used or disregarded by the Council. • The final Section 75 agreement increased the housing development from 2,500 to 3,850 houses (55%), but the school roll size was only increased by 30% to 440. There was also lack of clarity over the 3,850 number, as other documents reviewed by the independent examiner suggested a maximum number of 4,291 houses to be developed. There has been ‘overwhelming evidence’ that the pupils demand was significantly underestimated before the Council entered into the Section 75 agreement. • Concerns were expressed by parents, the Community Council, and other stakeholders, but were ignored by the Council. Page 45 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 40 • When BAE Systems proposed to further lower the number of secondary school pupils places from 300 to 200, the Council agreed without evidence of any challenge from officers. The Council did not use data on actual educational demand to do a robust estimation of the pupils expected demand. • The above shortcomings resulted in the Council weakening its negotiating position by allowing the capping of BAE contributions in both Section 75 agreements. The Bowles Report included recommendations for improving the reliability of estimates of demand for primary and secondary school places in Dargavel. As noted above, the Council has acted quickly to address these recommendations and appointed Edge Analytics to support its work in this area. The subsequent work of Edge Analytics has confirmed the Council’s estimates. The Council’s response and our assessment The Council had already been prioritising its response to many of the issues associated with Dargavel School since they emerged, and had anticipated and progressed many of the actions the Bowles Report subsequently recommended. For example, education provision in Dargavel has been a standing item on Education and Children’s Services Policy Board meeting agendas for over a year. The Council’s initial response to the recommendations contained in The Bowles Report was necessarily prepared shortly after the publication of the independent examiner’s report. As a result, this initial high-level response records the Council’s acceptance of the recommendations in the Report and commitment to addressing them. This initial response has since been supplemented by a more detailed action plan response in a Specific, Measurable, Achievable, Realistic and Timebound (SMART) format which enables appropriate monitoring and reporting of progress in implementing agreed actions. The Bowles Report has covered the decision making issues relevant to the outcome of building too small a school to meet community needs. The impact of that decision on educational outcomes for school children in the Bishopton and Dargavel areas remains a significant concern for the local community. The Council has put a range of mitigations in place to address those concerns, including the provision of modular primary school classrooms to provide additional short term capacity and a number of community engagement touch points to reassure parents and respond to local concerns. The Council remains in regular dialogue with parents, teachers and community groups in the local area. We note that a small number of members of the affected local communities continue to raise concerns with the Council and the Council continues to engage to address local concerns. The Bowles Report also raises wider issues for the Council in planning effectively for the future school estate. We note that the Council has employed Edge Analytics as Page 46 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 41 consultants to support its efforts to ensure it has the most robust long term projection data across the whole of its school estate to support better informed long term strategic investment decisions on the school estate that will be made in future years. A key challenge for the Council will be to win the trust and confidence of local communities as it communicates and explains any potential future school estate configuration decisions it may take in years to come. The Council has been very open and transparent in responding to our audit queries. We met with the senior management team at the end of August and issued our ‘key lines of enquiry’, which we include in the table below, and received a formal response on 6th September. We have remained in regular contact with the Council to discuss and clarify the Council’s response which has included the development of a more detailed action plan (in response to the Bowles recommendations) to enable appropriate scrutiny and facilitate effective tracking and monitoring of progress in implementing agreed actions. The Audit, Risk and Scrutiny Board is the Council’s main scrutiny body, but was not actively engaged in the commissioning of the Bowles Report or in scrutiny of the Council’s response to its recommendations until relatively recently. The Council chose to consider and scrutinise the Bowles Report at a full Council meeting with the first formal report on the issue to the Audit, Risk and Scrutiny Board due to be presented to the Board in November. The Council provided the following formal responses to our audit enquiries at the time of drafting this report. Audit Enquiry The Council’s response and audit assessment Future Budgetary Impact What is the full capital cost of the new school and has the Council considered a range of options on how will it be funded? Have the additional revenue costs been identified (i.e. additional staff members, gas and electric, etc)? Has the opportunity costs of building the additional school been identified? The Council estimates that the capital cost for the development of the 2nd 800 place Dargavel primary school will in the £42million to £45million range. The new school is expected to be completed by August 2027. The capital cost of extending Park Mains High School is estimated at between £27million to £30million and will accommodate an additional 400 pupils. Both estimates exclude financing, VAT and any other associated costs. The estimates above have been based on the standard area per pupil and cost Page 47 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 42 Audit Enquiry The Council’s response and audit assessment per square meter as per the Scottish Futures Trust (‘SFT’) guidance included in their ‘Learning Estate Investment Programme’ guidance. Audit assessment: The calculated initial capital cost is within SFT’s ranges. Although minimal in scale relative to the Council’s overall revenue budget, we asked the Council to prepare more a more detailed revenue cost assessment for running and operating the new schools. The Council estimates the net additional revenue impact to be £0.5million per annum, which will represent an additional 0.1% cost pressure on the Council’s budget in 2028/29 when the full year effect of this cost will require to be addressed Current Budgetary Impact What is the immediate impact on the Council’s overall budgets (capital and revenue), including the impact of future savings, impact on Council tax levels and supporting displaced pupils (i.e. transportation costs)? The immediate impact would be between circa £60 million in capital cost, with the expected borrowing financing cost of £4 million per year. The figure is net of an expected BAE Systems contribution to 200 spaces to the provision of the secondary school extension. The Council informed us that any impact on future revenue, savings or Council tax would be considered as part of the Council medium term financial plans. Audit assessment: The Council estimates additional capital costs of up to £75million (£60million net) to address primary and secondary school capacity issues in the Dargavel area. The revenue cost associated with borrowing to finance these costs is estimated at Page 48 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 43 Audit Enquiry The Council’s response and audit assessment £4million per annum with a further £0.5million per annum in net running costs for the new schools. The £4.5million in new revenue costs is now included in the Council’s existing savings target of £50million. The Council has not yet identified how it will achieve the cost savings required to fund this additional expenditure. Operational Performance When will the new school be ready? What work has the Council done to ensure any new school provision will meet the needs of current and future children for both primary and secondary education provision in the area? Has the Council considered the short- /long-term impact on pupil performance and other operational targets? Has that consideration extended to impact on Dargavel and surrounding schools? What mitigations have been put in place? How long are they required for? How will the Council monitor the impact on educational outcomes for the surrounding area? The new primary school, and extended secondary school are expected to be operational from August 2027. The Council’s Education and Children’s Services Policy Board considers the Dargavel school issue on an ongoing basis. The last update to August 2023 Board meeting considered the progress of the modular interim solution installation, other schools impacted and referred to developing a long-term Learning Estate Strategy and Management Plan. The Council delivered an interim solution (6 modular classrooms) to meet the immediate capacity needs for pupil places and to retain classroom space ratios within government guidelines. In future years, pupils not allocated places in Dargavel Primary (including modular classrooms) will be placed in the neighbouring Bishopton Primary school. These interim changes necessary to meet the immediate education needs of local children did lead to some initial concern with parents in both Dargavel and Bishopton schools. The Council has Page 49 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 44 Audit Enquiry The Council’s response and audit assessment been able to demonstrate that many of these initial concerns have been addressed and the Council’s monitoring indicates that these interim measures are working well with no evidence at this stage of any negative impact on education experience or attainment in the affected schools. Long term estimates of the demand for pupil places have been completed and mapped to the current school estate capacity. The Council appointed specialist consultants Edge Analytics to support with this work. The Council has been in discussion with BAE Systems and reached an agreement for additional land to be transferred to the Council to provide a preferred site to enable new school construction as well as providing increased land at the existing primary school to provide greater flexibility. The Council is assessing the preferred procurement and delivery route for the new school and will in due course undertake appropriate statutory consultation processes. Audit assessment: The level of scrutiny given to this issue at Council is appropriate. However, we note that the role of the Audit, Risk and Scrutiny Board in providing scrutiny over the Dargavel School issues has not been sufficiently articulated at the outset. The very first report on the issue was presented to this Board in September 2023 with a further report planned for November 2023 to provide scrutiny and challenge over the Council’s detailed response actions to the Bowles report. Page 50 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 45 Audit Enquiry The Council’s response and audit assessment The Bowles report itself was considered at full Council and regular updates provided through the Education and Children’s Services Policy Board since November 2022. The Council has implemented a number of mitigations to address immediate school capacity issues in the short term and work on estimating the demand for school places over the next 15 years has also been completed to support appropriately risk informed decision making by the Council. The Council monitors the impact of these changes on the educational outcomes for pupils as part of its existing established arrangements. Early indications are that pupils continue to perform well in both Dargavel and Bishopton schools which are both regarded as high performing primary schools. Community engagement What is being done to ensure community engagement improved and continues whilst the issues are resolved? What additional support is being provided to the pupils already impacted? The Council has an appropriate stakeholders engagement strategy in place. The Council has established more formal forums with stakeholders, parents, local groups and councillors amongst others to maintain and improve future engagement. Audit assessment: The decision making failures identified in the Bowles Report create a significant challenge for the Council in building trust and confidence with local communities in decision making affecting the school estate for both the Dargavel and Bishopton communities and more widely for how decisions on the future Page 51 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 46 Audit Enquiry The Council’s response and audit assessment school estate are appropriately scrutinised and communicated. The Council has recognised this, has been alert to this risk from the outset of the Dargavel issue, and has an existing stakeholder engagement strategy which has been appropriately adapted to the developing situation. In future years, the Council will have further school estate decisions to make and in this context the Council should consider developing a more specific plan for how it will make those decisions, the appropriate governance and scrutiny arrangements for those decisions, and how it will involve local communities in those decisions and ensure effective communication with all key stakeholders each stage of the decision making process. Lessons learned Has a lesson learned exercise been undertaken which identified the root cause of the issues identified in the external report and recommendation raised on how to resolve these issues? The Council accepted the findings of the Bowles Report in full and as an immediate response provided an initial high level action plan response when the report was published in June 2023. Amore detailed action plan has subsequently been prepared over the summer period and will be subject to regular monitoring and scrutiny of the Council’s progress in implementing agreed actions. Audit assessment: The Council has good arrangements in place for monitoring capital projects and has already implemented many of the Bowles Report recommendations. The Council has also developed a detailed action plan response to the Report recommendations. The Bowles Report Page 52 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 47 Audit Enquiry The Council’s response and audit assessment was considered at full Council and the Audit Risk and Scrutiny Board will scrutinise and monitor progress in implementing agreed actions. This governance route was not, however, clearly articulated at the outset and this would have provided greater clarity in respect to the appropriate governance route for scrutinising the Council’s response to the Dargavel issue. We note that the Education & Children’s Services Policy Board has been monitoring, and will continue to monitor, the educational aspects of Bowles Report recommendations and the Council’s response. We note that the Council is reviewing its governance and scrutiny arrangements as part of its response to the Bowles Report. Action plans Is there a detailed action plan in place which outlines the recommendation identified from both external and internal reviews? 1. Does this action plan outline: a. the response to the recommendation in sufficient detail for a third party to understand the proposed approach; b. the responsible owner of the action; and c. a deadline for the action to be completed? 2. Has this action plan been scrutinised and approved by the appropriate governance forum? See comments above, the Council has prepared a detailed action plan response to the Bowles Report recommendations. Audit assessment: See comments above. Contractor engagement The Council has worked closely with BAE Systems and negotiated a transfer Page 53 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 48 Audit Enquiry The Council’s response and audit assessment What are the outcomes of negotiations with BAE? How has the Council ensured that lessons learned have been applied to prevent similar issues reoccurring? What oversight have the legal team had in regard to this agreement? of land to the Council for £1 consideration, for the purpose of new school construction and to increase the land at the existing school site to provide increased flexibility. In exchange for this transfer the Council clarified the understanding that a maximum of 4,322 homes are consented to be delivered as a part of Dargavel Masterplan. The Council has also agreed to reduce the quantum of social housing to be delivered by 93 units, and redesignating part of the site from commercial to residential use. Audit assessment: The Council has worked constructively with BAE Systems and obtained additional land to enable a new School to be built with an estimated completion date of August 2027 and has secured additional land at the existing school site to secure greater flexibility to meet potential long term changes. Governance arrangements What is being done to ensure similar issues are not evident in similar projects recently completed or ongoing? What is being done to improve the governance around significant capital investments to ensure issues don't reoccur? Does the council operate with cross department teams in place (capital projects managers, finance, legal, education officers etc) working together to ensure a holistic approach to complex capital projects? The Council has demonstrated that the Bowles Report findings are limited to the Dargavel School project and has appropriate governance arrangements for managing major investment programmes such as its City Deal Programme and Community Investment Programme . In recognition of the growing scale of investment being delivered in the learning estate, the Council has also recently established a new Strategic Learning Estate work programme and its terms of reference and governance model aligns with the Council’s strategic Page 54 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 49 Audit Enquiry The Council’s response and audit assessment priorities, sets it purpose, oversight arrangements and brings officers from different departments into its Programme Board. The Council is planning to review its overall governance and scrutiny arrangements as part of a wider review of effective corporate governance. The Council has also agreed to undertake a review of the effectiveness of its Audit, Risk and Scrutiny Board against CIPFA good practice guidelines. Audit assessment: The Council has good arrangements for tracking and monitoring the project management of major capital projects. We note the Council’s planned reviews of governance and scrutiny arrangements, and we will monitor the outcomes from these reviews in future audit work. Accountability Has the Council considered any further steps that could be taken towards the key staff responsible for the decision making that resulted in the failure to build an appropriately sized school? The Council has sought independent legal advice and considered the potential for any form of appropriate action against former senior officers involved in Dargavel School decision making. All of the senior officers involved in the historic handling of Dargavel are no longer employed by the Council and the Council has assessed in conjunction with external advisors that there is no prospect of pursuing any specific action against former senior employees of the Council. It would be inappropriate for the Council to make any comment on any ongoing Page 55 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 50 Audit Enquiry The Council’s response and audit assessment disciplinary actions against existing employees. Audit assessment: The Council has obtained appropriate external legal advice and considered the potential for any form of action against former senior employees involved in Dargavel School decision making. Summary of the audit judgments and progress on Dargavel primary school The Council acted quickly to respond to the Dargavel issue, including appointing an independent examiner who has recognised the transparency and helpfulness of the Council in supporting his work in a difficult and challenging area. We can confirm that the Council continues to engage openly and transparently in addressing issues relevant to Dargavel School. This open and transparent approach is an important element of the Council’s response supporting the rebuilding of public trust and confidence in future decision making on the school estate. Officers recognise that estimating future population trends is an ongoing complex exercise and requires specialist input and challenge. The Council has appointed a specialist consulting firm (Edge Analytics) to support their work in providing the best possible data and estimates over the likely demand for future school places and to review those estimates on ongoing basis to react to any changes to expected demand patterns. The Dargavel School issue continues to be a priority area for the Council involving significant time for senior leaders and for the Council to ensure an appropriate response. We have observed an appropriate level of involvement of members at the Education, Children’s Services Policy Board level who continue to scrutinise the delivery of education across the Council. The Council has structured and formalised its approach to the governance of other major capital projects. There has been a recent review by officers and adoption of Strategic Learning Estate work programme, bringing together officers from different departments to oversee educational estate delivery and ensure joint working going forward. We note that the Council is undertaking its own review of scrutiny and governance arrangements partly in response to Bowles Report recommendations and we welcome the planned review of the effectiveness of the Audit, Risk and Scrutiny Page 56 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 51 Board to support the effectiveness of future scrutiny arrangements. We will continue to monitor developments in this area as part of our audit. We note that the Council assesses the impact of Dargavel School decisions on the standard of teaching delivery and pupil attainment as part of its regular monitoring arrangements. The Council assesses that, whilst there has been some disruption, there has been no detriment to either teaching delivery or pupil education in the Dargavel and Bishopton areas. The Council continues to monitor this closely. The Council recognises that it still faces a significant challenge to build the trust and confidence of the affected local communities in its decision making in relation to Dargavel. For example, although there is support from across associated Parent Councils for the Council’s decision to extend (rather than replace) an existing secondary school serving the Dargavel and Bishopton area, a recent report to the Education, Children’s Services Policy Board comments on the negative reaction from some within the Dargavel community to this decision. The Council recognises this and is alert to actively managing this ongoing issue. This confirms that future decision making on the school estate will remain a high profile issue for the Council going forward. Recommendation 1 Page 57 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 52 Financial management Our detailed findings on the Council’s financial management arrangements are set out below. Financial performance The Council reported General Fund overspend of £7.5million at 31 March 2023. Significant additional spend was incurred due to inflationary pressures during the year. £10million of expected budget savings were incorporated into revenue estimates for 2022/23 with £8.8million of further savings targeted for 2023/24, including savings of £1.4million from the use of the flexibilities in relation to service concession arrangements. The capital programme budgets for both HRA and non HRA elements have been re- profiled and decreased during the year by c£27million (17%) due to further COVID- 19 related delays. The Council estimates it will achieve a small underspend on its revised capital budget. However, the Council is aware of the pressure on the overall capital programme and an expected increase in costs due to contractor claims and materials cost inflation which will require to be funded. Revenue performance against budget The bulk of the General Fund overspend was split between two services: Children’s Services with £3.5million, and Environment & Infrastructure of £6.7million. The main financial challenge during the year has been from inflationary pressure on staff costs, the cost of food, fuel, energy, construction and children’s residential care. More specifically: the number and cost of complex child care packages have increased, high gas and electricity costs account for £2m of the overspend, refuse collection costs were impacted by increased fuel costs, with car park income still below pre-pandemic levels recording £1 million less income than expected. The largest cost element in the Council’s accounts are staff costs which was at c£384million representing 43% of total expenditure. In 2022/23 a national pay settlement was agreed for local government workers at 5% and for teachers at 7%. To support the additional cost, the Scottish Government provided councils with additional funding, with Renfrewshire Council receiving £8.6million. The council tax collection rate for the year was 95.5%, slightly below the target of 95.9%. However, income from this source exceeded budget by £2.2million due to better than expected prior year arrears collection rates. The General Fund balance increased to £127.4million at 31 March 2023 from £104.7million in the previous year. The Council maintains unallocated reserves of £10.3million which equals to 2.3% of the Council’s net annual running cost. Page 58 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 53 Housing revenue account (HRA) The Housing Revenue Account (HRA) reported a net cost of £15.7million (£8.7million), mainly due to increased repairs and maintenance costs. The balance of HRA reserves has been maintained at the same level as the prior year at £6.5 million. Capital expenditure The capital programme budget for 2022/23 was £161 million, which consisted of non-housing programmes of £132 million and a housing related programme of £29 million. The delivery of the capital programmes has been impacted by the complexity and scale of the projects, the costs of inflation, availability of contractors and increasing professional fees. This resulted in an in-year re-profiling of the capital programme and an underspend against budget of £42 million (or 25% of the budget) of which £32 million was for non-housing development and £10million related to housing. The largest element of the Council capital programme spend is City Deal, responsible for almost one third of the programme, with Leisure and Heritage projects, council dwellings and roads and transport projects making up the remainder. The projects re-profiled into 2023/24 largely relate to Paisley Museum, Paisley Town Hall and Paisley Town Centre Infrastructure, City Deal and the new Paisley Grammar Campus. Treasury management Capital spend is sourced through a number of funding and borrowing streams. Almost half of capital funding comes from external borrowing, with 46% being funded from government grants and contributions and 5% from other sources. During 2022/23 the Council borrowed £25 million from the Public Works Loans Board (PWLB) on a long-term loan basis. Cash levels have decreased when compared to the balance as at March 2022, The Council remained within its authorised capital financing requirement (CFR) of £480 million, with the actual CFR being £442.1 million. The ratio of net revenue used for paying for the borrowing financing cost (loan interest) was 33% for housing and 3% for non-housing. Systems of internal control We have evaluated the Council’s key financial systems and internal financial controls to ensure internal controls are operating effectively to safeguard public assets. Page 59 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 54 We did not identify any significant weaknesses in the Council’s accounting and internal control systems during our audit. Prevention and detection of fraud and irregularity We found the Council’s arrangements for the prevention and detection of fraud and other irregularities to be sufficient and appropriate. National fraud initiative The National Fraud Initiative (NFI) in Scotland is a counter-fraud exercise co- ordinated by Audit Scotland working together with a range of Scottish public bodies to identify fraud and error. The most recent NFI exercise commenced in 2022. The Council uploaded the data in line with the requirements of the NFI in October 2022 ahead of the new data sets being released in January 2023. Council officers are working through the matches and an update to the Council is going to be presented during 2023/24. There are no significant findings to note so far. Overall, the Council’s arrangements with respect to NFI are satisfactory. We will follow up completion of the work as part of our 2023/24 audit. Page 60 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 55 Financial sustainability Significant audit risk Our audit plan identified a significant risk in relation to financial sustainability under our wider scope responsibilities: Page 61 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 56 Extract from External Audit Plan - Financial sustainability Page 62 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 57 The Council considers its medium-term financial planning through its Financial Sustainability and General Fund Financial Outlook report regularly presented to the full Council. The Council has considered a range of scenarios from optimistic to pessimistic and identified a ‘central scenario’ with a funding gap of £45 million to £50million between 2024/25 and 2026/27. Assuming a 5% council tax increases in each of those years the funding gap reduces to a range of £30 -35million and would require the Council to identify c.£10million of savings and efficiencies each year. However, such council tax increases would be subject to prior Council vote and approval. The Council reviewed its budget planning assumptions to reflect the financial challenges impacting on the external environment which the Council operates in. In addition to council tax, other assumptions included pay and contractual inflation cost pressures. The emerging and uncertain impact of cost pressures on the Council’s finances and ability to deliver services in a sustainable manner remains a significant challenge and risk. The key Council’s transformation programme Right for Renfrewshire (“RFR”) aims to transform the Council’s services, create efficiencies, and generate savings over the medium term. It was paused between 2020 and 2021 to focus the efforts on the emergency response to the COVID-19 pandemic and restarted again in 2022. The Council recognises that as a result, the savings have fallen behind the requirement to secure financial sustainability. The original RFR savings target of £25million was revised in June 2022 when the Council reinstated the programme with a target to achieve £15million of savings instead. The Council delivered £5million of savings between 2020-22 against the original RFR target. The new savings target £15million has also proven to be challenging and it is currently expected that £8million will be achieved over the period of 2023-2025. The Council has been reviewing its medium-term sustainability workstreams noting that over the period from 2010 it has already achieved £173million of savings and that the scope for further savings is therefore limited without impacting the quality of the services delivery. The Council has concluded that these measures will deliver less savings than planned and is currently investigating the potential for further savings and efficiencies. The Council’s reserves include £21.5million of ringfenced reserves (in relation to COVID and inflation mitigation) and £10.3million of unallocated reserves. While the Council plans to potentially draw down up to £12million of ringfenced reserves to achieve a breakeven position in the short term, it has acknowledged that these cannot be utilised as a sustainable solution to close the medium-term budget gap. The Council recognises that difficult decisions on spending priorities will be required to address the projected budget deficit. The Local Government Finance circular 10/2022 confirmed that local authorities can utilise financial flexibility whereby the capital repayment element of service concessions can be accounted for over the expected useful life of the asset Page 63 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 58 instead of the contract period. The Council has approved the use of this flexibility, which will produce an in-year saving of £1.4million, with reduced cost available up to 2036/37. However, this re-profiling exercise will also generate cost, not previously present, beyond 2036/37. The net cost impact over the revised life of the assets is nil. Council’s utilisation of the service concession financial flexibilities has been incorporated into the Financial Outlook reports during 2022. Our detailed findings on the Council’s arrangements for achieving long term financial sustainability are set out below. 2023/24 revenue budget The Council approved its 2023/24 revenue budget at a meeting in March 2023. The Council voted 6% increase on council tax and agreed utilisation of non-recurring reserve funding up to £12million to achieve a break even position. The projected outturn at March 2023/24 is an overspend of £5.7million against its total budget of £509.6million. The key areas of the adverse variance relate to: • £2.6million in relation to external specialised residential accommodation placements within Children and Families; • £2.3million in relation to the ongoing shortfall in parking income, waste collection cost driven up by fuel prices and other inflationary pressures; and • £1.1million from repair and maintenance of streetlight columns, due to inflationary pressures and under-recovery within soft facilities management services There is also uncertainty in relation to ongoing pay negotiations and their impact on 2023/24 outturn. Cost improvement plans The Council re-commenced its service transformation programme in 2022, including arrange of financial sustainability workstreams to achieve savings over the medium term. This is branded under the name of Right for Renfrewshire (‘RFR’). There have been specific, targeted reviews undertaken as a part of RFR to generate savings and included reviews of the Operations and Infrastructure service within Environment and Infrastructure to generate savings over 2022/23 to 2024/25. Remaining areas of the Council where reviews have been undertaken include Corporate Governance, Marketing and Communications, Policy and Partnerships and People and Organisational Development. The Council expects that these reviews will largely deliver against their savings target in 2023/24. The budget savings under RFR were expected to be at £8million over the remaining 12 months, against £15 million target. £4.7million of these savings are incorporated Page 64 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 59 into 2023/24 budget. The Council is undertaking work on how to achieve a longer- term target of £20million savings in the medium to longer term. In addition, the above target will be affected by additional savings required to fund additional revenue costs in relation to the Dargavel Primary school issue. Medium term financial plan Officers have noted that the prior year’s savings were largely achieved by two departments which make up only 20% of the total council budget. Commitment to savings would need to be met by all services, including the Council’s subsidiaries. The medium-term financial challenge and financial gap has been considered by the Council numerous times, but no clear options have been presented or decision has been made as to how to address those challenges. This poses an increasing risk to the Council’s delivery of services over the medium-term, and we would recommend addressing as a priority. Recommendation 2 Capital plans The Council has a number of medium- and long-term capital projects, financed though borrowing, Levelling up Fund, City Deal, Regeneration Capital Grant funds and Scottish government funding. The biggest capital projects over the next 5 years include City Deal Projects (Clyde Waterfront & Renfrew Riverside, Glasgow Airport Investment Area), Advanced Manufacturing Innovation District Scotland South project, Paisley Museum and investment in heritage venues and town centre infrastructure. This is supported by asset lifecycle maintenance programmes. Exhibit: Capital programme 2023/24 (£m) 2024/25 (£m) 2025/26 (£m) 2026/27 (£m) 2027/28 (£m) Non- housing 145.9 94.0 85.4 53.4 45.6 Housing 29.7 48.6 69.0 71.7 51.9 Total 175.6 142.6 154.4 125.1 97.5 Projected outturn at March 2023/24 is an underspend of £0.1million. The total borrowing and long-term debt over the next three years is expected to increase by 34% from £429million in 2023/24 to £575million in 2025/26 and new borrowing will need to be financed, therefore reducing revenue available to provide other services. Page 65 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 60 These reductions have been budgeted for and impact is included within the overall projected £50million medium term financial gap. This year’s programme included construction of Paisley Grammar New Campus and Primary Schools Estate Programme, but additional expected cost of building a new primary school in Dargavel and extending the secondary school there is not included in the above estimates. The Council expects to finance this cost of c.£72-75m from external borrowing. Housing Revenue Account The Council plans to deliver total housing capital investment of £270.8million over the 5-year period up to 2027/28. The council expects that £26.6million of the total will be financed from government grant. The HRA 2023/24 budget of £29.7million is expected to be on track for delivery, with no under or overspend currently reported. The HRA operates a rolling 30-year Business Plan model which is the standard operating practice amongst local authorities and Registered Social Landlords. The 30-year basis of the model reflects the need for a long term planned approach to the replacement of major items such as rewiring, central heating aligned to the lifecycle of the element. Similar to non-housing construction, the sector is still experiencing the impact of pandemic recovery, with the backlog of repairs to void properties influencing income generation. The Council is focusing on the first phase of its capital programme to deliver c.1,100 housing properties and to invest £30million in the existing high-rise accommodation. Page 66 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 61 Vision, leadership and governance Our detailed findings on the Council’s arrangements are set out below. Vision The Council approved a new Council Plan in September 2022, articulating its vision, priorities and strategic outcomes for the Council. The Council Plan strategic outcomes are used to underpin the Council’s internal and external communication and engagement and these align to their organisational values. The Plan has five main strategic outcomes: Place, Economy, Fair, Green and Living our values. Corporate leadership team Renfrewshire council senior team consist of the Chief Executive, 3 Directors of departments and 15 Heads of Service (along with the Chief Officer of the HSCP and Chief Executive of partner organisation OneRen). The Council’s internal structure changed in December 2022 when Community Learning moved into the Chief Executive’s Services, and Community Protection and Housing services were consolidated with Environment and Infrastructure, and one director’s post was deleted as a result. Governance arrangements The Council’s governance framework comprises the systems and processes, and culture and values, by which the Council is directed and controlled and through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its strategic objectives set out in the Council plan. The Council has approved and adopted a Local Code of Corporate Governance and publishes information on how it complies with that Code. The Council has a number of Boards (Committees) with delegated authorities and specific remits in place. The Audit, Scrutiny and Risk Board is chaired by an independent member of the council and comprise nine members from all political parties represented on the Council. Its remit is to consider internal and external audit and scrutiny reports, note internal audit performance, consider and monitor progress reports against any action points raised by internal and external auditors. The Board also has responsibility for considering the Council’s code of corporate governance, approving the risk management policy and strategy and reviewing the effectiveness of risk management arrangements. Other functions include monitoring and reviewing service delivery performance, policies and practices and to submit recommendations to the Council. The Council has recently committed to undertaking a review of the effectiveness of the Audit, Risk and Scrutiny Board against the CIPFA good practice guidance for Page 67 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 62 audit committees. The Council should also consider the effectiveness of existing scrutiny arrangements across all governance bodies as part of its evaluation of the role of the Audit, Risk and Scrutiny Board. Recommendation 3 Seven Local Partnerships have been established and have identified initial local priorities. Decision making including that relating to relevant grants is delegated to each Local Partnership through a lead officer appointed by the Council. Risk Management Renfrewshire Council has a risk management framework in place formed over key components and supported by a high-level combined risk management policy and strategy, last revised in March 2021. The strategy is due to be reviewed by the Audit, Risk and Scrutiny Board in November 2023. The risk management objectives refer to: • Leadership and management; • Policy and strategy; • People; • Partnership and resources; • Processes; • Risk handing and assurance; and • Outcomes and delivery. Updates on progress reports and monitoring of risks are reported to the Audit, Risk and Scrutiny Board on a six-monthly basis. Each Council department has at least one representative on the Corporate Risk Management Group (the Group). The Group has overseen reporting of the 2022/23 strategic and corporate risk, monitoring progress on behalf of the Corporate Management Team. Services have taken ownership of their risks with processes being followed for reporting, and where necessary ‘escalation’ of significant risks to the strategic or corporate registers. All service departments submitted their risk data on time for the progress reports to the Audit, Risk and Scrutiny Board as planned. Cyber security There continues to be a significant risk of cyber-attacks to public bodies, and it is important that they have appropriate cyber security arrangements in place. A number of recent incidents in other organisations have demonstrated the significant impact that a cyber-attack can have on both the finances and operation of an organisation. Page 68 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 63 We have considered risks related to cyber security at the Council as part of our integrated audit as part of our understanding of the Council’s use of IT. Based on this initial assessment we concluded that arrangements are appropriate. Internal audit The internal audit service operates in accordance with the Public Sector Internal Audit Standards and reports to the Audit, Risk and Scrutiny Board. Internal audit undertakes an annual programme of work, approved by the Board, based on a strategic risk assessment. The Council’s Chief Auditor provides an independent opinion on the adequacy and effectiveness of the governance framework, risk management and internal control. To ensure the integrity of the internal audit function, the annual internal audit strategy and plan is determined by the Chief Auditor in consultation with all service Directors and their senior management teams. The internal audit opinion for 2022/23 was that, subject to management addressing the critical and important recommendations made in the limited and no assurance reports, it is considered that reasonable assurance can be placed upon the adequacy and effectiveness of the Council’s internal control, risk management and governance arrangements. Internal audit presented results of their activity for 2022/23, out of the planned days of 941, 903 (or 96%) were delivered. Internal audit also followed up on 94 recommendations of which 67% have been completed, 23% were partially completed and 7% not implemented. We consider internal audit work during our risk assessment and on ongoing basis. In line with the requirements of the Public Sector Internal Audit Standards (PSIAS) the internal audit function was subject to an external assessment performed by an internal auditor of another local authority. The external reviewer concluded that RC’s internal audit fully complies with PSIAS requirements. Page 69 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 64 Use of resources to improve outcomes Our detailed findings on the Council’s arrangements are set out below. Performance management framework The Council introduced a new performance framework to measure against the new 2022-27 Council Plan objectives. A high level summary of the Framework is presented below: Source: The Council’s internal documentation The framework assumes 6 monthly reporting to Leadership Board with performance indicators against action progress grouped by Council Plan strategic outcomes. These outcomes have also one cross-cutting theme – Improving outcomes for children and families. Service Improvement Plans (SIP) at teach service level were also given a new format to make them aligned with the above. The reporting is done on 6 monthly basis to relevant Boards including an annual outturn report. All performance indicators and actions in the Council Plan Framework are included in SIPs. The next stage of performance reporting is at operational level with range of service- specific performance reporting across Council to the appropriate Policy Board, together with statutory performance reports. Local Government Benchmark Framework (LGBF) is scrutinised by the Corporate Management Team (CMT) with reports to the Audit, Risk and Scrutiny Board. The Page 70 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 65 CMT would also review a number of performance reports, scorecards, people metrics and have ‘deep dives’ into specific areas on a quarterly basis. These documents are then used to create public performance reporting in user friendly formats, and by using interactive presentations, case studies and dashboards. Service improvement and reporting 2022/23 We have considered how the Council demonstrates a trend of service improvement in delivering their strategic priorities, as required by the Audit Scotland planning guidance for 2022/23. The Council reports its performance on website across different themes, against 105 indicators included in LGBF, Best Value requirements, and also includes a high level list of performance indicators in its statutory annual accounts. A summary of the information the Council reports publicly on its service performance is set out below. Extract from the accounts is included below. In terms of key performance indicators the Council mostly meets the target in relation to people support, although some of the performance declined relative to prior year (children services), while other (employment and support) have improved. Care, buildings and road indicators have overall declined. Page 71 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 66 Statutory performance information The Accounts Commission has a statutory responsibility to define the performance information that councils must publish. This responsibility links with the Commission’s best value audit responsibilities. In turn, councils have their own responsibilities, under their best value duty, to report performance to the public. The Accounts Commission issued a revised Statutory Performance Information Direction (‘2021 Direction’) in December 2021, which applies for the three-year period from March 2023 to March 2025. The 2023 Direction 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 • 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. The Council have made proper arrangements for preparing and publishing the statutory performance information in accordance with the Direction. The information reported on the Council’s website is the Council’s response to meeting the requirements. Climate change Tackling climate change is one of the greatest global challenges. The Scottish Parliament has set a legally binding target of becoming net zero by 2045 and has interim targets including a 75 percent reduction in greenhouse gas emissions by 2030. There are specific legal responsibilities placed on public bodies to contribute to reducing greenhouse gas emissions, to adapt to climate change, to act sustainably and to report on progress. All public bodies need to reduce their direct and indirect emissions and should have plans to do so. Many public bodies also have a role in reducing emissions in wider society, and in supporting activity to adapt to the current and potential future impact of climate change. The key actions the Council has taken to reduce climate change are set out in the table below: What targets has the body set for reducing emissions in its own organisation or in its local area? The Council set net zero target by 2030. Does the body have a climate change strategy or action plan which sets out how the body intends to achieve its targets? The Council has ‘Renfrewshire’s Plan for Net Zero’ strategy in place with five key themes and actions. Page 72 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 67 How does the body monitor and report progress towards meeting its emission targets internally and publicly? The Council plans to use annual updates of emissions modelling tool, which will be taken to a Board and published. Has the body considered the impact of climate change on its financial statements? No, but the Council is currently working on phased road map with interim annual targets for the area as a whole and also a carbon budget for the Council as an organisation. What are the areas of the financial statements where climate change has, or is expected to have, a material impact? Not applicable as per the answer above. Does the body include climate change in its narrative reporting which accompanies the financial statements and is it consistent with those financial statements? Yes, climate change targets, main policies and strategies are summarised in the annual report. Page 73 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 68 Best Value Appointed auditors have a duty to be satisfied that local government bodies have made proper arrangements to secure Best Value. There are the following four aspects to auditors’ work: • Thematic reviews; • Follow-up and risk-based work; • Service improvement and reporting; and • Contributing to Controller of Audit reports. Thematic review Auditors are required to report on Best Value or related themes prescribed by the Accounts Commission. This year’s thematic review is on the effectiveness of council leadership officers and members in developing new local strategic priorities following the elections in May 2022. We present the findings in a separate report with a summary set out below: How clear is the new council vision and its priorities? The Council has 2022-27 Council Plan clearly articulating the vision, priorities and 5 strategic outcomes for the Council. The development of the new Council Plan was done in tandem with the refresh of Renfrewshire's Community Plan with Strategic Needs Assessment which underpinned both documents, outlining the key themes, needs and opportunities for Renfrewshire. The Community Planning Executive Group had full oversight of the development process. There is a performance framework in place with indicators to measure progress against each of the strategic outcomes. How effectively have the views of citizens and communities been reflected in the priorities and decisions taken by the council? There is a variety of the forums for the views of the citizens to be reflected in the Council’s decision making. These include Fairer Renfrewshire Programme, Connected Communities Programme and a number of other ones. The Community Impact Assessment and resultant programmes are based on Page 74 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 69 consultation and engagement on priorities. There are also participatory budgeting programmes in place. How effectively do the council priorities reflect the need to reduce inequalities and climate change? As a part of the Community Impact Assessment there was a specific equalities-led engagement programme run, recognising that the pandemic exacerbated inequalities. This work then led to the Social Renewal Plan and Fairer Renfrewshire programme. These findings were also reflected in the Strategic Needs Assessment which was clear about the challenge faced. The Community Plan was refreshed almost exclusively to focus on the inequalities and the 'Fair' strategic outcome in the Council Plan has a strong focus on this. Council commitment to this includes specific funding for the programme and a sub-committee of the Leadership Board established to specifically focus on this key priority area. Renfrewshire Council has a strong commitment to tackling climate change, having declared a climate emergency in 2019. This commitment forms a stand- alone strategic outcome in the Council Plan (green) which closely links to our Plan for Net Zero and RenZero identity. How good are the delivery plans and is there alignment of financial, workforce, asset and digital plans with the council’s priorities? Service plans highlight how key priorities within the Council and Community Plan will be delivered, often at a more granular level. The Council's strategic framework has links from the Council and Community Plan to service level and operational plans. The Council has a well-established approach around transformation and achieving savings across services through the Right for Renfrewshire programme and now through Financial Sustainability workstream. There are workforce plans, financial plans, assets and digital plans at the Council, formalised into strategies, capital plans and other documents, followed by operational consideration. Overall, how effective has the leadership been (political and officer) in setting clear priorities and a sustainable approach to delivering them? The Council established a Cross Party Sounding Board to allow matters to be canvassed by officers with Elected Members in what is intended to be a non- political forum. The Council has agreed to establish a cross-party body to discuss and review existing governance arrangements of the Council. Officer Page 75 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 70 briefings for all of the three major political groups are offered in advance of policy boards and these occur more frequently under the current Council. Our interviews with members and senior management team members indicate that this has been an area of improvement over the years. The Service Improvement Plan scrutiny process outlined above gives Members the opportunity to scrutinise service performance in relation to progress against the agreed priorities. This process is also mirrored in the Council Plan scrutiny process with performance reported to Board every 6 months. Best Value Assurance Report follow-up Auditors are required to follow up Accounts Commission findings, Controller of Audit recommendations and any outstanding improvement actions reported in Best Value Assurance Reports and Annual Audit Reports. We are also required to have regard to the seven Best Value themes when completing our wider scope work A Best Value review was undertaken on Renfrewshire Council in 2016/17. The Best Value Assurance Report (BVAR) includes recommendations to help the Council address the improvement areas identified during the audit. We have considered progress made by the Council in implementing the recommendations made in the BVAR. Our findings are summarised below. Best value Assurance Report – follow up Auditor judgement Page 76 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 71 The Council had eight recommendations and progressed against each. We note however that some of the recommendations are not directly applicable to the Council after so many years since the report was published. Recommendation 1: Councillors should improve cross-party working, given the financial challenges that exist and the important decisions that will need to be made in the future. Progress: from our work and interviews with council members and officers we can conclude that the members are working with each other effectively. Recommendation 2: Councillors should take advantage of the training and development opportunities that the council provides to ensure they have the necessary skills and knowledge to perform their role effectively. Progress: appropriate training is delivered to members, monitored by the Council land reported to appropriate Board annually. Recommendation 3: The Council should review its governance arrangements to ensure they provide for a relationship with Renfrewshire Leisure Limited (RLL) that is clear, independent, and more easily understood by the public. Progress: governance arrangements has been updated and strengthened. Recommendation 4: The Council should develop a detailed medium and long-term workforce strategy and plan and implement its organisational development strategy. Implementing both the workforce and organisational development strategies will be critical to managing how future services are provided. Progress: this had a number of iterations over the years and a progress report on the Council’s People Strategy was presented to Finance, Resources and Customer Services Policy Board in September 2023. Recommendation 5: The Council is continuing to review how it will achieve the savings required within the medium- term financial strategy. The Council should prioritise how services need to be provided in future to meet these savings. Progress: The Council’s Financial Outlook is being continually reviewed in light of changing economic climate and regular reports are made to the Council. Recommendation 6: Community Planning partners need to plan their budgets and finances together to provide a clearer picture of the overall resources available. Progress: At the meeting of the Community Planning Executive Group in September 2023, a discussion took place on resourcing and the need to collectively focus resources on joint priorities. Recommendation 7: The Council and its partners need to continue to involve communities and work together on joint priorities and to strengthen partnership Page 77 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 72 working. This will provide a positive base to ensure the Community Empowerment (Scotland) Act 2015 is fully implemented. Progress: there was progress made in this are in relation to development of new local partnerships and through the Developing Communities. However, the Dargavel primary school issue demonstrated that more needs to be done in this area. Recommendation 8: The Annual Report should include a summary position regarding the Council’s performance together with relevant detailed performance information. This would improve the accessibility of performance information and help to demonstrate greater transparency by the Council. Progress: There a number of performance management methods and the Chief Executive’s Service’s current Service Improvement Plan is to review and refresh the Council’s performance management framework, which will continue to be reported on via the mid-year and outturn reports. We have considered the Best Value themes as part of our wider scope work and have not identified any significant risks in this respect. Service improvement and reporting We have considered this as part of our wider scope work within Vision, leadership and governance section of this report. Contributing to Controller of Audit Reports The Controller of Audit reports to the Accounts Commission on each council’s performance in meeting its Best Value duties at least once over the five-year audit appointment. Auditors are required to include judgments on the pace and depth of continuous improvement in the council as part of their wider scope work to contribute to these reports. Our findings and conclusions are set out in our wider scope work within Vision, leadership and governance section of this report. Page 78 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 73 Appendices Appendix 1: Responsibilities of the Council and the Auditor Appendix 2: Audit differences identified during the audit Appendix 3: Action Plan Appendix 4: Follow up of prior year recommendations Page 79 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 74 Appendix 1: Responsibilities of the Council and the Auditor Responsibilities of the Council The Council is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has responsibility for the administration of those affairs. The Director of Finance and Resources has been designated as that officer. The Director of Finance and Resources is responsible for the preparation of the Council’s annual accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). Area The Council’s responsibilities Corporate governance The Council is responsible for establishing arrangements to ensure the proper conduct of its affairs including the legality of activities and transactions, and for monitoring the adequacy and effectiveness of these arrangements. Those charged with governance should be involved in monitoring these arrangements. Financial statements and related reports The Council has responsibility for: • preparing financial statements which give a true and fair view of the financial position of the Council and its group and their expenditure and income, in accordance with the applicable financial reporting framework and relevant legislation; • maintaining accounting records and working papers that have been prepared to an acceptable professional standard and support the balances and transactions in its financial statements and related disclosures; • preparing and publishing, along with the financial statements, an annual governance statement, management commentary (or equivalent and a remuneration report that is consistent with the disclosures made in the financial statements and prepared in accordance with prescribed requirements. The management commentary should be fair, balanced and understandable and also address the longer-term financial sustainability of the Council. Management is responsible, with the oversight of those charged with governance, for communicating relevant information to users about the Council and its financial performance, including providing Page 80 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 75 Area The Council’s responsibilities adequate disclosures in accordance with the applicable financial reporting framework. The relevant information should be communicated clearly and concisely. The Council is responsible for developing and implementing effective systems of internal control as well as financial, operational and compliance controls. These systems should support the achievement of its objectives and safeguard and secure value for money from the public funds at its disposal. The Council is also responsible for establishing effective and appropriate internal audit and risk-management functions. Standards of conduct for prevention and detection of fraud and error The Council is responsible for establishing arrangements to prevent and detect fraud, error and irregularities, bribery and corruption and also to ensure that its affairs are managed in accordance with proper standards of conduct. Financial position The Council is responsible for putting in place proper arrangements to ensure its financial position is soundly based having regard to: • Such financial monitoring and reporting arrangements as may be specified; • Compliance with statutory financial requirements and achievement of financial targets; • Balances and reserves, including strategies about levels and their future use; • Plans to deal with uncertainty in the medium and long term; and • The impact of planned future policies and foreseeable developments on the financial position. Best Value The Council has a specific responsibility to ensure that arrangements have been made to secure best value. They are responsible for ensuring that these matters are given due priority Page 81 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 76 Area The Council’s responsibilities and resources, and that proper procedures are established and operate satisfactorily. Auditor responsibilities Code of Audit Practice The Code of Audit Practice (the Code) describes the high-level, principles-based purpose and scope of public audit in Scotland. The 2021 Code came into effect from 2022/23. The Code of Audit Practice outlines the responsibilities of external auditors appointed by the Auditor General and it is a condition of our appointment that we follow it. Our responsibilities Auditor responsibilities are derived from the Code, statute, International Standards on Auditing (UK) and the Ethical Standard for auditors, other professional requirements and best practice, and guidance from Audit Scotland. We are responsible for the audit of the accounts and the wider-scope responsibilities explained below. We act independently in carrying out our role and in exercising professional judgement. We report to the Council and others, including Audit Scotland, on the results of our audit work. Weaknesses or risks, including fraud and other irregularities, identified by auditors, are only those which come to our attention during our normal audit work in accordance with the Code and may not be all that exist. Wider scope audit work Reflecting the fact that public money is involved, public audit is planned and undertaken from a wider perspective than in the private sector. The wider scope audit specified by the Code broadens the audit of the accounts to include additional aspects or risks in areas of financial management; financial sustainability; vision, leadership and governance; and use of resources to improve outcomes. Page 82 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 77 Financial management Financial management means having sound budgetary processes. Audited bodies require to understand the financial environment and whether their internal controls are operating effectively. Auditor considerations Auditors consider whether the body has effective arrangements to secure sound financial management. This includes the strength of the financial management culture, accountability, and arrangements to prevent and detect fraud, error and other irregularities. 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. Auditor considerations Auditors consider the extent to which audited bodies show regard to financial sustainability. They look ahead to the medium term (two to five years) and longer term (over five years) to consider whether the body is planning effectively so it can continue to deliver services. Vision, leadership and governance Audited bodies must have a clear vision and strategy and set priorities for improvement within this vision and strategy. They work together with partners and communities to improve outcomes and foster a culture of innovation. Auditor considerations Auditors consider the clarity of plans to implement the vision, strategy and priorities adopted by the leaders of the audited body. Auditors also consider the effectiveness of governance arrangements for delivery, including openness and transparency of decision-making; robustness of scrutiny and shared working arrangements; and reporting of decisions and outcomes, and financial and performance information. Page 83 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 78 Use of resources to improve outcomes Audited bodies need to make best use of their resources to meet stated outcomes and improvement objectives, through effective planning and working with strategic partners and communities. This includes demonstrating economy, efficiency and effectiveness through the use of financial and other resources, and reporting performance against outcomes. Auditor considerations Auditors consider the clarity of arrangements in place to ensure that resources are deployed to improve strategic outcomes, meet the needs of service users taking account of inequalities, and deliver continuous improvement in priority services. Best Value Ministerial guidance to Accountable Officers for public bodies sets out their duty to ensure that arrangements are in place to secure Best Value in public services. Appointed auditors have a duty to be satisfied that local government bodies have made proper arrangements to secure best value. Our work in respect of the Council’s best value arrangements has been integrated into our audit approach, including our follow up on the Council’s Best Value Assurance Report and work on the wider scope dimensions. Audit quality The Auditor General and the Accounts Commission require assurance on the quality of public audit in Scotland through comprehensive audit quality arrangements that apply to all audit work and providers. These arrangements recognise the importance of audit quality to the Auditor General and the Accounts Commission and provide regular reporting on audit quality and performance. Audit Scotland maintains and delivers an Audit Quality Framework. The most recent audit quality report can be found at https://www.audit- scotland.gov.uk/publications/quality-of-public-audit-in-scotland-annual-report-202122 Independence The Ethical Standards and ISA (UK) 260 require us to give the Council full and fair disclosure of matters relating to our independence. We confirm that Azets Audit Services and the engagement team complied with the FRC’s Ethical Standard. We Page 84 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 79 confirm that all threats to our independence have been properly addressed through appropriate safeguards and that we are independent and able to express an objective opinion on the financial statements. Our period of total uninterrupted appointment as at the end of 31 March 2023 was one year. Audit and non-audit services The total fees charged to the Council for the provision of services in 2022/23 were as follows. Prior year charges for the predecessor auditor are also shown for comparative purposes: 2022/23 2021/22 Auditor remuneration £298,450 223,730 Pooled costs - 23,320 Contribution to PABV costs £78,110 110,340 Audit support costs £10,290 11,940 Sectoral cap adjustment £55,800 - Total Council’s audit £442,650 £369,330 Non-audit services - Council - - Non-audit services – wider group £710 - Total fees £443,360 £369,330 The FRC’s Ethical Standard stipulates that where an auditor undertakes non audit work, appropriate safeguards must be applied to reduce or eliminate any threats to independence. We have detailed in the table below the non-audit services provided to both the Council and the wider group, the threats to our independence and the safeguards we have put in place to mitigate these threats. Page 85 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 80 Non-audit service Service provided to Type of threat Safeguard Tax return preparation Park Lane Developments (Renfrewshire) LLP Self-review Non-audit services on this component are delivered by a separate tax team lead by a tax partner. Page 86 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 81 Appendix 2: Audit differences identified during the audit We are required to inform the Council of any significant misstatements within the financial statements presented for audit that have been discovered during the course of our audit. The non-trivial misstatement discovered during the course of our audit which have been adjusted for by management are summarised in the table below. Adjusted misstatements Details of the item corrected following discussions with management is as below. No Detail Assets Liabilities Reserves CIES Dr / (Cr) £m Dr / (Cr) £m Dr / (Cr) £m Dr / (Cr) £m 1. Correction of pension fund plan assets that were initially recognised in full. Adjusted from application of asset ceiling restriction. (258.3) 258.3 2. Valuation of property adjustment (20.6) 20.6 3. Resource transfer adjustment 23.3 (23.3) 4. Holiday pay accrual (0.7) 0.7 5. Asset depreciation adjustment (1.6) 1.6 Net impact on General Fund Reserve Nil Net impact on net assets (281.2) Unadjusted misstatements We identified no unadjusted misstatements during our audit. Page 87 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 82 Misclassification and disclosure changes Our work included a review of the adequacy of disclosures in the financial statements and consideration of the appropriateness of the accounting policies and estimation techniques adopted by the Council. We identified a number of reclassification adjustments and some minor presentational issues in the Council’s accounts, and these have all been amended by management. Details of all disclosure changes amended by management following discussions are as below. No Detail 1. Disclosure on the Dargavel School required extending to reflect the results of the independent review. 2. Disclosures in the remuneration report were inconsistent between each other. 3. Restatement of prior year reserves have had no note to explain its nature. 4. NDR Income account note contribution figure was inconsistent with the financial statements. 5. Pension asset has been presented under liabilities in the balance sheet as a ‘positive’ figure rather than under assets category. 6. Minor presentational and disclosure issues. The audit team have raised minor and presentational issues with management and we recommend that this is updated. 7. Presentational classification adjustment to Note 4 between depreciation and other service expenses, not impacting the core statements. Overall, we found the disclosed accounting policies, significant accounting estimates and the overall disclosures and presentation to be appropriate. Page 88 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 83 Appendix 3: Action plan Our action plan details the weaknesses and opportunities for improvement that we have identified during our audit. Action plan grading structure To assist the Council in assessing the significance of the issues raised and prioritising the action required to address them, the recommendations have been rated as follows: Rating Assessment rationale High An issue that results in a severe impact to the achievement of objectives in the area audited. Medium An issue that results in a moderate impact to the achievement of objectives in the area audited. Low An issue that results in a small impact to the achievement of objectives in the area audited. Current year action plan 1. Dargavel school response Medium Observation The Council has responded in a transparent and open manner to issues raised through the Bowles Report. We welcome the creation of a detailed action plan response to Bowles report recommendation and we note the planned reviews of overall governance arrangements and the specific review of the role the Audit, Risk and Scrutiny Board should have going forward. The Council recognises that it faces an ongoing challenge to build the trust and confidence of local communities in its school estate decision making. A recent report to the Education, Children’s Services Policy Board comments on the community negative reaction to the Council’s decision on extending (rather than replacing) an existing secondary school and indicates that decisions on the future school estate will remain a high profile area for the Council. Page 89 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 84 Implication Lack of clarity over the above points might lead to slow pace of remediating issue or re-occurrence in the future Recommendation We recommend that the Council: • Performs a more comprehensive and continuous assessment of future operating costs for planned new school provision. • Consider whether any additional monitoring and assessment arrangements for pupil educational attainment may be required for pupils in the Bishopton and Dargavel communities • Consider how it will evidence better joint working between council departments in future projects • Remains open and measures its effectiveness in rebuilding its relationship with the affected communities. Management response The Council has developed a substantial action plan addressing all the key recommendations from the independent review; and which will address the external audit points above. The action plan will subject to ongoing monitoring and scrutiny by the Audit, Risk and Scrutiny Board. Responsible officer: Chief Executive Implementation date: Ongoing Page 90 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 85 2. Financial sustainability High Observation Officers have noted that the prior year’s savings were mainly achieved by two departments which make up only 20% of the total council budget. Commitment to savings would need to be met by all services, including the Council’s subsidiaries. The medium term financial challenge and financial gap has been considered by the Council numerous times, but no clear options have been presented or decision have been made as to how to address those challenges. The Council now needs to make difficult spending priority decisions to secure financial sustainability going forward. Implication This poses an increasing risk to the Council’s delivery of services over the medium term and we would recommend addressing as a priority. Recommendation To present the Council with a range of options and services implications. Management response A Financial Outlook update has been reported to Council at each board cycle, the last being 28th September 2023. This continues to update status of the budget deficit position in the medium term and the progress of savings targets. The Council’s senior management team continue to identify options for further savings and service transformation, for agreement by elected members in setting future annual revenue budgets. Responsible officer: Director of Finance & Resources Implementation date: Ongoing 3. Cut off de minimis Low Observation The Council applies a ‘de minimis’ limit to determining how it will process transactions into the correct financial year. However, we identified that this threshold is not formally set. Implication There could be inconsistent treatment of the transactions with no formal limit set leading to misstatements. Recommendation To formalise arrangements around cut-off recording. Page 91 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 86 Management response A formal de minimis will be included in year-end guidance documents from 2023/24 onwards. Responsible officer: Head of Finance and Procurement Implementation date: 31 March 2024 4. Land valuations frequency Low Observation Our audit of fixed assets identified that a number of land values have been revalued in 2023, but had not been revalued in the five years before that valuation. Implication Revaluations to be made with sufficient regularity to ensure that the carrying amount does not differ materially from current value. Recommendation We recommend revaluing land values at least once in five years in line with standard industry practice and accounting requirements. Management response There have been resourcing issues within the Council’s Estates team, with external assistance purchased in 2023. Land values will be reviewed at least once in five years. Responsible officer: Head of Economy and Development Implementation date: 31 March 2024 Page 92 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 87 Appendix 4: Follow up of prior year recommendations We have followed up on the progress the Council has made in implementing the recommendations raised by the previous auditor last year which were reported as either new or ongoing. Recommendations raised in 2021/22 (predecessor auditor recommendations) 1. Property, plant and equipment valuations The Code of Practice on Local Authority Accounting requires authorities to revalue property, plant and equipment with sufficient regularity to ensure the carrying amount does not differ materially from current value, being the value that would have been obtained if revalued. Property, plant and equipment valuations within the annual accounts is supported by workings from valuers, using a rolling programme of revaluations. The valuation process could be enhanced through greater documentation of the annual valuation report and management scrutiny over the report including: • The assets revalued in year and the methodology applied in the valuation exercise; • Key assumptions and estimates made in the valuation; • The total valuation amount reflected within the annual accounts; and The recommendation was that a valuation report is prepared by the council’s valuer on an annual basis outlining the details of the work undertaken, the impact on the asset values and the methodology applied in completing the revaluation programme. There should be clear evidence of how officers have challenged and scrutinised the valuation to ensure the accounts are free from material misstatement. Implementation date Closed Response: The Council’s valuer has detailed which assets have been valued in the year and the impact of this on the wider category of assets. Improvements will continue to be made to Page 93 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 88 Recommendations raised in 2021/22 (predecessor auditor recommendations) annual valuation information to allow increased clarity on the work undertaken in year. Responsible officer: Head of Economy and Development 2. Related party disclosures The information held relating to member and officer interests could be enhanced to ensure that all relevant information is recorded to support the governance and financial reporting requirements around the disclosure of related parties. Processes and controls to consider and identify relevant relationships and transactions that require to be disclosed within the annual accounts should be reviewed for appropriateness. Risk: There is a risk that the council fail to identify related parties due to underlying documentation lacking sufficient detail. The recommendation was that a review of controls and processes around related parties is undertaken. This will include the documentation of member and officer interests as well as the processes in place to identify the relevant disclosures for inclusion in the financial statements. Ongoing Response: The Related Parties disclosure was refreshed and significantly expanded in the 2022/23 accounts and further development of the note will be undertaken for the 2023/24 accounts. Responsible officer: Head of Finance and Procurement Page 94 of 268
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Renfrewshire Council: 2022/23 Annual Audit Report to the Council and the Controller of Audit 89 Recommendations raised in 2021/22 (predecessor auditor recommendations) 3. Financial strategy to support financial sustainability The council face continuing financial challenges and significant uncertainty. It is anticipated that new financial flexibilities may become available and the impact of these should be assessed within the scope of the wider financial strategy. Risk: There is a risk that decisions around financial flexibilities, transformation and redesign of savings are made without detailed financial impacts being available to support the decision-making process. The recommendation was to develop a revised financial strategy incorporating new or temporary financial flexibilities and assess how the total balances available are best utilised to support the financial sustainability of the council over the medium term. The council will need to actively engage with local and national partners to deliver the required level of efficiencies and savings. Ongoing Response: Financial Outlook update reports have been reported to Council at each board cycle, the last being 28th September 2023. This continues to update the budget position in the medium term and the progress of savings targets. The use of financial flexibilities was agreed by Council in September 2021. Responsible officer: Director of Finance and Resources Page 95 of 268
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We are an accounting, tax, audit, advisory and business services group that delivers a personal experience both digitally and at your door. Accounting | Tax | Audit | Advisory | Technology © Azets 2023. All rights reserved. Azets refers to Azets Audit Services Limited. Registered in England & Wales Registered No. 09652677. VAT Registration No. 219 0608 22. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Page 96 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk Azets Audit Services Exchange Place 3 Semple Street Edinburgh EH3 8BL Dear Sirs Renfrewshire Council Financial Statements for the year ended 31 March 2023 This representation letter is provided for the purpose of expressing an opinion as to whether Renfrewshire Council’s financial statements present a true and fair view, in all material respects, in accordance with 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). I confirm to the best of my knowledge and belief and having made appropriate enquiries of the Renfrewshire Council’s Chief Executive and the Audit, Risk and Scrutiny Board, the following representations given to you in connection with your audit of Renfrewshire Council’s annual accounts for the year ended 31 March 2023. Financial Statements i. Renfrewshire Council and I have fulfilled our responsibilities for the preparation of Renfrewshire Council’s financial statements in accordance with 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), for being satisfied that they give a true and fair view and for making accurate representations to you. ii. I have complied with the requirements of all statutory directions affecting Scotland and these matters have been appropriately reflected and disclosed in the financial statements. iii. The financial statements are free of material misstatements, including omissions. iv. Renfrewshire Council has complied with all aspects of contractual agreements that could have a material effect on the financial statements in the event of non- compliance. There has been no non-compliance with requirements of any regulatory authorities that could have a material effect on the financial statements in the event of non-compliance. Page 97 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk v. I acknowledge my responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error, and I believe that I have appropriately fulfilled these responsibilities. vi. The methods, data and significant assumptions used by us in making accounting estimates, including those measured at fair value, are appropriate to achieve recognition, measurement and disclosure that is reasonable in the context of the applicable financial reporting framework. I am satisfied that the material judgements used in the preparation of the financial statements are soundly based, in accordance with the Code and adequately disclosed in the financial statements. vii. Renfrewshire Council has satisfactory title to all assets disclosed in the accounts. I have no plans or intentions that may materially alter the carrying value and, where relevant, the fair value measurements or classification of assets and liabilities as at 31 March 2023 are reflected in the financial statements. viii. Except as disclosed in the financial statements: a. there are no unrecorded liabilities, actual or contingent; b. none of the assets of Renfrewshire Council has been assigned, pledged or mortgaged; c. there are no material prior year charges or credits, nor exceptional or non- recurring items requiring separate disclosure. ix. Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of applicable law and accounting standards. x. All events subsequent to the date of the financial statements and which require adjustment or disclosure have been adjusted or disclosed. xi. Actual or possible litigation and claims have been accounted for and disclosed in accordance with the requirements of UK adopted international accounting standards, and as interpreted and adapted by the Code. xii. I confirm my estimation of the holiday pay accrual is materially accurate and complete within the financial statements. xiii. I have assessed Renfrewshire 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 Renfrewshire Council’s ability to continue as a going concern. xiv. Page 98 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk Information Provided xv. I have provided you with: a. access to all information of which I am aware that is relevant to the preparation of the Renfrewshire Council’s financial statements such as accounting records, and all other records requested; b. additional information that you have requested from us for the purpose of your audit; and c. unrestricted access to persons within Renfrewshire Council (via remote arrangements where necessary), from whom you determined it necessary to obtain audit evidence. xvi. I have communicated to you all deficiencies in internal control of which management is aware. xvii. All transactions undertaken by Renfrewshire Council have been recorded in the accounting records and are properly reflected in the financial statements. xviii. I have disclosed to you the results of my assessment of the risk that the financial statements may be materially misstated as a result of fraud. xix. I have disclosed to you all information in relation to known fraud or suspected fraud that I am aware of and that affects Renfrewshire Council and involves: a. management; b. employees who have significant roles in internal control; or c. others where the fraud could have a material effect on the financial statements. xx. I have disclosed to you all information in relation to instances of, or allegations of fraud, or suspected fraud, affecting the financial statements communicated by employees, former employees, analysts, regulators or others. xxi. 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. xxii. I have disclosed to you the identity of Renfrewshire Council's related parties and all the related party relationships and transactions of which I am aware. xxiii. I have disclosed to you all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements. Page 99 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk xxiv. I acknowledge our legal responsibilities regarding disclosure of information to you as auditors and confirm that so far as I am aware, there is no relevant audit information needed by you in connection with preparing your audit report of which you are unaware. Annual Governance Statement xxv. I am satisfied that the Annual Governance Statement (AGS) fairly reflects the Renfrewshire Council's risk assurance and governance framework and I confirm that I am not aware of any significant risks or weaknesses in governance or internal control that are not disclosed within the AGS. Management Commentary xxvi. The disclosures within the Management Commentary fairly reflect my understanding of Renfrewshire Council's financial and operating performance over the period covered by the financial statements. Remuneration Report xxvii. I am satisfied that the disclosures within the Remuneration report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Approval The approval of this letter of representation was minuted by Renfrewshire Council at its meeting on 16 November 2023. Yours faithfully Signature: Name: Alastair MacArthur Position: Director of Finance and Resources Date Page 100 of 268
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To: Council On: 16 November 2023 Report by: Director of Finance & Resources Heading: Audited Annual Accounts 2022/23 - Renfrewshire Council Group 1. Summary 1.1 The 2022/23 unaudited Annual Accounts were approved by Council on 22 June 2023. Each year the Council’s appointed external auditors carry out an audit of the Council’s financial statements and provide an opinion as to whether those statements provide a true and fair view of the financial position of the Council, and its income and expenditure for the year; and whether they have been prepared in accordance with the relevant regulations. 1.2 The audited Annual Accounts 2022/23 for Renfrewshire Council and its Group are now presented to the Council for approval. 1.3 There were two material adjustments made to the annual accounts over the course of the audit in relation to pension fund disclosures and the revaluation of properties. Further detail is included in Azets’ Annual Audit report, presented at agenda item 1. Other minor and presentational changes were also agreed. 2. Recommendations 2.1 The Council is asked to approve the attached audited Annual Accounts 2022/23 for signature in accordance with the Local Authority Accounts (Scotland) Regulations 2014. Item 2 Page 101 of 268
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Implications of the Report 1. Financial – The 2022/23 Annual Accounts demonstrate that the Council continues to operate services within the resources available, and in line with the relevant legislation. 2. HR & Organisational Development – none arising directly from this report. 3. Community/Council Planning – none arising directly from this report. 4. Legal – The reported audit opinion, free from qualification, demonstrates the Council’s compliance with the statutory accounting requirements set out in the Local Government (Scotland) Act 1973 and the Local Government in Scotland Act 2003. 5. Property/Assets – none arising directly from this report. 6. Information Technology – none arising directly from this report. 7. Equality & Human Rights – none arising directly from this report. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk – none arising directly from this report. 11. Privacy Impact – none arising directly from this report. 12. Cosla Policy Position – none arising directly from this report. 13. Climate Risk – none arising directly from this report. Author: Christine McCourt, Head of Finance and Procurement Page 102 of 268
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Renfrewshire Council Audited Accounts 2022–2023 Page 103 of 268
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Contents Management Commentary ......................................... 2 Statement of Responsibilities ..................................... 17 Annual Governance Statement ................................... 18 Remuneration Report ................................................ 26 Independent auditor’s report ..................................... 35 Comprehensive Income and Expenditure Statement ..... 39 Movement in Reserves Statement .............................. 40 Balance Sheet .......................................................... 41 Cashflow Statement ................................................. 42 Note 1: Expenditure and Funding Analysis ................... 43 Note 2: Financing and investment income and expenditure ............................................................. 45 Note 3: Taxation and non-specific grant income ........... 45 Note 4: Expenditure and income analysed by nature .... 45 Note 5: Grant income ............................................... 46 Note 6: Adjustment between accounting basis and funding basis under regulations ................................. 47 Note 7: Usable reserves ............................................ 48 Note 8: Unusable reserves ........................................ 51 Note 9: Property, Plant and Equipment ....................... 55 Note 10: Heritage Assets .......................................... 58 Note 11: Investment properties ................................. 58 Note 12: Assets held for sale ..................................... 59 Note 13: Intangible assets ........................................ 59 Note 14: Capital expenditure and capital financing ....... 60 Note 15: Service Concession Arrangements ................. 61 Note 16: Leases ....................................................... 63 Note 17: Inventories ................................................ 64 Note 18: Cash and cash equivalents ........................... 64 Note 19: Debtors ..................................................... 65 Note 20: Creditors.................................................... 65 Note 21: Provisions .................................................. 66 Note 22: Financial Instruments .................................. 66 Note 23: Nature and extent of risks arising from Financial Instruments ............................................................ 70 Note 24: External audit costs ..................................... 73 Note 25: Agency services .......................................... 73 Note 26: Related parties ........................................... 74 Note 27: Pension schemes accounted for as defined contribution schemes ................................................ 76 Note 28: Defined benefit pension schemes .................. 77 Note 29: Contingent liabilities .................................... 82 Note 30: Events after the balance sheet date .............. 82 Note 31: Accounting Standards Issued not Adopted...... 82 Note 32: Accounting Policies – Renfrewshire Council ..... 83 Note 33: Judgements in Applying Accounting Policies ... 95 Note 34: Assumptions made about the future .............. 96 Common Good Funds................................................ 97 Housing Revenue Account ......................................... 99 Council Tax Income Account .................................... 101 Non-Domestic Rates Income Account ........................ 103 Group Accounts ..................................................... 104 Notes to the Group Accounts ................................... 107 Group Accounting Policies ....................................... 119 Page 104 of 268
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2 Annual Accounts 2022/23 Management Commentary The purpose of the Management Commentary is to present an overview of Renfrewshire Council’s performance during the 2022/23 financial year and to help readers understand its financial position at 31 March 2023. In addition, it outlines the main issues and risks that may impact the performance of the Council in the future. Renfrewshire Council, one of 32 local authorities in Scotland, was established by the Local Government (Scotland) Act 1994 and came into being on 1 April 1996. It provides services to over 179,000 residents in the entire Renfrewshire area, which has a mixed geography, with many villages complementing its three main towns of Johnstone, Paisley and Renfrew. The Council is part of a wider Group, with partnerships spanning a number of organisations to varying degrees. The Council also works closely with the Renfrewshire Health and Social Care Partnership, which delivers care services across the region; and with OneRen, which delivers leisure and cultural services. During 2022/23, Renfrewshire Council was organised into five directorate services, as follows: In December 2022, a report to Council outlined changes to the senior management structure that resulted in Communities services moving into the Chief Executive’s Service, and Housing services consolidating with Environment and Infrastructure. One director post was deleted from the structure. Page 105 of 268
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3 Annual Accounts 2022/23 Our Aims and Objectives The Council’s aims were revised during 2022 with a refreshed Community Plan and a new Council Plan. The Community Plan is Renfrewshire’s Local Outcomes Improvement Plan, and the Council works with local partners to achieve a Renfrewshire that is: Thriving, Well, Fair and Safe. It covers the period 2017-2027, but was refreshed in 2022 to consider how to respond to and recover from the unique challenges over the last few years. The new Council Plan presents the Council’s vision for the next 5 years as It outlines five new strategic outcomes which the Council will work with partners, communities, and businesses to deliver and one cross-cutting theme which will underpin the delivery of the outcomes. These are: • Place: working together to enhance wellbeing across communities, • Economy: building an inclusive, green, and resilient economy, • Fair: nurturing bright, happy, and healthy futures for all, • Green: leading Renfrewshire to Net Zero, and • Living Our Values: making a difference together. • Improving outcomes for Children and Families: Cross-cutting Each Council service prepares a Service Improvement Plan, themed around the Council Plan’s strategic outcomes, demonstrating how the services will contribute to the delivery of the Council Plan. Financial Strategy The financial strategy and plans of the Council support the delivery of the Council’s priorities as outlined in the Council Plan. In order to achieve this, the financial strategy must ensure resources are effectively and efficiently used in line with overall objectives; and ensure that resources are managed sustainably and in a way that continues to ensure the stability of service delivery. The medium-term Financial Outlook 2023-26 was reported to the Council on 15 December 2022, with a further update in March 2023. These reports highlight the increasingly challenging financial and economic environment the Council is facing, predominantly linked to high levels of inflation. The Council’s medium-term financial outlook continues to be based on an assumed flat-cash revenue settlement over the next three years; however, it is cost pressures that are increasing significantly and the principal driver for the extremely challenging financial outlook. Incorporating an affordable level of pay increase over the period 2024/25 to 2026/27, and a reduced level of inflation on supplies and services costs suggests that the Council is facing a £45-50m funding gap over this period, before any decisions on council tax. Assuming a 5% council tax increase in each of these three years would reduce the funding gap to £30-35m, meaning that the Council must target cost reductions and savings averaging at least £12m each year to remain in financial balance. For this reason, financial sustainability and stability risks remain high on the Council’s priorities going into 2023/24. Information on the year-end financial position of the Council at 31 March 2023 is detailed later in the Financial Performance section. Review of the Year The Council publishes an annual Public Performance Report to provide the public with information on how our services are performing. The story map provides an overview of performance for the LGBF indicators and Page 106 of 268
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4 Annual Accounts 2022/23 the key priority areas for the Council. It includes case studies, infographics, and performance indicators. Each year the Council considers the latest data available through the Local Government Benchmarking Framework (LGBF), which compares the performance of local authorities against a number of indicators. There are currently 105 indicators within the framework, and the 2021/22 data shows Renfrewshire had: • 47 improved in performance and 38 improved in ranking • 43 declined in performance and 41 declined in ranking • 1 remained the same in performance and 12 remained the same in ranking • 14 did not have data available yet A detailed report on Renfrewshire’s performance in the Local Government Benchmarking Framework was taken to the Council’s Audit, Risk and Scrutiny Board in May 2023. Key Achievements 2022/23 Page 107 of 268
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5 Annual Accounts 2022/23 Council Services Key Performance Indicators 22/23 21/22 Target Pothole repairs completed within timescales 95% 83% 80% Reported street lighting faults which were repaired within the 7-day timescale 99.2% 99.9% 95% Affordable housing completions 369 170 200 Number of unemployed/ low waged people being supported through Renfrewshire Council Employability Programme (INVEST) 1,370 859 1,100 Number of people supported, sustained in work at 6 Months through Renfrewshire Council Employability Programme (INVEST) 340 221 180 Number of people viewing or attending the events programme 151,500 63,630 65,000 Looked After Children cared for in the community 90% 92% 89.9% Accommodated Looked After Children placed with families 87% 89% 83% Community Asset Transfer - number of months from receipt of an application to a determination being issued from the Council 4 n/a 6 Proportion of vehicle fleet using alternative fuels 28% 25% 25% Statutory A-road inspections completed on target 83% 100% 100% Statutory B-road inspections completed on target 86% 100% 100% Building Standards first reports issued within 20 days 67% 53.4% 95% New business start-ups with Business Gateways Support 206 272 320 Care leavers participating in employment, training or education 52% 59% 55% Council housing stock which meets the Scottish Housing Quality Standard 68% 57% 100% Page 108 of 268
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6 Annual Accounts 2022/23 Areas for Improvement and Development Detailed consideration of performance is a core part of our Service Improvement Plan and Council Plan reporting, which note areas for continued improvement and development as well as successes. As well as the achievements noted above, services have identified areas where progress has been delayed or where further work is required. The average time it takes to re-let council dwellings was 60.59 days against a target of 53 days. Despite issues with utilities suppliers and ongoing labour supply shortages within the construction industry, there has been improvement in the average re-let times from the 2021/22 figure, which was 66 days. Whilst the council has not met its target, void turnaround times and processes remain an area of primary focus, which is evident from the improvement since last year, and the Council continues to look for improved ways of working. The percentage of rent lost due to voids also improved from 2% in 2021/22 to 1.86% in 2022/23. The amount of CO2 emitted by the Council’s public vehicle fleet was slightly higher than the target of 3,000 tonnes, with 3,267 tonnes emitted in 2022/23, higher than the 2021/22 figure of 3,223. The use of the Council fleet has increased over the last year due to an increase of operational services post-pandemic. There is currently a trial of using hydrotreated vegetable oil in place of diesel, and the Council have purchased 14 electric vehicles which will reduce emissions going forward. In the delivery of the £10.9m roads and footways capital investment programme for last year, the Council successfully delivered 82 of the 90 planned projects. The remaining eight were unable to progress due to external factors and will be rescheduled into the 2023/24 programme. In common with many other council areas, Renfrewshire’s poverty-related attainment gap has widened during the pandemic. The poverty-related attainment gap is the gap between those in the most and least deprived 20% of areas and is measured through LGBF. Attainment was greatly affected through 2020 and 2021 due to Covid-19 and the effects are still being felt within education. The numeracy gap for those in p1,4 and 7 in Renfrewshire was 23% compared to an average of 21% in 2020/21, and 19% in 2021/22 compared to an average of 18%. For literacy, the gap was 29% in 2020/21 compared to an average of 25%, and 21% in 2021/22 which matched the average. Closing the gap will remain a key priority for Children’s Services. In November 2022, a report to the Education and Children’s Services Policy Board noted revised roll projections for the Dargavel Village primary school catchment, currently served by Dargavel Primary School, which opened in January 2022. The revised roll projection exercise was carried out following higher than anticipated admissions to the new primary school over the course of the year. The findings from the preliminary phase of the review based on the existing school roll, known pre-school population within the school catchment area and potential future pace of house completions across the Dargavel development, provided clear preliminary conclusions that the existing school capacity would be materially insufficient to meet the future demand profile of the catchment. There is also a higher than anticipated impact on secondary provision. This preliminary work was further developed with support from Edge Analytics, specialists in school roll and demographic projections who support local authorities across the UK sector. The updated modelling underpinned a decision by the Council to plan for the expansion of educational capacity for Dargavel Village through a second primary school and larger than previously planned extension to Park Mains High School. An independent review into the matter was instructed by the Chief Executive, which started in January 2023. The findings of this review were reported to the Council at its meeting on 22 June 2023. The report can be found on the Council’s website at the following link: Dargavel Primary – Independent External Review There were eight recommendations arising from the independent review, as follows: Page 109 of 268
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7 Annual Accounts 2022/23 1. Build a more robust model of primary school need for Dargavel. 2. Reconsider catchment areas 3. Produce robust supplementary guidance on developer contributions 4. Seek to work co-operatively with BAE 5. Corporate working and organisational culture 6. Risk management 7. Role of members 8. Public confidence The Chief Executive reported a response to the findings at the same meeting, with actions related to each of these recommendations set out in detail. This report can be found on the Council’s website at the following link: Dargavel Primary School Independent Review – Response to Recommendations. General performance information can be found on the Council’s website at the following path: Your Council>Information, performance and statistics>Council Performance. LGBF data can be found at: Your Council>Information, performance and statistics>Council Performance>Benchmarking. Service Update Reports, Service Delivery Plans and Operational Performance Reports are reported to the relevant Policy Board and can be found on the Council Committee Management Information System at: https://renfrewshire.cmis.uk.com/renfrewshire/Council andBoards.aspx Net Zero by 2030 Renfrewshire Council declared a climate emergency in June 2019 and approved the Plan for Net Zero in August 2022, which committed the Council to working towards net zero by 2030 for both the Renfrewshire area as a whole and Renfrewshire Council as an organisation. This target places Renfrewshire 15 years ahead of the national target (as set out in the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019, which commits Scotland to become net zero by 2045); and 20 years ahead of the UK Government target of net zero by 2050. Renfrewshire’s Plan for Net Zero is Council-led, but is for the whole of Renfrewshire, and the scale of the challenge is significant. Renfrewshire Council contributes around 2.5% of the area’s total carbon emissions, but around 33% of area-wide emissions are from sectors that could be shaped or influenced by council policy or partnerships, including waste and recycling services; land use and planning policies; and transport strategies. During 2022/23, a Planning and Climate Change Policy Board was established to progress climate-related initiatives and projects. The last Net Zero update was reported to the Board in January 2023 and can be found on the Council’s Committee Management Information System at: https://renfrewshire.cmis.uk.com/renfrewshire/Coun cilandBoards.aspx Renfrewshire’s Plan for Net Zero was approved in August 2022 and it outlines five themes, with key outcomes to be achieved against each theme. The core principle at the heart of the Plan, is for the Council to act as a driver or catalyst for change, to lead by example and maximise the opportunities of a just transition to net zero - integrating climate action into the Council’s financial planning, decision making and existing activities and embedding climate considerations across all that we do in a way that ensures continued delivery of high quality public services and closely aligns with our ambitions for Renfrewshire. The next phase of the Plan for Net Zero will produce a detailed phased road map, broken down into clear annual phasing and interim targets for each year alongside costed phased delivery plans. Page 110 of 268
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8 Annual Accounts 2022/23 As well as mitigation (reducing emissions), interventions within the Plan for Net Zero aim to address adaptation - resilience of our communities, buildings and critical infrastructure to local impacts of climate change, such as increased flooding; heatwaves; and more frequent severe weather events. Gender Pay Gap The gender pay gap is the difference between the average hourly rates of pay of men and women expressed as a percentage, where a positive figure indicates that women are paid less than men. The gender pay gap is different from equal pay, which is a direct comparison of two people or groups carrying out the same or an equivalent role. In 2021, the mean gender pay gap in Scotland when comparing overall average hourly earnings was 10.1%. This means for every £1 men earned, women earned £0.90. At 31 March 2023, the mean gender pay gap for Renfrewshire Council was 0.48% (2.29% at 31 March 2022). Plan for Net Zero Clean Energy Sustainable Transport Circular Economy Connected Communities Resilient Place Page 111 of 268
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9 Annual Accounts 2022/23 Key Financial Ratios The following tables provide information regarding the financial performance of the Council in 2022/23 and the affordability of its ongoing commitments: 2021/22 Estimate Actual Actual Reserves Uncommitted General Fund reserves as a % of budgeted net expenditure 2.2% 2.1% 2.3% Reflects the level of funding available to meet unplanned expenditure and manage financial risk. Movement in uncommitted General Fund balance n/a -4.4% -0.9% Reflects Council decision to use £0.450m of unearmarked balances in year for Fly-Tipping and £0.020m in support of disaster emergencies. Council Tax In-year collection rate 95.9% 95.5% 95.5% Reflects the Council’s effectiveness in collecting Council Tax debt Council Tax income as a proportion of total taxation and non-specific grant income 17.2% 17.6% 19.5% Reflects the Council’s ability to vary expenditure by raising Council Tax, the principal local authority controlled source of finance Debt/Long term borrowing Capital Financing Requirement (CFR) £462.0m £442.1m £360.5m External debt £362.0m £340.7m £320.5m Ratio of financing costs to net revenue stream (General Fund) 3.2% 3.0% 3.1% Financial Indicator 2022/23 Commentary The information is this section demonstrates that the level of external debt (driven by the capital programme) is affordable, owing to the low proportion of our budget spent on servicing debt. Further information, including descriptions of these terms and their significance, is available in the Treasury Management Annual Report, presented to Council on 30 June 2022. Financial Performance Primary Financial Statements The annual accounts summarise the Council’s transactions for the year, its financial position at 31 March 2023, and its cashflows. The annual accounts are prepared in accordance with the International Accounting Standards Board Framework for the Preparation and Presentation of Financial Statements as interpreted by the Code of Practice on Local Authority Accounting in the United Kingdom (“the Code”). The Primary Financial Statements include the Comprehensive Income and Expenditure Statement (CIES), Movement in Reserves Statement (MIRS), Balance Sheet and Cashflow Statement. These statements are accompanied by notes to the accounts, which provide more details on the figures shown in the statements and set out the accounting policies adopted by the Council. There are also separate statements for Council Tax, Non-Domestic Rates, the Housing Revenue Account and the Common Good Funds. The Comprehensive Income and Expenditure Statement (CIES) presents the total cost of providing Council Page 112 of 268
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10 Annual Accounts 2022/23 services in 2022/23 along with the income available to fund those services. The outturn explained in the following section differs from the accounting deficit of £68m shown in the CIES due to accounting adjustments required to comply with proper accounting practice, but which under statute should not impact on local taxpayers. A reconciliation of these figures can be found in the Note 1: Expenditure and Funding Analysis. General Fund The General Fund is funded by government grant and Council Tax revenues and the Council is also able to apply usable reserves from the General Fund Balance to fund expenditure. As mentioned previously, the Council’s medium-term Financial Outlook highlights the increasingly challenging financial and economic environment the Council is facing, predominantly linked to high levels of inflation. For the General Fund in 2022/23, resulting increases in the cost of food, fuel, energy, construction and other contracts have featured in regular budget monitoring reports throughout the financial year, culminating in a year-end overspend against budget of £8.3m. Specific pressures that contributed to this position were as follows: • Children’s residential care: the number and cost of complex care packages has increased significantly; • Exceptionally high gas and electricity costs resulted in a £2m overspend; • The refuse collection service was impacted by high fuel costs as well as overtime arising from carried forward holiday entitlement; and • Car-parking income under-recovered by £1m, having not recovered since the pandemic despite charging being re-introduced in 2021. The Council’s largest category of spend is staffing, so naturally any pay settlement linked to high levels of inflation will create a further cost pressure. In 2022/23 a national pay settlement of 5% was agreed for local government workers and 7% for teachers. In recognition of the exceptional inflationary environment, the Scottish Government provided councils with additional funding in support of the 2022/23 pay settlements. For Renfrewshire, this amounted to £9.7m. Adult Services experienced a year-end underspend of £0.8m which increased the reserves of the Renfrewshire Health and Social Care Partnership, who operate these services. The Council fell just short of its target in-year council tax collection rate of 95.9% in 2022/23, instead returning a creditable 95.5% in light of the prevailing cost of living crisis on household finances. Income from Council Tax actually over-recovered by £2.2m, owing mainly to more prior year arrears being collected than had been anticipated. The income budget had also been set at a prudent level owing to the cost of living crisis and the expected impact on household finances. Recovery was further boosted by Cost of Living Awards made during the year, which were credited to Council Tax accounts and therefore processed as revenue After accounting for the Adult Services underspend and the over-recovery in Council Tax revenues, the final position for the Council’s General Fund balance at 31 March 2023 was an overspend of £6.1m. Page 113 of 268
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11 Annual Accounts 2022/23 Revised Budget Actual Variance £m £m £m Chief Executive's Service 27.525 27.605 (0.080) Children's Services 229.760 233.285 (3.525) Communities and Housing 10.897 10.897 0.000 Environment and Infrastructure 54.781 61.470 (6.689) Finance and Resources 44.669 43.686 0.983 Miscellaneous Services 21.843 20.795 1.048 Adult Services 93.580 93.580 0.000 Net Expenditure 483.055 491.318 (8.263) Revenue Support Grant (297.652) (297.652) 0.000 Council Tax Income (78.504) (80.713) 2.209 Non-Domestic Rates Income* (108.076) (108.076) 0.000 Funding (484.232) (486.441) 2.209 Use of General Fund Balances (1.177) 4.877 (6.054) 2022/23 *Adult Services underspent against budget in the year by £0.758m; this was transferred to HSCP reserves and does not impact on the Council’s General Fund balance. The Council collected £120.9m directly from local businesses with £12.8m due back to the Scottish Government National Non-Domestic Rates Pool. The Council’s Reserves The Council holds the following balances in reserve. Further details can be found in Note 7: Usable reserves. As at 31 March 2022 Usable Reserves As at 31 March 2023 £m £m 104.667 General Fund Balance 127.391 6.497 Housing Revenue Account 6.497 7.594 Capital Receipts Reserve 8.184 95.699 Other Statutory Funds 93.979 214.457 Total 236.051 The General Fund balance of £127.4m will be carried forward to 2023/24. Of this balance, £117.1m has been earmarked for a particular purpose, as outlined in Note 7: Usable reserves. This leaves unallocated reserves of £10.3m (2.3% of the Council’s net annual running costs), which is in line with levels agreed by the Council under its revised financial planning principles. It is viewed that this balance is appropriate to the financial risk environment the Council is facing both in light of the ongoing response and recovery from the pandemic, but also to mitigate adverse risks anticipated in public finances generally over the medium to longer term. Housing Revenue Account The balance on the Housing Revenue Account (HRA) as at 31 March 2023 has been maintained at £6.5m. This remains a prudent level of unallocated reserves for the HRA to mitigate the impact of any unforeseen risks and to provide an element of mitigation against forecast pressures related to the prevailing economic climate. The year-end break-even position was arrived at after some large budget variances were experienced in-year. Property repairs and maintenance, including voids management, significantly overspent; however, this was offset by lower capital charges and increased interest receivable following higher interest rates over the year. Page 114 of 268
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12 Annual Accounts 2022/23 Infrastructure Assets The Scottish Government published a Statutory Override in August 2022, to allow councils to continue the current accounting treatment for Infrastructure assets until 31 March 2024. Further detail is provided at Note 9. Capital and Borrowing Renfrewshire Council continues to make significant capital investment in council housing, schools, culture, roads and the town centre estate. On 3 March 2022, the Council approved the housing capital investment programme for 2022/23 of £29m; and the General Fund capital investment programme for 2022/23 of £132m. The capital investment programmes were affected by the availability of contractors, as well as high levels of inflation impacting construction costs and professional fees. Programmes have therefore been re-profiled during the year to reflect revised timescales of individual projects, or where project completion dates have been delayed, resulting in actual capital spend for the year of £19m for housing capital investment and £100m for the General Fund. Further detail is provided in Note 14: Capital expenditure and capital financing The following charts show the actual expenditure incurred and income received in relation to the 2022/23 capital programme. During the course of 2022/23 there was new long-term external borrowing from the Public Works Loans Board (PWLB) of £25m to support the capital programme. The level of cash balances available to the Council remains consistent with daily cash requirements, treasury and capital investment plans. The decrease in cash balances compared to 31 March 2022 is attributable in part to a significant capital programme, particularly the Council’s cultural and heritage investment over the year, with Paisley Town Hall the first of a number of transformed cultural facilities planned to open later in 2023. The Council’s borrowing strategy 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 with the remainder from market and other loans. Further details are provided in Note 22: Financial Instruments. The Council regulates its capital spending limits within a prudential framework recommended by CIPFA and endorsed by the Scottish Government. Each year, the Page 115 of 268
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13 Annual Accounts 2022/23 Council sets its capital financing requirement (CFR) for the forthcoming year in its Treasury Management Strategy Statement (TMSS), approved by the Council on 3 March 2022 with a mid-year update to the Finance, Resources and Customer Services Policy Board on 17 November 2022. The TMSS for 2022/23 can be found on the Council Committee Management Information System at: http://renfrewshire.cmis.uk.com/renfrewshire/Home.aspx. The CFR is a prudent assessment of the aggregate external borrowings for capital investment purposes that are affordable and sustainable over the longer- term. The actual CFR at 31 March 2023 was £440.5m, within the authorised limit of £480.0m. The Council’s external borrowings have only been applied for capital investment purposes, with the Council’s net external debt being £340.7m at 31 March 2023 compared to the operational boundary of £462.0m. The Council’s costs of borrowing remain consistently one of the lowest of all Scottish local authorities, are affordable, and align to the Council’s medium to long-term financial strategy. The Council’s non-housing financing costs were 3.0% as a proportion of the Council’s non-housing net revenue stream. Housing related financing costs as at 31 March 2023 were 32.5% of net housing revenues, lower than the mid-year forecast of 33.4%. Net Pension Position The disclosure requirements for pension benefits under IAS19 are detailed in Notes 27 and 28. The appointed actuaries, have confirmed an increase of £489.3m in their assessment of the Council’s share of the actuarial position of the local government pension fund as at 31 March 2023. This is largely attributable to the corporate bond yield (upon which the pension discount rate is derived) having risen over the past year, which served to reduce the employer's pension obligations and led to the gain on the balance sheet. The assessment provides only a snapshot as at 31 March 2023 and necessarily changes on a day-to-day basis to reflect stock market movements in particular. The appointed actuaries remain of the view that the asset holdings of the Strathclyde Pension Scheme and the contributions from employees and employers provide sufficient security and income to meet future pension liabilities. Accounting rules require that a cap is placed on the value of a pension asset that can be reported in the Balance Sheet. For 2022/23, this has adjusted the value of the pension asset shown in the balance sheet to £175.9m. A potential change to pension rules is outlined in Note 29: Contingent liabilities; however, this has not been reflected in the pension liability reported in the Balance Sheet. Provisions and Contingencies The Council has provided for eventualities which may have a material effect on the financial position of the Council. The reasons for the provisions made are outlined in Note 21: Provisions. In general, any contingent liabilities known to the Council are covered by insurance arrangements. As outlined at Note 7, the Council has also set aside £2.8m for uninsured claims. Any contingencies that cannot yet be accurately quantified are outlined in Note 29: Contingent Liabilities. The Renfrewshire Council Group Local authorities are required to prepare Group Accounts in addition to their own Council’s accounts where they have a material interest in other organisations. The Group Accounts consolidate the results of the Council with five subsidiaries: • Renfrewshire Leisure Limited, trading as OneRen, a registered charity and company limited by guarantee formed to provide facilities for recreation, sport, cultural and other leisure activities for the benefit of the community in Renfrewshire; • the Common Good Funds; • the Coats Observatory Trust; • Park Lane Developments (Renfrewshire) LLP; and • Paisley Museum Reimagined Limited. Page 116 of 268
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14 Annual Accounts 2022/23 The Group Accounts also consolidate the Council’s share of four other entities treated as associates or joint ventures: • Strathclyde Partnership for Transport; • Strathclyde Concessionary Travel Scheme Joint Committee; • Renfrewshire Valuation Joint Board; and • Renfrewshire Health and Social Care Integration Joint Board. The Council has non-material interests in a number of other entities namely Scotland Excel; Glasgow and the Clyde Valley Strategic Development Planning Authority; and Glasgow City Region – City Deal Cabinet. Financial Outlook and Key Risks Financial Sustainability The Financial update reports to Council in December 2022 and March 2023 outlined continued and considerable uncertainty for local government finances. In 2020, the Council agreed to replenish unallocated reserves to a threshold of £10m in order to address the risks of significant and unplanned cost pressures which may emerge over the medium term, and this has been maintained in 2022/23. The impact of the UK’s exit from the EU and the war in Ukraine are still being felt, particularly in relation to the cost of materials as well as labour shortages in the construction industry. Clearly the UK has had a period of very high inflation, with the Consumer Price Index (CPI) peaking at 11.1% in October 2022. The Scottish Government published its Medium Term Financial Strategy (MTFS) on 25 May 2023, outlining its potential spending and funding position over the next 5 years. The MTFS outlines a growing financial gap for the Scottish Government, with spending pressures are expected to outstrip the resources available from 2024/25, with an estimated funding gap of approaching £2 billion by 2027/28. The outlook for the local government settlement is likely to remain very constrained and in line with that previously outlined in the Resource Spending Review i.e. effectively real terms cuts. As outlined in the Revenue Estimates 2023/24 report to Council in March 2023, after adjusting for new responsibilities, areas of growing responsibility and other conditional aspects of the settlement to provide a like-for-like comparison to 2022/23, the underlying core grant for Renfrewshire Council increased by £0.239m (0.1%). The Council decided to increase Council Tax by 6% in 2023/24 and used £0.605m of earmarked reserves to balance the revenue budget. Existing service and cost pressures arising from pay settlements, demographic and socio-economic factors will continue to play a major role in driving spending pressures for the Council; however, the predominant focus of the Council will be addressing its projected medium-term funding gap. As reported to the Council in June 2023, the central forecast is a financial gap of £45- 50m by the end of 2027. This forecast is prior to any decisions on council tax increases. Assuming a 5% uplift in council tax in each year is decided, the cumulative gap would reduce to a range of £30-35m. As outlined in the Unaudited Annual Accounts report to Council in June 2023, earmarked balances have been pooled and consolidated to provide a Financial Flexibility Fund which will allow the Council some flexibility in managing the financial challenge over the medium term. In addition, a Loan Charges Flexibility Fund has also been established, to provide for future borrowing costs and reducing loan charge support for service concession (PFI/PPP) arrangements over the longer term. The Council continues to mitigate treasury risks, including those associated with the security of cash deposits, by actively considering debt restructuring as outlined in the Council's agreed Treasury Management Strategy. The Council also continually reviews, in consultation with its treasury advisors, the criteria for placing deposits with financial institutions on the Council’s approved counterparty list. As part of the Council’s treasury strategy, it continues to utilise internal cash balances, deferring or minimising Page 117 of 268
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15 Annual Accounts 2022/23 external borrowing with the dual objectives of reducing the level of cash deposits held by the Council, whilst generating ongoing savings in net interest costs. This strategy is monitored carefully in order to ensure that the Council retains sufficient cash balances to support its ongoing requirements and remains alert to any anticipated adverse movement in future borrowing rates. Other Key Risks Risk Mitigating Actions Economy A range of strategic challenges – the COVID-19 pandemic, the UK leaving the EU, the climate emergency, high inflation in the UK economy leading to high food and energy costs– impact on the local and national economy. Renfrewshire’s economy has well-established strengths in transport, manufacturing, construction and retail, but all sectors and supply chains have been impacted by these economic challenges. We mitigate the impact through our large-scale infrastructure investment programme which includes the AMIDS development, our investment in housing and heritage assets, our employability programmes and our support for new and existing businesses, which includes support to bid for council contracts and to reduce carbon emissions. Reducing inequalities The pandemic has exacerbated many existing inequalities and had a disproportionate impact on our poorer communities. In Renfrewshire, we seek to address unequal outcomes through strong partnership working, through our Fairer Renfrewshire programme, through specific programmes which tackle local priorities (such as our focus on alcohol and drug use), through national programmes such as the Scottish Attainment Challenge, and on building community capacity. In the short-term, we are significantly focused on food insecurity and income maximisation. Climate, Sustainability and Adaptability Renfrewshire Council declared a Climate Emergency in 2019. The climate emergency brings risk to the Council and to our communities and we are focused on mitigation and on working toward a just transition to net zero. Our Plan for Net Zero was approved in 2022 and our Council Plan and Service Improvement Plans set out how each part of the Council will contribute to Net Zero. Our procurement strategy considers sustainability and community benefits in all contract strategies. Our Climate Panel provided an opportunity for community voices (including under-represented groups) to be heard. Our Community Climate Fund supported community organisations to enable behaviour change and deliver local green projects. Internally, we manage our corporate assets and capital investment programme to optimise use of the estate and promote reductions in energy use. Page 118 of 268
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16 Annual Accounts 2022/23 Common Good Funds and Coats Observatory Trust The Council administers the Common Good Funds for the areas of Paisley, Renfrew and Johnstone, as well as the Coats Observatory Charitable Trust. In order to comply with the Code, Audit Scotland and the Office of the Scottish Charity Regulator (OSCR) requirements, the Council separately prepares the financial statements of the Coats Observatory Trust, with the financial performance of the Common Good Funds disclosed in the Council’s Annual Accounts. Balances are also included in the Group Accounts. Azets is the appointed auditor for the Coats Observatory Charitable Trust. Overall, the Common Good Funds incurred a combined in-year surplus of £0.65m which is added to the previous surplus brought forward. The total net asset value decreased by £1.6m, with investments increasing by £3.0m. Both the market values of investments and income generated from dividends are likely to be subject to ongoing volatility as the economy recovers from the pandemic and is subject to increased inflationary risk. The total net asset value of the Observatory Trust decreased by £0.023m owing to depreciation. There were no other transactions in the year. Conclusion and Acknowledgements We would like to acknowledge efforts by the whole Finance team in producing the annual accounts, as well as colleagues in other services for their continued hard work and support. Further information on the annual accounts or on the Council’s general finances can be obtained on the Council website (www.renfrewshire.gov.uk), or by telephoning 0300 300 0285. Cllr Iain Nicolson Alan Russell Alastair MacArthur Leader of the Council Chief Executive Director of Finance and Resources Page 119 of 268
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17 Annual Accounts 2022/23 Statement of Responsibilities The Authority's Responsibilities The Authority is required to: • make arrangements for the proper administration of its financial affairs and to secure that one of its officers has responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). In Renfrewshire Council, that officer is the Director of Finance and Resources; • manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; • ensure that 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), and; • approve the Annual Accounts for signature. I can confirm that these annual accounts were approved by signature by the Council at its meeting on 16 November 2023. Signed on behalf of Renfrewshire Council. Cllr Iain Nicolson Leader of the Council The Director of Finance and Resources’ Responsibilities The Director of Finance and Resources is responsible for the preparation of the Authority'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 the Annual Accounts, the Director of Finance and Resources has: • selected suitable accounting policies and then applied them consistently; • made judgements and estimates which 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 Director of Finance and Resources has also: • kept adequate accounting records that were up to date; and • taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the financial statements 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. Alastair MacArthur Director of Finance and Resources Page 120 of 268
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18 Annual Accounts 2022/23 Annual Governance Statement Scope of responsibility Renfrewshire Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded, properly accounted for, and used economically, efficiently and effectively. The Council also has a statutory duty to make arrangements to secure best value under the Local Government in Scotland Act 2003. In discharging this overall responsibility, the Council’s members and the corporate management team are responsible for putting in place proper arrangements for its affairs and facilitating the effective exercise of its functions, which includes arrangements for the management of risk. The Council has approved and adopted a Local Code of Corporate Governance, which is consistent with the principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) framework; Delivering Good Governance in Local Government. A copy of the Local Code is available on our website at: www.renfrewshire.gov.uk > Your Council > Information, performance and statistics > Information Governance This statement explains how Renfrewshire Council has complied with the Local Code and also meets the Code of Practice on Local Authority Accounting in the UK, which details the requirements for an annual Governance Statement. The purpose of the governance framework The governance framework comprises the systems and processes, and culture and values, by which the Council is directed and controlled and through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its strategic objectives set out in the Council plan. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. Internal control cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the Council’s policies aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The governance framework The main features of our governance arrangements are described in the Local Code but are summarised below: The overarching strategic priorities and vision of the Council are set out in the Council Plan 2022-2027 and the Renfrewshire Community Plan 2017-2027. The Council Plan is aligned to the Community Plan and sets out 5 strategic outcomes that the organisation will work to achieve over a 5-year period with specific priorities relating to tackling inequality, promoting economic and cultural regeneration, attainment and sustainability. Renfrewshire’s Community Plan (which also acts as Renfrewshire’s Local Outcome Improvement Plan as required by the Community Empowerment (Scotland) Act 2015) details how community planning partners will work together to achieve the key priorities identified for Renfrewshire. • The key outcomes the Council is committed to delivering with its partners, are set out in the Community Plan; • The Council operates within an established governance framework which incorporates a scheme of delegated functions, financial regulations, standing orders relating to contracts and procedural standing orders. These elements of the framework are kept under regular review by the Council; • The Council facilitates policy and decision making through a policy board structure; • Services are able to demonstrate how their own activities link to the Council’s vision and priorities through their service improvement plans. Performance management and monitoring of service delivery is reported through policy boards regularly including six monthly updates to the Leadership Page 121 of 268
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19 Annual Accounts 2022/23 Board on progress against the implementation of the Council Plan; • The Corporate Management Team has agreed a new refreshed approach to its performance monitoring and the Council Plan scorecard will be considered alongside other performance information each quarter and followed up with an in-depth look at performance in one service particular area of interest at regular intervals. • An annual report on the Local Government Benchmarking Framework, which includes data for over 100 indicators for all 32 local authorities, is provided to the Audit, Risk and Scrutiny Board each year. • The Council has adopted a code of conduct for its employees. Elected members adhere to the nationally prescribed Code of Conduct for Members. In addition, the Council has in place a protocol for Relationships between Political Groups, Elected Members and Officers; • The Council’s approach to risk management is set out in the risk management strategy and is well embedded. Risks are reported regularly to the Audit, Risk and Scrutiny Board. During the year development work was completed on a new assurance model for managing business as usual risk, which involves senior managers working through a series of modules to ascertain their levels of assurance in how these risks are being managed within their services. A further development includes the Corporate Risk Management Group undertaking “control deep dive” exercises which involves detailed investigation of specific risk controls known to be in place to ascertain if the risk is over/under or well controlled; • The Director of Finance and Resources is the Council’s Senior Information Risk Owner and information risk is monitored through the Information Management and Governance Group and its sub-groups. The Managing Solicitor (DPO) is the statutory Data Protection Officer; • Comprehensive arrangements are in place to ensure members and officers are supported by appropriate training and development; • Registers of interests for elected members and senior officers are maintained and published on the Council’s website; • The Council complies with the CIPFA Code of Practice on Managing the Risk of Fraud and Corruption and the Council’s arrangements for fraud prevention, detection and investigation are managed through the corporate counter fraud service; • The Council’s approach to ‘whistleblowing’ is outlined in the whistleblowing policy; • Cyber-attacks are both increasing and becoming more sophisticated and while no system of internal control can provide absolute assurance, the Council has a range of multi layered Cyber Security controls in place and tested annually to check standards are in line with government guidance. Industry cyber security standards are followed and explicitly those belonging to Public Sector Network (PSN), National Cyber Security Centre (NCSC) guidance, Scottish Government Public Sector Cyber Resilience Plan and Payment Card Industry (PCI) data security standards. The O365 security and compliance toolset provides a wide range of protection against cyber-attacks including identity theft and phishing. The Council holds a current Certificate of Compliance for PSN standards. ICT network and digital services are monitored monthly through our cyber security partner. These are all monitored and managed through the Cyber Security team which is headed up by a CISM qualified Cyber Security Architect (Cyber Information Security Manager). Events and alerts are monitored 24 x 7 by our cyber security partner who are authorised to take emergency preventative action where necessary; • Clear and independent governance arrangements are in place with One Ren and the Renfrewshire Health and Social Care Partnership with oversight from the Head of Policy and Commissioning and the Head of Corporate Governance respectively and the Council’s Leadership Board. • Seven Local Partnerships have been established and have identified initial local priorities. Decision making including that relating to relevant grants is Page 122 of 268
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20 Annual Accounts 2022/23 delegated to each Local Partnership through a Lead Officer appointed by the Council. This governance framework has been in place at Renfrewshire Council for the year ended 31 March 2023. Within the 2021/22 report, Audit Scotland concluded that the Council’s governance arrangements, including during the Covid-19 pandemic , were “appropriate and operated effectively.” The system of internal financial control The system of internal financial control is based on a framework of regular management information, financial regulations, administrative procedures (including segregation of duties), management and supervision, and a system of delegation and accountability. Development and maintenance of the system is undertaken by managers within the Council. The system includes: • Guidance on financial management supported by comprehensive financial regulations and codes; • Comprehensive budgeting systems, and detailed guidance for budget holders; • Regular reviews of periodic and annual financial reports which indicate financial performance against the forecasts; • Setting targets to measure financial and other performance; • The preparation of regular financial reports that indicate actual expenditure against the forecasts; • Clearly defined capital expenditure guidelines; • As appropriate, formal project management principles; • The Chief Finance Officer is the Director of Finance and Resources who complies with the CIPFA Statement on the Role of The CFO in Public Services. The role and responsibilities of the Audit Committee and the Chief Auditor The role of the audit committee is under the remit of the Audit, Risk and Scrutiny Board, which is chaired by a member of the opposition. Its role is: • to approve the internal audit charter and annual internal audit plans; • to review internal and external audit reports and the main issues arising, including those relating to the annual accounts and seek assurance that action has been taken and make recommendations to the Council where appropriate; • to receive and consider the Chief Auditor’s annual report, summarising internal audit activity and the level of assurance this provides over the arrangements for internal control, risk management and governance within the Council; • monitor the performance of internal audit; • to consider the annual review of the Local Code of Corporate Governance. The internal audit service operates in accordance with the Public Sector Internal Audit Standards and reports to the Audit, Risk and Scrutiny Board. Internal audit undertakes an annual programme of work, approved by the Board, based on a strategic risk assessment. The Council’s Chief Auditor provides an independent opinion on the adequacy and effectiveness of the governance framework, risk management and internal control. The Council conforms to the requirements of the CIPFA Statement on the Role of the Head of Internal Audit (2019). Members and officers of the Council are committed to the concept of sound governance and the effective delivery of Council services. The Audit, Risk and Scrutiny Board complies with the CIPFA guidance Audit Committees: Practical Guidance for Local Authorities and Police. The Council’s Chief Auditor has responsibility to review independently and report to the Audit, Risk and Scrutiny Board annually, to provide assurance on the adequacy and effectiveness of the Local Code and the extent of compliance with it. The Audit, Risk and Scrutiny Board performs a scrutiny role in relation to the application of the Local Code of Corporate Governance and regularly monitors the performance of the Council’s internal audit service. Internal Audit reporting arrangements include communication of finalised audit engagements, monitoring the progress of agreed management actions Page 123 of 268
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21 Annual Accounts 2022/23 and communication of any unacceptable risk identified to the Board. Review of effectiveness and continuous improvement Renfrewshire Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness of the framework is informed by the work of the Corporate Management Team who have responsibility for the development and maintenance of the governance environment, the Chief Auditor’s annual report, and reports from the external auditors and other review agencies and inspectorates. The effectiveness of the governance framework is reviewed annually by the Corporate Management Team, including the use of an annually updated self- assessment tool covering six key areas of governance (including the impact on governance of the coronavirus pandemic), as follows: • Business Planning and Performance Management • Internal Control Environment • Budgeting, Accounting and Financial Control • Risk Management and Business Continuity • Conflicts of Interest, Whistleblowing and Gifts and Hospitality This self-assessment indicated the governance framework is being complied with in all material respects. In addition, the review of the effectiveness of the governance arrangements and the systems of internal control within the group entities places reliance upon the individual bodies’ management assurances in relation to the soundness of their systems of internal control. The Council’s approach to continuous improvement has a number of strands. Our Council Plan and Service Improvement Planning processes drive much of this and allow for elected member scrutiny of improvement activity. Services also undertake improvement work linked to their core duties and to statutory requirements. Registered services in education, housing, social work and social care regularly undertake self- assessment activity as part of their regulatory framework and inspection process. Services within Environment, Housing and Infrastructure maintain their ISO 9001 accreditation as one means of demonstrating quality. The Council has recently developed its own model of corporate self-assessment based on the Public Service Improvement Framework. The Council continues to recognise the need to exercise strong financial management arrangements to manage the financial pressures common to all local authorities, and has robust financial control and financial planning processes in place. The CIPFA Financial Management (FM) Code was adopted in June 2021. An Action Plan has been established following wide engagement with senior managers, service users and Finance staff. It contains 59 improvement actions with target dates ranging from 2023 until 2025. Work to refresh the initial engagement will be undertaken over the next 1-2 years to ensure that improvement work continues to be relevant and effective. • In the post-pandemic period, the Council has had a strong focus on recovering from Covid-19 and continuing to mitigate some of the impacts on our communities, including those relating to rapidly increasing living costs. As an organisation, the Council has adopted continues to adopt new ways of working, building on the strong approach developed during the pandemic in areas such as digital access for customers, and embracing hybrid working. Whilst this is still a recovery phase, much of the business-as-usual work has fully resumed, including: • the work on social renewal, which began during the pandemic, is now part of the wider Fairer Renfrewshire programme, which is overseen by a sub-committee of the Leadership Board services have returned to the regular programme of reporting performance to elected members through policy boards, with service improvement plans submitted for approval in spring 2022 and regular progress updates provided. • the Right for Renfrewshire programme recommenced over 2022, and the service redesigns progressed were in those areas where it was anticipated that there would be potentially less Page 124 of 268
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22 Annual Accounts 2022/23 direct impact from the pandemic recovery process and where the greatest opportunity exists for appropriate management and service capacity to be directed towards the Right for Renfrewshire agenda; • the ongoing impact of the pandemic on service delivery continue to be monitored as part of service recovery arrangements. There have been no significant changes to internal controls although significant numbers of new and amended processes; • the Council commenced planning for Brexit during 2019/20 and identified risks have been incorporated into the Strategic and Corporate Risk Registers. Some of these risks will be further exacerbated by the ongoing conflict in Ukraine and the associated sanctions on Russia which will place additional cost and supply pressures on some products and materials that are likely to increase and continue into 2023/24. Audit Scotland has introduced a new approach to auditing Best Value in local government which has commenced this year as part of the next 5-year Best Value Audit programme. This approach involves thematic areas of focus each year which will be considered for all local authorities within the same snapshot in time rather than the previous rolling programme of deep dive audits which inspect each local authority across a five-year programme. This significant shift in approach and for year one, will examine the effectiveness of leadership in developing new local strategic priorities. Audit Scotland have also indicated they will be looking at Councils’ approaches to climate change, cyber security (both will be looked at in year one) reducing inequalities and demonstrating improved outcomes for communities (ongoing). Alongside the ongoing Best Value auditing and this new approach with annual themes, there will also be a Section 102 Audit carried out and a report produced at some point within the 5-year programme. Unlike the new annual thematic reviews, this is anticipated to involve a deeper dive across all Best Value themes collated into a lengthier report specifically for Renfrewshire Council. The first year of this will run from October 2023 to August 2024 and Renfrewshire Council has not been included for this round. Another change for Renfrewshire Council sees the appointment of a new team of external auditors, Azets. More information about Azets and the planned audit approach was outlined to the Audit, Risk & Scrutiny Board in March 2023 in the External Audit Plan 2022/23 Audit Scotland provided an unqualified and unmodified audit opinion on the 2021/22 annual accounts. An external independent review is ongoing regarding the circumstances which led to an error with the projected required school roll of Dargavel Primary School. Once this external review has reached its conclusion, the findings from this review will be considered by Council, including any improvement actions identified. Regular reviews of the Council’s arrangements are undertaken by internal audit, in the 2021/22 governance statement, 2 areas were identified where only limited assurance could be provided. • Memorial safety - The inspection process for memorials has progressed significantly and is currently sitting at 85% complete. The remaining 15% will be completed by the end of June 2023. In addition to the initial inspections being carried out the service is now carrying out reinspection’s to the headstones that were identified as requiring to be monitored annually for any deterioration at their initial inspection. • Corporate purchase cards – card holders and approvers have been reminded that the procedures must be complied with, and sample checks are being undertaken by the Procurement team. Regular internal audit reviews of compliance with the procedures will continue to be undertaken. The programme of work undertaken by internal audit in 2022/2023 identified 6 occasions where a limited or no assurance level was provided in relation to the internal control, risk management and governance objectives for the specific areas of each audit review. Of these 4 were specific to individual service areas and although these areas require to be addressed there is no significant impact on the Council’s overall system of internal Page 125 of 268
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23 Annual Accounts 2022/23 control and action plans are in place to address the risk identified. The two areas identified as impacting on the overall internal control, risk management and governance arrangements are: • Business continuity plans - Service level Business Continuity Plans require to be improved to record all the ICT areas referred to in the council’s Business Continuity Plan template for all service areas. The main areas to be reviewed and updated are service area restoration plans and plans in the event of ICT system outages. The Crisis and Resilience Management Team have overarching responsibility for Business Continuity Plans and recommendations have been made to address the areas identified and ensure a consistent approach is taken across services. • Creditor payments - The audit specifically reviewed the arrangements for compliance with the purchase to pay procedures, whereby manual payments should only be made in very specific circumstances. The review identified that current process in place for the passing and payment of manual invoices fall short in several areas and creates several risks, particularly in relation to possible breaches of the Council’s Contract Standing Orders. Internal audit undertakes an annual exercise to ensure that recommendations arising from internal audit engagements have been implemented by service management and the results are reported to the Audit, Risk and Scrutiny Board. This work highlighted that 67% of recommendations were implemented by the due date. 30% had passed their original due date and revised implementation dates have now been set and 3% were superseded. Of the 13 recommendations followed up that were deemed to be critical, 8 have been fully implemented, 3 have been partially implemented and 2 were still to be implemented. Revised implementation dates have been agreed for each of these recommendations. It is our view that the Council has in place a sound for governance, risk management and internal control and that appropriate mechanisms are in place to identify any areas of weakness. This is corroborated by an Annual Report incorporating the Annual Assurance Statement prepared by the Council’s Chief Auditor stating that subject to management addressing the critical and important recommendations made the limited and no assurance reports, it is considered that reasonable assurance can be placed upon the adequacy and effectiveness of the Council’s internal control, risk management and governance arrangements. Action Plan Following consideration of the review of adequacy and effectiveness the following action plan has been agreed to ensure continual improvement of the Council’s governance. Agreed action Responsible person Date All service level business continuity plans are to be updated to record all the ICT risks referred to in the council’s business continuity plan template for all service areas. Service Directors September 2023 A review of the current manual payment process is under review with key stakeholders from the Corporate Procurement Unit and the Finance Business Partners, this will enable and introduce an exception policy to support the No Purchase Order No Payment. Once the review is conducted the exception policy will be implemented and the No Purchase Order No Payment approach will commence, this is anticipated to take up to 12 Months. Procure to Pay (P2P) Manager May 2024 The agreed actions will be subject to review to identify the progress being made in implementing them. Page 126 of 268
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24 Annual Accounts 2022/23 Update on the 2021/22 Action Plan Agreed action Progress Update Responsible person Date Prepare 3-year Improvement Plans for each service. Complete All 2022 Service Improvement Plans were approved by the relevant Policy Boards in May/June 2022. Service Directors June 2022 Review and refresh quarterly scorecard of performance information. Complete The new Council Plan scorecard was approved by Leadership Board in December 2022 New approach to Corporate Management Team (CMT) scorecard approved by CMT March 2023. Head of Policy and Partnerships December 2022 March 2023 Establish an action plan arising from the CIPFA FM Code. Complete The Action Plan was delayed due to other priorities and capacity issues in the Finance team; however, it is now complete and was finalised on 8 March 2023. Head of Finance and Procurement December 2022 Update on the 2020/21 Action Plan The 2020/21 Governance Statement identified areas of continuous improvement activities to be taken forward to improve the overall governance, risk management and internal control environment. Progress over the last 12 months against the agreed action plan is detailed below. Agreed action Progress Update Responsible person Date Review and update where necessary the policy for expressing concerns outwith line management whistleblowing for approval by Board. Complete Chief Auditor February 2023 Review and refresh the Council Plan Complete Head of Policy and Partnerships September 2022 Page 127 of 268
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25 Annual Accounts 2022/23 Assurance Subject to the above, and on the basis of the assurances provided, we consider the governance and internal control environment operating during 2022/23 provides reasonable and objective assurance that any significant risks impacting on the achievement of our principal objectives will be identified and actions taken to avoid or mitigate their impact. Systems are in place to continually review and improve the governance and internal control environment and action plans are in place to address identified areas for improvement. Cllr Iain Nicolson Alan Russell Leader of the Council Chief Executive Page 128 of 268
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26 Annual Accounts 2022/23 Remuneration Report The Local Authority Accounts (Scotland) Amendment Regulations 2014 (SSI No. 2014/200) amend the Local Authority Accounts (Scotland) Regulations 2011 (SI No 2011/64) and requires local authorities in Scotland to prepare a Remuneration Report as part of the annual statutory accounts. All information disclosed in sections 3 to 8 in this Remuneration Report has been audited by the Council’s appointed auditor, Azets. The other sections of the Remuneration Report will be reviewed by Azets to ensure that they are consistent with the financial statements. 1. Remuneration Policy for Senior Employees The salary of senior employees is set by reference to national arrangements. The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services sets the salaries for the Chief Executives of Scottish local authorities. The salaries of the Corporate Directors and Heads of Service are based on a spinal column point model as agreed by the Finance and Resources Policy Board on 14 May 2014. Senior employees received a 5% pay award in 2022/23 and no other benefits. 2. Remuneration policy for the Leader of the Council, the Provost and Senior Councillors The annual salary of the Leader of the Council and the upper limit for the annual salary of the Provost (or civic head) are set by the Scottish Government in terms of the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007, as amended by the Local Governance (Scotland) Act 2004 (Remuneration) Amendment Regulations 2021. The salary for the Leader of the Council in 2022/23 was £39,148 per annum (£37,111 in 2021/22) and the salary for the Provost was £29,361 per annum (£27,834 in 2021/22). In terms of the same Regulations, the Scottish Government permits Renfrewshire Council to nominate up to 14 senior councillors (in addition to the Leader of the Council and the Provost), whose salaries in aggregate must not exceed a specified amount, in 2022/23 being £342,524 per annum; and whose salaries individually must be on a specified scale, in 2022/23 £19,571 to £29,361. At the Council meeting of 30 June 2022, it was agreed that Renfrewshire Council would have 13 senior councillors: six Policy Board Conveners (salary of £28,910 per annum in 2022/23); four Regulatory Board Conveners (salary of £23,400 in 2022/23); Chair of OneRen Board; Chair/Vice-Chair of Integration Joint Board and one Leader of the Opposition (salary of £23,400 in 2022/23). 3. Remuneration of Senior Employees The regulations define a senior employee as any employee who meets one or more of the following criteria: • has responsibility for the management of the local authority to the extent that the person has power to direct or control the major activities of the authority whether solely or collectively with other persons. • holds a post that is politically restricted by reason of section 2(1)(a), (b) or (c) of the Local Government and Housing Act 1989. • whose annual remuneration, including any annual remuneration from a local authority subsidiary body is £150,000 or more. The Council has interpreted the above criteria as including the Chief Executive, Directors and the Chief Executive of OneRen. The term ‘remuneration’ means gross salary, fees and bonuses, allowances and expenses and compensation for loss of office. The table below outlines the remuneration details for senior employees, including prior year figures. The table shows the relevant amounts, before tax and other deductions, due to, or receivable by, each of the persons named for the year to 31 March 2023, whether or not those amounts were actually paid to, or received by, those persons within that period. There were no non-consolidated bonuses or performance-related payments made to any senior officer in 2022/23. Page 129 of 268
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27 Annual Accounts 2022/23 2021/22 Total Remuneration Annual Salary Election Allowances Total Remuneration £ £ £ £ 120,930 Sandra Black Chief Executive until 15 December 2021 (full year equivalent 2021/22 £151,238) 0 0 0 136,965 Alan Russell Director of Finance and Resources until 15 December 2021; Chief Executive from 16 December 2021; 158,344 2,435 160,779 123,340 Mary Crearie Director of Communities and Housing Services 129,136 0 129,136 40,985 Alastair MacArthur Acting Director of Finance and Resources from 16 December 2021 to 15 February 2022; Director of Finance and Resources from 16 February 2022 125,242 974 126,216 126,743 Gordon McNeil Director of Environment and Infrastructure Services 129,136 800 129,936 123,340 Steven Quinn Director of Children's Services 129,136 300 129,436 672,303 Total 670,994 4,509 675,503 Senior employees Name Post held 2022/23 In 2022/23, some Senior Employees received remuneration connected to election activities; this was £22,461 in 2021/22. 2021/22 2022/23 Total Remuneration Total Remuneration £ £ 104,035 Victoria Hollows 108,924 104,035 108,924 Chief Executive, OneRen Total Name Senior Employees of Subsidiary Bodies Post held 4. Remuneration of Senior Councillors Under the regulations, remuneration disclosures are to be made for the Leader of the Council, the Civic Head and any councillor designated a Senior Councillor by the Council. The table below shows the relevant amounts, before tax and other deductions, due to each of the persons named for the year to 31 March 2023, whether or not those amounts were actually paid or received within that period and relate only to the Senior Councillor posts indicated. No payments were made in connection with loss of employment or office, nor were any other payments made that are not included in the table. A local government election took place on 6 May 2022. Elected members who held a senior councillor position on 1 April 2022 were paid at that remuneration level until 5 May 2022. All members elected to Renfrewshire Council on 6 May 2022 reverted to basic councillor remuneration on that date. Senior Councillor appointments were then made at the statutory meeting of the Council on 19 May 2022, except for the Chair/Vice Chair of the Integration Joint Board, who was formally appointed on 24 June 2022 at the first meeting of that Page 130 of 268
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28 Annual Accounts 2022/23 Board, and the Licensing Board Convener, who was formally appointed on 5 September 2022 at the first meeting of that Board. The following table reports on remuneration related to senior councillor positions only, and prior year figures are shown only once per person. 2021/22 2022/23 Total Remuneration Name Position held Total Remuneration £ £ 27,512 Cathy McEwan Policy Board Convener 2,589 22,690 Jennifer Adam Chair/Vice Chair IJB (2) 2,175 22,690 Bill Binks Regulatory Board Convener 2,357 22,690 Andy Steel Regulatory Board Convener 2,175 27,512 Jacqueline Cameron Chair/Vice Chair IJB 2,589 22,690 Eddie Devine Leader of largest opposition group 2,141 22,690 Neill Graham Leader of 2nd largest opposition group 2,175 0 Michelle Campbell Policy Board Convener 23,753 0 Emma Rodden Policy Board Convener 23,753 as above Andy Steel Policy Board Convener 23,753 0 Andy Doig Regulatory Board Convener 19,637 0 Stephen Burns Regulatory Board Convener 19,637 as above Cathy McEwan Regulatory Board Convener (1) 13,197 as above Jennifer Adam Chair/Vice Chair IJB (2) 21,573 0 Iain McMillan Leader of largest opposition group 19,637 37,111 Iain Nicolson Leader Of the Council 36,821 27,834 Lorraine Cameron Provost 27,580 27,512 Marie McGurk Policy Board Convener 26,341 27,512 Jim Paterson Policy Board Convener 26,341 27,512 John Shaw Policy Board Convener 26,341 22,690 John McNaughtan Regulatory Board Convener 21,812 27,512 Lisa-Marie Hughes Chair, OneRen (3) 23,796 366,157 370,174 Senior Councillors Until 5 May 2022 From 19 May 2022 Full Year (excluding 6-19 May) Total Notes: 1. Cllr McEwan was appointed as Convener of the Licensing Board on 5 September 2022, which was the first meeting of that board following the election 2. Cllr Adam was appointed as Chari/Vice-Chair of the Renfrewshire Integrated Joint Board (IJB) on 24 June 2022, which was the first meeting of that board following the election 3. Cllr Hughes was appointed as Chair of OneRen on 28 June 2022, which was the first meeting of that board following the election Page 131 of 268
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29 Annual Accounts 2022/23 5. Pension Entitlement Pension benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS). Councillors’ 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 (or indices) 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. From 1 April 2015 benefits for local government employees are based on career average pay. Pension benefits are based on the pay received for each year in the scheme increased by the increase in the cost of living, as measured by the appropriate index (or indices). The scheme’s normal retirement age is linked to the state pension age of each member. From 1 April 2009 a five-tier contribution system was introduced with contributions from scheme members being based on how much pay falls into each tier. This is designed to give more equality between the cost and benefits of scheme membership. Prior to 2009 contributions rates were set at 6% for all non-manual employees. The tiers and members contribution rates are as follows: Equivalent bandings for 2021/22 Up to £23,000 5.5% Up to £22,300 £23,001 to £28,100 7.25% £22,301 to £27,300 £28,101 to £38,600 8.5% £27,301 to £37,400 £38,601 to £51,400 9.5% £37,401 to £49,900 Over £51,401 12% Over £49,901 Tiered contribution rates on whole time pay 2022/23 If a person works part-time their contribution rate will be based on their part-time pay. 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 accrual rate guarantees a pension based on 1/49th of pensionable pay for each year of membership, adjusted in line with the cost of living (prior to 2015 the accrual rate guaranteed a pension based on 1/60th of final pensionable salary). The value of the accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a pension on 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 entitlements for Senior Employees and Senior Councillors for the year to 31 March 2023 are shown in the table below, together with the contribution made by the Council to each individual’s pension during the year. Any senior employees and councillors omitted from the following tables are not members of the Local Government Pension Scheme (LGPS). Page 132 of 268
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30 Annual Accounts 2022/23 2022/23 2021/22 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Sandra Black Chief Executive until 15 December 2021 0 20,750 n/a n/a n/a n/a Alan Russell Director of Finance and Resources until 15 December 2021; Chief Executive from 16 December 2021 30,560 25,784 69 95 5 4 Mary Crearie Director of Communities and Housing Services 24,923 23,778 63 83 6 1 Alastair MacArthur Acting Director of Finance and Resources from 16 December 2021; Director of Finance and Resources from 16 February 2022 24,167 19,893 53 72 5 6 Gordon McNeil Director of Environment and Infrastructure Services 24,923 23,778 42 35 4 3 Steven Quinn Director of Children's Services 24,923 23,778 23 0 3 0 129,496 137,761 250 285 23 14Total Senior Employees Name Post held In-year pension contributions by Renfrewshire Council Accrued pension benefits as at 31 March 2023 Change in accrued pension benefits since 31 March 2022 2022/23 2021/22 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Victoria Hollows Chief Executive, OneRen 21,022 20,062 41 48 4 2 21,022 20,062 41 48 4 2 Senior Employees of Subsidiary Bodies Name Post held In-year pension contributions by Renfrewshire Leisure Accrued pension benefits as at 31 March 2023 Change in accrued pension benefits since 31 March 2022 Total Page 133 of 268
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31 Annual Accounts 2022/23 The following table reports on in-year pension contributions relating to senior councillor positions only. Pension benefits shown relate to those that the individual has accrued as a consequence of their total local government service and not just their current appointment. 2022/23 2021/22 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Iain Nicolson Leader Of the Council 6,944 7,162 11 3 2 0 Cathy McEwan Policy Board Convener/Regulatory Board Convener 2,870 5,310 6 0 1 0 Marie McGurk Policy Board Convener 5,015 5,310 4 0 1 0 Jim Paterson Policy Board Convener 5,015 5,310 4 0 1 0 John Shaw Policy Board Convener 5,015 5,310 4 0 1 0 Emma Rodden Policy Board Convener 3,943 0 3 0 n/a n/a Michelle Campbell Policy Board Convener 3,943 0 3 0 3 0 Andy Steel Regulatory Board Convener/Policy Board 4,918 4,379 3 0 0 0 John McNaughtan Regulatory Board Convener 4,180 4,379 3 0 0 0 Jennifer Adam Regulatory Board Convener/Chair/Vice Chair Integration Joint Board 4,370 4,379 3 0 1 0 Jacqueline Cameron Chair/Vice Chair Integration Joint Board 642 5,310 4 0 2 0 Lisa-Marie Hughes Chair, OneRen 4,393 5,310 4 0 2 0 Stephen Burns Regulatory Board Convener 3,359 0 3 0 n/a n/a Andy Doig Regulatory Board Convener 3,359 0 3 0 n/a n/a Eddie Devine Leader of largest opposition group until 5 May 2022 642 4,379 8 1 1 0 Neill Graham Leader of 2nd largest opposition group until 5 May 2022 642 4,379 2 0 0 0 Iain McMillan Leader of opposition group from 19 May 2022 3,989 0 0 0 n/a n/a Total 63,238 60,917 68 4 15 0 Leader of the Council, Provost, Senior councillors Name Post held In-year pension contributions by Renfrewshire Council Accrued pension benefits as at 31 March 2023 Change in accrued pension benefits since 31 March 2022 Page 134 of 268
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32 Annual Accounts 2022/23 6. Councillors’ remuneration The Council paid the following amounts to its elected members (councillors) during the year. 2021/22 2022/23 £ £ 892,271 Salaries 948,984 1,187 Travel costs – reimbursed 2,129 1,420 Travel costs – paid directly by the Council 4,480 0 Subsistence expenses - accommodation 200 230 Training and Conferences 0 6,030 Telephone and information technology expenses – paid directly by the Council 4,649 901,138 Total 960,442 The public record of members' salaries, allowances and expenses for 2022/23 is available for inspection on the Register of Councillors’ Interests page of the Council’s website and navigating to: Your Council>Councillors> Record of councillor salaries, allowances, expenses and training register. 7. Remuneration of Employees The following table gives a statement of the number of employees whose remuneration, excluding pension contributions and election expenses, was in excess of £50,000 during 2022/23, in bands of £5,000; and also details of the number of those employees highlighted who left the employment of the Council during 2022/23. This information includes those senior employees who are subject to the fuller disclosure requirements in the tables above. Note that leavers may be included due to retirement or redundancy costs. Bands with nil employees for both years are not shown. Teachers Non-teachers Total Remuneration band Teachers Non-teachers Total 146 73 219 £50,000 to £54,999 92 43 135 97 55 152 £55,000 to £59,999 131 80 211 56 22 78 £60,000 to £64,999 96 18 114 17 32 49 £65,000 to £69,999 64 11 75 2 8 10 £70,000 to £74,999 20 20 40 3 4 7 £75,000 to £79,999 9 2 11 1 3 4 £80,000 to £84,999 5 7 12 1 1 2 £85,000 to £89,999 4 6 10 1 8 9 £90,000 to £94,999 1 1 2 0 2 2 £95,000 to £99,999 2 10 12 0 4 4 £100,000 to £104,999 0 1 1 0 1 1 £105,000 to £109,999 0 3 3 0 3 3 £120,000 to £124,999 0 0 0 0 0 0 £125,000 to £129,999 0 3 3 0 1 1 £130,000 to £134,999 0 0 0 0 1 1 £140,000 to £144,999 0 0 0 0 0 0 £155,000 to £159,999 0 1 1 324 218 542 424 206 630 2021/22 2022/23 Of the staff noted above, five left during the year and their termination payments are included in the above analysis; however, they would have been included as an over £50k earner in a normal year (five in 2021/22). The number of teachers earning above £50k has increased due to the late agreement for the 2021/22 pay settlement, which was not reflected in the published 2021/22 figures. Page 135 of 268
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33 Annual Accounts 2022/23 8. Exit Packages The Council has agreed a number of exit packages in 2022/23 as detailed in the table below. The exit packages agreed were all on a voluntary basis; there were no compulsory redundancies. The Council only agrees exit packages where they are consistent with wider workforce planning and service delivery objectives; and where the savings accruing from an individual ceasing employment with the Council are sufficient to pay back the costs of the exit package within an acceptable period. The assessment of the payback period takes account of the total costs of the exit package. The total exit package costs in the table below include redundancy, pension strain and compensatory lump sum payments; and also, the notional capitalised costs of compensatory added years. These notional costs are not based on actual costs, but are the estimated present value of projected costs over the lifetime of the individuals in receipt of the exit package, based on the following assumptions: 2022/23 2021/22 Future Life expectancy at age 65 – males 20.5 years 21.0 years Future Life expectancy at age 65 – females 24.2 years 24.5 years Pension increase rate 3.0% 3.2% Discount Rate 4.8% 2.7% Value Value £m £m £0 - £20,000 4 0.065 10 0.120 £20,001 - £40,000 5 0.112 3 0.093 £40,001 - £60,000 2 0.107 6 0.285 £60,001 - £80,000 6 0.420 4 0.270 £80,001 - £100,000 4 0.351 1 0.092 £100,001 - £150,000 17 2.082 4 0.479 £150,001 - £200,000 11 1.808 6 1.140 £200,001 - £250,000 3 0.604 3 0.668 £250,001 - £300,000 0 0.000 3 0.815 £300,001 - £350,000 3 0.989 2 0.632 Total 55 6.538 42 4.594 Exit Package Cost 2022/23 2021/22 Number of Employees Number of Employees Page 136 of 268
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34 Annual Accounts 2022/23 9. Trade Union Facility Time Renfrewshire Council recognises that it is to the mutual benefit of the Council and its employees that employees are represented by Trade Unions. The Council is committed to the principle of collective bargaining at both national and local level. The Council recognises the key role of Trade Unions in promoting and developing good employee relations and health and safety practices. The Trade Union (Facility Time Publication Requirements) Regulations 2017 requires public sector employers to publish information relating to facility time taken by union representatives. 30 Total cost of facility time £221,081 Total pay bill £330,069,268 FTE employee number 29.35 Percentage of the total pay bill spent on facility time 0.07% Number of representatives % time 25.00 1% - 50% 40.12% 3.00 51% - 99% 2.00 100% Percentage of time spent on facility time Trade Union (TU) representative Number of employees who were relevant union officials during the period Paid Trade Union activities Percentage of pay bill spent on facility time Time spent on paid TU activities as a percentage of total paid facility time hours Cllr Iain Nicolson Alan Russell Leader of the Council Chief Executive Page 137 of 268
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35 Annual Accounts 2022/23 Independent auditor’s report to the members of Renfrewshire Council and the Accounts Commission Reporting on the audit of the financial statements Opinion on financial statements We certify that we have audited the financial statements in the annual accounts of Renfrewshire 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 Comprehensive Income and Expenditure Statements, Movement in Reserves Statements, Balance Sheets, and Cash Flow Statements, the council-only Housing Revenue Account Income and Expenditure Statement, the Movement on the Housing Revenue Account Statement, the Council Tax Income Account, the Non-domestic Rate Account, and the Common Goods Fund 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 our 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 We conducted our 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. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We were appointed by the Accounts Commission on 18 May 2022. Our period of appointment is five years, covering 2022/23 to 2026/27. We are independent of the council and its group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the council. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern basis of accounting We 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 we have performed, we 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, we report on the council’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. Page 138 of 268
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36 Annual Accounts 2022/23 Risks of material misstatement We report in our Annual Audit Report the most significant assessed risks of material misstatement that we identified and our judgements thereon. Responsibilities of the Director of Finance and Resources and Audit, Risk and Scrutiny Board for the financial statements As explained more fully in the Statement of Responsibilities, the Director of Finance and Resources 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 Director of Finance and Resources 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 Director of Finance and Resources 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, Risk and Scrutiny Board is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our 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 our 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. We design procedures in line with our responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using our 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 Director of Finance and Resources 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 Director of Finance and Resources concerning the policies and procedures of the councils and its group regarding compliance with the applicable legal and regulatory framework; • discussions among our 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 our 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 Page 139 of 268
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37 Annual Accounts 2022/23 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 our auditor’s report. Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report We have audited the parts of the Remuneration Report described as audited. In our opinion, the audited parts of the Remuneration Report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Director of Finance and Resources is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities and the unaudited parts of the Remuneration Report. Our 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 our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on the financial statements does not cover the other information and we 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 our opinion, based on the work undertaken in the course of the audit: • the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and • the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). Matters on which we are required to report by exception We are required by the Accounts Commission to report to you if, in our 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 • We have not received all the information and explanations we require for our audit. Page 140 of 268
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38 Annual Accounts 2022/23 We have nothing to report in respect of these matters. Conclusions on wider scope responsibilities In addition to our responsibilities for the annual accounts, our conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in our Annual Audit Report. Use of our 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, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Gary Devlin, (for and on behalf of Azets Audit Services), Exchange Place 3 Semple Street Edinburgh EH3 8BL Date: Page 141 of 268
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39 Annual Accounts 2022/23 Comprehensive Income and Expenditure Statement This statement shows the accounting cost of providing services and managing the Council during the year. It includes, on an accruals basis, all of the Council’s day-to-day expenses and related income. It also includes transactions measuring the value of non-current assets actually consumed during the year and the real projected value of retirement benefits earned by employees during the year. The statement shows the accounting cost in accordance with generally accepted accounting practices, rather than the cost according to the statutory regulations that specify the net expenditure that Councils need to take into account when setting the annual council tax charge. The required adjustments between accounting basis and funding basis under regulations are shown in the Movement in Reserves Statement. Gross expenditure Gross income Net expenditure Note Gross expenditure Gross income Net expenditure £m £m £m £m £m £m 253.334 (41.446) 211.888 294.465 (38.357) 256.108 57.024 (54.169) 2.855 69.707 (59.300) 10.407 104.227 (12.804) 91.423 Environment and Infrastructure 104.694 (4.462) 100.232 106.841 (48.250) 58.591 Finance and Resources 109.077 (48.963) 60.114 41.418 (7.783) 33.635 37.895 (9.097) 28.798 12.708 (13.850) (1.142) Miscellaneous Services 17.692 (14.653) 3.039 233.939 (147.843) 86.096 Adult Services 260.152 (161.744) 98.408 809.491 (326.145) 483.346 893.682 (336.576) 557.106 (0.175) 0.000 (0.175) (Gain)/Loss on the disposal of non-current assets 0.103 0.000 0.103 25.222 (0.631) 24.591 Financing and investment income and expenditure 2 24.322 (6.646) 17.676 0.000 (486.210) (486.210) Taxation and non-specific grant income 3 0.000 (505.934) (505.934) 834.538 (812.986) 21.552 918.107 (849.156) 68.951 (165.905) 8 (104.500) (0.058) 8 0.469 (214.582) 28 (269.861) (380.545) Other comprehensive (income) and expenditure (373.892) (358.993) Total comprehensive (income) and expenditure (304.941) (Surplus)/Deficit from investments in equity instruments designated as Fair Value through Other Comprehensive Income Actuarial (gain)/loss on pension assets and liabilities 2021/22 2022/23 Children's Services Chief Executive's Service Deficit/(Surplus) on the Provision of Services Cost of Services Communities and Housing Services (Surplus)/Deficit on the revaluation of non- current assets Figures shown in brackets represent income or gains and figures without brackets represent expenditure or losses. Page 142 of 268
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40 Annual Accounts 2022/23 Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the Council, analysed into usable reserves (those reserves that can be applied to fund expenditure or to reduce local taxation) and unusable reserves. The surplus or deficit on the provision of services line shows the true economic cost of providing the Council’s services, more details of which are shown in the CIES. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax-setting and dwellings rent-setting purposes. The net increase or (decrease) before transfers to other statutory reserves line shows the statutory General Fund Balance and the Housing Revenue Account Balance before any discretionary transfers to or from the other statutory reserves of the Council. 2022/23 General Fund Balance Housing Revenue Account Revenue statutory funds Capital Funds Total Usable Reserves Unusable Reserves Total reserves Note £m £m £m £m £m £m £m Balance at 1 April 2022 104.667 6.497 2.974 100.319 214.457 1,278.820 1,493.277 Movement in reserves during the year (50.865) (18.086) 0.000 0.000 (68.951) 373.892 304.941 25.394 11.784 0.000 0.000 37.178 (37.178) 0.000 Transfers to / (from) other statutory reserves 7 (0.121) 0.000 0.121 0.000 0.000 0.000 0.000 Adjustment for Service Concession Arrangements 27.601 0.000 0.000 0.000 27.601 (27.601) 0.000 Adjustments between accounting basis and funding basis under regulations 6 20.715 6.302 0.000 (1.251) 25.766 (25.766) 0.000 22.724 0.000 0.121 (1.251) 21.594 283.347 304.941 Balance at 31 March 2023 127.391 6.497 3.095 99.068 236.051 1,562.167 1,798.218 Increase / (Decrease) in year Total Comprehensive Income and Expenditure Adjustments to Usable Reserves permitted by accounting standards Comparative movements in 2021/22 General Fund Balance Housing Revenue Account Revenue statutory funds Capital Funds Total usable reserves Unusable reserves Total reserves Note £m £m £m £m £m £m £m Balance at 1 April 2021 88.458 6.497 2.864 96.274 194.093 940.631 1,134.724 Movement in reserves during the year (15.516) (6.036) 0.000 0.000 (21.552) 380.545 358.993 14.295 11.178 0.000 0.000 25.473 (25.473) 0.000 Transfers to / (from) other statutory reserves 7 (0.550) 0.000 0.110 0.000 (0.440) 0.000 (0.440) Adjustments between accounting basis and funding basis under regulations 6 17.980 (5.142) 0.000 4.045 16.883 (16.883) 0.000 16.209 0.000 0.110 4.045 20.364 338.189 358.553 Balance at 31 March 2022 104.667 6.497 2.974 100.319 214.457 1,278.820 1,493.277 Increase / (Decrease) in year Total Comprehensive Income and Expenditure Adjustments to Usable Reserves permitted by accounting standards Page 143 of 268
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41 Annual Accounts 2022/23 Balance Sheet The balance sheet shows the value as at 31 March 2023 of the assets and liabilities recognised by the Council. The net assets of the Council are matched by the reserves held by the Council. Reserves are reported in two categories. The first category comprises usable reserves, which are reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve, which may only be used to fund capital expenditure or to repay debt). The second category of reserves comprises those that the Council is not able to use to provide services. This category includes reserves that hold unrealised gains and losses in the value of assets (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold, and reserves that hold differences shown as ‘adjustments between accounting basis and funding basis under regulations’ in the Movement in Reserves Statement. As at 31 March 2022 As at 31 March 2023 £m Note £m 1,663.152 Property, plant and equipment 9 1,797.350 (20.557) 44.186 Heritage assets 10 44.186 1.479 Investment property 11 1.593 3.349 Intangible assets 13 2.524 9.513 Long-term investments 22 4.157 2.966 Long-term debtors 19 2.582 0.000 Other long-term assets 28 175.891 -258.205 1,724.645 2,028.283 0.922 Assets held for sale 12 0.100 183.583 Short-term investments 22 166.751 1.032 Inventories 17 1.314 81.666 Short-term debtors 19 67.422 0.700 18.817 Cash and cash equivalents 18 11.632 286.020 247.219 (92.034) Short-term borrowing 22 (93.653) (75.843) Short-term creditors 20 (89.147) 0.032 (0.240) Short-term provisions 21 (0.252) (168.117) (183.052) (69.152) Long-term creditors 20 (65.690) (5.117) Long-term provisions 21 (4.942) (219.781) Long-term borrowing 22 (223.600) (55.221) Other long-term liabilities 28 0.000 (349.271) (294.232) 1,493.277 1,798.218 Alastair MacArthur (214.457) Usable reserves 7 (236.051) (1,278.820) Unusable reserves 8 (1,562.167) (1,493.277) (1,798.218)Total reserves Long-term assets Current assets Current liabilities Long-term liabilities Net assets Director of Finance and Resources The unaudited accounts were issued on 22 June 2023 and the audited accounts were authorised for issue on 16 November 2023. Page 144 of 268
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42 Annual Accounts 2022/23 Cashflow Statement This statement shows the changes in cash and cash equivalents of the Council during the year. It shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources that are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (that is, borrowing) to the Council. 2021/22 2022/23 £m £m (21.552) Net surplus/(deficit) on the provision of services (68.951) Adjustment for non-cash movements: 63.319 Depreciation, amortisation, impairment and revaluations 51.918 0.729 Increase/(decrease) in creditors 18.982 (0.450) (Increase)/decrease in debtors 14.628 (0.153) (Increase)/decrease in inventories (0.282) 48.269 Pension (liability)/asset 38.749 0.610 Carrying amount of non-current assets sold 0.610 0.232 Other non-cash items charged to the net surplus or deficit on the provision of services (0.163) (42.875) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (44.807) 48.129 Net cash flows from operating activities 10.684 Net cash flows from investing activities : (82.237) Purchase of property, plant and equipment, investment property and intangible assets (87.082) (0.785) Proceeds from the sale of property, plant and equipment, investment property and intangible assets (1.697) (52.871) Proceeds from short-term and long-term investments 22.188 43.660 Other receipts from investing activities 46.504 Net cash flows from financing activities (2.847) Cash payments for the reduction of the outstanding liability relating to finance leases and on-balance sheet PFI /PPP contracts (3.220) 19.497 Repayment of short-term and long-term borrowing 5.438 (27.454) Net increase/(decrease) in cash and cash equivalents (7.185) 46.271 Cash and cash equivalents at the beginning of the reporting period 18.817 18.817 Cash and cash equivalents at the end of the reporting period 11.632 The Net cash flow from operating activities above includes the following elements of interest paid and received: 2021/22 2022/23 £m £m (0.631) Interest received (6.646) 10.895 Interest paid 11.660 5.525 Interest element of finance lease and PPP payments 4.923 15.789 9.937 Interest Paid and Received Page 145 of 268
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43 Annual Accounts 2022/23 Note 1: Expenditure and Funding Analysis The Expenditure and Funding Analysis shows how annual expenditure is used and funded from resources (government grants, rents, council tax and non-domestic rates) by the Council in comparison with those resources consumed or earned by the Council in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the Council’s service departments. Income and expenditure accounted for under generally accepted account practices is presented more fully in the CIES. 2022/23 Net Expenditure chargeable to the General Fund and HRA Adjustments between Funding and Accounting basis Depreciation charged to Revaluation Reserve Net Expenditure in the CIES £m £m £m £m Children's Services 233.285 0.993 20.390 256.108 Communities and Housing Services 10.897 (12.287) 11.798 10.407 Environment & Infrastructure 61.470 38.013 0.749 100.232 Finance & Resources 43.686 14.853 1.575 60.114 Chief Executive's Service 27.605 (1.269) 2.462 28.798 Miscellaneous Services 20.795 (16.985) 0.203 3.039 Adult Services 93.580 5.560 0.000 98.408 Net cost of services 491.318 28.878 37.177 557.106 Other income and expenditure (486.441) (2.732) (488.155) (Surplus) / Deficit 4.877 26.146 37.177 68.951 Opening General Fund and HRA balance (111.164) Less (Surplus) / Deficit in the year 4.877 Add other items not charged to the Surplus / (Deficit) (27.601) Closing General Fund and HRA at 31 March* (133.888) * For a split of this balance between the General Fund and the HRA, see the Movement in Reserves Statement. 2022/23 Adjustments for capital purposes Net change for the pensions adjustments Other differences Total Adjustments £m £m £m £m Children's Services 18.383 11.212 (26.999) 2.596 Communities and Housing Services 5.936 3.386 (21.609) (12.287) Environment & Infrastructure 12.990 8.466 16.557 38.013 Finance & Resources 1.969 6.831 6.053 14.853 Chief Executive's Service (2.736) 2.381 (0.914) (1.269) Miscellaneous Services (0.202) (1.746) (15.037) (16.985) Adult Services 0.003 6.235 (1.410) 4.828 Net cost of services 36.343 36.765 (43.359) 29.749 Other income and expenditure (46.897) 1.984 42.181 (2.732) Total adjustments between accounting basis and funding basis (10.554) 38.749 (1.178) 27.017 • Adjustments for capital purposes: adds in depreciation, impairment and revaluation gains and losses to the service net expenditure including income on the disposal of assets and the amounts written off for those assets and the Page 146 of 268
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44 Annual Accounts 2022/23 statutory charges for capital financing and capital grants which are not chargeable under generally accepted accounting practices. • Net change for the pensions adjustments: removes employer pension contributions as allowed by statute and replaces with the current and past service costs within the IAS 19 employee benefits pension related expenditure and income. The net interest on the defined benefit liability is also included as charged to the CIES. • Other differences: any other differences between those amounts debited or credited to the CIES and amounts payable or receivable to be recognised under statute, including those primarily involved in the financial instruments adjustment account, the employee statutory adjustment account and other statutory funds. Any other non-statutory adjustments would also be included here. 2021/22 Net Expenditure chargeable to the General Fund and HRA Adjustments between Funding and Accounting basis Depreciation charged to Revaluation Reserve Net Expenditure in the CIES £m £m £m £m Children's Services 217.871 (16.333) 10.350 211.888 Communities and Housing Services 11.109 (19.432) 11.178 2.855 Environment & Infrastructure 55.880 34.833 0.710 91.423 Finance & Resources 40.045 17.258 1.288 58.591 Chief Executive's Service 28.009 3.822 1.804 33.635 Miscellaneous Services 28.094 (29.379) 0.143 (1.142) Adult Services 79.974 6.122 0.000 86.096 Net cost of services 460.982 (3.109) 25.473 483.346 Other income and expenditure (477.191) 15.507 0.000 (461.794) (Surplus) / Deficit (16.209) 12.398 25.473 21.552 Opening General Fund and HRA balance (94.955) Less (Surplus) / Deficit in the year (16.209) Closing General Fund and HRA at 31 March* (111.164) * For a split of this balance between the General Fund and the HRA, see the Movement in Reserves Statement. 2021/22 Adjustments for capital purposes Net change for the pensions adjustments Other differences Total Adjustments £m £m £m £m Children's Services 2.064 12.728 (31.125) (16.333) Communities and Housing Services 0.366 3.497 (23.295) (19.432) Environment & Infrastructure 9.795 9.319 15.719 34.833 Finance & Resources 2.944 7.771 6.543 17.258 Chief Executive's Service 1.939 2.677 (0.794) 3.822 Miscellaneous Services (8.264) 0.477 (21.592) (29.379) Adult Services 0.000 6.893 (0.771) 6.122 Net cost of services 8.844 43.362 (55.315) (3.109) Other income and expenditure (43.835) 4.907 54.435 15.507 Total adjustments between accounting basis and funding basis (34.991) 48.269 (0.880) 12.398 Page 147 of 268
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45 Annual Accounts 2022/23 Note 2: Financing and investment income and expenditure 2021/22 2022/23 £m £m 20.315 Interest payable and similar charges 22.338 4.907 Net interest on the net defined benefit liability 1.984 (0.631) Interest receivable and similar income (6.646) 24.591 Total 17.676 Note 3: Taxation and non-specific grant income 2021/22 2022/23 £m £m (86.464) Income from Council Tax and community charge (80.713) (81.663) Distribution from the national non-domestic rate pool (108.076) (274.423) General Revenue Grant from the Scottish Government (270.144) (43.660) Capital grants and contributions (47.001) (486.210) Total (505.934) Note 4: Expenditure and income analysed by nature This note presents the subjective analysis of expenditure and income shown by operational service area in the CIES. 2021/22 2022/23 £m Note £m Expenditure 356.167 Employee benefits expenses 383.749 390.005 Other service expenses 420.837 63.319 Depreciation, amortisation, impairment 89.096 25.222 Interest Payments 2 24.322 (0.175) (Gain) /Loss on the disposal of assets 8 0.103 834.538 Total expenditure 918.107 Income (326.145) Fees, charges and other service income (336.576) (0.631) Interest and investment income 2 (6.646) (168.127) Income from council tax and non-domestic rates 3 (188.789) (318.083) Government grants and contributions 3 (317.145) (812.986) Total income (849.156) 21.552 (Surplus) or deficit on the provision of services 68.951 Page 148 of 268
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46 Annual Accounts 2022/23 Note 5: Grant income The Council credited the following grants, contributions and donations direct to services in the CIES during 2022/23. 2021/22 2022/23 £m £m 43.434 Housing benefit 40.841 0.549 Housing benefit and Council Tax administration 0.549 1.203 Discretionary Housing Payment 0.687 0.200 Private sector housing grant 0.200 0.579 Education Maintenance Allowance 0.491 0.016 Gaelic Education 0.061 0.015 School Milk 0.000 4.276 Pupil Equity Fund 4.663 21.860 Early Years Expansion 18.716 9.265 Other Education 7.772 3.163 Children's Services 3.203 12.322 Adult Services 12.254 1.436 Employability 3.406 8.011 Other grants 3.415 106.329 Total 96.258 Page 149 of 268
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47 Annual Accounts 2022/23 Note 6: Adjustment between accounting basis and funding basis under regulations This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the Council in the year in accordance with proper accounting practice to the resources that are specified by statutory provisions as being available to the Council to meet future capital and revenue expenditure. The first table outlines the current year position, and the second table outlines the comparative prior year position. General Fund Balance Housing Revenue Account Balance Capital Statutory Funds Capital Receipts Reserve £m £m £m £m £m Reversal of items charged to the CIES: Charges for depreciation and impairment of non-current assets (34.956) (16.099) 0.000 0.000 51.055 Amortisation of intangible assets (0.863) 0.000 0.000 0.000 0.863 Capital grants and contributions applied 46.599 0.402 0.000 0.000 (47.001) Amounts of non-current assets written off on disposal or sale as part of the gain or loss on disposal to the CIES 0.173 (0.276) 0.000 0.000 0.103 Insertion of items not charged to the CIES: Statutory provision for the repayment of Loans Fund & Finance Lease principal 1.815 11.434 0.000 0.000 (13.249) Capital expenditure charged against the General Fund and HRA Balances 2.325 0.000 1.841 0.000 (4.166) Transfer of cash sale proceeds credited as part of the gain or loss on disposal to the CIES 0.000 0.000 0.000 (1.697) 1.697 Use of the Capital Receipts Reserve to finance new capital expenditure 0.000 0.000 0.000 1.107 (1.107) Amount by which finance costs charged to the CIES are different from finance costs chargeable in the year in accordance with statutory requirements 0.323 0.173 0.000 0.000 (0.496) Reversal of items relating to retirement benefits debited or credited to the CIES (74.376) (0.089) 0.000 0.000 74.465 Employer’s pension contributions and direct payments to pensioners payable in the year 37.587 (1.871) 0.000 0.000 (35.716) Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 0.658 0.024 0.000 0.000 (0.682) Total adjustments (20.715) (6.302) 1.841 (0.590) 25.766 Usable reserves Unusable reserves2022/23 Adjustment primarily involving the Employee Statutory Adjustment Account: Adjustments primarily involving the Pension Reserve: Adjustment primarily involving the Financial Instruments Adjustment Account: Adjustments primarily involving the Capital Receipts Reserve: Adjustments primarily involving the Capital Adjustment Account: Page 150 of 268
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48 Annual Accounts 2022/23 General Fund Balance Housing Revenue Account Capital Statutory Funds Capital Receipts Reserve £m £m £m £m £m Reversal of items charged to the CIES: Charges for depreciation and impairment of non-current assets (21.812) (15.158) 0.000 0.000 36.970 Amortisation of intangible assets (0.876) 0.000 0.000 0.000 0.876 Capital grants and contributions applied 36.513 7.147 0.000 0.000 (43.660) Amounts of non-current assets written off on disposal or sale as part of the gain or loss on disposal to the CIES 0.169 0.006 0.000 0.000 (0.175) Insertion of items not charged to the CIES: Statutory provision for the repayment of Loans Fund & Finance Lease principal 3.011 15.087 0.000 0.000 (18.098) Capital expenditure charged against the General Fund and HRA Balances 10.464 0.000 (5.089) 0.000 (5.375) Transfer of cash sale proceeds credited as part of the gain or loss on disposal to the CIES 0.000 0.000 0.000 (0.785) 0.785 Use of the Capital Receipts Reserve to finance new capital expenditure 0.000 0.000 0.000 1.829 (1.829) Amount by which finance costs charged to the CIES are different from finance costs chargeable in the year in accordance with statutory requirements 0.289 0.203 0.000 0.000 (0.492) Reversal of items relating to retirement benefits debited or credited to the CIES (80.312) (0.215) 0.000 0.000 80.527 Employer’s pension contributions and direct payments to pensioners payable in the year 34.168 (1.910) 0.000 0.000 (32.258) Amount by which officer remuneration charged to the CIES on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 0.406 (0.018) 0.000 0.000 (0.388) Total adjustments (17.980) 5.142 (5.089) 1.044 16.883 Adjustments primarily involving the Capital Receipts Reserve: Adjustment primarily involving the Financial Instruments Adjustment Account: Adjustments primarily involving the Pension Reserve: Adjustment primarily involving the Employee Statutory Adjustment Account: Adjustments primarily involving the Capital Adjustment Account: Usable reserves Unusable reserves2021/22 Note 7: Usable reserves Usable reserves are those reserves the Council is able to apply to fund expenditure or reduce taxation and comprise both capital and revenue reserves. Movements in the revenue reserves during the year are outlined in the Movement in Reserves Statement and a summary is shown in below. More information about the Housing Revenue Account can be found on page 95. Page 151 of 268
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49 Annual Accounts 2022/23 As at 31 March 2022 As at 31 March 2023 £m £m (104.667) General Fund Balance (127.391) (6.497) Housing Revenue Account Balance (6.497) (7.594) Capital Receipts Reserve (8.184) (95.699) Other Statutory Funds (93.979) (214.457) Total (236.051) Usable Reserves This note sets out the amounts set aside from the General Fund Balance in statutory funds established under Schedule 3 of the Local Government (Scotland) Act 1975 to provide financing for specific areas of expenditure, and the amounts transferred back from these funds to meet General Fund expenditure in 2022/23. Balance at 1 April 2021 Transfers out Transfers in Balance at 31 March 2022 Transfers out Transfers in Balance at 31 March 2023 £m £m £m £m £m £m £m Insurance Fund 2.543 0.000 0.110 2.653 0.000 0.115 2.768 Reservoir Repair Fund 0.321 0.000 0.000 0.321 0.000 0.006 0.327 Revenue statutory funds 2.864 0.000 0.110 2.974 0.000 0.121 3.095 Education Capital Items Fund 1.400 (0.224) 1.093 2.269 (0.509) 0.346 2.106 Investment Capital Fund 86.236 (0.680) 4.900 90.456 (2.175) 0.497 88.778 Capital statutory funds 87.636 (0.904) 5.993 92.725 (2.684) 0.843 90.884 Total 90.500 (0.904) 6.103 95.699 (2.684) 0.964 93.979 • The Insurance Fund is the funding mechanism for the control of insurable risk and covers the main classes of insurance. It is earmarked for premiums and self-funded insurance costs. • The Reservoir Repair Fund is funding received from a contractor for repairs in perpetuity to the Thornly Dam. • The Education Capital Items Fund is earmarked funding for specific schools to be used in future years for planned purchases of a capital nature, such as computers and information communication technology equipment. • The Investment Capital Fund represents planned funding earmarked to support the Council’s investment programme and the wider strategic management of the Council’s associated debt profile. • In addition to the capital statutory funds above the Capital Receipts Reserve is also a statutory fund. The Capital Receipts Reserve holds cash receipts from asset sales and is used to fund planned capital expenditure. Balance at 1 April 2021 Sale proceeds Capital exp funded Balance at 31 March 2022 Sale proceeds Capital exp funded Balance at 31 March 2023 £m £m £m £m £m £m £m Capital Receipts Reserve 8.638 0.785 (1.829) 7.594 1.697 (1.107) 8.184 Ring-fenced elements of the General Fund Balance The following note sets out the amounts within the General Fund Balance that the Council has ring-fenced for future expenditure plans. The unallocated balance of £10.318m represents 2.1% of the Council’s net annual running costs. Page 152 of 268
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50 Annual Accounts 2022/23 Balance at 1 April 2021 Transfers out Transfers in Balance at 31 March 2022 Transfers out Transfers in Balance at 31 March 2023 £m £m £m £m £m £m £m COVID-19 General Recovery Fund 11.390 (16.412) 14.182 9.160 (1.780) (7.380) - COVID-19 Education Recovery Fund 6.149 (3.534) 3.713 6.328 (0.403) (5.925) - COVID-19 Recovery Construction Fund - - 10.000 10.000 (2.735) (7.265) - Inflation Mitigation - - 4.990 4.990 - (4.990) - Financial Sustainability Fund - - - - (6.054) 27.560 21.506 Social Renewal Plan 2.706 (0.911) - 1.795 (1.180) (0.615) - Tackling Poverty 2.421 (1.019) - 1.402 (0.770) (0.632) - Fairer Renfrewshire Programme - - - - (1.584) 6.081 4.497 Climate Change Action Fund 0.742 (0.131) - 0.611 (0.256) (0.355) - Community Empowerment Fund 0.375 (0.036) - 0.339 (0.038) (0.301) - Sustainable Communities Fund - - - - - 0.656 0.656 PPP Schools Replacement Fund 12.670 - - 12.670 - (12.670) - Loan Charges Flexibility Fund - - - - - 44.759 44.759 Alcohol and Drugs Commission 2.000 (0.196) - 1.804 (0.601) 0.100 1.303 British Sign Language 0.081 (0.080) - 0.001 (0.001) - 0.000 City Deal 0.659 (1.094) 2.185 1.750 (0.237) 0.106 1.619 Civil Contingencies Shared Service - - - - - 0.114 0.114 Culture Bid Legacy 3.532 (0.225) 0.260 3.567 (0.869) 0.395 3.093 Development Contribution – Paisley Town Centre 1.057 - - 1.057 - - 1.057 Digital Infrastructure 0.375 - 2.014 2.389 - 0.033 2.422 Discretionary business grants 2.303 (1.911) - 0.392 - - 0.392 Early Years Change Fund 1.900 - - 1.900 - 1.000 2.900 Employability 8.095 (1.704) 3.090 9.481 (0.171) - 9.310 Environment & Infrastructure 1.500 (0.500) 0.015 1.015 (0.500) 0.045 0.560 Fly Tipping Enforcement - - - - (0.208) 0.450 0.242 Invest in Renfrewshire 0.576 (0.576) - - - - - Local Authority Economic Recovery Fund - - - - 0.305 - 0.305 Leisure: Inclusive Play Facility 0.050 - - 0.050 (0.043) - 0.007 Local Heat and Energy Efficiency Strategy - - - - - 0.075 0.075 Memorial Headstone Safety 0.987 (0.362) - 0.625 (0.511) - 0.114 Paisley Town Centre Heritage Asset Strategy 2.995 (1.895) 0.154 1.254 (0.369) - 0.885 Private Sector Housing Grant 2.632 (0.851) 0.425 2.206 (0.167) - 2.039 Pupil Equity Fund 1.225 - 0.034 1.259 (0.599) 0.370 1.030 Rapid Rehousing Transition Plan - - - - (0.114) 0.154 0.040 Resettlement and Asylum Fund - - - - - 0.585 0.585 School Music Participation 0.375 (0.125) 0.035 0.285 (0.125) 0.062 0.222 Service Modernisation & Reform 6.981 (0.124) 4.202 11.059 (0.225) 0.185 11.019 Town Centre Public WiFi 0.093 (0.060) - 0.033 (0.033) - (0.000) Villages Improvement Fund 0.292 (0.159) - 0.133 (0.133) - (0.000) Welfare Reform 0.612 (0.291) 0.712 1.033 (0.447) 0.493 1.079 Year-end flexibility: Children's Svc 2.798 (0.220) 2.713 5.291 (2.645) 2.597 5.243 General Fund: Ring-fenced 77.571 (32.416) 48.724 93.879 (22.493) 45.687 117.073 Unallocated Balance 10.887 (0.099) - 10.788 (0.470) - 10.318 Total General Fund Balance 88.458 (32.515) 48.724 104.667 (22.963) 45.687 127.391 Page 153 of 268
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51 Annual Accounts 2022/23 Note 8: Unusable reserves Unusable reserves are those reserves that the Council is not able to utilise to provide services, and comprise: • Reserves that hold unrealised gains and losses, particularly in relation to the revaluation of property, plant and equipment and financial instruments, where amounts will only become available to provide services (or limit resources in the case of losses) once the gains or losses are realised as the assets are disposed of. This category of reserves comprises the Revaluation Reserve and the Financial Instruments Revaluation Reserve. • Adjustment accounts that deal with situations where income and expenditure are recognised according to statutory regulations against the General Fund Balance and the Housing Revenue Account Balance on a different basis from that expected by generally accepted accounting practices. These adjustment accounts will carry either a debit balance (showing that the Council is required by statute to fund its expenditure more slowly than accounting standards would expect) or a credit balance (where the Council has set resources aside under statute earlier than accounting standards require). The adjustment accounts effectively offset the General Fund Balance and the Housing Revenue Account Balance to give the Council more or less spending power in the short term than proper accounting practices would allow. The adjustment accounts comprise the Capital Adjustment Account, the Financial Instruments Adjustment Account, the Capital Receipts Reserve, the Pension Reserve and the Employee Statutory Adjustment Account. As at 31 March 2022 As at 31 March 2023 £m £m (705.624) Revaluation Reserve (772.123) 55.220 Pension Reserve (175.892) (646.538) Capital Adjustment Account (631.565) 11.437 Financial Instruments Adjustment Account 10.941 (0.997) Financial Instruments Revaluation Reserve (0.528) 7.682 Employee Statutory Adjustment Account 7.000 (1,278.820) Total Unusable Reserves (1,562.167) Unusable Reserves Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its non-current assets. The balance is reduced when assets with accumulated gains are: i) revalued downwards or impaired and the gains are lost, ii) used in the provision of services and the gains are consumed through depreciation; or iii) disposed of and the gains are realised. The Revaluation Reserve contains only revaluation gains accumulated since 1 April 2007, which was the date that the Revaluation Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. Page 154 of 268
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52 Annual Accounts 2022/23 As at 31 March 2022 As at 31 March 2023 £m £m (565.557) Balance at 1 April (705.624) (165.905) Upward revaluation of non-current assets (104.500) 25.473 Difference between fair value depreciation and historic cost depreciation 37.178 0.365 Accumulated (gains) / losses on disposal of non-current assets transferred to the Capital Adjustment Account 0.823 (140.067) Movement in Year (66.499) (705.624) Balance at 31 March (772.123) Revaluation Reserve Pension Reserve The Pension 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 or regulations. The Council accounts for post-employment benefits in the CIES 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 pension funds. The debit balance on the Pension Reserve shows a significant shortfall in the benefits earned by past and current employees and the Council’s share of Strathclyde Pension Fund resources available to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid. As at 31 March 2022 As at 31 March 2023 £m £m 221.533 Balance at 1 April 55.220 (214.582) Actuarial (gains) / losses on pension assets and liabilities (528.066) 0.000 Restriction to Asset Ceiling 258.205 80.527 Reversal of items relating to retirement benefits debited or credited to the surplus or deficit on the provision of services in the CIES 74.465 (32.258) Employer’s pension contributions payable in the year (35.716) 55.220 Balance at 31 March (175.892) Pension Reserve 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. The Capital Adjustment Account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the CIES (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The Capital Adjustment Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and enhancement. Page 155 of 268
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53 Annual Accounts 2022/23 The Capital Adjustment Account contains accumulated gains and losses on investment properties and gains recognised on donated assets that have yet to be consumed by the Council, and also revaluation gains accumulated on property, plant and equipment before 1 April 2007. The Revaluation Reserve was created to hold such gains arising from 1 April 2007 onwards. As at 31 March 2022 As at 31 March 2023 £m £m (615.667) Balance at 1 April (646.538) 0.000 Adjustment to opening balance re accelerated debt repayment Reversal of items relating to capital expenditure charged to the CIES: 36.970 Charges for depreciation, impairment and revaluation losses of non-current assets 51.055 0.876 Amortisation of intangible assets 0.863 0.785 Non-current assets sale proceeds 1.697 (0.175) (Gain)/Loss on disposal of non-current assets charged to the CIES 0.103 (0.365) Adjusting amounts written out of the Revaluation Reserve (0.823) 38.091 Net written out amount of non-current assets consumed in the year 52.895 Capital financing applied in the year: (1.829) Use of the Capital Receipts Reserve to finance new capital expenditure (1.107) (43.660) Capital grants and contributions credited to the CIES that have been applied to capital financing (47.001) 0.000 Application of grants to capital financing from the Capital Grants Unapplied Account 0.000 (18.098) Loans Fund and Finance Lease principal repayments (13.249) (5.375) Capital expenditure charged against the General Fund and Housing Revenue Account balances (4.166) 0.000 Adjustment for Service Concession Arrangements 27.601 (68.962) (37.922) (646.538) Balance at 31 March (631.565) Capital Adjustment Account Financial Instruments Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments, and for bearing losses or benefiting from gains in accordance with statutory provisions [or regulations]. The Council uses the Financial Instruments Adjustment Account to: • Manage premiums incurred on the early repayment of borrowings. Generally accepted accounting practices require that premiums are debited to the CIES when they are incurred (except where the loan debt being repaid is exchanged for new loan debt on substantially similar terms). However, statutory arrangements or regulations allow any premiums that would normally require to be to be taken immediately to the surplus or deficit on the provision of services, to be amortised to the General Fund Balance over the various periods of time as specified in the regulations/statutory guidance. Furthermore, statutory arrangements [or regulations] require that any premiums that were on the Council’s balance sheet at 31 March 2007 be amortised to the General Fund Balance over the unexpired term that was outstanding on the associated loans when they were redeemed. The Council had various premiums totalling £17.630m at 31 March 2007 and, under the statutory arrangements, these will be fully amortised to the General Fund Balance by financial year 2053-2054. • Manage borrowings that were on the Council’s balance sheet at 31 March 2007 and that have a stepped interest rate feature. These borrowings comprise five ‘lender option borrower option’ (LOBO) loans for which the interest rate was Page 156 of 268
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54 Annual Accounts 2022/23 fixed for an initial period, and at a pre-agreed later date the interest rate changed. Generally accepted accounting practices require that interest charges relating to borrowings that have a stepped interest rate feature are debited to the CIES on the basis of a single effective interest rate (EIR) over the expected life of the loans, rather than based on the contractual cash outflows of interest. However, statutory arrangements [or regulations] allow such borrowings that were on the Council’s balance sheet at 31 March 2007 to be charged to the General Fund Balance in accordance with the accounting treatment prior to 1 April 2007, which did not require the use of the effective interest rate as the basis for the interest charge. • Manage ‘soft loans’ that were on the Council’s balance sheet at 31 March 2007. Soft loans are loans advanced by the Council at nil or below prevailing interest rates. Generally accepted accounting practices require that the discounted interest rate is recognised as a reduction in the fair value of the loan, with the difference being debited to the CIES as service expenditure. However, statutory arrangements [or regulations] require that, for soft loans on the Council’s balance sheet at 31 March 2007, the reduction in value and corresponding charge to be reversed, so that there is no impact on the General Fund Balance. As at 31 March 2007 interest free loans amounting to £0.156m had been advanced to employees who had had changes implemented to their pay cycle. These loans are repayable when employees leave the Council’s employment. Financial Instruments Adjustment Account Refinancing premiums and discounts Borrowing on stepped interest rate loans Loans to third parties at less than market rate Total £m £m £m £m Balance at 1 April 2022 10.550 0.866 0.021 11.437 Premiums incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements (0.472) 0.000 0.000 (0.472) Amount by which finance costs charged to the CIES are different from finance costs chargeable in the year in accordance with statutory requirements 0.000 (0.021) (0.003) (0.024) Balance at 31 March 2023 10.078 0.845 0.018 10.941 Financial Instruments Revaluation Reserve The Financial Instruments Revaluation Reserve contains the gains made by the Council arising from increases in the value of its investments that are measured at fair value through other comprehensive income. The balance is reduced when investments with accumulated gains are: i) revalued downwards or impaired and the gains are lost; or ii) disposed of and the gains are realised. As at 31 March 2022 As at 31 March 2023 £m £m (0.939) Balance at 1 April (0.997) (0.058) Downward/(Upward) revaluation of investments 0.469 (0.997) Balance at 31 March (0.528) Financial Instruments Revaluation Reserve Page 157 of 268
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55 Annual Accounts 2022/23 Employee Statutory Adjustment Account The Employee Statutory Adjustment Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for short-term accumulating compensated absences at the end of the financial year. As at 31 March 2022 As at 31 March 2023 £m £m 8.070 Balance at 1 April 7.682 (8.070) Settlement or cancellation of accrual made at the end of the prior year (7.682) 7.682 Amounts accrued at the end of the current year 7.000 7.682 Balance at 31 March 7.000 Employee Statutory Adjustment Account Note 9: Property, Plant and Equipment The Code requires that where a component of an asset is replaced, the carrying amount (i.e. net book value) of the old component shall be derecognised to avoid double counting and the new component is reflected in the carrying amount of the infrastructure asset. However, due to practical difficulties in applying component accounting for the recognition and derecognition of replaced components of infrastructure assets, most local authorities have been unable to comply with the requirement to assess the net book value of the replaced component and have treated the amount of the replaced component as zero, because the replaced component is considered to have been fully used up at the point that it is replaced. In recognition of this difficulty, the Scottish Government issued a Statutory Override in August 2022. Renfrewshire Council has elected to apply both of the following provisions: • 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 required to be a nil amount, and no subsequent adjustment shall be made to the carrying amount of the asset with respect to that part. Page 158 of 268
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56 Annual Accounts 2022/23 Note 9: Property, Plant and Equipment (continued) Council dwellings Other land and buildings Vehicles, plant, furniture and equipment Infrastructure assets Assets under construction Surplus assets Total Of which funded by PFI £m £m £m £m £m £m £m £m Balance sheet net carrying amount at 31 March 2022 618.804 341.319 408.817 214.168 57.786 22.258 1,663.152 135.370 Reclassified (to)/ from Assets Held for Sale 0.000 0.000 0.000 0.000 0.000 0.297 0.297 0.000 Other Reclassifications 6.656 (0.147) 1.966 4.766 (13.177) 0.000 0.064 0.000 Additions 7.414 1.529 16.625 13.538 79.917 0.000 119.023 1.685 Disposals 0.000 (0.227) (0.130) 0.000 0.000 (0.918) (1.275) 0.000 Depreciation (20.627) (9.380) (51.712) (9.740) 0.000 (0.092) (91.551) (9.516) Revaluation adjustments taken to the Revaluation Reserve 102.701 2.519 (0.939) 0.000 0.000 0.219 104.500 0.000 Revaluation adjustments recognised in the CIES (0.258) 7.537 (3.473) 0.000 0.000 (0.666) 3.140 0.000 Balance sheet net carrying amount at 31 March 2023 714.690 343.150 371.154 222.732 124.526 21.098 1,797.350 127.539 Gross carrying amount at 31 March 2023 714.690 361.314 617.573 n/a 124.526 26.180 1,844.283 139.579 Accumulated depreciation at 31 March 2023 0.000 (18.164) (246.419) n/a 0.000 (5.082) (269.665) (12.040) Infrastructure Assets 0.000 0.000 0.000 222.732 0.000 0.000 222.732 0.000 Balance sheet net carrying amount at 31 March 2023 714.690 343.150 371.154 222.732 124.526 21.098 1,797.350 127.539 Movements in 2022/23 Page 159 of 268
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57 Annual Accounts 2022/23 Council dwellings Other land and buildings Vehicles, plant, furniture and equipment Infrastructure assets Assets under construction Surplus assets Total Of which funded by PFI £m £m £m £m £m £m £m £m Balance sheet net carrying amount at 31 March 2021 579.608 296.670 350.381 173.012 62.874 21.698 1,484.243 107.052 Reclassified (to)/ from Assets Held for Sale 0.000 0.000 0.000 0.000 0.000 (0.822) (0.822) 0.000 Other Reclassifications 2.018 2.938 7.964 35.218 (48.797) 0.659 0.000 0.064 Additions 5.168 4.485 14.953 12.933 43.709 0.000 81.248 2.122 Disposals 0.000 0.000 (2.050) 0.000 0.000 0.000 (2.050) 0.000 Depreciation 0.000 6.594 26.735 (6.995) 0.000 0.016 26.350 5.621 Revaluation adjustments taken to the Revaluation Reserve 32.010 23.221 25.238 0.000 0.000 0.856 81.325 10.156 Revaluation adjustments recognised in the CIES 0.000 7.411 (14.404) 0.000 0.000 (0.149) (7.142) 0.404 Balance sheet net carrying amount at 31 March 2022 618.804 341.319 408.817 214.168 57.786 22.258 1,663.152 125.419 Gross carrying amount at 31 March 2022 618.804 353.451 620.666 n/a 58.064 27.290 1,678.275 133.326 Accumulated depreciation at 31 March 2022 (0.000) (12.132) (211.849) n/a (0.278) (5.032) (229.291) (7.907) Infrastructure Assets 0.000 0.000 0.000 214.168 0.000 0.000 214.168 0.000 Balance sheet net carrying amount at 31 March 2022 618.804 341.319 408.817 214.168 57.786 22.258 1,663.152 125.419 Movements in 2021/22 Page 160 of 268
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58 Annual Accounts 2022/23 Note 10: Heritage Assets 2021/22 2022/23 £m £m 39.303 Balance at 1 April 44.186 (0.046) Revaluations to CIES 0.000 4.929 Revaluations to Revaluation Reserve 0.000 44.186 Balance at 31 March 44.186 Heritage Assets A valuation of the fair value of the Council’s Heritage Assets was carried out by an external valuer between October 2021 and March 2022. In the four years prior to 2022/23, there were no acquisitions, donations, or disposals of Heritage Assets. The combined collections managed by the Renfrewshire Arts and Museums Service number in excess of 350,000 objects and it is impractical to undertake a full valuation of all the items in the collection. The balances above reflect the valuation of materials examined by the external valuer during 2021/22. Further detail on the valuation of each category of asset is outlined in Accounting Policy K on page 84. The details of the valuations of the assets are as follows: • Archaeology items • Natural history and science book collections • Art collection • Ceramics • Natural history and Numismatics • Science and social history collections • Special collections • Textiles • Transport collection • World cultures Note 11: Investment properties The following items of income and expense have been accounted for in the ‘Financing and Investment income and expenditure’ line in the CIES. 2021/22 2022/23 £m £m (0.118) Rental income from investment property (0.120) (0.118) Net Loss / (Gain) (0.120) Investment Properties There are no restrictions on the Council’s ability to realise the value inherent in its investment property or on the Council’s right to the remittance of income and the proceeds of disposal. The Council has no contractual obligations to purchase, construct or develop investment property, nor does it have contractual obligations in relation to repairs, maintenance or enhancement. The following table summarises the movement in the fair value of investment properties during the year: 2021/22 2022/23 £m £m 1.467 Opening balance at 1 April 1.479 0.012 Net gains or (losses) from fair value adjustments 0.178 0.000 Transfers from inventories and property, plant and equipment (0.064) 1.479 Closing balance at 31 March 1.593 Fair Value of Investment Properties Page 161 of 268
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59 Annual Accounts 2022/23 Fair Value Hierarchy Detail of the authority's investment properties and information about the fair value hierarchy as at 31 March 2023 are as follows: Quoted Prices in active markets for identical assets (level 1) Other significant observable inputs (level 2) Other significant unobservable inputs (level 3) Fair Value as at 31 March 2023 £m £m £m £m Commercial Units 0.000 0.690 0.000 0.690 Office Units 0.000 0.075 0.000 0.075 Commercial Sites 0.000 0.700 0.000 0.700 Other 0.000 0.128 0.000 0.128 Total 0.000 1.593 0.000 1.593 Valuation Techniques used to Determine Level 2 and 3 Fair Values for Investment Properties Sufficient title and lease information is available in the respect of Investment Properties. This, coupled with knowledge of the rent being achieved, or likely to be achieved, has enabled the market approach to be used in respect of the fair value measurement of Investment Properties. Market knowledge, through sales evidence of surplus development sites within Renfrewshire has also been factored into the fair value measurement. Therefore, the level of observable inputs is significant, leading to the properties being categorised at level 2 in the fair value hierarchy. Note 12: Assets held for sale The following table summarises the movement in the fair value of assets held for sale during the year: 2021/22 2022/23 £m £m 0.625 Opening balance at 1 April 0.922 Assets reclassified as held for sale: 0.822 Surplus Assets (0.297) (0.525) Assets sold (0.525) 0.922 Closing balance at 31 March 0.100 Assets Held for Sale Note 13: Intangible assets The Council accounts for purchased software licences as intangible assets. The cost of the licences is amortised on a straight-line basis over the expected life of the licences, which is three to five years for all ICT systems. Amortisation charges are initially charged to ICT services and then absorbed as an overhead across all the service headings in the net expenditure of services. The movement on intangible asset balances during the year is shown in the following table. 2021/22 2022/23 £m £m Balance at 1 April 6.124 Gross carrying amount 6.061 (1.947) Accumulated amortisation (2.712) 4.177 Net carrying amount at 1 April 3.349 0.048 Additions: purchases 0.038 (0.111) Disposals (0.238) 0.111 Disposal amortisation 0.238 (0.876) Amortisation for the year (0.863) 3.349 Net carrying amount at 31 March 2.524 Comprising: 6.061 Gross carrying amount 5.861 (2.712) Accumulated amortisation (3.337) 3.349 Balance at 31 March 2.524 Purchased Software Licences Page 162 of 268
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60 Annual Accounts 2022/23 There are no individual intangible assets that are material to the financial statements and there are currently no contractual commitments for the acquisition of intangible assets. Note 14: Capital expenditure and capital financing Capital expenditure involves the creation of assets, the benefit of which will be available to future council tax and non-domestic rate payers. It is financed from borrowing and capital income (sales receipts), and so the cost of the asset is effectively borne over a number of years. The Council’s overall capital investment programme is sub-divided into two programmes: housing and non- housing. In 2022/23 total spending on capital projects was £119.061m (£81.296m in 2021/22) and was within the overall prudential limits approved by Council. Capital receipts of £1.107m (£1.829m in 2021/22) were used to fund spending on capital projects. The net capital expenditure for the year of £66.787m (£30.432m in 2021/22) was financed from external borrowing, credit arrangements and from cash balances. The table below shows the total amount of capital expenditure incurred in the year, including the value of assets acquired under finance leases and Service Concession Arrangements. Also shown are the resources that have been used to finance this capital expenditure. 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 movement in the CFR during the year is also analysed in the table below. As at 31 March 2022 As at 31 March 2023 £m £m 347.082 Opening Capital Financing Requirement 360.926 Capital investment: 1.509 Opening Balance adjustment 0.000 81.248 Property, plant and equipment 119.023 0.048 Intangible assets 0.038 Sources of finance: (1.829) Capital receipts – sale of other council assets (1.107) (43.660) Government grants and other contributions (47.001) (5.375) Sums set aside from revenue – direct revenue contributions (4.166) (18.097) Loans Fund/Finance Lease principal repayments (13.249) 0.000 Adjustment for Service Concession Arrangements 27.601 360.926 Closing Capital Financing Requirement 442.065 Explanation of movements in year: 16.254 Increase/(decrease) in underlying need to borrow (unsupported by government financial assistance) 84.357 (0.111) Reduction in finance leases obligations (0.114) (2.740) Increase/(decrease) in PPP finance lease creditor (3.104) 13.403 Increase/(Decrease) in Capital Financing Requirement 81.139 Page 163 of 268
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61 Annual Accounts 2022/23 At 31 March 2023 the Council had commitments on capital contracts for non-housing projects of £89.723 (£58.987m in 2021/22) and for housing projects of £28.542m (£25.922m in 2021/22). This expenditure will be funded from a combination of government grants, external borrowing, income from selling assets and contributions from revenue budgets. Note 15: Service Concession Arrangements The Council entered into a Public Private Partnership on 1 July 2006 for the provision and maintenance of educational buildings and other facilities. This agreement provides the Council with replacement buildings such as primary and secondary schools and community education premises. The provider is required to ensure the availability of these buildings to a pre- agreed standard, with deductions from the fee payable being made if facilities are unavailable or performance is below the minimum standard. When the agreement ends in 2038, the buildings will be handed to the Council at nil consideration with a guarantee of no major maintenance requirements for a five-year period. The Council only has rights to terminate the contract if it compensates the contractor in full for costs incurred and future profits that would have been generated over the course of the remainder of the contract. The assets used to provide services are recognised on the Council’s Balance Sheet. Movements in their value over the year are shown in the movement on the Property, Plant and Equipment balance in Note 9. The Council makes an agreed payment each year which is increased by inflation and can be reduced if the contractor fails to meet availability and performance standards. Under the agreement the Council is committed to paying the following sums (assuming an average inflation rate of 2.5% per annum and excluding any performance/availability deductions). The discount rate used in this calculation is the interest rate implicit in the PFI agreement, which was fixed at the outset at 7.6%. Future Repayment Periods - Schools Service Charges Liability Repayment Interest Repayment Contingent Rentals Total £m £m £m £m £m Payable within 1 year 6.134 3.114 4.699 4.496 18.443 Payable within 2-5 years 28.274 12.522 16.497 19.607 76.900 Payable within 6-10 years 34.761 22.215 14.478 32.104 103.558 Payable within 11-15 years 41.511 25.498 5.130 34.014 106.153 Payable within 16-20 years 0.000 0.000 0.000 0.000 0.000 Payable within >20 years 0.000 0.000 0.000 0.000 0.000 Total 110.680 63.349 40.804 90.221 305.054 In 2019/20, the Council entered into a Service Concession Agreement for the use of a waste materials recovery facility at Bargeddie. Residual waste is then processed at a thermal treatment plant in Dunbar. North Lanarkshire Council is the lead authority and is contracted to Viridor. Five councils, including Renfrewshire, have an inter-authority agreement with North Lanarkshire Council. Renfrewshire Council’s share of the contract is 20%. The discount rate used in this calculation is the interest rate implicit in the agreement, which was fixed at the outset at 5.68%. Page 164 of 268
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62 Annual Accounts 2022/23 Future Repayment Periods - Waste Facility Service Charges Liability Repayment Interest Repayment Total £m £m £m £m Payable within 1 year 3.915 0.157 0.276 4.348 Payable within 2-5 years 16.748 0.638 1.021 18.407 Payable within 6-10 years 23.874 0.605 1.057 25.536 Payable within 11-15 years 26.737 1.170 0.870 28.777 Payable within 16-20 years 30.479 1.603 0.478 32.560 Payable within 21-25 years 11.090 0.685 0.055 11.830 112.843 4.858 3.757 121.458Total Outstanding Service Concession Arrangements Schools Waste Facility Total £m £m £m Balance at 1 April 2021 (68.894) (5.157) (74.051) Additions during the year 0.000 0.000 0.000 Payments during the year 2.598 0.141 2.739 Balance at 31 March 2022 (66.296) (5.016) (71.312) Adjustment for Service Concession Arrangements 0.000 0.000 0.000 Payments during the year 2.947 0.158 3.105 Balance at 31 March 2023 (63.349) (4.858) (68.207) In accordance with Accounting Policy R and in line with Finance Circular 10/2022, the Council has applied the permitted PPP Service Concession Arrangement flexibility in financial year 2022/23 on a retrospective annuity basis with a useful life of 40 years. The flexibility being applied is consistent with the current Loans Fund arrangements and is considered prudent, sustainable and affordable over the life of the asset. The current repayment charges have been compared against an annuity repayment profile based on the estimated useful asset lives for the schools service concession arrangement. The most appropriate asset life is considered to be 40 years which replicates the useful life of other similar type assets on the Council’s balance sheet i.e. schools. The calculation of the repayment charges for the service concession arrangement using asset life annuity is compared to the current charges which are made over the contract period. By applying the flexibility, a one-off pre 2022/23 retrospective saving of £27.601m, as detailed om the table below, will be achieved. Current Repayment Revised Repayment (Cost)/Reduction £m £m £m Pre 2022/23 38.667 11.066 27.601 Paid in 2022/23 2.947 1.408 1.539 Payable within 1 year 3.114 1.516 1.598 Payable within 2-5 years 12.522 7.316 5.206 Payable within 6-10 years 22.215 12.768 9.447 Payable within 11-15 years 25.498 18.457 7.041 Payable within 16-20 years 0.000 26.682 (26.682) Payable within 21-25 years 0.000 25.750 (25.750) Total 104.963 104.963 0.000 PPP Service Concession Liability Repayment Page 165 of 268
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63 Annual Accounts 2022/23 In addition to the one-off retrospective element, an in-year saving occurred in the scheduled debt repayments in 2022/23 of £1.539m. This will be followed by a reduction in the annual charges for a further 15 years and then the continuation of statutory charges after the contract arrangements have been repaid. Over the full asset life of the service concession arrangement, the total repayment for the debt liability remains the same. Impact on CIES and Balance Sheet The reprofiling of the debt liability repayments increases the Capital Financing Requirement (CFR) by £27.601m as at 1 April 2022. The increases in the CFR , (see Note 14), will continue to be reduced by the revised repayments after the service concession arrangement has expired until the end of the revised annuity period. Being a cumulative statutory adjustment there is no prior year restatement of statutory adjustments in the Annual Accounts. The statutory adjustment up to 31 March 2023 has the following impact on the 2022/23 Balance Sheet (Capital Adjustment Account) and Movement in Reserves Statement. £m £m £m Capital Adjustment Account 27.601 1.539 29.140 Movement in Reserves (27.601) (1.539) (29.140) 0.000 0.000 0.000 PPP Service Concession Flexibility Note 16: Leases Renfrewshire Council as Lessee Operating Leases The Council has 19 properties and 6 vehicles classed as operating leases, with average lives of 10 years. The future minimum lease payments due under non- cancellable leases in future years are: As at 31 March 2022 As at 31 March 2023 £m £m 0.897 Not later than one year 0.563 1.873 Between one and five years 0.966 3.146 Later than five years 1.249 6.823 2.778 During 2022/23, there was £0.785m expenditure charged to the CIES in relation to these leases (£0.975m in 2021/22). Finance Leases Finance leases, which have substantially transferred to the Council the benefits and risks of ownership of a non- current asset, are treated as if the asset had been purchased outright. Assets acquired under finance leases are included in non-current assets at the lower of the fair value or the present value of the minimum lease payments. The capital element of the lease is included as obligations under creditors. The lease rentals comprise capital and interest elements; the capital element is applied to reduce the outstanding obligation and the interest element is charged to revenue over the terms of the lease. The Council has 44 electric vehicles under a finance lease agreement over a period of 5 years beginning during 2019/20. As at 31 March 2023, outstanding obligations to make payments under finance leases are as follows: As at 31 March 2022 As at 31 March 2023 £m £m 0.115 Not later than one year 0.118 0.155 Between one and five years 0.037 0.000 Later than five years 0.000 0.381 0.155 Page 166 of 268
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64 Annual Accounts 2022/23 Renfrewshire Council as Lessor Operating Leases The Council leases out property and equipment under operating leases for the following purposes: • for the provision of community services, such as sports facilities, tourism services and community centres • for economic development purposes to provide suitable affordable accommodation for local businesses. The future minimum lease payments receivable under non-cancellable leases in future years are: As at 31 March 2022 As at 31 March 2023 £m £m 0.169 Not later than one year 0.169 0.611 Between one and five years 0.735 6.339 Later than five years 6.215 7.297 7.119 The minimum lease payments receivable does not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. Note 17: Inventories 2021/22 2022/23 £m £m 0.879 Balance at 1 April 1.032 7.454 Additions during the year 9.136 (7.294) Recognised as an expense during the year: inventories sold, exchanged or distributed (8.852) (0.025) Recognised as an expense during the year: inventories written down (0.002) 0.018 Reversals during the year of previous inventory write-downs 0.000 1.032 Balance at 31 March 1.314 Inventories Note 18: Cash and cash equivalents The balance of cash and cash equivalents is made up of the following components. With the exception of imprest accounts held at Council establishments, the balances in all of the categories listed below are used together to manage the Council’s overall cash balances on a day-to-day basis. 2021/22 2022/23 £m £m (11.049) Current account balances with the council's banker (3.216) 2.954 Euro account balances with the council's banker - sterling equivalent 6.997 1.561 Callable deposits with UK banks and building societies 1.714 25.299 Callable deposits in money market funds and ultra-short bond funds 6.086 0.052 Imprest accounts held at council establishments 0.051 18.817 Total cash and cash equivalents 11.632 Page 167 of 268
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65 Annual Accounts 2022/23 Note 19: Debtors Amounts due to be received by the Council at 31 March are set out below. This is analysed by type of debtor to provide greater transparency of the sums due. Short-term Long-term Short-term Long-term £m £m £m £m 20.790 0.000 Central government bodies (non-NHS) 21.141 0.000 30.832 1.080 Central government bodies (NHS) 7.793 1.080 2.939 0.000 Other local authorities 3.316 0.000 4.564 0.000 HM Revenue and Customs 11.146 0.000 0.061 0.032 Employees 0.005 0.030 18.056 0.000 Council Tax arrears 19.819 0.000 (10.973) 0.000 less impairment (11.911) 0.000 4.757 0.000 Rent arrears 4.681 0.000 (2.654) 0.000 less impairment (2.829) 0.000 30.820 6.265 Other entities and individuals 31.645 6.005 (17.526) (4.411) less impairment (17.384) (4.533) 81.666 2.966 Total Debtors 67.422 2.582 31 March 2022 As at 31 March 2023 Note 20: Creditors Amounts due to be paid by the Council as at 31 March are set out below. This is analysed by type of creditor to provide greater transparency of the sums due. Short-term Long-term Short-term Long-term £m £m £m £m (8.943) (0.157) Central government bodies (non-NHS) (7.810) (0.150) (0.430) 0.000 Central government bodies (NHS) (1.549) 0.000 (2.629) 0.000 Other local authorities (6.922) 0.000 (6.231) 0.000 HM Revenue and Customs (9.154) 0.000 (5.677) 0.000 Strathclyde Pension Fund and Scottish Public Pensions Agency (8.007) 0.000 (12.150) 0.000 Employees (12.900) 0.000 (2.947) (63.350) Service concession arrangements: schools (3.114) (60.235) (0.158) (4.859) Service concession arrangements: waste facility (0.157) (4.701) (0.115) (0.155) Finance lease liabilities (0.118) (0.037) (4.182) 0.000 Council Tax refundable to taxpayers (4.863) 0.000 (0.795) 0.000 Council Tax receipts in advance (1.210) 0.000 0.000 (0.005) Financial guarantees 0.000 (0.003) (31.586) (0.626) Other entities and individuals (33.343) (0.564) (75.843) (69.152) Total Creditors (89.147) (65.690) As at 31 March 2022 As at 31 March 2023 Page 168 of 268
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66 Annual Accounts 2022/23 Note 21: Provisions Provisions are made 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. Teacher’s maternity pay is a short-term provision, made to reflect the changes in European legislation that allow teachers to accrue all holidays during parental leave. The movement in these short-term provisions is detailed below: Short-term Provisions Teachers’ maternity pay Other Total £m £m £m Balance at 1 April 2022 (0.120) (0.120) (0.240) Additional provisions made during the year (0.122) (0.130) (0.252) Reversal of existing provisions 0.120 0.120 0.240 As at 31 March 2023 (0.122) (0.130) (0.252) A summary of the movements in the long-term provisions made by the Council is detailed below, along with an explanation of the reason for the provision: Long-term Provisions Holiday pay compensation Insurance claims Total £m £m £m Balance at 1 April 2022 (0.445) (4.672) (5.117) Additional provisions made during the year 0.000 (1.167) (1.167) Amounts used during the year 0.000 1.342 1.342 As at 31 March 2023 (0.445) (4.497) (4.942) Holiday pay compensation payments The Council has received a number of claims arising from a European Court of Justice ruling in relation to holiday pay. A provision has been made to reflect the potential outcome of known claims. A contingent liability is recognised in Note 29 for potential claims that have not yet materialised. Insurance claims The provision for insurance claims represents the actuarial assessment of excess costs arising from insurance claims together with identified liabilities in respect of insurance claims outstanding against Renfrewshire Council and predecessor local authorities. The Council has increased its net assessment by £1.167m on the basis of information held by the Council and notified by Glasgow City Council, the coordinating authority for the former Strathclyde Regional Council. Note 22: Financial Instruments Categories of financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The term ‘financial instrument’ covers both financial assets and financial liabilities and includes trade payables, borrowings (for example Public Works Loan Board debt and market debt), financial guarantees, bank overdraft, trade receivables, loans receivable, cash deposits with financial institutions (some on a fixed term basis Page 169 of 268
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67 Annual Accounts 2022/23 and some which are immediately available) and longer-term investments. The following categories of financial instrument are carried in the balance sheet. Long-term Current Long-term Current £m £m £m £m (199.427) (1.869) (223.600) (0.828) 0.000 (2.698) 0.000 (2.770) (199.427) (4.567) (223.600) (3.598) (20.000) (32.916) 0.000 (52.916) 0.000 (0.871) 0.000 (0.871) (0.354) (0.512) 0.000 (0.845) (20.354) (34.299) 0.000 (54.632) 0.000 (53.168) 0.000 (35.423) (219.781) (92.034) (223.600) (93.653) 0.000 (43.590) 0.000 (49.657) (68.362) (3.219) (64.973) (3.388) (0.005) 0.000 (0.003) 0.000 (68.367) (46.809) (64.976) (53.045) As at 31 March 2022 As at 31 March 2023 Financial Liabilities Total Public Works Loan Board (PWLB) borrowing Borrowing from group entities Total Borrowing Financial Liabilities included in Creditors Principal sum borrowed Accrued interest Principal sum borrowed Accrued interest EIR adjustments Total non-PWLB borrowing (“market debt”) At amortised cost trade payables Service Concession and Finance Lease liabilities Financial guarantees Long-term Current Long-term Current £m £m £m £m 5.001 183.499 0.000 165.000 0.000 0.084 0.000 1.751 4.512 0.000 4.157 0.000 9.513 183.583 4.157 166.751 0.000 (9.437) 0.000 (1.461) 0.000 0.002 0.000 0.012 0.000 (0.001) 0.000 (0.002) 0.000 28.253 0.000 13.083 0.000 18.817 0.000 11.632 1.437 90.077 1.093 78.842 5.027 0.065 4.986 0.057 0.913 0.000 1.037 0.000 (4.411) (19.740) (4.533) (20.213) 2.966 70.402 2.583 58.686 As at 31 March 2022 Financial Assets At amortised cost: Principal Accrued interest Accrued interest As at 31 March 2023 At fair value through other comprehensive income - designated equity instruments At fair value through profit or loss Principal Accrued interest Loss allowance Total Investments Total Cash and cash equivalents At amortised cost: At amortised cost: Trade receivables Loans made for service purposes Loss allowance Financial Assets included in Debtors Page 170 of 268
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68 Annual Accounts 2022/23 Loans to other entities and individuals comprise a loan to Park Lane Developments (Renfrewshire) LLP of £0.275m (2021/22 £0.275m), a loan to Kilbarchan Amateur Athletic Club of £0.075m (2021/22 £0.076), home loans of £0.335m (2021/22 £0.413m), soft loans to service users of £0.030m (2021/22 £0.030m), soft loans to employees of £0.022m (2021/22 £0.022m), social care charging order debtors of £0.785m (2021/22 £0.749m) and property charging order debtors of £0.024m (2021/22 £0.027m). Note that these balances are not principle amounts owed, rather valued at amortised cost based on a notional (effective) interest rate. Equity instruments elected to fair value through other comprehensive income The Council has elected to account for the Insurance Fund at fair value through other comprehensive income because it is a long-term strategic holding and changes in its fair value is not considered to be part of the Council’s annual financial performance. The Insurance Fund is invested in the Phoenix Fund, managed on behalf of the Council by abrdn Capital Limited. The objective of the fund is to achieve long term growth with low volatility, through a widely diversified portfolio. The fair value of the investment is £4.157m at 31 March 2023 (£4.512m as at 31 March 2022). Income from the Fund is reinvested. Fair value of financial instruments Financial instruments, except those classified at amortised cost, are carried in the Balance Sheet at fair value. For most assets, including money market funds, the fair value is taken from the market price. The fair values of other instruments have been estimated by calculating the net present value of the remaining contractual cash flows at 31 March 2023. The Council’s ‘Fair value through other comprehensive income’ assets comprise its insurance fund investments. The fair value of the insurance fund investments equates to the market value of those investments, and this valuation has been provided by the Council’s investment manager, abrdn Capital Limited. Financial instruments classified at amortised cost are carried in the Balance Sheet at amortised cost. Their fair values have been estimated by calculating the net present value of the remaining contractual cash flows at 31 March 2023, using the following methods and assumptions: • Loans borrowed by the Council have been valued by discounting the contractual cash flows over the whole life of the instrument at the appropriate market rate for local authority loans. • For ‘lender option borrower option’ (LOBO) loans, PWLB premature repayment rates have been applied to provide the fair value under PWLB debt redemption procedures. The PWLB redemption rates provide a reasonable proxy for rates and a number of market participants have used this basis when considering early redemption costs for market loans. It is likely that lenders will only exercise their options when market rates have risen above the contractual loan rate. The interest rate risk associated with the Council’s LOBOs is not deemed to be significant and the potential penalties charged may make the redemption of the loans an uneconomic option. • The fair values of other long-term loans and investments have been discounted at the market rates for similar instruments with similar remaining terms to maturity on 31 March. • The fair values of financial guarantees have been estimated based on the likelihood of the guarantees being called and the likely payments to be made. • The fair values of finance lease assets and liabilities and of service concession (PFI) scheme liabilities have been calculated by discounting the contractual cash flows (excluding service charge elements) at the appropriate AA-rated corporate bond yield. • No early repayment or impairment is recognised for any financial instrument. • The fair value of short-term instruments, including trade payables and receivables, is assumed to approximate to the carrying amount given the low and stable interest rate environment. Fair values are shown in the table below, split by their level in the fair value hierarchy: Page 171 of 268
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69 Annual Accounts 2022/23 • Level 1 – fair value is only derived from quoted prices in active markets for identical assets or liabilities, e.g. bond prices • Level 2 – fair value is calculated from inputs other than quoted prices that are observable for the asset or liability, e.g. interest rates or yields for similar instruments • Level 3 – fair value is determined using unobservable inputs, e.g. non-market data such as cash flow forecasts or estimated creditworthiness. The fair value for each category of financial instrument is shown below, with the balance sheet carrying amount shown for comparison. Carrying Amount Fair value Financial Liabilities Carrying Amount Fair value £m £m £m £m Financial liabilities measured at amortised cost: (203.994) (254.715) Public Works Loan Board borrowing 2 (227.198) (222.758) (54.653) (73.852) Non-PWLB borrowing (“market debt”) 2 (54.632) (61.519) Other liabilities: (71.581) (102.940) Service Concession and Finance Lease liabilities 3 (68.361) (126.783) (0.005) (0.005) Financial guarantees 3 (0.003) (0.003) (330.233) (431.512) (350.194) (411.063) Financial liabilities measured at amortised cost: (53.168) n/a Borrowing from group entities (35.423) n/a (43.590) n/a Trade payables: short-term (49.657) n/a (96.758) (85.080) As at 31 March 2022 As at 31 March 2023 Fair value level Total financial liabilities for which fair value is disclosed Total financial liabilities for which fair value is not disclosed Carrying Amount Fair value Financial Assets Carrying Amount Fair value £m £m £m £m 25.299 25.299 Callable deposits in money market funds and ultra-short bond funds 1 6.086 6.086 2.954 2.954 Euro current account balances with the council’s banker 2 6.997 6.997 4.512 4.512 Investments in pooled funds (insurance fund) 1 4.157 4.157 32.765 32.765 17.240 17.240 188.584 187.713 Fixed term deposits with UK local authorities 2 166.751 166.751 (9.488) (9.488) Callable deposits with UK banks and building societies (including sterling current account balances with the Council’s banker) 2 (1.502) (1.502) 0.052 0.052 Imprest accounts held at council establishments 2 0.051 0.051 1.592 1.707 Loans made for service purposes 3 1.546 1.681 180.740 179.984 166.846 166.981 213.505 212.749 184.086 184.221 Financial assets measured at amortised cost: 1.437 n/a Trade receivables and prepayments: long-term 1.092 n/a 70.339 n/a Receivables and prepayments: short-term 58.631 n/a 71.776 59.723 As at 31 March 2022 As at 31 March 2023 Total financial assets for which fair value is disclosed Total financial assets for which fair value is not disclosed Fair value level Total Financial assets measured at fair value Total Financial assets measured at amortised cost Page 172 of 268
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70 Annual Accounts 2022/23 Items of income, expense, gain and loss relating to financial instruments The following items of income, expense, gain and loss relating to financial instruments are included within the lines ‘Financing and investment income and expenditure’ and ‘(Surplus)/Deficit from investments in equity instruments designated as Fair Value through Other Comprehensive Income’ in the CIES. 2021/22 Amortised cost Elected to Fair Value through Other Comprehensive Income Fair Value through Profit or Loss 2022/23 £m £m £m £m £m £m 16.420 Interest expense 0.000 0.000 0.000 16.583 16.583 0.000 Impairment losses 0.000 0.000 0.000 0.000 0.000 0.000 Fee expense 0.000 0.000 0.000 0.000 0.000 16.420 Total expense in the Surplus / Deficit on the Provision of Services 0.000 0.000 0.000 16.583 16.583 (0.353) Interest income (3.605) 0.000 (0.701) 0.000 (4.306) (0.110) Dividend income 0.000 (0.110) 0.000 0.000 (0.110) (0.260) Other income (0.196) 0.000 0.000 0.000 (0.196) (0.723) Total income in the Surplus/Deficit on the Provision of Services (3.801) (0.110) (0.701) 0.000 (4.612) (0.009) Net (gain) or loss on revaluation 0.000 (0.057) 0.040 0.000 (0.017) (0.009) (Surplus)/Deficit on the revaluation of financial assets 0.000 (0.057) 0.040 0.000 (0.017) 15.688 Net (Gain)/Loss for the year (3.801) (0.167) (0.661) 16.583 11.954 Financial Assets Financial liabilities at amortised cost Note 23: Nature and extent of risks arising from Financial Instruments The Council’s management of treasury risks actively works to minimise the Council’s exposure to the unpredictability of financial markets and to protect the financial resources available to fund services. The Council complies with 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. In line with the Treasury Management Code, the Council approves a Treasury Management Strategy before the commencement of each financial year. The Strategy sets out the parameters for the management of risks associated with financial instruments. The Council also produces Treasury Management Practices specifying the practical arrangements to be followed to manage these risks. The Treasury Management Strategy includes an Investment Strategy in compliance with Scottish Government guidance on Local Government Investments. This Guidance emphasises that priority is to be given to security and liquidity, rather than yield. The Council’s Treasury Management Strategy and its Treasury Management Practices seek to achieve a suitable balance between risk and return or cost. Page 173 of 268
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71 Annual Accounts 2022/23 Credit Risk Credit risk arises from the short-term lending of surplus funds to financial institutions and local authorities, as well as credit exposures to the Council’s customers. It is the policy of the Council to place deposits only with other local authorities and a limited number of high- quality banks, building societies and money market funds whose credit rating is independently assessed as sufficiently secure by the Council’s treasury advisers and to restrict lending to a prudent maximum amount for each entity. The Treasury Management Strategy outlines the limits placed on investments with any counterparty. The table below summarises the credit risk exposures of the Council’s treasury investment portfolio (including accrued interest) by credit rating. 2021/22 2022/23 £m £m 25.299 AAA (money market funds and and ultra-short bond funds) 6.037 0.500 A 0.500 1.062 A– 1.204 188.584 UK local authorities 165.000 215.445 Total 172.741 Total Investment Portfolio by Credit Rating The Council does not generally allow credit for customers such that, at 31 March 2023, £8.932m of sundry income debt is past its due date for payment (£8.131m as at 31 March 2022). The past due amount can be analysed by age as follows: 2021/22 2022/23 £m £m 2.125 Less than three months 1.684 1.019 Three to six months 1.515 0.429 Six months to one year 0.965 4.558 More than one year 4.768 8.131 Total 8.932 Sundry Income Debt Past Due Loss allowances on trade receivables have been calculated by reference to the Council’s historic experience of default, adjusted for current and forecast economic conditions. Receivables are determined to have suffered a significant increase in credit risk where they are 30 or more days past due and they are determined to be credit-impaired where they are 90 or more days past due. Receivables are written off to the Surplus or Deficit on the Provision of Services when there is no reasonable prospect of payment, or when they become prescribed; but steps are still taken to collect sums owing when information becomes available which suggests the debtor can make payment. Collateral Renfrewshire Council occasionally provides loans to residents who wish to buy their homes under Right to Buy legislation. In such cases the Council takes a standard security over the property. As at 31 March 2023 the outstanding value of home loans advanced by the Council was £0.335m (£0.413m as at 31 March 2022). Liquidity risk The Council’s main source of borrowing is HM Treasury’s Public Works Loan Board, but the Council also has loans classed as ‘lender option borrower option’ (LOBO). There is no significant risk that the Council will be unable to raise finance to meets its commitments under financial instruments. The Council has safeguards in place to ensure that a significant proportion of its borrowing does not mature for repayment at any one time in the future to reduce the financial impact of re-borrowing at a time of unfavourable interest rates. The Council’s policy is to ensure that not more than 15% of loans are due to mature within any financial year and 50% within any rolling five-year period through a combination of prudent planning of new loans taken out and, where it is economic to do so, making early repayments. Page 174 of 268
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72 Annual Accounts 2022/23 The maturity analysis of the principal element of borrowing is as follows: £m % £m % 34.785 13.68% Less than one year* 0.828 0.30% 20.835 8.20% Between one and two years 5.000 1.80% 10.023 3.94% Between two and five years 5.016 1.81% 188.569 74.18% More than five years 266.500 96.09% 254.212 100.00% Total 277.344 100.00% As at 31 March 2022 Principal Borrowing Maturity Analysis As at 31 March 2023 *The principal maturing in less than one year exceeded the 15% target in 2021/22 due to the technical possibility that the call option on LOBO loans could have been called by the lender. Market risk: interest rate risk Changes in market interest rates influence the interest payable on borrowings and on interest receivable on surplus funds invested. For example, a rise in interest rates would mean an increase in the interest charged on borrowing at variable rates and an increased cost to the taxpayer. An increase in interest rates would also mean an increase in the income received on lending at variable rates and a reduction in cost for the taxpayer. Changes in market rates also affect the notional ‘fair value’ of lending and borrowing. For example, a rise in interest rates would reduce the fair value of both lending and borrowing at fixed rates. Changes in the fair value of lending and borrowing do not impact upon the taxpayer and are confined to prescribed presentational aspects in the Accounts. The Council has a variety of strategies for managing the uncertainty of future interest rates and the financial impact on the Council’s finances: • it is the policy of the Council to limit its exposure to variable rate borrowing to a maximum of 25% of what it borrows; • during periods of falling rates and where it is economically advantageous to do so, the Council will consider the repayment and restructuring of fixed interest rate debt; • the Council takes daily advice from its specialist treasury advisers and actively monitors changes in interest rates to inform decisions on the lending of surplus funds, new borrowings and restructurings of existing borrowings. To illustrate the notional impact of changes in interest rates upon the Council, the following table shows the financial effect if rates had been 1% higher during 2022/23, with all other variables held constant. As at 31 March 2023 £m Interest rate risk Decrease in the fair value of fixed rate loans and deposits Decrease in the fair value of fixed rate borrowing 0.161 (10.347) (10.186) (1.195) 0.015 52.864 Increase in interest payable on new fixed rate borrowings taken during the year Increase in interest receivable on deposits placed during the year Notional impact on the Surplus/Deficit on the Provision of Services Share of this impact which would be attributable to the Housing Revenue Account Other changes that would have no impact on the Surplus/Deficit on the Provision of Services or Other Comprehensive Income and Expenditure: The impact of a 1% fall in interest rates would be as above but with the changes being reversed. Page 175 of 268
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73 Annual Accounts 2022/23 Market risk: price risk The Council’s Insurance Fund is invested in an externally managed fund under the powers of schedule 3 of the Local Government (Scotland) Act 1975 and section 3 of the Local Government etc. (Scotland) Act 1994. The investments are managed on behalf of the Council by abrdn Capital Limited in the Phoenix Fund. The objective of the fund is to achieve long-term growth with low volatility, through a widely diversified portfolio. The benchmark return is SONIA+2% per annum. During 2022/23 the book cost of investments increased by £0.115m (£0.110m increase during 2021/22). The investment is classified as fair value through other comprehensive income, meaning that all movements in price will impact on the gains and losses recognised in other comprehensive income and expenditure. This is an accounting requirement that has no impact on the taxpayer. To illustrate the impact of changes in share price upon the Council, an increase or fall of 5% in the general price of shares at 31 March 2023 would have resulted in a £0.071m gain or loss being recognised in Other Comprehensive Income and Expenditure for 2022/23. Market risk: foreign exchange risk As at 31 March 2023 the Council had a foreign currency deposit of €7.959m with the Council’s banker (€3.500m as at 31 March 2022). This sum was being held in order to mitigate the foreign exchange risk associated with a contract being entered into as part of the Glasgow and Clyde Valley City Deal programme. The sterling valuation of this deposit as at 31 March 2023, based on the euro to sterling exchange rate at that time, was £6.997m. To illustrate the impact of changes in foreign exchange rates upon the Council, a relative increase or decrease of 1% in the euro to sterling exchange rate at 31 March 2023 would have resulted in a £0.080m gain or loss being recognised in Other Comprehensive Income and Expenditure for 2022/23. Note 24: External audit costs 2021/22 (restated) 2022/23 £m £m 0.350 Fees payable with regard to external audit services carried out by the appointed auditor for the year 0.443 0.350 Total 0.443 Audit Fees In 2022/23 a rebate of £0.019m was received in relation to a reduction in travel and subsistence costs during the 2019/20 and 2020/21 audits carried out by Audit Scotland. This has been adjusted in the 2021/22 reported fee. The 2022/23 figure excludes the audit fee for the Coats Observatory Trust, which was £6,000. Note 25: Agency services The Council bills and collects non-domestic rates on behalf of the Scottish Government from ratepayers situated within Renfrewshire Council and East Renfrewshire Council. The Council also bills and collects, along with its own council tax, domestic water and sewerage charges on behalf of Scottish Water. In addition, the Council received a number of funding streams from the Scottish Government in 2022/23 to support third parties (individuals and businesses) impacted by the COVID-19 pandemic. The Council had no discretion over the terms of the funding and could not use it for service delivery. This means the Council acted as agent only and the grant funding received and paid out are not included in the Council's reserves, CIES or Balance Sheet. In some cases, an administration grant was awarded to the Council to facilitate these payments. This is accounted for as operational income and expenditure and not disclosed here. Page 176 of 268
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74 Annual Accounts 2022/23 2021/22 2022/23 £m £m 81.663 Scottish Government - Contributions (to)/from the non-domestic rates pool 108.076 10.434 Non-domestic rates collected: East Renfrewshire 13.640 0.063 Service income from East Renfrewshire Council for collection of non-domestic rates 0.066 (10.497) Cost of collection of Non-domestic rates from East Renfrewshire (13.706) 32.136 Domestic water and sewerage charges collected 34.350 (32.136) Domestic water and sewerage charges paid over to Scottish Water (34.350) 0.637 Service income from Scottish Water for collection of domestic water and sewerage charges 0.637 3.318 COVID-19 PPE and Testing kits issued to external providers 0.133 (3.318) COVID-19 PPE and Testing kits received from Scottish Government (0.133) 8.437 Financial Hardship and Self-Isolation grants paid out 0.000 (4.372) Financial Hardship and Self-Isolation funding received from Scottish Government as part of Revenue Support Grant 0.000 (4.065) Financial Hardship and Self-Isolation funding received from Scottish Government (specific funding) 0.000 0.933 Additional payments to Health and Social Care staff (£500) 0.000 0.375 Additional payments to Secondary Teachers (£400) 0.000 (1.308) Additional payments to Health and Social Care staff and Teachers funding received from Scottish Government 0.000 0.000 Cost of Living Awards paid out 9.540 0.000 Cost of Living Awards funding from the Scottish Government (9.540) 0.000 Scottish Child Bridging Payments paid out 0.911 0.000 Scottish Child Bridging Payments funding received from the Scottish Government (0.911) 8.122 Strategic Framework grants paid out (8.122) Strategic Framework funding received from Scottish Government 0.000 5.984 Other support for businesses (including furlough support) paid out (5.984) Other support for businesses (including furlough support) funding received from Scottish Government 0.000 Agency Services Note 26: Related parties The Council’s related parties are those bodies or individuals that have the potential to control or significantly influence the Council, or to be controlled or significantly influenced by the Council, or where those individuals or bodies and the Council are subject to common control. The Council is required to disclose material transactions that have occurred with related parties and the amount of any material sums due to or from related parties. Related party relationships require to be disclosed where control exists, irrespective of whether there have been transactions between the related parties. Disclosure of this information 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. Senior Officers and Elected Members Members of the council and senior officers have control over the Council’s financial and operating policies. They have the responsibility to adhere to a Code of Conduct, requiring them to declare an interest in matters that directly or indirectly influence, or appear to influence, their judgement or decisions taken during the course of their work. The total of councillors’ and senior officers’ remuneration allowances paid in 2022/23 are shown in the Remuneration Report on page 26. Page 177 of 268
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75 Annual Accounts 2022/23 Senior Officers No senior officer holds a remunerated position outside of their Council employment. For details of Senior Officers’ interests, please check the register of interests on the Council website at: https://www.renfrewshire.gov.uk>Your Council >Information, performance and statistics >Council structure/article/2179/Council-structure. Senior Elected Members Under the Council Code of Conduct, elected members and senior officials must declare any registered interests in any bodies where the Council itself does not have significant influence over their operations. Each member’s Register of Interest is available at Councillors - Renfrewshire Website. In 2022/23, the Council made payments to the following bodies where senior councillors have declared a non- financial interest, either through non-remunerated positions held with the organisations, or through being a member of those bodies. Senior Councillor Non-financial Interest / Position Organisation Council Spend in 2022/23 £ Lorraine Cameron Renfrewshire Council representative Kibble Trust 2,725,159 Michelle Campbell Chairperson Erskine Arts Charity 78,495 Iain Nicolson Member Inchinnan Development Trust 27,386 Jim Paterson Renfrewshire Council representative Renfrewshire Citizens' Advice Bureau 473,991 NB: This disclosure excludes group entities and trade union membership. Some senior councillors also hold a remunerated position outwith the Council, i.e. they receive payment from other organisations for employment, or board positions. The following table details these remunerated positions and notes where the Council has made payments to any of the organisations listed. Senior Councillor Remunerated Position Employer / Organisation Council Spend in 2022/23 £ Jacqueline Cameron Non-executive Director: 8 hours per week Public Health Scotland 14,712 Non-Executive Director NHSGGC Health Board 8,984,616 Bank nurse: casual employee NHSGGC Health Board 8,984,616 Constituency Support Officer: part- time employee Gavin Newlands MP Constituency Office 0 Andy Doig Housing Support worker: part-time employee RCA Trust 207,389 Researcher Russell Findlay MSP Constituency Office 0 Marie McGurk Co-Owner Paisley Podiatry and Chiropody Centre 0 Jim Paterson Caseworker: part-time employee Gavin Newlands MP Constituency Office 0 Emma Rodden Constituency Assistant: full-time employee Tom Arthur MSP Constituency Office 0 John Shaw Chief of Staff: full-time employee Gavin Newlands MP Constituency Office 0 Michelle Campbell Neill Graham Page 178 of 268
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76 Annual Accounts 2022/23 Key Related Parties: subsidiaries and associates The organisations set out in the group accounts note are those which the Council is considered to have control or influence over. The following entities have a significant impact on the Council’s operations and have been consolidated into the group accounts: • OneRen (formerly Renfrewshire Leisure) • Renfrewshire Valuation Joint Board • Paisley Museum Reimagined Ltd • Park Lane Developments (Renfrewshire) LLP • Strathclyde Concessionary Travel Scheme Joint Committee • Strathclyde Partnership for Transport • Renfrewshire Health and Social Care Integration Joint Board • Scotland Excel • Glasgow and the Clyde Valley Strategic Development Planning Authority • Glasgow City Region – City Deal Cabinet • Coats Observatory Trust • Johnstone, Paisley and Renfrew Common Good Funds For further details of the nature of group relationships, please refer to the Group Accounts and Notes from page 100. Key Related Parties: Other Public Bodies Scottish Government The Scottish Government has effective control over the operations of the Council as 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, such as Council Tax and Non-Domestic Rates. Grants received from the Scottish Government are set out in the analysis in Note 3: Taxation and non-specific grant income, and other grants received from government departments are shown in Note 5: Grant Income. UK Government The UK Department of Work and Pensions administers funding for the delivery of Housing Benefit and associated costs. The total received by the Council in 2022/23 was £43.9m (£48.9m in 2021/22). In 2022/23, the Council also received funding from the UK Home Office and Department for Levelling Up, Housing and Communities in relation to asylum and resettlement programmes amounting to £0.8m (£0.4m in 2021/22). Rental income Income received from the Care Inspectorate (£0.074m) and Scotland Excel (£0.097m) relate to rental income for occupancy of part of Renfrewshire House. The property rentals were conducted under standard terms and conditions and no guarantees have been applied. Strathclyde Pension Fund Strathclyde Pension Fund is the principal administrators of the post-retirement funds held on behalf of the current and former employees of the Council. Information about transactions during the year and outstanding assets and liabilities in relation to the Council’s share of the Strathclyde Pension Fund can be found in Note 28. Note 27: Pension schemes accounted for as defined contribution schemes Renfrewshire Council participates in the Scottish Teachers' Superannuation Scheme. The scheme is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The scheme is financed by payments from employers and from those current employees who are members of the scheme and paying contributions at progressively higher marginal rates based on pensionable pay, as specified in Page 179 of 268
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77 Annual Accounts 2022/23 the regulations. The rate of employer contributions is set with reference to a funding valuation undertaken by the scheme actuary. The last four-yearly valuation was undertaken as at 31 March 2020, which set the contribution rate payable from 1 April 2020 to 31 March 2023. Renfrewshire Council has no liability for other employers’ obligations to the multi-employer scheme. As the scheme is unfunded there can be no deficit or surplus to distribute on the wind-up of the scheme or withdrawal from the scheme. The scheme is an unfunded multi-employer defined benefit scheme. It is accepted that the scheme can be treated for accounting purposes as a defined contribution scheme in circumstances where Renfrewshire Council is unable to identify its share of the underlying assets and liabilities of the scheme. While the employee rate applied is variable, it will provide an actuarial yield of 9.6% of pensionable pay. At the last valuation a shortfall of £1.3bn was identified in the notional fund, which will be repaid by the increased rate of employers’ pension contribution, effective from 1 September 2019, of 23%. Based on the proportion of employer contributions paid in 2022/23, Renfrewshire Council’s level of participation in the scheme is 3.0%. The Council paid £19.719m (£18.487m in 2021/22) for employer's contributions to the Scottish Public Pensions Agency. £0.444m of expenditure (£0.349m in 2021/22) was charged to service revenue accounts in respect of “added years” pension enhancement termination benefits, representing 0.5% of teachers’ pensionable pay (0.4% in 2021/22). The estimated contribution for 2023/24 is £18.909m. Note 28: Defined benefit pension schemes 28a: Participation in pension schemes The pension scheme for teachers (the Scottish Teachers’ Superannuation Scheme) is explained in the previous note, whilst this note relates exclusively to the pension scheme for all other employees: the Local Government Pension Scheme. The Local Government Pension Scheme in Scotland (LGPS) is a funded, defined benefit, statutory occupational pension scheme. It is regulated by the Scottish Public Pensions Agency but is administered locally by fund administering authorities through regional pension funds. For Renfrewshire Council, the fund administering authority is Glasgow City Council and the regional pension fund is the Strathclyde Pension Fund. As a funded scheme, the Council and employees pay contributions into the fund, calculated at a level intended to balance the scheme’s pension liabilities with the scheme’s investment assets. The statutory nature of the fund means that the post-employment benefits are defined and set out in law. The Strathclyde Pension Fund is a multi-employer fund, and it is possible for each employer to identify its own share of the assets and liabilities of the fund on a consistent and reasonable basis. The principal risks to the scheme are assumptions relating to longevity, inflation, and investment performance; in addition, statutory changes to the scheme. These risks are mitigated to an extent by statutory requirements limiting charges to the Council’s general fund. The Council has additional liabilities for unfunded discretionary pension payments outside the main schemes such as arrangements for the award of discretionary post-employment benefits upon early retirement. This is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pensions liabilities, and cash has to be generated to meet actual pensions payments as they eventually fall due. 28b: Transactions relating to post- employment benefits The Council accounts for post-employment benefits in the CIES as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions Page 180 of 268
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78 Annual Accounts 2022/23 and accounting for investment returns on any resources set aside to meet the costs. However, the charge according to statutory regulations that is required to be made against the General Fund Balance and the Housing Revenue Account Balance is based upon the employer contributions payable by the Council to the pension fund in the year. This requires an adjustment to be made in the movement in reserves statement to remove the cost (according to generally accepted accounting practices) of post-employment benefits and replace that cost with the value of employer contributions payable to the fund in the year. The following transactions have been made in the CIES and the General Fund Balance via the movement in reserves statement during the year: 2021/22 2022/23 £m £m Included within net cost of services: 70.497 Current service cost 69.403 5.123 Past service cost/(gain) 3.078 Included within Financing and Investment income and expenditure: 35.942 Interest cost 47.114 (31.035) Expected return on scheme assets (45.130) 80.527 Total of Post-employment benefits charged to the Surplus/Deficit on the Provision of Services 74.465 Included within Other Comprehensive Income and Expenditure: (88.246) Return on Assets excluding amounts included in net interest 71.373 (10.729) Actuarial gains and losses arising on changes in Demographic Assumptions (13.264) (122.672) Actuarial gains and losses arising on changes in Financial Assumptions (672.239) 7.065 Actuarial gains and losses arising on changes in Other Assumptions 86.064 (134.055) Total of LGPS post-employment benefits charged to the CIES (453.601) Movement in reserves statement: (214.582) Actuarial losses or (gains) (528.066) 0.000 Restriction on pension asset to Asset Ceiling 258.205 0.264 Effect of business combinations and disposals 0.000 80.527 Reversal of items relating to post-employment benefits debited or credited to the Surplus/Deficit on the Provision of Services 74.465 (32.522) Employer contributions and direct payments to pensioners payable in the year (35.716) (166.313) Movement in the year on the Pension Reserve (231.112) The cumulative amount of actuarial gains and losses recognised in the CIES as at 31 March 2023 is a gain of £394.710m (£124.849m gain as at 31 March 2022). 28c: Assets and liabilities relating to post-employment benefits Renfrewshire Council's share of the defined benefit obligation (that is, the scheme liabilities) and of the scheme assets in the Strathclyde Pension Fund has been assessed by Hymans Robertson LLP, the Fund’s independent actuaries. The assessment indicates that, as at 31 March 2023, scheme assets exceeded the defined benefit obligation by £434.096m (£55.221m excess of obligations over assets as at 31 March 2022). The defined benefit obligation is valued on an actuarial basis using the “projected unit credit” method, which estimates the pensions that will be payable in future years (dependent on assumptions about mortality rates, salary levels and other factors) discounted to their Page 181 of 268
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79 Annual Accounts 2022/23 present value. The discount rate used at 31 March 2023 was 4.75% based on the indicative rate of return on high quality corporate bonds. Scheme assets are valued at fair value which, in the case of marketable securities, is market value using the current bid price. Where no market price is available, the fair value of scheme assets is estimated. The valuations are based on the latest formal valuation of the Strathclyde Pension Fund which was carried out as at 31 March 2020. The common position for employers participating in the Strathclyde Pension Fund is that, based on a snapshot valuation as at 31 March 2023, a net pension asset is disclosed as a result of prevailing market conditions at that date. The net pension asset position of £434.096m represents a decrease in liability of £489.317m between 31 March 2022 and 31 March 2023. The net pension liability has a substantial impact on the net worth of the Council as recorded in the balance sheet. However, this surplus of scheme assets is restricted to the “asset ceiling” i.e. the net present value of future service costs less net present value of future contributions as at 31 March 2023. This has been calculated to be £175.892m Local government legislation provides that local authorities have an obligation to meet the expenditure of the joint boards of which they are constituent members. As a consequence, Renfrewshire Council has additional liabilities arising from the pension scheme deficits of the Renfrewshire Valuation Joint Board. In accordance with accounting regulations, the group accounts include a share of the post-employment benefits transactions, defined benefit obligations and scheme assets of this joint board. Further information can be found in the annual report and accounts of each joint board. The main fund (Fund 1) of Strathclyde Pension Fund does not have an asset and liability matching (ALM) strategy. 28d: Movement in defined benefit obligation (scheme liabilities) The following is a reconciliation of the 2022/23 opening and closing balances of the present value of Renfrewshire Council’s share of the Strathclyde Pension Fund’s defined benefit obligation (that is, scheme liabilities). 2021/22 2022/23 £m £m 1,767.336 Balance at 1 April 1,725.861 70.497 Current service cost 69.403 5.123 Past service cost (including curtailments) 3.078 35.942 Interest cost 47.114 8.426 Member contributions 9.240 6.649 Effect of business combinations and disposals 0.000 (126.336) Actuarial losses or (gains) (599.439) Losses or (gains) on curtailment (4.605) Estimated benefits paid: unfunded (4.685) (37.171) Estimated benefits paid: other (38.581) 1,725.861 Balance at 31 March 1,211.991 Page 182 of 268
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80 Annual Accounts 2022/23 28e: Movement in scheme assets The following is a reconciliation of the 2022/23 opening and closing balances of the fair value of Renfrewshire Council’s share of the Strathclyde Pension Fund’s scheme assets. 2021/22 2022/23 £m £m 1,545.802 Balance at 1 April 1,670.640 31.035 Expected return on scheme assets 45.130 8.426 Member contributions 9.240 27.917 Employer contributions 31.031 4.605 Contributions in respect of unfunded benefits 4.685 6.385 Effect of business combinations and disposals 0.000 88.246 Actuarial (losses) or gains (71.373) (4.605) Estimated benefits paid: unfunded (4.685) (37.171) Estimated benefits paid: other (38.581) 1,670.640 Balance at 31 March 1,646.087 The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy as provided by the administering authority. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. The actual return on scheme assets from 1 April 2022 to 31 March 2023 was 1.6%. The fair value of the assets held in the scheme may be analysed as follows: Quoted Prices in active markets Prices not quoted in active markets Total Quoted Prices in active markets Prices not quoted in active markets Total £m £m £m £m £m £m 367.318 0.794 368.112 Equity instruments 321.441 2.951 324.392 0.000 0.000 0.000 Debt instruments (bonds) 0.000 0.000 0.000 0.000 327.050 327.050 Private Equity 0.000 404.589 404.589 0.000 140.891 140.891 Real Estate 0.000 135.719 135.719 9.268 782.810 792.078 Investment Funds 7.090 743.114 750.204 0.000 0.000 0.000 Derivatives 0.000 (0.001) (0.001) 41.946 0.563 42.509 Cash and cash equivalents 22.766 8.418 31.184 418.532 1,252.108 1,670.640 Fair value of scheme assets 351.297 1,294.790 1,646.087 As at 31 March 2022 As at 31 March 2023 Page 183 of 268
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81 Annual Accounts 2022/23 28f: Scheme history: analysis of defined benefit obligation and scheme assets The Council’s share of the accumulated deficit or surplus in the scheme is shown below. The analysis shows the nature of various elements of the Council’s share of the scheme’s defined benefit: As at 31 March 2022 As at 31 March 2023 £m £m (895.339) Current employee members (568.195) (69.073) Pre-local government reorganisation (1996) liabilities (57.322) (182.553) Deferred pensioners (111.002) (488.130) Pensioners (401.978) (1,635.095) Total Present Value of the Defined Benefit Obligation - Funded liabilities (1,138.497) (82.127) Retirals from Renfrewshire Council (66.196) (8.639) Retirals pre-local government reorganisation (1996) (7.298) (90.766) Total Present Value of the Defined Benefit Obligation - Unfunded liabilities (73.494) (1,725.861) Present value of defined benefit obligation (1,211.991) 1,670.640 Fair value of scheme assets 1,646.087 0.000 Restriction to asset ceiling (258.205) (55.221) Net (liability)/asset arising from defined benefit obligation 175.891 Basis for estimating assets and liabilities The following table shows the principal assumptions used by Hymans Robertson LLP, the Fund’s independent actuaries, to estimate the Council’s post-employment benefits transactions for 2022/23, and the Council’s share of the Strathclyde Pension Fund’s defined benefit obligation (scheme liabilities) and scheme assets as at 31 March 2023: 2021/22 2022/23 2.7% Discount rate for defined benefit obligation 4.8% 2.7% Long-term expected rate of return on scheme assets* 2.7% 3.9% Rate of increase in salaries 3.7% 3.2% Rate of increase in pensions 3.0% 3.2% Rate of inflation 3.0% Mortality assumptions (years): Longevity at age 65 for current pensioners: 19.6 Men 19.3 22.4 Women 22.2 Longevity at age 65 for future pensioners: 21.0 Men 20.5 24.5 Women 24.2 Take up of option to convert annual pension into retirement lump sum 50% For Pre-April 2009 service 50% 75% For Post-April 2009 service 75% *The expected rates of return are set equal to the discount rate as per IAS19 , Page 184 of 268
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82 Annual Accounts 2022/23 The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above. The sensitivity analyses 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 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 did not change from those used in the previous period. The limitations of methods and assumptions used are associated with any changes in market conditions that affect the net discount rate. These can have a significant effect on the value of the obligations reported. Impact on the Defined Benefit Obligation on the Scheme % £m 0.1% decrease in the Real Discount Rate 2% 22.091 1 year increase in the member life expectancy 4% 48.480 0.1% increase in the Salary Increase Rate 0% 2.675 0.1% increase in the Pension Increase Rate 2% 19.729 In addition, a one-year increase in life expectancy is estimated to increase the Defined Benefit Obligation by 3-5%. Impact on the Authority’s cash flows An objective of the Fund is to keep employers’ contributions at as constant a rate as possible. The Fund has agreed a strategy to achieve a funding rate of 100% in the longer term. Employers’ and employees’ contributions have been determined so that rates are standard across all participating employers. The rate for employer contributions has been set at 19.3% for 2022/23 to 2023/24. The total contribution expected to be made by the Council to the Strathclyde Pension Fund in the forthcoming year to 31 March 2023 is £29.439m. The weighted average duration of the defined benefit obligation is 19 years. Note 29: Contingent liabilities i) The Council has been notified of a number of contractor claims for additional costs incurred on construction contracts. The Council disputes the claims, which may be referred for arbitration. The Council recognises a contingent liability for potential costs, which may be incurred to resolve this dispute. It is not considered practicable at this stage to estimate the financial effect. ii) Following two court cases, including Mrs Goodwin v Department for Education, it is expected that proposed changes to public service pension schemes will be required, to ensure that surviving same-sex spouses and civil partners receive benefits equivalent to those received by the surviving spouses of opposite-sex marriages. Strathclyde Pension Fund’s actuary estimates that the potential impact may be in the range of 0.1%- 0.2% of gross obligations, which equates to between £1.767m and £3.535m for the Council. This estimate is not reflected in the Primary Financial Statements because the trigger event that would require recognition has not yet occurred. Note 30: Events after the balance sheet date Events taking place after the authorised date for issue per the balance sheet 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. Note 31: Accounting Standards Issued not Adopted The Code requires the disclosure of information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted. The following new or amended standards are adopted within the 2023/24 Code: Page 185 of 268
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83 Annual Accounts 2022/23 • IFRS 16 Leases • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) • Annual Improvements to IFRS Standards 2018–2020. The annual IFRS improvement programme notes the following relevant standards: o IFRS 1 (First-time adoption) – amendment relates to foreign operations of acquired subsidiaries transitioning to IFRS o IAS 37 (Onerous contracts) – clarifies the intention of the standard o IFRS 16 (Leases) – amendment removes a misleading example that is not referenced in the Code material. None of the matters covered in the annual improvements are dealt with in detail in the 2023/24 Code; however during the Code consultation process, CIPFA/LASAAC did not envisage a significant effect on local authority financial statements. The Code allows implementation from 1 April 2022 and there is therefore no impact on the 2022/23 accounts. There is no material impact anticipated in future years from the implementation of these standards, other than IFRS 16 Leases. The impact of this standard is that many long-term rented assets will now be disclosed in the Balance Sheet along with their associated liability and be subject to depreciation. CIPFA LASAAC has since issued a formal decision to defer the implementation of IFRS 16 until 1 April 2024 (i.e., in the 2024/25 accounts), with the option to adopt earlier if local authorities wish to do so. Renfrewshire Council will look to adopt the new standard in the 2023/24 accounts if it is deemed practical to do so at that time. Note 32: Accounting Policies – Renfrewshire Council The Financial Statements for the year ended 31 March 2023 have been prepared in accordance with proper accounting practice as per section 12 of the Local Government in Scotland Act 2003. Proper accounting practice comprises the Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code) and the Service Reporting Code of Practice, supported by International Financial Reporting Standards and recommendations made by the Local Authority (Scotland) Accounts Advisory Committee (LASAAC). They are designed to give a true and fair view of the financial performance and position of the Council and comparative figures for the previous financial year are provided. There are no significant departures from these recommendations. The accounts have been prepared under the historic cost convention, other than changes resulting from the revaluation of certain categories of non-current assets and financial instruments, and on a going concern basis. A Accruals of Expenditure and Income Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: i) Revenue from the sale of goods or provision of services is recognised when the performance obligation relating to the transaction has been satisfied, and it is probable that the economic benefits or service potential associated with the transaction will flow to the Council. ii) 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. Works are charged as expenditure when they are completed, before which they are carried as assets under construction on the Balance Sheet. iii) Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument. Interest receivable and dividend income is recognised when it is probable that the economic benefits or service potential associated with the transaction will flow to the Council. iv) Where income and expenditure have been recognised but cash has not been received or paid, a Page 186 of 268
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84 Annual Accounts 2022/23 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. v) Supplier invoices paid in the two weeks following the year-end are accrued together with specific accruals in respect of further material items provided the goods or services were received by 31 March 2023 or relate to services associated with the prior financial year. B Business Improvement District Following the formation of the Paisley First BID company on 15 January 2015, the Council has entered into an agreement to act as the billing body for the purposes of the Planning etc. (Scotland) Act 2006 and the Regulations and is responsible for the administration, collection and recovery of the BID Levy. As the Council is acting as agent for the BID company, no transactions in relation to the BID levy or BID Revenue Account are included in the CIES with the exception of any contribution made by the Council to the BID project, the costs and income related to the collection of the BID levy or any income from the BID company in relation to services provided. C Cash and Cash Equivalents Cash is defined as cash in hand and deposits repayable on demand less overdrafts repayable on demand. Cash equivalents are defined as call accounts, money market funds and instant deposits. Fixed term deposits are not classified as cash or cash equivalents as these are held for investment purposes rather than for meeting short- term cash commitments. D Charges for the Use of Assets Services are charged for the use of assets no matter how they are financed, and this charge includes a provision for depreciation where appropriate. E Contingent Assets and Liabilities Contingent assets and liabilities are not recognised in the financial statements but are disclosed as a note to the accounts where they are deemed material. F Employee Benefits Benefits payable during employment All salaries and wages earned up to 31 March 2023 are included in the Accounts irrespective of when payment was made. An accrual is made for the cost of holiday entitlements earned by employees, but not taken before the year end and which employees may carry forward into the next financial year; along with any pay inflation agreed for the year and not yet paid. 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. They are charged on an accruals basis to the relevant service line in the CIES when the Council is demonstrably committed to either terminating the employment of an officer or making an offer to encourage voluntary redundancy. The Council is only demonstrably committed to a termination when it has a detailed formal plan for the termination, and it is without realistic possibility of withdrawal. 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 pension enhancement termination benefits and to 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. Page 187 of 268
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85 Annual Accounts 2022/23 Post-employment benefits The Council participates in two formal pension schemes: the Local Government Pension Scheme which is administered by Strathclyde Pension Fund; and the Scottish Teachers’ Superannuation Scheme. Liabilities for the Scottish Teachers’ Superannuation Scheme cannot be identified specifically to the Council; therefore, the scheme is accounted for as a defined contributions scheme. The Local Government Pension Scheme is accounted for as a defined benefit scheme in accordance with International Accounting Standard 19 (IAS19) (as revised in 2011). Renfrewshire Council's share of the net pension asset or liability in Strathclyde Pension Fund and a pension reserve are recognised in the Balance Sheet. The CIES recognises changes during the year in the pension asset or liability. Service expenditure includes pension costs based on employers' pension contributions payable and payments to pensioners in the year. Liabilities are included in the Balance Sheet on an actuarial basis using the projected unit method. Liabilities are discounted to their value at current prices using a discount rate based on the indicative rate of return on high quality corporate bonds. Assets are included in the Balance Sheet at their fair value, principally the bid price for quoted securities, and estimated fair value for unquoted securities. G Events after the Balance Sheet date Events after the Balance Sheet date are those events that occur between the end of the reporting period and the date when the Statements are authorised for issue. There are two types of events: • Adjusting events – those that provide evidence of conditions that existed at the end of the reporting period, and the Statements are adjusted to reflect such events • Non-adjusting events – those that are indicative of conditions that arose after the reporting period, and the Statements are not adjusted. Events taking place after the date of authorisation for issue are not reflected in the Statements. H Prior Period Adjustments When items of income and expense are material, their nature and amount is disclosed separately, either on the face of the CIES or in the notes to the accounts, depending on how significant the items are to an understanding of the Council’s financial performance. Where there has been a change in accounting policy, that change will be applied retrospectively. Where there has been a change in accounting estimate, that change will be applied prospectively. Where a material misstatement or omission has been discovered relating to a prior period, that misstatement or omission will be restated unless it is impracticable to do so. I Financial Instruments Financial Assets Financial assets are classified into three categories of valuation: • At amortised cost; • At fair value through other comprehensive income – designated equity instruments; and • At fair value through profit or loss. Financial Assets Measured at Amortised Cost Financial assets measured at amortised cost 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 CIES for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the loans made by the Council, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the CIES is the amount receivable for the year in the loan agreement. Page 188 of 268
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86 Annual Accounts 2022/23 Any gains and losses that arise on the derecognition of an asset are credited or debited to the Financing and Investment Income and Expenditure line in the CIES. The Council has assets such as investments and debtors which are classified as financial assets measured at amortised cost. Financial Assets Measured at Fair Value through other Comprehensive Income (FVOCI) Financial assets that are measured at FVOCI are recognised on the Balance Sheet when the Council becomes party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Investment income is credited to Financing and Investment Income and Expenditure in the CIES when it becomes receivable by the Council. Where an equity instrument is designated as FVOCI, changes in fair value are posted to Other Comprehensive Income and Expenditure and are balanced by an entry in the Financial Instruments Revaluation Reserve (an unusable reserve). When the asset is derecognised, the cumulative gain or loss previously recognised in Other Comprehensive Income and Expenditure is transferred from the Financial Instruments Revaluation Reserve and recognised in the Surplus or Deficit on the Provision of Services. The Council has made an irrevocable election to designate these assets as FVOCI on the basis that they are held for non-contractual benefits, not for trading, but for strategic purposes. Financial assets measured at fair value through profit and loss Assets are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the CIES when it becomes receivable by the Council. Assets values are based on the following principles: • instruments with quoted market prices – the market price • other instruments with fixed and determinable payments – discounted cash flow analysis • equity shares with no quoted market prices – independent appraisal of company valuations. Any gains and losses that arise on the derecognition of the asset are credited/debited to the Financing and Investment Income and Expenditure line in the CIES. Where fair value cannot be measured reliably, the instrument is carried at cost (less any impairment losses). Expected Credit Loss Model Where assets are identified as impaired as a result of an expected credit loss, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the CIES. If the asset has fixed or determinable payments, 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. Otherwise, the impairment loss is measured as any shortfall of fair value against the acquisition cost of the instrument (net of any principal repayment and amortisation). 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 initially measured at fair value and carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the CIES 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 CIES is the amount payable for the year according to the loan agreement. Page 189 of 268
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87 Annual Accounts 2022/23 Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Income and Expenditure Account in the year of extinguishment. 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 is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the CIES 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 CIES, 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 that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the CIES 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 Guarantees Financial guarantees are recognised at fair value assessed as the probability of the guarantees being called and the likely amount payable under the guarantees. Loans Fund The Council operates a Loans Fund and all loans raised are paid into the Fund. Advances are made to departments to finance capital expenditure during the year. Repayments to the Loans Fund are calculated using the annuity method. The local Authority (Capital Financing and Accounting) (Scotland) Regulations 2016 - loans fund accounting came into force on 1 April 2016 and replaced the statutory provisions for local authority borrowing, lending and loans funds as set out in Schedule 3 of the local Authority (Scotland) Act 1975. The regulations contain the following provisions in respect of the loans fund: • Regulation 12 places a duty on a local authority to maintain a loans fund, which is to be administered in accordance with the proper accounting practices and prudent financial management, • Regulation 13 requires a local authority to make loans fund advances each year for expenditure of or lending to third parties by, the local authority which it has determined should be met from borrowing, and • Regulation 14 requires a local authority to determine for each loans fund advance the period over which it will be repaid and the amount of each repayment. Both the period and the annual amounts must be considered by the authority to be prudent. Interest is calculated and allocated to the CIES in accordance with Local Authorities Scotland Accounts Advisory Committee’s (LASAAC) Guidance Note 2: Statement on the Calculation and Allocation of Loans Fund Interest and Expenses. Financial Instruments - Fair Value Measurement Fair value is defined as 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 take place either in the principal market for that asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Valuation techniques used are appropriate in the circumstances and have sufficient data 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 Page 190 of 268
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88 Annual Accounts 2022/23 disclosed in the 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. The fair value hierarchy gives priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). J Government Grants and other Contributions 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 CIES until conditions attaching to the grant or contribution have been satisfied. 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 or Taxation and Non-Specific Grant Income in the CIES. Where capital grants are credited to the CIES, 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. K Heritage Assets The Council’s heritage assets are held in the museums operated by OneRen (Paisley Museum and Art Gallery, Renfrew Town Hall and Museum, and The Secret Collection). The purpose of holding these assets according to the Museums’ Statement of Purpose is “to enhance public understanding of the human and natural world, principally by the use of original objects”. 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. The accounting policies in relation to heritage assets that are deemed to include elements of intangible heritage assets are also presented below. Purchased acquisitions are recognised at cost and donated acquisitions are recognised at valuation with reference to appropriate commercial markets. Acquisitions are made in line with the approved Acquisition and Disposal Policy. The collections of heritage assets are accounted for as follows: Art Collection The collection includes fine, contemporary and applied art works. The collection is included in the balance sheet at market value where this is available (from external valuations provided by suitably experienced and knowledgeable experts) or insurance valuations provided by the relevant collection curator. The assets within the collection are deemed to have indeterminate lives and a high residual value, and therefore no depreciation is charged. Page 191 of 268
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89 Annual Accounts 2022/23 Shawl and textile design The museums hold a collection of approximately 1,000 Paisley-type shawls, and a considerable collection of original designs for shawl manufacture. The collection is included in the balance sheet at insurance valuation which is based on market values. The assets within the collection are deemed to have indeterminate lives and a high residual value, and therefore no depreciation is charged. Natural History The collection includes vertebrate and invertebrate zoology, botany, geology and microslide collections; in addition to a library of natural history books. The collection is included in the balance sheet at insurance valuation which is based on market values. The assets within the collection are deemed to have indeterminate lives and a high residual value, and therefore no depreciation is charged. Human History The museums hold collections relating to social history, transport, science (including an important collection of astronomical apparatus in Coats Observatory), archaeology, arms, local archives, numismatics, photography, textiles, ethnography and Egyptology. The collection is included in the balance sheet at insurance valuation which is based on market values. However, where an external valuation or cost information is available, or a valuation may be secured at a cost which is not prohibitive relative to the value of the item, then the Council will recognise the asset in the balance sheet at this value. The assets within the collection are deemed to have indeterminate lives and a high residual value, and therefore, no depreciation is charged. In addition to the museum collections, there are a number of public space statues, monuments, memorials, fountains and outdoor artworks at various locations throughout Renfrewshire. These assets are not generally recognised in the balance sheet. The Council considers that obtaining valuations would involve disproportionate cost and that reliable cost or valuation information cannot be obtained for these items. This is because of the diverse nature of assets held, the number of assets and the lack of comparable data. However, where reliable cost information can be reasonably obtained, the asset will be included in the balance sheet. The carrying amounts of heritage assets are reviewed where there is evidence of impairment for heritage assets, eg 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. Heritage assets will occasionally be disposed of in accordance with the approved Acquisitions and Disposal Policy (a copy of which is available). Assets are only disposed of for curatorial reasons (eg the item has deteriorated to such an extent it is no longer suitable for public display) and not with the aim of generating funds. Any 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. Expenditure incurred in preserving individual items is recognised in the CIES. L Intangible Assets The Council accounts for purchased software licences as Intangible Assets. Expenditure on intangible assets is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Items costing less than £9,000 are not treated as Intangible Assets. Intangible assets are measured initially at cost. Amounts are not revalued, as the fair value of the assets held by the Council cannot be determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life. An asset is tested for impairment whenever there is an indication that the Page 192 of 268
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90 Annual Accounts 2022/23 asset might be impaired. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the CIES. 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 (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. M Interests in Companies and Other Entities The Council has material interests in two charitable companies, a limited liability partnership and Joint Boards and Committees that have the nature of subsidiaries and associates under accounting conventions, requiring it to prepare group accounts. In the Council’s own single-entity accounts, these interests are not recorded as the Council has no shares in, or ownership of, any of these organisations. Reflected in the Council’s single-entity balance sheet is a 50% share in an Integration Joint Board, which is recorded as an investment. N Inventories Inventories (generally consumable stock) are included in the Balance Sheet at weighted average cost. The Code requires inventories to be held at lower of cost or Net Realisable Value. Weighted average cost is used as the measure of cost. O Investment Property Investment properties are those that are used solely to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost and subsequently at fair value. 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 CIES. 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 (for any sale proceeds greater than £10,000) the Capital Receipts Reserve. P 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 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. The Council as Lessee Finance Leases Property, plant and equipment held under a finance lease is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Lease payments are apportioned between: • a charge for the acquisition of the interest in the property – applied to write down the lease liability, and • a finance charge (debited to the CIES). Page 193 of 268
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91 Annual Accounts 2022/23 Property, Plant and Equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the assets estimated useful life. Operating Leases Rentals paid under operating leases are charged to the CIES. Title to the property, plant or equipment remains with the lessor. The Council as Lessor Finance Leases Where the Council grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. Lease rentals receivable are apportioned between: • a capital receipt for the disposal of the asset – applied to write down the Debtor (together with any premiums received); and • finance income (credited to the CIES). 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 CIES. Q Overheads and Central Support Costs Where internal costs are allocated to user departments, the basis of allocation varies by originating department, for example the cost of Payroll Services may be allocated on the number of payslips per service. In many instances the allocation is time-based. Internal transactions are no longer present in the income and expenditure figures reported in the CIES. R Service Concession Arrangements – School Buildings and Other Facilities The Council carries the assets used under PFI or Service Concession 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. The accounting treatment of the contractual arrangements are in accordance with IFRIC12 Service Concession Arrangements. S 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. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential 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. The cost of assets acquired other than by purchase is deemed to be its fair value. The valuation of work-in- progress is based on cost plus an appropriate proportion of overheads, together with attributable profits and allowances for foreseeable losses. Plant, furniture and computer equipment costing less than £9,000 are not treated as fixed assets. This de- minimis level does not apply where certain categories of these assets are grouped together and form part of the approved capital programme. Page 194 of 268
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92 Annual Accounts 2022/23 Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the CIES. Where gains are credited to the CIES, they are reversed out of the General Fund Balance to the Capital Adjustment Account. Assets are then carried in the Balance Sheet using the following measurement bases: • infrastructure, community assets and assets under construction – depreciated historical cost; • council dwellings – fair value, determined using the basis of existing use value for social housing (EUV- SH). Council dwellings are valued using a Beacon Principle (adjusted vacant possession) methodology in accordance with the Royal Institution of Chartered Surveyors (RICS) guidance; • Vehicles, plant, furniture and equipment – depreciated replacement cost; • Other land and buildings – fair value, determined as the market value amount that would be paid for the asset in its existing use (existing use value – EUV). Operational assets are shown at the lower of net current replacement cost or net realisable value in existing use. Non-operational assets are shown at the lower of net current replacement cost or net realisable value. Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost is used as an estimate of fair value. Assets included in the Balance Sheet at fair value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their fair value at the year-end, but as a minimum every five years. The effective date of any revaluation is 31 March. Valuations are undertaken by the Council Valuer who is MRICS qualified. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. 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. Fair Value Measurement The authority 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 in an orderly transaction between market participants at the measurement date. The authority 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 for which fair value is measured are categorised within the fair value hierarchy as follows: • Level 1 - quoted prices in active markets for identical assets 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, either directly or indirectly; • Level 3 - unobservable inputs for the asset. 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 an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are 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, the carrying amount of the asset is written down against the relevant service line(s) in the CIES. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Page 195 of 268
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93 Annual Accounts 2022/23 CIES, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Disposals 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 CIES. Gains in fair value are recognised only up to the amount of any previously losses recognised in the Surplus or Deficit on Provision of Services. 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 CIES as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the CIES 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 in excess of £10,000 are categorised as capital receipts and are credited to the Capital Receipts Reserve. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life, investment properties and assets that are not yet available for use (i.e., assets under construction). Deprecation is calculated on the following bases: • dwellings and other buildings – straight-line allocation over the useful life of the property of between 10 and 50 years as estimated by the Council Valuer • vehicles, plant and equipment – a percentage of the value of each class of assets in the Balance Sheet, as advised by a suitably qualified officer based on useful lives of between 3 and 30 years. • infrastructure – straight-line allocation over between 10 and 60 years. General Fund services are charged with depreciation where appropriate for the use of assets no matter how they are financed. Depreciation on the Council’s non- operational assets is not charged to service revenue accounts. It is however reflected in the CIES through non-distributable costs. 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. Significance is determined by comparing a component’s cost against the overall cost of an asset, and a component is deemed significant if its cost is 20% or more of the total asset cost. The de- minimis threshold for componentisation is £1m. 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 Capital Adjustment Account. T Provisions Provisions are made 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. Provisions are charged as an expense to the appropriate service line in the CIES. 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. Page 196 of 268
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94 Annual Accounts 2022/23 U Reserves The Council has various reserve funds. The two capital reserves arising from the system of capital accounting are the Revaluation Reserve and the Capital Adjustment Account. The former of these represents the store of gains on revaluation of fixed assets not yet realised through sales and the latter relates to amounts set aside from capital resources to meet past expenditure. The two accounting reserves arising from the restatement of financial instruments to “fair value” are the Financial Instruments Adjustment Account and the Financial Instruments Revaluation Reserve. The Financial Instruments Adjustment Account is a balancing account to allow for differences in statutory requirements and proper accounting practices for lending & borrowing by the Council. The Financial Instruments Revaluation Reserve is a store of gains or losses on revaluation of the investments of the Insurance Fund not yet realised through sales. The Pension Reserve arises from the IAS19 accounting disclosures for retirement benefits and recognises the Council's share of actuarial gains and losses in the Strathclyde Pension Fund and the change in the Council’s share of the Pension Fund net liability chargeable to the CIES. V 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 has been charged as expenditure to the relevant service in the CIES 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. W Value Added Tax Income and Expenditure excludes any amount relating to Value Added Tax (VAT), as all VAT is payable to HM Revenue & Customs and all VAT is recoverable from them. Page 197 of 268
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95 Annual Accounts 2022/23 Note 33: Judgements in Applying Accounting Policies In applying the accounting policies, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. Where a judgement has been made, this is referred to in the relevant note to the core financial statements; however, a summary of those with the most significant effect is detailed below. Item Judgement Public Sector Funding The Council has assessed that anticipated levels of local government funding over the medium term do not provide sufficient 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. This is discussed further in the Management Commentary. Service Concession Arrangements The Council is deemed to control the services provided under the agreement for the provision of schools. The accounting policies for PFI 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. Bargeddie Waste Facility is shared by a number of Scottish councils with North Lanarkshire Council taking the lead. The apportionment of costs and liabilities over the life of the facility, which was funded by a service concession agreement, has been agreed between the councils involved and the local external audit team. Note 15 provides further details. Council acting as Agent, not Principal 'Agent' is where the Council is acting as an intermediary and 'Principal' is where the Council is acting on its own behalf. From 2020/21, the Council received funding from the Scottish Government relating to grants and subsidies in support of hardship experienced by third parties from the impact COVID-19. In many cases, the Council had no discretion over the terms of the grants awarded and any unspent grant was repaid to the Scottish Government; these have been treated as Agent transactions and excluded from the CIES, Balance Sheet and related Notes. Cashflows have, however, been included in the Cashflow Statement. CIPFA and the Local Authority (Scotland) Accounts Advisory Committee issued guidance in relation to the funding streams administered by Scottish local authorities in terms of their treatment as Agent or Principal activities and this guidance has been followed. Further detail on the sums involved can be found in Note 25. Impairment of financial assets In line with IFRS9: Financial Instruments, the approach to impairment of financial assets depends on the type of asset being assessed, either using a ‘historic loss rate’ approach, or a ‘probability of default’ approach, whereby historical experience of default rates across a similar class of instrument and credit rating is used to estimate 12-month expected credit losses. Further detail can be found at Note 22: Financial Instruments. Determination of Contingent Liabilities and Provisions A Provision is defined by the Code as a liability of uncertain timing or amount. A Contingent Liability is a possible obligation whose timing or value cannot be reliably measured and the Council makes a judgement on which is appropriate based on information available at the Balance Sheet date. Page 198 of 268
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96 Annual Accounts 2022/23 Item Judgement Rolling Valuation Programme The Council employs professional valuers who are registered with the Royal Institution of Chartered Surveyors. These valuers carry out regular reviews of the value of assets reported in the Balance Sheet and any significant changes in value are processed as asset revaluations or impairments. These values are based on their professional opinion using available market information at the time of assessment. Due to the high number of assets, a rolling programme of asset valuation has been established for many years, with the aim of revaluaing one fifth of the portfolio each financial year. This carries inherent risk that assets not valued in-year have been subject to material changes in value. The highest risk in this respect relates to assets valued using the Depreciated Replacement Cost (DRC) method, which for Renfrewshire Council, includes schools and leisure centres. To mitigate for this risk, a desktop exercise was undertaken for 2022/23 accounts to estimate the potential increase in value of all DRC assets not valued in-year and reflected any material adjustment required in these accounts. Note 34: Assumptions made about the future 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 as at 31 March 2023 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: Item Uncertainty Effect if results differ from assumption Pensions Liability 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. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied. The carrying value of the net pension asset was £434.1m, before the asset cap, as at 31 March 2023 (liability of £55.2m as at 31 March 2022). Further detail can be found in Note 28: Defined Benefit Pension Schemes. The effects on the net pension liability of changes in individual assumptions can be measured. For instance, a 0.1% decrease in the discount rate assumption would result in an increase in the pension liability of £22.0m. However, the assumptions interact in complex ways. At 31 March 2023, the Council’s actuaries advised that (before the asset cap is applied) the net pensions opening liability had increased by £86.064m as a result of estimates being corrected as a result of experience; decreased by £13.3m as a result of updating demographic assumptions; and decreased by £672.2m as a result of updating financial assumptions. Debt Impairment At 31 March 2023, the Council had a balance for long and short term debtors (including council tax, rent arrears and trade debtors) of £70m. A review of significant balances suggested that an impairment of doubtful debts of £36.7m was appropriate. However, in the current economic climate it is not certain that such an allowance would be sufficient. Over 2022/23, the principal debt impairment increase related to Council Tax and Rents, which increased by £1.1m. Based on experience, the bad debt provision is considered adequate; however, if collection rates were to deteriorate, a 10% increase in the amount of potential impairment losses would require an additional £3.7m to be set aside as an allowance. Page 199 of 268
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97 Annual Accounts 2022/23 Common Good Funds The Common Good Funds comprise land granted to a Burgh by the Crown; further grants of land and buildings, mainly in the late 19th and early 20th century by local industrialists and other landowners for the common good of the inhabitants of the Burgh; and rental income and sale proceeds from such land. The bulk of the Paisley Common Good was granted to the Burgh of Paisley by the King Charles II Charter, dated 27 and 28 July 1666, and has been administered by the Burgh and its successors since that date. The bulk of the Renfrew Common Good was granted to the Royal Burgh of Renfrew by the Queen Anne Charter, dated 7 August 1703, and again has been administered by the Burgh and its successors since that date. Income and expenditure statement Paisley Johnstone Renfrew Total £m £m £m £m Expenditure 0.739 0.000 2.682 3.421 Income (0.192) 0.000 (1.622) (1.814) (Surplus)/Deficit for the year 0.547 0.000 1.060 1.607 (Surplus)/Deficit Brought Forward (6.646) (0.052) (34.763) (41.461) Accumulated (Surplus)/Deficit at 31 March 2023 (6.099) (0.052) (33.703) (39.854) Income and Expenditure Statement for the Year Ending 31 March 2023 Paisley Johnstone Renfrew Total £m £m £m £m Expenditure 0.219 0.000 0.331 0.550 Income (0.392) 0.000 (1.839) (2.231) (Surplus)/Deficit for the year (0.173) 0.000 (1.508) (1.681) (Surplus)/Deficit Brought Forward (6.473) (0.052) (33.255) (39.780) Accumulated (Surplus)/Deficit at 31 March 2022 (6.646) (0.052) (34.763) (41.461) Income and Expenditure Statement for the Year Ending 31 March 2022 Balance Sheet Paisley Johnstone Renfrew Total £m £m £m £m Tangible Fixed Assets 0.928 0.000 13.024 13.952 Heritage Assets 0.063 0.046 0.109 0.218 Investments 4.737 0.000 18.114 22.851 Debtors 0.027 0.000 0.136 0.163 Short-term deposits 0.350 0.006 2.347 2.703 Total assets 6.105 0.052 33.730 39.887 Creditors: Amounts Falling Due Within One Year (0.006) 0.000 (0.027) (0.033) Net Assets 6.099 0.052 33.703 39.854 Income Funds (3.747) (0.036) (21.391) (25.174) Revaluation reserve: Investments (0.916) 0.000 (2.999) (3.915) Revaluation reserve: Fixed Assets (1.436) (0.016) (9.313) (10.765) Total Reserves (6.099) (0.052) (33.703) (39.854) Balance Sheet as at 31 March 2023 Page 200 of 268
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98 Annual Accounts 2022/23 Balance Sheet as at 31 March 2022 Paisley Johnstone Renfrew Total £m £m £m £m Tangible Fixed Assets 1.009 0.000 12.611 13.620 Heritage Assets 0.063 0.047 0.109 0.219 Investments 5.260 0.000 20.075 25.335 Debtors 0.000 0.000 0.026 0.026 Short term deposits 0.320 0.005 2.021 2.346 Total assets 6.652 0.052 34.842 41.546 Creditors: Amounts Falling Due Within One Year (0.005) 0.000 (0.080) (0.085) Net Assets 6.647 0.052 34.762 41.461 Income Funds (3.629) (0.036) (20.859) (24.524) Revaluation reserve: Investments (1.581) 0.000 (5.379) (6.960) Revaluation reserve: Other Fixed Assets (1.437) (0.016) (8.524) (9.977) Total Reserves (6.647) (0.052) (34.762) (41.461) Accounting Policies and Note Accounting Policies adopted for the Common Good are the same as those adopted for Renfrewshire Council except for the application of IAS 16. IAS 16 requires that assets be depreciated and that the charge for depreciation be set against and surplus in the Income and Expenditure account. In addition, IAS 16 requires any decreases in the value of assets to be recognized in the Income and Expenditure account, unless there is previous increase in the value of the asset held in the Revaluation Reserve. Conversely, any increases in the value of assets are to be recognized in the surplus or deficit in the Income and Expenditure account, to the extent that it reverses a decrease of the same asset previously recognized in the Income and Expenditure account. The Council is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. The Director of Finance and Resources has been designated as that officer in Renfrewshire Council. They manage the affairs of the Council to secure the economic, efficient and effective use of resources and safeguard its assets and those of any charitable trust it controls. Given that the Common Good is owned by the Council, these specific provisions are supplemented by the general provisions relating to the administration of local authority monies, i.e., the duty to obtain best value. Income to the Common Good Funds is solely from investment returns (both financial investments and property rental income) and bank interest; no donations to the Funds are solicited. The only other source of income, which arises periodically, is from the sale of fixed assets. The investment performance of the Common Good Funds is monitored regularly by Council officers and is reported bi- annually to the Investment Review Board, which is comprised of five cross-party elected members. The minutes of the Investment Review Board are submitted to the Finance, Resources and Customer Services Policy Board, whose meetings are held in public. In turn, the minutes of this Board are submitted to the full Council for ratification. Therefore, all elected members are kept informed of both the performance of the funds and any decision regarding the operation of the Funds, which would be made by the Finance, Resources and Customer Services Policy Board. Revaluation adjustments related to investments are included in Income within the CIES and were £0.664m for Paisley Common Good and £2.380m for Renfrew Common Good. Page 201 of 268
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99 Annual Accounts 2022/23 Housing Revenue Account Income and expenditure statement The Housing Revenue Account (HRA) reflects a statutory obligation to maintain a revenue account for local authority housing provision in accordance with the Housing (Scotland) Act 1987. The Housing Revenue Account 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 regulations; this 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 movement on the Housing Revenue Account statement. 2021/22 2022/23 £m £m 16.244 Repairs and maintenance 19.851 17.160 Supervision and management 14.852 26.336 Depreciation and impairment of non-current assets 27.883 0.671 Increase/(Decrease) in the allowance for bad debts 0.839 1.300 Other expenditure 3.208 61.711 Total Expenditure 66.633 (48.622) Dwelling rents (48.115) (1.438) Non-dwelling rents (1.185) (2.996) Other income (1.616) (53.056) Total Income (50.916) 8.655 Net Cost of HRA services as included in the CIES 15.717 HRA share of the operating income and expenditure included in the CIES: (0.006) (Gain)/Loss on sale of HRA non-current assets 0.276 0.000 (Gain)/Loss on revaluation of investment properties 0.000 4.478 Interest payable and similar charges 4.110 (0.159) Interest and investment income (1.704) 0.215 Pensions interest cost and expected return on pensions assets 0.089 (7.147) Taxation and non specific grant income (0.402) 6.036 Deficit for the year on HRA services 18.086 Movement on the Housing Revenue Account statement This statement shows the movement in the year on the Housing Revenue Account (HRA) Balance. The surplus or deficit for the year on the HRA income and expenditure statement represents the true economic cost of providing the Council’s HRA services, more details of which are shown in the HRA income and expenditure statement itself. The adjustments between accounting basis and funding basis under regulations detail the adjustments that are made to the HRA income and expenditure, as recognised by the Council in the year in accordance with proper accounting practice, to the statutory amounts required to be charged to the HRA Balance for dwellings rent setting purposes. An analysis of these adjustments can be found in Page 202 of 268
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100 Annual Accounts 2022/23 Note 6: Adjustment between accounting basis and funding basis under regulations on page 47. 2021/22 2022/23 £m £m (6.497) Balance on the HRA at 1 April (6.497) 6.036 Deficit for the year on the HRA income and expenditure statement 18.086 5.142 Adjustments between accounting basis and funding basis under statute (6.302) (11.178) Adjustments to Usable Reserves permitted by accounting standards (11.784) (0.000) Net (Increase)/Decrease before transfers to or from reserves 0.000 (6.497) Balance on the HRA at 31 March (6.497) Notes to the Housing Revenue Account income and expenditure statement The number and types of dwelling in the Council’s housing stock The Council was responsible for managing 12,216 dwellings during 2022/23 (12,216 in 2021/22). The following shows an analysis of these dwellings by type. The figures below exclude void initiative properties. Number Average weekly rent Type of dwelling Number Average weekly rent 416 £64.48 One-apartment 419 £65.43 3,685 £72.84 Two-apartment 3,665 £75.85 5,864 £82.37 Three-apartment 5,853 £88.19 2,040 £92.06 Four-apartment 2,065 £100.16 211 £98.94 Five-apartment 214 £108.38 12,216 Total 12,216 As at 31 March 2022 As at 31 March 2023 Other information Dwellings Non-Dwellings Total as at 31 March 2023 Total as at 31 March 2022 £m £m £m £m Void Rent Loss 2.638 0.262 2.900 4.118 Rental Income Arrears 4.268 0.582 4.850 4.367 Provision for uncollectable rent arrears 3.330 0.346 3.676 3.166 Corporate and Democratic Core costs 0.033 0.056 Page 203 of 268
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101 Annual Accounts 2022/23 Council Tax Income Account The Council Tax income account shows the gross income raised from Council Taxes levied and deductions made under statute. Councils raise taxes from residents through Council Tax, which is a tax linked to property values. The Council Tax Reduction Scheme represents a discount introduced across Scotland following the abolition of Council Tax Benefits as part of the UK government’s Welfare Reform programme. The resultant net income is transferred to the Council’s CIES. 2021/22 2022/23 £m £m 118.049 Gross council tax levied 123.138 (16.199) Other discounts and reductions (26.330) (13.433) Council tax reduction scheme (13.143) (2.476) Write-off of uncollectable debts and allowance for impairment (2.707) 0.523 Adjustment to previous years’ community charge and council tax (0.245) 86.464 Transfer to the Comprehensive Income and Expenditure Statement 80.713 Calculation of the Council Tax Dwellings are valued by the Assessor and placed within valuation bands ranging from the lowest “A” to the highest “H”. The band D Council Tax charge is calculated using the Council Tax base, and this in turn fixes the charge for each of the other bands, which are based on pre-determined proportions relative to the band D charge. The band D charge for 2022/23 was £1,315.42 (£1,315.42 in 2021/22). 2021/22 2022/23 £ £ 876.95 A 903.26 1,023.10 B 1,053.79 1,169.26 C 1,204.34 1,315.42 D 1,354.88 1,728.32 E 1,780.17 2,137.56 F 2,201.69 2,576.03 G 2,653.31 3,222.78 H 3,319.46 Council Tax Band If a property is occupied by only one person over 18, a discount of 25% is applied. Since 15 July 2016, unoccupied and unfurnished properties have been exempted from Council Tax for the first six months. A discount of 10% is then available for the next six months and 100% additional Council Tax levy is then payable for as long as the property remains empty, although the 10% discount may be extended by a further 12 months if the property is being actively marketed for sale or let. Certain persons are disregarded for Council Tax purposes, including students, people who are in detention and those who are severely mentally impaired. Reductions in Council Tax are available for people with disabilities. Page 204 of 268
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102 Annual Accounts 2022/23 Charges for water and sewerage services are the responsibility of Scottish Water. Renfrewshire Council collects total monies and makes a precept payment to Scottish Water on the basis of collection levels based on a pre-determined formula. The figures below exclude the water and sewerage charges. Calculation of the Council Tax base The Council Tax base is the number of chargeable dwellings across all valuation bands (adjusted for dwellings where discounts apply), after providing for non-payment, expressed as an equivalent number of band D dwellings. Band Number of dwellings Number of exemptions Disabled relief Discounts Council Tax Reduction Total equivalent dwellings Ratio to Band D 2022/23 Band D equivalent 2021/22 Band D equivalent A 13,463 2,135 8 1,925 3,616 5,856 0.67 3,904 3,899 B 25,888 1,648 77 3,268 5,562 15,392 0.78 11,972 11,958 C 15,193 518 59 1,592 1,990 11,079 0.89 9,848 9,834 D 13,263 329 45 1,194 761 11,007 1.00 11,007 10,820 E 11,599 189 73 723 439 10,223 1.31 13,432 13,319 F 6,993 77 48 303 120 6,464 1.63 10,504 10,252 G 4,223 80 19 140 50 3,934 1.96 7,704 7,491 H 208 4 0 10 2 192 2.45 470 475 90,830 Band A dwellings subject to disabled relief 8 8 Class 17 and 24 dwellings 73 79 Sub-total 68,922 68,135 Less: Provision for non-payment and future award of discounts and reliefs -4,017 -4,675 Council Tax Base 64,905 63,460 Page 205 of 268
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103 Annual Accounts 2022/23 Non-Domestic Rates Income Account This account is an agent’s statement that reflects the statutory obligation for those councils who issue bills to non- domestic rate payers to maintain a separate non-domestic rate account. The account shows the rates collected from non-domestic rate payers during the year. Any difference between the rates collected and the amount the Council is guaranteed to receive under the national pooling arrangements is adjusted via the Scottish Government's general revenue grant to the Council. Non-domestic rate income is redistributed from the national non-domestic rate pool in proportions based on the prior year mid-year income returns net of prior year adjustments. In 2012/13 the Scottish Government introduced the Business Rates Incentivisation Scheme (BRIS) which allows councils, where an agreed target income figure is exceeded, to retain 50% of the ‘above target’ income. 2021/22 2022/23 £m £m 145.727 Gross rates levied 147.870 (55.765) Reliefs and other deductions (21.774) (4.306) Write-off of uncollectable debts and allowance for impairment (3.543) 85.656 Net Non-Domestic Rates income 122.553 (0.759) Adjustment to previous years’ non-domestic rates (1.692) (3.234) Contribution (to)/from the National Non-Domestic Rate pool (12.785) 0.000 Non-domestic rate income retained by authority (BRIS) 0.000 81.663 Transfer to the Comprehensive Income and Expenditure Statement 108.076 The nature and amount of each rate fixed The non-domestic rates charge for each subject is determined by the rateable value placed upon it by the Assessor, multiplied by the rate per pound (the “rate poundage”) set each year by the Scottish Government. For 2022/23 the charge was 49.0 pence in the pound, with a 1.3 pence supplement for properties with a rateable value over £51,000 and a 2.6 pence supplement for properties with a rateable value above £95,000. Under the Small Business Bonus Scheme (SBBS) relief is available to businesses where the combined rateable value of all business premises is £35,000 or less and the rateable value of individual premises is £18,000 or less. Properties with a total rateable value up to and including £15,000 are entitled to a 100% reduction in their business rates on each individual property and properties with a rateable value of between £15,001 to £35,000 receive a 25% reduction on each individual property with a rateable value of £18,000 or less. Analysis of Renfrewshire Council’s rateable values 2022/23 £m 103.652 47.218 31.534 1.587 101.814 285.805 1.440 287.245 (1.374) 285.871Net Rateable Value at 31 March Analysis of Rateable Values Commercial Industrial and freight transport Education and public service Communications Others Rateable Value at 1 April Adjustments (Full Year Rateable Value) Less: Wholly Exempt Subjects Rateable Value at 31 March Page 206 of 268
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104 Annual Accounts 2022/23 Group Accounts Group Comprehensive Income and Expenditure Statement This statement shows the accounting cost of providing services and managing operations during the year. It includes, on an accruals basis, all day-to-day expenses and related income. The statement shows the accounting cost in accordance with generally accepted accounting practices, rather than the cost according to the statutory regulations that specify the net expenditure that councils need to take into account when setting the annual council tax charge. The required adjustments between accounting basis and funding basis under regulations are shown in the group movement in reserves statement. Gross expenditure Gross income Net expenditure Note Gross expenditure Gross income Net expenditure £m £m £m £m £m £m 253.334 (41.446) 211.888 294.465 (38.357) 256.108 57.024 (54.169) 2.855 69.707 (59.300) 10.407 104.227 (12.804) 91.423 Environment and Infrastructure 104.694 (4.462) 100.232 106.841 (48.250) 58.591 Finance and Resources 109.077 (48.963) 60.114 50.217 (13.059) 37.158 45.825 (14.131) 31.694 13.140 (13.523) (0.383) Miscellaneous Services 18.509 (15.032) 3.477 233.939 (147.843) 86.096 Adult Services 260.152 (161.744) 98.408 818.722 (331.094) 487.628 902.429 (341.989) 560.440 (0.175) 0.000 (0.175) (Gain)/Loss on the disposal of non-current assets 0.103 0.000 0.103 25.222 (1.615) 23.607 Financing and investment income and expenditure G6 24.322 (8.234) 16.088 0.000 (486.210) (486.210) Taxation and non-specific grant income 3 0.000 (505.934) (505.934) 843.769 (818.919) 24.850 926.854 (856.157) 70.697 (12.454) G3 8.135 12.396 78.832 (166.292) (105.285) (0.873) G15 3.514 (226.812) (302.266) (4.216) G4 (2.084) (398.193) Other comprehensive (income) and expenditure (406.121) (385.797) Total comprehensive (income) and expenditure (327.289) Share of other comprehensive (income) and expenditure of associates and joint ventures Actuarial (gain)/loss on pension assets and liabilities 2021/22 2022/23 Children's Services Chief Executive's Service Cost of Services Deficit/(Surplus) on the Provision of Services Share of the (surplus) / deficit on the provision of services by associates and joint ventures Group Deficit/(Surplus) (Surplus)/Deficit on the revaluation of non- current assets (Surplus)/Deficit from investments in equity instruments designated as Fair Value through Other Comprehensive Income Communities and Housing Services Figures shown in brackets represent income or gains and figures without brackets represent expenditure or losses. Page 207 of 268
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105 Annual Accounts 2022/23 Group Movement in Reserves Statement The group movement in reserves statement shows the movement in the year on the different reserves held by the Council's group, analysed into the Council's usable reserves, the Council's unusable reserves and the Council's share of the reserves of the subsidiaries, associates and joint ventures within the group. Council’s Usable Reserves Council’s Unusable Reserves Council’s Total Reserves Council’s share of Reserves of Subsidiaries, Associates and Joint Ventures Total Reserves Note £m £m £m £m £m Balance at 1 April 2022 214.457 1,278.820 1,493.277 104.347 1,597.624 Movement in reserves during the year Total Comprehensive Income and Expenditure (54.026) 373.892 319.866 7.423 327.289 Adjustments between Group accounts and Council accounts G5 (14.925) 0.000 (14.925) 14.925 0.000 Adjustments to Usable Reserves permitted by accounting standards 37.178 (37.178) 0.000 0.000 0.000 Adjustment for Service Concession Arrangements 27.601 (27.601) 0.000 0.000 0.000 Adjustments between accounting basis and funding basis under regulations 6 25.766 (25.766) 0.000 0.000 0.000 Increase / (Decrease) in year 21.594 283.347 304.941 22.348 327.289 Balance at 31 March 2023 236.051 1,562.167 1,798.218 126.695 1,924.913 Comparative movements in 2021/22 Council’s Usable Reserves Council’s Unusable Reserves Council’s Total Reserves Council’s share of Reserves of Subsidiaries, Associates and Joint Ventures Total Reserves Note £m £m £m £m £m Balance at 1 April 2021 194.093 940.631 1,134.724 77.543 1,212.267 Movement in reserves during the year Total Comprehensive Income and Expenditure (9.256) 380.545 371.289 14.508 385.797 Adjustments between Group accounts and Council accounts G5 (12.296) 0.000 (12.296) 12.296 0.000 Adjustments to Usable Reserves permitted by accounting standards 25.473 (25.473) 0.000 0.000 0.000 Transfers to / (from) other statutory reserves 7 (0.440) 0.000 (0.440) 0.000 (0.440) Adjustments between accounting basis and funding basis under regulations 6 16.883 (16.883) 0.000 0.000 0.000 Increase / (Decrease) in year 20.364 338.189 358.553 26.804 385.357 Balance at 31 March 2022 214.457 1,278.820 1,493.277 104.347 1,597.624 Page 208 of 268
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106 Annual Accounts 2022/23 Group Balance Sheet The group balance sheet shows the value as at 31 March 2023 of the assets and liabilities recognised by the Council. The net assets of the Council’s group are matched by the reserves held by the group. Reserves are reported in two categories: usable reserves, which are those reserves that the group may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations; and unusable reserves, comprising those that the group is not able to use to provide services. This category includes reserves that hold unrealised gains/losses in the value of assets where amounts would only become available to provide services if the assets are sold, and reserves that hold timing differences shown as ‘adjustments between accounting basis and funding basis under regulations’ in the group movement in reserves statement. As at 31 March 2022 As at 31 March 2023 £m Note £m 1,677.558 Property, plant and equipment G10 1,811.898 44.405 Heritage assets G11 44.405 1.906 Investment property G9 2.014 3.349 Intangible assets 13 2.524 34.848 Long-term investments G15 27.008 64.790 Investments in associates and joint ventures G3 58.739 2.691 Long-term debtors G15 2.308 1,829.547 1,948.896 0.922 Assets held for sale 12 0.100 183.583 Short-term investments G15 166.751 1.106 Inventories 1.381 80.877 Short-term debtors G12 67.340 19.819 Cash and cash equivalents G15 13.513 286.307 249.085 (92.005) Short-term borrowing G15 (94.161) (74.206) Short-term creditors G13 (87.332) (0.240) Short-term provisions 21 (0.252) (166.451) (181.745) (69.152) Long-term creditors 20 (65.690) (5.117) Long-term provisions 21 (4.942) (219.781) Long-term borrowing G15 (223.600) (57.729) Other long-term liabilities 202.909 (351.779) (91.323) Alastair MacArthur 1,597.624 1,924.913 (241.908) Usable reserves G7 (265.043) (1,355.716) Unusable reserves G8 (1,659.870) (1,597.624) (1,924.913) Director of Finance and Resources Total reserves Long-term assets Current assets Current liabilities Long-term liabilities Net assets The unaudited accounts were issued on 22 June 2023 and the audited accounts were authorised for issue on 16 November 2023. Page 209 of 268
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107 Annual Accounts 2022/23 Group Cashflow Statement The group cash flow statement shows the changes in cash and cash equivalents of the Council’s group during the year. It shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources that are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (that is, borrowing) to the Council. The Council’s share of the cash flows of its associates and joint ventures is disregarded for the purpose of this statement because the Council’s share of the associates’ and joint ventures’ reserves is unusable and cannot be used to fund services. 2021/22 2022/23 £m £m (12.396) Group surplus/(deficit) (78.832) 103.510 Adjustment for non-cash movements 135.202 (42.875) Adjustments for items included in the group surplus/deficit that are investing and financing activities (44.807) 48.239 Net cash flows from operating activities 11.563 (92.233) Net cash flows from investing activities (20.087) 16.650 Net cash flows from financing activities 2.218 (27.344) Net increase/(decrease) in cash and cash equivalents (6.306) 47.163 Cash and cash equivalents at the beginning of the reporting period 19.819 19.819 Cash and cash equivalents at the end of the reporting period 13.513 Notes to the Group Accounts The Council’s share of Group entities is reviewed on an annual basis and some prior year figures are adjusted as a result, when compared to the prior year audited accounts. Note G1: Details of the group’s combining entities Renfrewshire Council is represented on the board of a number of organisations. The extent of the Council’s controlling interest has been reviewed in determining those entities that should be consolidated and incorporated within the group accounts. Those organisations, which have a significant impact on the Council’s operations, are listed below. The accounting period for all of these bodies is the year to 31 March 2023. In addition to the information included in the group accounts on the preceding pages the accounting regulations require specific disclosures about the combining entities and the nature of their business. OneRen, the Paisley, Renfrew and Johnstone Common Good Funds, Paisley Museum Reimagined Limited, Park Lane Developments (Renfrewshire) LLP and the Coats Observatory Trust administered by Renfrewshire Council (as sole trustee) are treated as subsidiaries in the Council’s group accounts, with assets, liabilities, reserves, income and expenses being consolidated line-by-line. Page 210 of 268
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108 Annual Accounts 2022/23 Renfrewshire Leisure Limited, trading as OneRen, is a company limited by guarantee formed in 2014 and registered as a charity in Scotland. Its principal place of business is the Lagoon Leisure Centre, 11 Christie Street, Paisley PA1 1NB. The charity provides leisure and culture facilities within Renfrewshire Council’s area to the general public and operates ten leisure centres within Renfrewshire plus a range of cultural service buildings, libraries and community halls. The objectives of the charity are to provide facilities for recreation, sport, cultural and other leisure activities for the benefit of the community in Renfrewshire. Any surplus generated by the charity is applied solely to its continuation and development. During 2022/23 Renfrewshire Council provided additional funding of £0.350m to OneRen to mitigate the financial impact of the pandemic recovery period, as well as a pass-through of Scottish Government funding in support of the local government pay settlement (£0.518m). The accounts of the charity are published separately and may be obtained from the Chief Executive, Lagoon Leisure Centre, 11 Christie Street, Paisley PA1 1NB. Paisley Museum Reimagined Limited was formed in 2019 by Renfrewshire Council, with the objective of managing the development and delivery of the fundraising strategy for Paisley Museum and to drive the capital appeal for the redevelopment of Paisley Museum and furthering Paisley's cultural regeneration. The company is treated as a subsidiary within the Group Accounts. Copies of the financial statements may be obtained from its registered office at Renfrewshire House, Cotton Street, Paisley, Scotland, PA1 1WB. Park Lane Developments (Renfrewshire) LLP was formed in 2010 by Renfrewshire Council and Park Lane Real Estate LLP in order to facilitate the regeneration of Paisley town centre through the transformation of the town’s former Arnotts store into a mixed-use retail, office and residential development. The Partnership is treated as a subsidiary within the Group Accounts. Copies of the financial statements for the partnership may be obtained from its registered office at 87 Port Dundas Road, Cowcaddens, Glasgow G4 0HF. The group comprehensive income and expenditure statement (CIES) includes total net comprehensive income for the year of £29.529m (2021/22 £8.732m) for OneRen, total net comprehensive expenditure for the year of £1.607m (2021/22 net comprehensive income of £1.681m) for the Paisley, Renfrew and Johnstone Common Good Funds, total net comprehensive expenditure for the year of £0.033m (2021/22 £0.057m restated) for Park Lane Developments (Renfrewshire) LLP, total net comprehensive income for the year of £0.533m (2021/22 net comprehensive expenditure of £0.152m) for Paisley Museum Reimagined Limited and total net comprehensive expenditure for the year of £0.023m (2021/22 £0.070m restated) for the Coats Observatory Trust. The group balance sheet includes net assets of £27.389m (2021/22 net liabilities of £2.140m) for OneRen, net assets of £39.854m (2021/22 £41.461m) for the Common Good Funds, net assets of £0.076m (2021/22 £0.109m restated) for Park Lane Developments (Renfrewshire) LLP, net liabilities of £0.040m (2021/22 £0.573m) for Paisley Museum Reimagined Limited and net assets of £0.677m (2021/22 £0.700m restated) for the Coats Observatory Trust. Strathclyde Concessionary Travel Scheme Joint Committee comprises the twelve councils in the west of Scotland and oversees the operation of the concessionary fares scheme for public transport within its area. The costs of the scheme are met by a combination of funding from the twelve constituent councils and by direct grant funding from the Scottish Government. Strathclyde Partnership for Transport administers the scheme on behalf of the committee. In 2022/23, Renfrewshire Council contributed £0.325m or 8.00% of the committee’s estimated running costs (2021/22 £0.325m or 7.99%) and its share of the year-end net asset was £0.402m (2021/22 £0.367m) and is included in the group balance sheet. Copies of its accounts may be obtained from the Treasurer to Strathclyde Concessionary Travel Scheme, Strathclyde Partnership for Transport, 131 St. Vincent Street, Glasgow G2 5JF. Strathclyde Partnership for Transport was formed on 1 April 2006 as the successor to the Strathclyde Passenger Transport Authority. It is a joint committee of the twelve councils in the west of Scotland. In association with the related Page 211 of 268
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109 Annual Accounts 2022/23 strategic development committees, the partnership’s remit includes the promotion of joint working to set out the policy framework for achieving the most effective management, development and integration of the transport network across boundaries in the medium to longer term through the Regional Transport Strategy. Renfrewshire Council contributed £2.853m or 8.01% to the committee’s estimated running costs in 2022/23 (2021/22 £2.861m or 8.00%) and its share of the year-end net asset was £37.982m (2021/22 £38.643m) and is included in the group balance sheet. Copies of its accounts may be obtained from the Treasurer to Strathclyde Partnership for Transport, 131 St. Vincent Street, Glasgow G2 5JF. Strathclyde Partnership for Transport Renfrewshire Council’s Share Strathclyde Partnership for Transport Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 321.591 25.713 Long-term assets 322.315 25.805 181.166 14.485 Current assets 177.970 14.249 (19.454) (1.555) Current liabilities (25.878) (2.072) 483.303 38.643 Net assets 474.407 37.982 Income and Expenditure Summary 76.706 6.133 Income 82.322 6.591 69.538 5.560 Expenditure 74.534 5.967 7.168 0.573 Surplus for the year 7.788 0.624 As at 31 March 2022 As at 31 March 2023 2021/22 2022/23 Renfrewshire Valuation Joint Board was formed in 1996 at local government re-organisation by Act of Parliament. Its principal place of business is The Robertson Centre, 16 Glasgow Road, Paisley PA1 3QF. The board maintains the electoral, council tax and non-domestic rates registers for the three councils of East Renfrewshire, Inverclyde and Renfrewshire. The board’s running costs are met by the three member councils. Surpluses or deficits on the board’s operations are shared between the councils. In 2022/23, Renfrewshire Council contributed £1.635m or 57.7% of the board’s estimated running costs (2021/22 £1.561m or 56.3%) and its share of the year-end net asset was £3.538m (2021/22 £0.255m restated) and is included in the group balance sheet. Copies of its accounts may be obtained from the Treasurer to the Renfrewshire Valuation Joint Board, Renfrewshire Council, Renfrewshire House, Paisley PA1 1JB. The following additional disclosures are required under accounting regulations for Renfrewshire Valuation Joint Board because it is a related party to the Council. Renfrewshire Valuation Joint Board Renfrewshire Council’s Share Renfrewshire Valuation Joint Board Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 0.182 0.102 Long-term assets 0.126 0.073 0.693 0.390 Current assets 0.886 0.511 (0.087) (0.049) Current liabilities (0.082) (0.047) (0.335) (0.188) Pension asset / (liability) 5.202 3.001 0.453 0.255 Net assets 6.132 3.538 Income and Expenditure Summary 2.802 1.577 Income 2.884 1.664 3.215 1.809 Expenditure 3.031 1.749 (0.413) (0.232) Deficit for the year (0.147) (0.085) As at 31 March 2022 As at 31 March 2023 2021/22 2022/23 Page 212 of 268
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110 Annual Accounts 2022/23 The Public Bodies (Joint Working) (Scotland) Act 2014 established the framework for the integration of health and adult social care in Scotland. On 27 June 2015, Scottish Ministers legally established the Renfrewshire Health and Social Care Integration Joint Board (IJB) as a formal legal partnership between Renfrewshire Council and NHS Greater Glasgow and Clyde. The IJB is responsible for the strategic planning of the functions delegated to it and for ensuring the delivery of its functions through the locally agreed operational arrangements. Copies of the financial statements for the IJB may be obtained from Chief Officer, Renfrewshire Health and Social Care Integration Joint Board, Renfrewshire House, Cotton Street, Paisley, PA1 1WB. Renfrewshire Integration Joint Board Renfrewshire Council’s Share Renfrewshire Integration Joint Board Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 51.049 25.525 Current assets 33.633 16.817 51.049 25.525 Net assets 33.633 16.817 Income and Expenditure Summary 367.251 183.626 Income 359.320 179.660 343.208 171.604 Expenditure 376.736 188.368 24.043 12.022 (Deficit)/Surplus for the year (17.416) (8.708) As at 31 March 2022 As at 31 March 2023 2021/22 2022/23 Note G2: Non-material interest in other entities In addition to the combining entities detailed in note G1, the Council has a “significant interest” in a number of joint committees. The Council’s share of the net assets or liabilities of these joint committees is not material to the fair understanding of the financial position and transactions of the Council. Accordingly, the group accounts do not include these organisations. In the interest of transparency, the following disclosures are made concerning the business nature of each organisation. Scotland Excel is formed by agreement among local authorities throughout Scotland and is maintained through a joint committee comprising representatives from all of the member councils. Launched on 1 April 2008 as a centre of procurement expertise for the local government sector, it is the largest non-profit making purchasing agency in Scotland. Its aim is to help improve the efficiency and effectiveness of public sector procurement. Renfrewshire Council contributed £0.126m (3.2%) to the committee’s estimated running costs in 2022/23 (£0.122m in 2021/22). Glasgow and the Clyde Valley Strategic Development Planning Authority. The committee covers the eight councils within its area. Under the Town and Country Planning (Scotland) Act 1997, each member council not only has responsibilities for local planning matters in its area but also the strategic issues that cover the wider area of the Glasgow and Clyde valley. Accordingly, the committee prepares, monitors and reviews the Strategic Development Plan on behalf of member councils and liaises with central government, Scottish Enterprise and other bodies. Renfrewshire Council contributed £0.068m (12.5%) to the committee’s estimated running costs in 2022/23 (£0.052m in 2021/22). Glasgow City Region – City Deal Cabinet is a Joint Committee, the purpose of which is to determine the Strategic Development priorities for the Clyde Valley Region and to monitor and ensure the delivery of the City Deal programme as Page 213 of 268
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111 Annual Accounts 2022/23 agreed between member authorities and the UK and Scottish Governments. The City Deal programme aims to deliver a £1.13 billion investment programme through 20 infrastructure projects and will drive innovation and growth through the support of the key sectors, including delivery of labour market and innovation programmes. The committee operates in an administrative / project management capacity and does not hold any assets or liabilities developed from the City Deal programme. Note G3: Associates and joint ventures The aggregate value of the assets, liabilities, income and expenditure of the Council’s associates and joint ventures are shown in the two tables which follow. The net asset figure from these two tables combined (£16.817m + £41.922m = £58.739m) equates to the figure disclosed in the group balance sheet as ‘Investments in associates and joint ventures’. Aggregate of Joint Venture results Renfrewshire Council’s Share Aggregate of Joint Venture results Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 51.049 25.525 Current assets 33.633 16.817 51.049 25.525 Net assets 33.633 16.817 Income and Expenditure Summary 367.251 183.626 Income 359.320 179.660 343.208 171.604 Expenditure 376.736 188.368 24.043 12.022 (Deficit)/Surplus for the year (17.416) (8.708) Joint ventures As at 31 March 2022 As at 31 March 2023 2021/22 2022/23 Aggregate of Associate results Renfrewshire Council’s Share Aggregate of Associate results Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 321.773 25.815 Long-term assets 322.440 25.878 186.993 15.285 Current assets 184.227 15.190 (20.079) (1.647) Current liabilities (26.305) (2.147) (0.335) (0.188) Pension asset / (liability) 5.202 3.001 488.352 39.265 Net assets 485.564 41.922 Income and Expenditure Summary 83.591 8.036 Income 89.369 8.588 75.700 7.604 Expenditure 81.299 8.015 7.891 0.432 Surplus for the year 8.070 0.573 Associates As at 31 March 2022 As at 31 March 2023 2021/22 2022/23 Page 214 of 268
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112 Annual Accounts 2022/23 Note on contingent assets, contingent liabilities and capital commitments The Council is unaware of any material contingent asset or contingent liability as at 31 March 2023 in relation to any of its associates or joint ventures. The Council is unaware that any commitments have been entered into by any of its associates or joint ventures as at 31 March 2023, either with the Council itself or with other parties. Note G4: Material items of group income and expenditure In order to assist the reader in a better understanding of the impact of the inclusion of the results of the associates and joint ventures, the following tables provide an analysis of the Council’s share of the material amounts of income and expenditure disclosed in the group CIES. 2021/22 2022/23 £m £m Share of (surplus) or deficit: 3.298 Subsidiaries: 1.746 (0.434) Paisley, Renfrew and Johnstone Common Good Funds (0.650) 0.025 Coats Observatory Trust 0.020 3.498 OneRen 2.876 0.057 Park Lane Developments (Renfrewshire) LLP 0.033 0.152 Paisley Museum Reimagined Limited (0.533) (0.432) Associates: (0.573) (0.573) Strathclyde Partnership for Transport (0.624) (0.091) Strathclyde Concessionary Travel Scheme Joint Committee (0.034) 0.232 Renfrewshire Valuation Joint Board 0.085 Joint Venture: (12.022) Renfrewshire Health and Social Care Integration Joint Board 8.708 (9.156) Aggregate share of (surplus) or deficit 9.881 Share of other comprehensive (income) and expenditure: (13.432) Subsidiaries: (30.145) (1.247) Paisley, Renfrew and Johnstone Common Good Funds 2.257 0.045 Coats Observatory Trust 0.003 (12.230) OneRen (32.405) (4.216) Associates: (2.084) (2.815) Strathclyde Partnership for Transport 1.285 0.000 Strathclyde Concessionary Travel Scheme Joint Committee (0.001) (1.401) Renfrewshire Valuation Joint Board (3.368) (17.648) Aggregate share of other comprehensive (income) and expenditure (32.229) (26.804) Aggregate share of total comprehensive (income) and expenditure (22.348) Material items of group income and expenditure Page 215 of 268
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113 Annual Accounts 2022/23 Note G5: Adjustments between group accounts and council accounts In the group movement in reserves statement, adjustments between group accounts and council accounts are required to bring the Council’s reserve balances back to the amount presented in the Council-only figures (before adjustments between accounting basis and funding basis under regulations). This is because intra-group transactions are eliminated when total comprehensive income and expenditure is calculated for the group. The adjustments between group accounts and council accounts can be analysed as follows: 2021/22 2022/23 £m £m 0.148 Grants made by the Paisley, Renfrew and Johnstone Common Good Funds to Renfrewshire Council in contribution towards the funding of community events and projects 0.123 0.059 Governance costs charged to the Paisley, Renfrew and Johnstone Common Good Funds by Renfrewshire Council 0.059 (0.003) Interest income received from Renfrewshire Council by the Paisley, Renfrew and Johnstone Common Good Funds (0.040) (12.941) Service charge and other expenditure payable by Renfrewshire Council to OneRen (15.629) 0.297 Expenditure payable by OneRen to Renfrewshire Council 0.442 0.144 Expenditure payable by Paisley Museum Reimagined Limited to Renfrewshire Council 0.120 (12.296) Total adjustments between Group accounts and Council accounts (14.925) Adjustments between Group accounts and Council accounts Note G6: Group financing and investment income and expenditure 2021/22 2022/23 £m £m 20.312 Interest payable and similar charges 22.298 4.907 Net interest on the net defined benefit liability 1.984 (0.631) Interest receivable and similar income (6.646) (0.208) Income and expenditure in relation to investment properties and changes in their fair values (0.352) (0.773) Other investment income (1.196) 23.607 Total financing and investment income and expenditure 16.088 Group financing and investment income and expenditure Note G7: Group Usable reserves 2021/22 2022/23 £m £m (214.457) Council Usable Reserves - Note 7 (236.051) Group Usable Reserves: (24.524) Paisley, Renfrew and Johnstone Common Good Funds: unrestricted funds (25.174) (0.241) Coats Observatory Trust: usable balances (0.218) (0.368) OneRen (0.371) 0.573 Paisley Museum Reimagined Limited 0.040 (2.891) Renfrewshire Health and Social Care Integration Joint Board (3.269) (241.908) Total Group Usable Reserves (265.043) Group Usable Reserves Page 216 of 268
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114 Annual Accounts 2022/23 Note G8: Group Unusable reserves Unusable reserves are those reserves that the Council is not able to utilise to provide services. Included within the total Group Unusable Reserves are the unusable reserves of the Council’s subsidiaries; also included is the Council’s share of the reserves of the associates and joint ventures within the group. 2021/22 2022/23 £m £m (1,278.820) Council Unusable Reserves - Note 8 (1,513.106) Group Unusable Reserves: (6.960) Paisley, Renfrew and Johnstone Common Good Funds: financial instruments revaluation reserve (3.915) (9.977) Paisley, Renfrew and Johnstone Common Good Funds: revaluation reserve (10.765) (0.459) Coats Observatory Trust: revaluation reserve (0.459) 2.508 OneRen: pension reserve (27.018) (0.109) Park Lane Developments (Renfrewshire) LLP (0.076) Council share of the Reserves of associates and joint ventures: (38.643) Strathclyde Partnership for Transport (37.982) (0.367) Strathclyde Concessionary Travel Scheme Joint Committee (0.402) (0.255) Renfrewshire Valuation Joint Board (3.538) (22.634) Renfrewshire Health and Social Care Integration Joint Board (13.548) (1,355.716) Total Group Unusable Reserves (1,610.809) Group Unusable Reserves Note G9: Group investment properties The following items of income and expense have been accounted for in the ‘Financing and investment income and expenditure’ line in the group CIES: 2021/22 2022/23 £m £m (0.419) Rental income from investment property (0.472) (0.419) Net (gain) or loss (0.472) Group Investment Properties There are no restrictions on the Council’s ability to realise the value inherent in investment property, nor on the right to the remittance of income and the proceeds of disposal. With regards Common Good properties, the Council is obliged to observe the provisions of the Community Empowerment (Scotland) Act 2015 in terms of public consultation on disposal proposals; however, the right to the remittance of income and proceeds of disposal remains with the Common Good Funds. The following table summarises the movement in the fair value of investment properties during the year: 2021/22 2022/23 £m £m 1.993 Balance at 1 April 1.906 (0.081) Net losses from fair value adjustments 0.178 0.000 Transfers from inventories and property, plant and equipment (0.064) (0.006) Other changes (0.006) 1.906 Balance at 31 March 2.014 Group Investment Properties Page 217 of 268
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115 Annual Accounts 2022/23 Note G10: Group Property, plant and equipment Council PPE (Note 9) Council share of Group PPE Total Group PPE £m £m £m Balance sheet net carrying amount at 31 March 2022 1,663.152 14.406 1,677.558 Assets reclassified (to) or from the “held for sale” category 0.297 0.000 0.297 Other asset reclassifications 0.064 0.000 0.064 Additions 119.023 0.000 119.023 Disposals (1.275) 0.000 (1.275) Depreciation (91.551) 0.108 (91.443) Revaluation adjustments taken to the Revaluation Reserve 104.500 0.034 104.534 Revaluation adjustments recognised in the CIES 3.140 0.000 3.140 Balance sheet net carrying amount at 31 March 2023 1,797.350 14.548 1,811.898 Gross carrying amount at 31 March 2023 1,844.283 19.058 1,863.341 Accumulated depreciation at 31 March 2023 (269.665) (4.510) (274.175) Infrastructure assets 222.732 0.000 222.732 Balance sheet net carrying amount at 31 March 2023 1,797.350 14.548 1,811.898 Movements in 2022/23 Council PPE (Note 9) Council share of Group PPE Total Group PPE £m £m £m Balance sheet net carrying amount at 31 March 2021 1,484.243 14.339 1,498.582 Assets reclassified (to) or from the “held for sale” category (0.822) 0.000 (0.822) Additions 81.248 0.000 81.248 Disposals (2.050) 0.000 (2.050) Depreciation 26.350 (0.166) 26.184 Revaluation adjustments taken to the Revaluation Reserve 81.325 0.233 81.558 Revaluation adjustments recognised in the CIES (7.142) 0.000 (7.142) Balance sheet net carrying amount at 31 March 2022 1,663.152 14.406 1,677.558 Gross carrying amount at 31 March 2022 1,678.275 19.020 1,697.295 Accumulated depreciation at 31 March 2022 (229.291) (4.614) (233.905) Infrastructure assets 214.168 0.000 214.168 Balance sheet net carrying amount at 31 March 2022 1,663.152 14.406 1,677.558 Movements in 2021/22 Page 218 of 268
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116 Annual Accounts 2021/22 Note G11: Group heritage assets A valuation of the fair value of the Council’s Heritage Assets was carried out by an external valuer between October 2021 and March 2022, resulting in an increase of £4.883m. The value at 31 March 2023 was £44.405m (£39.522m in 2021/22). Included in this value are the civic regalia and equipment of the Paisley, Renfrew and Johnstone Common Good Funds, which have been externally valued on a present value insurance basis at £0.219m as at 31 March 2023 (£0.219 at 31 March 2022). Note G12: Group short-term debtors The balances detailed below are composed mostly of the debtors of the Council, to which the debtors of OneRen, Park Lane Developments (Renfrewshire) LLP and the Paisley, Renfrew and Johnstone Common Good Funds have been added. As at 31 March 2022 As at 31 March 2023 £m £m 5.527 Trade receivables 6.110 5.298 Prepayments 4.311 70.052 Other receivables 56.219 80.877 Total 66.640 Group Short-term Debtors Note G13: Group short-term creditors The balances detailed below are composed mostly of the creditors of the Council, to which the creditors of OneRen, Park Lane Developments (Renfrewshire) LLP and the Paisley, Renfrew and Johnstone Common Good Funds have been added. As at 31 March 2022 As at 31 March 2023 £m £m (14.909) Trade payables (24.957) (59.297) Other payables (62.407) (74.206) Total (87.364) Group Short-term Creditors Note G14: Amounts due between Renfrewshire Council and its associates and joint ventures An analysis of the amounts owing and owed between the Council and its associates and joint ventures, analysed into amounts relating to loans and amounts relating to other balances, is shown in the table below. As at 31 March 2022 As at 31 March 2023 £m £m Amounts owing to Renfrewshire Council: 0.737 Other balances 0.789 0.737 Total 0.789 Amounts owed by Renfrewshire Council: (51.076) Liability for Renfrewshire Integration Joint Board’s retained underspend (33.660) (0.675) Other balances (1.119) (51.751) Total (34.779) Page 219 of 268
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117 Annual Accounts 2021/22 Note G15: Group financial instruments Balance sheet carrying amounts of group financial instruments The following categories of financial instrument are carried in the group balance sheet. Additional qualitative information on the various categories of financial instruments can be found in Note 22: Financial Instruments. Long-term Current Long-term Current £m £m £m £m 5.001 183.499 0.000 165.000 0.000 0.084 0.000 1.751 29.847 0.000 27.008 0.000 34.848 183.583 27.008 166.751 0.000 (8.435) 0.000 0.420 0.000 0.002 0.000 0.012 0.000 (0.001) 0.000 (0.002) 0.000 28.253 0.000 13.083 0.000 19.819 0.000 13.513 1.162 89.288 0.818 78.888 5.027 0.065 4.986 0.057 0.913 0.000 1.037 0.000 (4.411) (19.740) (4.533) (20.213) 2.691 69.613 2.308 58.732 At amortised cost: Accrued interest As at 31 March 2022 Financial Assets As at 31 March 2023 At amortised cost: Principal At amortised cost: Accrued interest At fair value through other comprehensive income - designated equity instruments Total Investments At amortised cost: Principal At amortised cost: Loss allowance At fair value through profit or loss Total Cash and cash equivalents At amortised cost: Trade receivables At amortised cost: Loans made for service purposes At amortised cost: Accrued interest At amortised cost: Loss allowance Financial Assets included in Debtors Long-term Current Long-term Current £m £m £m £m (199.427) (1.869) (223.600) (0.828) 0.000 (2.698) 0.000 (2.770) (199.427) (4.567) (223.600) (3.598) (20.000) (32.916) 0.000 (52.916) 0.000 (0.871) 0.000 (0.871) (0.354) (0.512) 0.000 (0.845) (20.354) (34.299) 0.000 (54.632) 0.000 (53.139) 0.000 (35.931) (219.781) (92.005) (223.600) (94.161) 0.000 (41.849) 0.000 (47.709) (68.362) (3.219) (64.973) (3.388) (0.005) 0.000 (0.003) 0.000 (68.367) (45.068) (64.976) (51.097) As at 31 March 2023As at 31 March 2022 Financial Liabilities At amortised cost: Trade payables Principal sum borrowed Accrued interest Total Public Works Loan Board (PWLB) borrowing Principal sum borrowed Accrued interest EIR adjustments Total non-PWLB borrowing (“market debt”) Borrowing from group entities Total Borrowing Service concession and finance lease liabilities Financial guarantees Financial Liabilities included in Creditors Note: the figures in this table include accrued interest where this is applicable Page 220 of 268
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118 Annual Accounts 2021/22 Fair value of group financial instruments The fair value through other comprehensive income financial assets carried on the group balance sheet comprise the Council’s insurance fund investments and the investments of the Paisley and Renfrew Common Good Funds. The fair value of these investments equates to the market value of the investments as provided by the Council’s investment manager, abrdn Capital Limited. In terms of the fair value measurement hierarchy the financial instruments measured at fair value are considered to be Level 1 being quoted prices (unadjusted) in active markets for identical assets or liabilities that the authority can access at the measurement date, Level 2 being inputs other than quoted prices that can be accessed at the measurement date, or Level 3 being unobservable inputs e.g. cashflow forecasts or estimated creditworthiness (see table below). Carrying Amount Fair value Financial Liabilities Carrying Amount Fair value £m £m £m £m Financial liabilities measured at amortised cost: (203.994) (254.715) Public Works Loan Board borrowing 2 (227.198) (222.758) (54.653) (73.852) Non-PWLB borrowing (“market debt”) 2 (54.632) (61.519) Other liabilities: (71.581) (102.940) Service concession and finance lease liabilities 3 (68.361) (126.783) (0.005) (0.005) Financial guarantees 3 (0.003) (0.003) (330.233) (431.512) (350.194) (411.063) Financial liabilities measured at amortised cost: (53.139) n/a Borrowing from group entities (35.931) n/a (41.849) n/a Trade payables: short-term (47.709) n/a (94.988) (83.640) As at 31 March 2022 As at 31 March 2023 Fair value level Total financial liabilities for which fair value is disclosed Total financial liabilities for which fair value is not disclosed Carrying Amount Fair value Financial Assets Carrying Amount Fair value £m £m £m £m 25.299 25.299 Callable deposits in money market funds 1 6.086 6.086 2.954 2.954 Euro account balances with the Council’s banker 2 6.997 6.997 29.847 29.847 Investments in pooled funds 1 27.008 27.008 58.100 58.100 40.091 40.091 188.584 187.713 Fixed term deposits with UK local authorities 2 166.751 166.751 (8.486) (8.486) Callable deposits with UK banks & building societies* 2 0.379 0.379 0.052 0.052 Imprest accounts held at council establishments 2 0.051 0.051 1.592 1.707 Loans made for service purposes 3 1.546 1.681 181.742 180.986 168.727 168.862 239.842 239.086 208.818 208.953 Financial assets measured at amortised cost: 1.162 n/a Trade receivables and prepayments: long-term 0.817 n/a 69.550 n/a Receivables and prepayments: short-term 58.677 n/a 70.712 59.494 As at 31 March 2022 As at 31 March 2023 Fair value level Total Financial assets measured at fair value Total Financial assets measured at amortised cost Total financial assets for which fair value is disclosed Total financial assets for which fair value is not disclosed *includes current account balances with the Council’s banker. Page 221 of 268
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119 Annual Accounts 2021/22 The short-term nature of cash and cash equivalents means that their fair value equates to their balance sheet carrying amount. Further qualitative information on the fair value of financial instruments can be found in Note 22. Items of income, expense, gain and loss relating to group financial instruments The following items of income, expense, gain and loss relating to group financial instruments are included within the lines ‘Financing and Investment income and expenditure’ and ‘(Surplus) or deficit from investments in equity instruments designated as ‘Fair Value through Other Comprehensive Income (OCI*)’ in the group CIES. 2021/22 Amortised cost Elected to Fair Value through OCI* Fair Value through Profit or Loss 2022/23 £m £m £m £m £m £m 16.417 Interest expense 0.000 0.000 0.000 16.543 16.543 16.417 Total expense in the Surplus / Deficit on the Provision of Services 0.000 0.000 0.000 16.543 16.543 (0.294) Interest income (3.482) 0.000 (0.701) 0.000 (4.183) (0.794) Dividend income 0.000 (0.794) 0.000 0.000 (0.794) (0.409) Other income (0.319) (0.551) 0.000 0.000 (0.870) (1.497) Total income in the Surplus/Deficit on the Provision of Services (3.801) (1.345) (0.701) 0.000 (5.847) (0.824) Net (gain) or loss on revaluation 0.000 2.987 0.040 0.000 3.027 (0.824) (Surplus)/Deficit on the revaluation of financial assets 0.000 2.987 0.040 0.000 3.027 14.096 Net (Gain)/Loss for the year (3.801) 1.642 (0.661) 16.543 13.723 Financial Assets Financial liabilities at amortised cost Group Accounting Policies Introduction The Code of Practice on Local Authority Accounting in the United Kingdom 2022/23 (“the Code”) requires local authorities to consider their interests in all types of entity. This includes other local authorities or similar bodies defined in section 106 of the Local Government (Scotland) Act 1973, for example statutory bodies such as valuation boards. Authorities are required to prepare a full set of group accounts in addition to their own Council’s accounts where they have a material interest in such entities. Combining entities Renfrewshire Council’s group accounts consolidate the results of the Council with the results of the Paisley, Renfrew and Johnstone Common Good Funds; the Coats Observatory Trust administered by Renfrewshire Council; and seven other entities: 1. Renfrewshire Leisure Limited, trading as OneRen; 2. Paisley Museum Reimagined Limited; 3. Park Lane Developments (Renfrewshire) LLP; 4. Strathclyde Partnership for Transport; 5. Strathclyde Concessionary Travel Scheme Joint Committee; 6. Renfrewshire Valuation Joint Board; 7. Renfrewshire Health and Social Care Integration Joint Board. The Council has effective control over OneRen, Paisley Museum Reimagined Limited, the Paisley, Renfrew and Page 222 of 268
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120 Annual Accounts 2021/22 Johnstone Common Good Funds and the Coats Observatory Trust administered by Renfrewshire Council (as sole trustee) and, as such, these are treated as subsidiaries in the Council’s group accounts, with assets, liabilities, reserves, income and expenses being consolidated line-by-line. The Council also holds 50% (£50) of the share capital of Park Lane Developments (Renfrewshire) LLP. Under the terms of the Partnership Agreement, the Council has enhanced voting rights and Park Lane Developments (Renfrewshire) LLP has no claim on the remaining assets should the partnership be wound up; therefore, the entity is treated as a subsidiary. Strathclyde Partnership for Transport and Strathclyde Concessionary Travel Scheme Joint Committee are included within the group accounts under the definition of associate, even though the Council holds less than 20% or more of the voting (or potential voting) power (which is the criterion normally used to confer significant influence). However, the view has been taken that the nature of the funding arrangements between the constituent Councils and these entities is sufficient to confer significant influence. Renfrewshire Valuation Joint Board is included within the group accounts as an associate because the Council does not have a controlling interest in the body in terms of the voting rights. Renfrewshire Council’s share of each associate’s net assets or liabilities is calculated based on the Council’s proportionate contribution to each associate’s annual revenue costs. The Council has no shares in, or ownership of, any of these three organisations, which are entirely independent of the Council under law and for taxation. The Public Bodies (Joint Working) (Scotland) Act 2014 established the framework for the integration of health and adult social care in Scotland. Scottish Ministers legally established the Renfrewshire Health and Social Care Integration Joint Board on 27 June 2015 as a formal legal partnership between Renfrewshire Council and NHS Greater Glasgow and Clyde. This entity is included as a joint venture in the Council’s group accounts. Renfrewshire Council’s share of the joint venture’s net liabilities is calculated based on the Council’s proportionate ordinary shareholding in the joint venture. Basis of preparation of group statements and going concern For the associates and joint ventures detailed above, the combination has been accounted for under the accounting conventions of the acquisition basis using the equity method, with the Council’s share of the net assets or liabilities of each entity incorporated and adjusted each year by the Council’s share of that entity’s results and the Council’s share of other gains and losses (recognised in the group CIES). For four of the combining entities the Council has a share in a net liability. The net liability position of both the Renfrewshire Valuation Joint Board and OneRen arises from the inclusion of liabilities related to the defined benefit pension schemes as required by IAS19 (which requires that pension liabilities reflect the long- term cost of paying post-employment benefits). For Park Lane Developments (Renfrewshire) LLP the net liability arises from long-term borrowing to fund regeneration work within and around the site of the former Arnott’s store in Paisley. For Paisley Museum Reimagined Limited the net liability relates to sums due by the company to Renfrewshire Council for the provision of ongoing administrative support. All of the organisations noted above prepare their annual accounts on a going concern basis. Arrangements with the Council and other funders for the longer-term funding of Park Lane Developments (Renfrewshire) LLP are considered sufficient to meet future funding requirements. The Council will continue to support Paisley Museum Reimagined Limited until their anticipated revenue generation materialises. Page 223 of 268
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121 Annual Accounts 2021/22 Consideration for acquisition of associates’ net assets or liabilities The Council has acquired its share of the net assets of its associates for a nil consideration. There is no deferred or contingent purchase consideration. A fair value for its share of the net assets or liabilities of the three joint boards and committees at the point of acquisition and the post-acquisition results are unable to be accurately determined in view of the length of time since the transfer of these responsibilities at local government re- organisation in 1996 and the change in accounting for pensions under FRS17 in 2003/04. It is not possible to provide the fair value of the investment in the other combining entities of the Council as there are no published price quotations for these entities. No goodwill has been included in the group balance sheet in view of the length of time since acquisition, that no consideration was involved and that a fair value at the date of acquisition cannot now be properly assessed. Group boundary: non-material interests in other entities The Council has a significant interest in three joint committees that have not been included in the group accounts. The Council’s share of their net assets or liabilities is not material to the fair understanding of the financial position and transactions of the Council. In the interest of transparency, details of the business nature of each organisation are shown in notes G1 and G2. Inventories Inventories (generally consumable stock) are included in the group balance sheet at weighted average cost and the lower of cost or net realisable value: weighted average cost – Council’s stock; lower of cost or net realisable value – OneRen’s stock. The difference in valuation methods does not have a material effect on the results of the group given the levels of stockholdings in these entities. Post-employment benefits In common with Renfrewshire Council, all combining entities, except Park Lane Developments (Renfrewshire) LLP, participate in the Local Government Pension Scheme, which is administered locally by Glasgow City Council through the Strathclyde Pension Fund. The associates have accounting policies for pensions accounting that are consistent with those of the Council. Property, plant and equipment The basis of valuation across the combining entities is in accordance with the Code. Operational property, plant and equipment assets are shown at the lower of net replacement cost or net realisable value in existing use with the following exceptions: i) The Concessionary Travel Scheme Joint Committee has no fixed assets. ii) Strathclyde Partnership for Transport holds exceptional types of fixed assets in its balance sheet. Within intangible assets, there are subsidised bus contracts that are recorded at amortised cost. There are also “third-party” assets that are rolling stock and other public assets used by other transport operators but which the partnership has the power to direct to the benefit of the travelling public within the partnership’s operating area – these are held at historic cost. iii) OneRen uses the historic cost convention for its recent leasehold improvements, but this is considered a suitable proxy for market value in existing use on a replacement cost basis. OneRen also uses depreciated historic cost for its computers, plant, furniture and fittings rather than the Council’s depreciated replacement cost basis, however this is not considered to be material given the small values involved. Page 224 of 268
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122 Annual Accounts 2021/22 Restrictions on the transfer of funds The Council’s share of the reserves of its associates is unusable in that it cannot be used to fund the Council’s services nor to reduce taxation. All associates are entirely independent of the Council under law and for taxation. The Council is unable to access their reserves, whether classified as usable or otherwise in the associate’s own financial statements. Value Added Tax Value Added Tax paid by OneRen is accounted for within income and expenditure to the extent that it is irrecoverable from HM Revenue and Customs. Page 225 of 268
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Finance and Resources, Renfrewshire House, Cotton Street, Paisley PA1 1JB Telephone: 0300 300 0285 www.renfrewshire.gov.uk Page 226 of 268
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1 ___________________________________________________________________ To: Council On: 16 November 2022 ___________________________________________________________________ Report by: Director of Finance & Resources ___________________________________________________________________ Heading: Audit Report 2022/23 Coats Observatory Trust ___________________________________________________________________ 1. Summary 1.1 Each year the Council’s appointed external auditors carry out an audit of the financial statements of Coats Observatory Trust, controlled by Renfrewshire Council, and provide an opinion as to whether those statements provide a true and fair view of the financial position of the charity and its income and expenditure for the year; and also whether they have been prepared in accordance with the relevant regulations. 1.2 In accordance with International Auditing Standards (ISA260), Azets is obliged to report to those charged with the governance of the organisation matters that have arisen in the course of the audit. 1.3 The attached reports from Azets outlines their findings from the audit of the 2022/23 Observatory Trust accounts. 1.4 Under the Local Authority Accounts (Scotland) Regulations 2014, the Council must meet to consider the Annual Accounts and aim to approve those accounts for signature no later than 30 September. 1.5 Azets officers will attend the Council meeting to present their reports. 2. Recommendations 2.1 The Council is asked to consider the attached reports from Azets. Item 3 Page 227 of 268
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2 ___________________________________________________________________ Implications of the Report 1. Financial – The Annual Accounts demonstrate that the Council continues to operate the charity it controls within the resources available, and in line with the relevant legislation. 2. HR & Organisational Development – none arising directly from this report. 3. Community/Council Planning – none arising directly from this report. 4. Legal – An audit opinion free from qualification demonstrates compliance with the relevant legislation and statutory accounting requirements. 5. Property/Assets – none arising directly from this report. 6. Information Technology – none arising directly from this report. 7. Equality & Human Rights – none arising directly from this report. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk – none arising directly from this report. 11. Privacy Impact – none arising directly from this report. 12. Cosla Policy Position – none arising directly from this report. 13. Climate Risk – none arising directly from this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 228 of 268
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OFFICIAL Coats Observatory Trust Fund 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission November 2023 Page 229 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 2 Table of Contents Key messages 3 Introduction 5 Annual accounts audit 7 Page 230 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 3 Key messages This report concludes our audit of Coats Observatory Trust Fund (the “Trust”) for the year ended 31 March 2023. This section summarises the key findings and conclusions from our audit. Financial statements audit Audit opinion The annual accounts are due to be considered by the Council on 16 November 2023 and approved upon completion of the audit. We anticipate our independent auditor’s report to be unqualified. Key audit findings The Trust had appropriate administrative processes in place to prepare the annual accounts and the supporting working papers. We have obtained adequate evidence in relation to the key audit risks identified in our audit plan. The accounting policies used to prepare the financial statements are considered appropriate. We are satisfied with the appropriateness of the accounting estimates and judgements used in the preparation of the financial statements. All material disclosures required by relevant legislation and applicable accounting standards have been made appropriately. This is subject to the completion of the final audit senior management review. Audit adjustments We have not identified any audit adjustments during the audit process. We identified some disclosure and presentational adjustments during our audit. As part of our completion procedures, we will confirm these have been reflected in the final set of financial statements. Page 231 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 4 Accounting systems and internal controls We have applied a risk-based methodology to the audit. This approach requires us to document, evaluate and assess The Trust’s processes and internal controls relating to the financial reporting process. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we include these in this report. We consider the control environment within The Trust to be satisfactory. Page 232 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 5 Introduction The annual audit comprises the audit of the financial statements. We outlined the scope of our audit in our External Audit Plan for Renfrewshire Council (“the Council”), which we presented to the Board at the outset of our audit. We have not made any subsequent changes to the risks outlined in that plan. Responsibilities The Charities Accounts (Scotland) Regulations 2006 outline the accounting and auditing requirements for charitable bodies. The Regulations require an auditor to prepare a report to the charity trustees where an audit is required by any other enactment. The Trust is Renfrewshire Council’s charitable trust and is covered by the requirements of section 106 of the Local Government (Scotland) Act 1973 and consequently require a full audit. Each registered charitable trust has required a full audit since 2013/14. Coats Observatory Trust Fund is a registered charity preparing its accounts on a receipts and payments basis. The Trustees are responsible for preparing its annual accounts, including financial statements which properly present the receipts and payments, and for implementing appropriate internal control systems. The weaknesses or risks identified in this report are only those that have come to our attention during our normal audit work and may not be all that exist. Communication in this report of matters arising from the audit or of risks or weaknesses does not absolve management from its responsibility to address the issues raised and to maintain an adequate system of control. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on, the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose. We would like to thank all management and staff for their co-operation and assistance during our audit. Auditor independence International Standards on Auditing in the UK (ISAs (UK)) require us to communicate on a timely basis all facts and matters that may have a bearing on our independence. We confirm that we complied with the Financial Reporting Council’s (FRC) Ethical Standard. In our professional judgement, we remained independent, and our objectivity has not been compromised in any way. Page 233 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 6 We set out in Appendix 1 our assessment and confirmation of independence. Adding value All our clients quite rightly demand of us a positive contribution to meeting their ever- changing business needs. We add value by being constructive and forward looking, by identifying areas of improvement and by recommending and encouraging good practice. In this way we aim to promote improved standards of governance, better management and decision making and more effective use of public money. Any comments you may have on the service we provide would be greatly appreciated. Comments can be reported directly to any member of your audit team. Openness and transparency This report will be published on Audit Scotland’s website www.audit-scotland.gov.uk. Page 234 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 7 Annual accounts audit The Trust’s annual accounts are the principal means of accounting for the stewardship of its resources and its performance in the use of those resources. Our audit opinion Opinion Basis for opinion Conclusions Financial statements We conduct our audit in accordance with applicable law and International Standards on Auditing. Our findings / conclusions to inform our opinion are set out in this section of our annual report. We expect to issue an unqualified audit opinion on the annual accounts subject to final checks on potential post- balance sheet events. We have not identified any errors. We received the draft annual accounts and supporting papers in line with our audit timetable and those draft accounts were of good quality. Further information and revisions were provided promptly where required. Our thanks go to the Finance team for their assistance with our work. Opinions prescribed by the by the Accounts Commission on the Trustees’ Annual Report We plan and perform audit procedures to gain assurance that the information given in the Trustees' Annual Report is consistent with the financial statements and that report has been prepared in accordance with The Charity Accounts (Scotland) Regulations 2006. We have no matters to report. Page 235 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 8 Opinion Basis for opinion Conclusions Matters reported by exception We are required by The Charity Accounts (Scotland) Regulations 2006 to report to you if, in our opinion: adequate accounting records have not been kept; or the financial statements are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit. We have no matters to report. An overview of the scope of our audit The scope of our audit was detailed in our External Audit Plan for the Renfrewshire Council, which was presented to the Audit, Risk and Scrutiny Board in March 2023. The plan explained that we follow a risk-based approach to audit planning that reflects our overall assessment of the relevant risks that apply to the Trust. This ensures that our audit focuses on the areas of highest risk (the significant risk areas). Planning is a continuous process, and our audit plan is subject to review during the course of the audit to take account of developments that arise. At the planning stage, we identified the significant risks that had the greatest effect on our audit. Audit procedures were then designed to mitigate these risks. In our audit, we test and examine information using sampling and other audit techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain evidence through performing a review of the significant accounting systems, substantive procedures and detailed analytical procedures. Significant risk areas and key audit matters Significant risks are defined by auditing standards as risks that, in the judgement of the auditor, require special audit consideration. In identifying risks, we consider the nature of the risk, the potential magnitude of misstatement, and its likelihood. Significant risks are those risks that have a higher risk of material misstatement. Audit procedures were designed to mitigate these risks. Page 236 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 9 As required by the Code of Audit Practice and the planning guidance issued by Audit Scotland, we consider the significant risks for the audit that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the audit team (the ‘Key Audit Matters’), as detailed in the tables below. Our audit procedures relating to these matters were designed in the context of our audit of the annual accounts as a whole, and not to express an opinion on individual accounts or disclosures. Our anticipated opinion on the annual accounts is not modified with respect to any of the risks described below. Significant risks at the financial statement level These risks are considered to have a pervasive impact on the financial statements as a whole and potentially affect many assertions for classes of transaction, account balances and disclosures. Management override of controls Significant risk description Management of any entity is in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Although the level of risk will vary from entity to entity, this risk is nevertheless present in all entities. Due to the unpredictable way in which such override could occur, it is a risk of material misstatement due to fraud and thus a significant risk on all audits. This was considered to be a significant risk and Key Audit Matter for the audit. Inherent risk of material misstatement: Very High Page 237 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 10 Management override of controls How the scope of our audit responded to the significant risk Key judgement There is the potential for management to use their judgement to influence the financial statements as well as the potential to override controls for specific transactions. Audit procedures Documenting our understanding of the journals posting process and evaluating the design effectiveness of management controls over journals. Analysing the journals listing and determining criteria for selecting high risk and / or unusual journals. Testing high risk and / or unusual journals posted during the year and after the unaudited annual accounts stage back to supporting documentation for appropriateness, corroboration and appropriate approval in line with The Trust’s journals policy. Gaining an understanding of the accounting estimates and critical judgements made by management. We challenged key assumptions and considered the reasonableness and indicators of management bias which could result in material misstatement due to fraud. Evaluating the rationale for any changes in accounting policies, estimates or significant unusual transactions. Key observations We have completed our work and have not identified any issues. Significant risks at the assertion level for classes of transaction, account balances and disclosures Key risk area Valuation of the Trust land and buildings Significant risk description The valuation of Coats Observatory land and buildings is based on fair value, determined as the market value that would be paid for the asset in its current use. Valuation is provided by the Council Valuer and updated as a minimum every five years. The latest Page 238 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 11 Key risk area valuation of the Observatory building was 31 March 2021. Inherent risk of material misstatement: Assets (valuation): High How the scope of our audit responded to the significant risk Key judgements There is a significant degree of subjectivity in the measurement and valuation of land and buildings. This subjectivity and the material nature of the Trust’s asset base represents an increased risk of misstatement in the annual accounts. Audit procedures Procedures performed to mitigate risks of material misstatement in this area will include: Evaluating the competence, capabilities and objectivity of the valuation expert. Considering the basis on which the valuation is carried out and the challenge in the key assumptions applied. Testing the information used by the valuer to ensure it is complete and consistent with our understanding. If there have been any specific changes to the assets in the year, we will ensure these have been communicated to the valuer. Key observations We have completed our work and have not identified any issues. Materiality Materiality is an expression of the relative significance of a matter in the context of the financial statements as a whole. A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditor’s report. The assessment of what is material is a matter of professional judgement and is affected by our assessment of the risk profile of The Trust and the needs of users. We review our assessment of materiality throughout the audit. Whilst our audit procedures are designed to identify misstatements which are material to our audit opinion, we also report to the Audit, Risk and Scrutiny Board Page 239 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 12 and management any uncorrected misstatements of lower value errors to the extent that our audit identifies these. Our initial assessment of materiality was £7,000. On receipt of the unaudited financial statements, we reassessed materiality and have increased this to £6,700 in proportion to the decrease of the asset value for 2022/23 financial year. We consider that our updated assessment has remained appropriate throughout our audit. £ Overall materiality for the financial statements 100% 6,700 Performance materiality 75% 5,025 Trivial threshold 5% 335 Materiality Our assessment is made with reference to The Trust’s gross expenditure. We consider this to be the principal consideration for the users of the annual accounts when assessing financial performance of The Trust. Our assessment of materiality equates to approximately 1% of gross assets as disclosed in the 2022/23 unaudited annual accounts. In performing our audit, we apply a lower level of materiality to the Remuneration Report. Our materiality was set at £5k. We perform audit procedures on all transactions, or groups of transactions, and balances that exceed our materiality levels set. We perform a greater level of testing on the areas deemed to be at significant risk of material misstatement. Performance materiality Performance materiality is the working level of materiality used throughout the audit. We use performance materiality to determine the nature, timing and extent of audit procedures carried out. Performance materiality is set at a value less than overall materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of the uncorrected and undetected misstatements exceeds overall materiality. Trivial misstatements Trivial misstatements are matters that are clearly inconsequential, whether taken individually or in Page 240 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 13 aggregate and whether judged by any quantitative or qualitative criteria. Audit differences We have not identified any errors during our audit. Internal controls As part of our work, we considered internal controls relevant to the preparation of the financial statements such that we were able to design appropriate audit procedures. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we report these to the Audit, Risk and Scrutiny Board. These matters are limited to those which we have concluded are of sufficient importance to merit being reported. We did not identify any significant control weaknesses during our audit. Other communications Accounting policies, presentation and disclosures Our work included a review of the adequacy of disclosures in the financial statements and consideration of the appropriateness of the accounting policies adopted by The Trust. The accounting policies, which are disclosed in the financial statements are considered appropriate. The accounting policies used in preparing the financial statements are unchanged from the previous year. There are no significant financial statements disclosures that we consider should be brought to the attention of The Trust. All the disclosures required by relevant legislation and applicable accounting standards have been made appropriately. Overall, we found the disclosed accounting policies, and the overall disclosures and presentation to be appropriate. Fraud and suspected fraud We have previously discussed the risk of fraud with management and the Audit, Risk and Scrutiny Board. We have not been made aware of any incidents in the period nor have any incidents come to our attention as a result of our audit testing. Our work as auditor is not intended to identify any instances of fraud of a non- material nature and should not be relied upon for this purpose. Non-compliance with laws and regulations Page 241 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 14 As part of our standard audit testing, we have reviewed the laws and regulations impacting The Trust. There are no indications from this work of any significant incidences of non-compliance or material breaches of laws and regulations. Written representations We requested written representations from management, and these have been shared with the Audit, Risk and Scrutiny Board alongside this report, and are due to be approved and signed alongside the financial statements upon completion. Related parties We are not aware of any related party transactions which have not been disclosed. Page 242 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 15 Appendix 1: Responsibilities of The Trust and the Auditor Responsibilities of The Trust The Council is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has responsibility for the administration of those affairs. The Director of Finance and Resources has been designated as that officer in Renfrewshire Council. They manage the affairs of the Council to secure the economic, efficient and effective use of resources and safeguard its assets and those of any charitable trust it controls. Area The Trust’s responsibilities Corporate governance The Director of Finance and Resources has responsibility for ensuring that an effective system of internal financial control is maintained and operated. This system of internal financial control can only provide reasonable and not absolute assurance that assets are safeguarded, transactions are recorded and properly authorised, and that material errors or irregularities are either prevented, or detected within a timely period. The system of internal financial control is based on a framework of regular management information, financial regulations, administrative procedures and a system of delegation and accountability. The Director of Finance and Resources is responsible for keeping proper accounting records that are up to date and ensure that the financial statements comply with the Charities Accounts (Scotland) Regulations 2006 (as amended) and Accounting and Reporting by Charities: Statement of Recommended Practice (SoRP) applicable to charities preparing their accounts in accordance with the Financial Reporting Standard for Smaller Entities published on 16 July 2014. Decisions regarding the operation, assets, processes or policies of the Trust Fund are delegated by the Council to the Finance, Resources and Customer Services Policy Board (FRCSPB). Internal Control The Trustees have overall responsibility for the Trust Funds’ system of internal control. This system is designed by senior management to ensure effective and efficient operation, including financial reporting and compliance with laws and regulations. The Trustees acknowledge that such a system is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. Page 243 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 16 Area The Trust’s responsibilities Standards of conduct for prevention and detection of fraud and error The Trust is responsible for establishing arrangements to prevent and detect fraud, error and irregularities, bribery and corruption and also to ensure that its affairs are managed in accordance with proper standards of conduct. Auditor responsibilities Our 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 our 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 economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: using our understanding of the local government sector and charity sector to identify that the Local Government (Scotland) Act 1973, Charities and Trustee Investment (Scotland) Act 2005 and The Charities Accounts (Scotland) Regulations 2006 are significant in the context of the charity; inquiring of the Trustees as to other laws or regulations that may be expected to have a fundamental effect on the operations of the charity/charities; inquiring of the Trustees concerning the charity’s policies and procedures regarding compliance with the applicable legal and regulatory framework; discussions among our 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. Page 244 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 17 The extent to which our procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the charity’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 our auditor’s report. Audit quality The Auditor General and the Accounts Commission require assurance on the quality of public audit in Scotland through comprehensive audit quality arrangements that apply to all audit work and providers. These arrangements recognise the importance of audit quality to the Auditor General and the Accounts Commission and provide regular reporting on audit quality and performance. Audit Scotland maintains and delivers an Audit Quality Framework. The most recent audit quality report can be found at https://www.audit- scotland.gov.uk/publications/quality-of-public-audit-in-scotland-annual-report-202122 Independence The Ethical Standards and ISA (UK) 260 require us to give The Trust and fair disclosure of matters relating to our independence. In accordance with our profession’s ethical guidance and further to our External Audit Annual Plan issued confirming audit arrangements we have no matters to bring to the Audit, Risk and Scrutiny Board’s attention. We confirm that Azets Audit Services and the engagement team complied with the FRC’s Ethical Standard. We confirm that all threats to our independence have been properly addressed through appropriate safeguards and that we are independent and able to express an objective opinion on the financial statements. Our period of total uninterrupted appointment as at the end of 31 March 2023 was one year. Page 245 of 268
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Coats Observatory Trust: 2022/23 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Controller of Audit 18 Audit and non-audit services The total fees charged to the entity for the provision of services in 2022/23 were as follows. 2022/23 Auditor remuneration £6,000 Total fees £6,000 The FRC’s Ethical Standard stipulates that where an auditor undertakes non-audit work, appropriate safeguards must be applied to reduce or eliminate any threats to independence. We have not provided any non-audit services to The Trust. Page 246 of 268
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We are an accounting, tax, audit, advisory and business services group that delivers a personal experience both digitally and at your door. Accounting | Tax | Audit | Advisory | Technology © Azets 2023. All rights reserved. Azets refers to Azets Audit Services Limited. Registered in England & Wales Registered No. 09652677. VAT Registration No. 219 0608 22. Registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Page 247 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk Azets Audit Services Exchange Place 3 Semple Street Edinburgh EH3 8BL Dear Sirs Coats Observatory Trust Fund Financial Statements for the year ended 31 March 2023 Letter of Representation (ISA 580) This representation letter is provided for the purpose of expressing an opinion as to whether Coats Observatory Trust Fund’s financial statements present a true and fair view, in all material respects, in accordance with 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). I confirm to the best of my knowledge and belief and having made appropriate enquiries of the Coats Observatory Trust Fund’s trustees, the following representations given to you in connection with your audit of Coats Observatory Trust Fund’s annual accounts for the year ended 31 March 2023. Financial Statements i. We have fulfilled our responsibilities as trustees under the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006,for the preparation of Coats Observatory Trust Fund’s financial statements in accordance with 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), for being satisfied that they give a true and fair view and for making accurate representations to you. ii. I have complied with the requirements of all statutory accounting regulations affecting the accounts of Coats Observatory Trust Fund and these matters have been appropriately reflected and disclosed in the financial statements. iii. The financial statements are free of material misstatements, including omissions. iv. 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.. Page 248 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk v. I acknowledge my responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud and error, and I believe that I have appropriately fulfilled these responsibilities. vi. The methods, data and significant assumptions used by us in making accounting estimates, including those measured at fair value, are appropriate to achieve recognition, measurement and disclosure that is reasonable in the context of the applicable financial reporting framework. I am satisfied that the material judgements used in the preparation of the financial statements are soundly based, in accordance with the Code and adequately disclosed in the financial statements. vii. Coats Observatory Trust Fund has satisfactory title to all assets disclosed in the accounts. While the observatory building is currently subject to renovation as part of the Paisley Museum Reimagined project, I have no information that would materially alter the carrying value and, where relevant, the fair value measurements or classification of assets and liabilities as at 31 March 2023 reflected in the financial statements. viii. Except as disclosed in the financial statements: a. there are no unrecorded liabilities, actual or contingent; b. none of the assets of Coats Observatory Trust Fund has been assigned, pledged or mortgaged; c. there are no material prior year charges or credits, nor exceptional or non- recurring items requiring separate disclosure. ix. Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of applicable law and accounting standards. x. All events subsequent to the date of the financial statements and which require adjustment or disclosure have been adjusted or disclosed. xi. Actual or possible litigation and claims have been accounted for and disclosed in accordance with the requirements of UK adopted international accounting standards, and as interpreted and adapted by the Code. xii. I have assessed Coats Observatory Trust Fund’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 Coats Observatory Trust Fund’s ability to continue as a going concern. Information Provided xiii. I have provided you with: Page 249 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk a. access to all information of which I am aware that is relevant to the preparation of the Coats Observatory Trust Fund’s financial statements such as accounting records, and all other records requested; b. additional information that you have requested from us for the purpose of your audit; and c. unrestricted access to persons within Coats Observatory Trust Fund (via remote arrangements where necessary), from whom you determined it necessary to obtain audit evidence. xiv. I have communicated to you all deficiencies in internal control of which management is aware. xv. All transactions undertaken by Coats Observatory Trust Fund have been recorded in the accounting records and are properly reflected in the financial statements. xvi. I have disclosed to you the results of my assessment of the risk that the financial statements may be materially misstated as a result of fraud. xvii. I have disclosed to you all information in relation to known fraud or suspected fraud that I am aware of and that affects Coats Observatory Trust Fund and involves: a. management; b. employees who have significant roles in internal control; or c. others where the fraud could have a material effect on the financial statements. xviii. I have disclosed to you all information in relation to instances of, or allegations of fraud, or suspected fraud, affecting the financial statements communicated by employees, former employees, analysts, regulators or others. xix. 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. xx. I have disclosed to you the identity of Coats Observatory Trust Fund's related parties and all the related party relationships and transactions of which I am aware. xxi. I have disclosed to you all known actual or possible litigation and claims whose effects should be considered when preparing the financial statements. xxii. I acknowledge our legal responsibilities regarding disclosure of information to you as auditors and confirm that so far as I am aware, there is no relevant audit information needed by you in connection with preparing your audit report of which you are unaware. Page 250 of 268
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My Ref: Contact: Telephone Number: Email: AR/CB Alastair MacArthur 0300 300 0285 Alastair.macarthur@renfrewshire.gov.uk Finance and Resources Director: Alastair MacArthur Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk Approval The approval of this letter of representation was minuted by Coats Observatory Trust Fund at its meeting on 16 November 2023. Yours faithfully Name: Alastair MacArthur Position: Director of Finance and Resources Page 251 of 268
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1 ___________________________________________________________________ To: Council On: 16 November 2023 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audited Financial Statements 2022/23 Coats Observatory Trust ___________________________________________________________________ 1. Summary 1.1 The 2022/23 unaudited financial statements were approved by Council on 22 June 2023. Each year the appointed external auditors carry out an audit of the financial statements of the Coats Observatory Trust and provide an opinion as to whether those statements provide a true and fair view of the financial position of the charity and its income and expenditure for the year; and also whether they have been prepared in accordance with the relevant regulations. 1.2 The audited financial statements for the Coats Observatory Trust are now presented to Council for approval. 1.3 There were no material adjustments to the financial statements over the course of the audit. Further detail is included in Azets’ Annual Audit report, presented at agenda item 3. ___________________________________________________________________ 2. Recommendations 2.1 The Council is requested to approve the attached 2022/23 audited financial statements for the Coats Observatory Trust. Item 4 Page 253 of 268
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2 ___________________________________________________________________ Implications of the Report 1. Financial – The 2022/23 Annual Accounts demonstrate the Council continues to manage the charity it controls within the resources available and in line with relevant legislation. 2. HR & Organisational Development – none arising directly from this report. 3. Community/Council Planning – none arising directly from this report. 4. Legal – An audit opinion free from qualification demonstrates compliance with the relevant legislation and statutory accounting requirements. 5. Property/Assets – none arising directly from this report. 6. Information Technology – none arising directly from this report. 7. Equality & Human Rights – none arising directly from this report. 8. Health & Safety – none arising directly from this report. 9. Procurement – none arising directly from this report. 10. Risk – none arising directly from this report. 11. Privacy Impact – none arising directly from this report. 12. Cosla Policy Position – none arising directly from this report. 13. Climate Risk – none arising directly from this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 254 of 268
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RENFREWSHIRE COUNCIL COATS OBSERVATORY TRUST FUND SC019454 TRUSTEES’ REPORT AND FINANCIAL STATEMENTS 1 APRIL 2022 to 31 MARCH 2023 Page 255 of 268
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Table of Contents TRUSTEES’ REPORT ....................................................................... 1 INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF COATS OBSERVATORY TRUST FUND AND THE ACCOUNTS COMMISSION FOR SCOTLAND ..................... 1 TRUST ACCOUNTS FINANCIAL STATEMENTS OVERVIEW ............................... 4 STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 MARCH 2023 5 STATEMENT OF BALANCES AS AT 31 MARCH 2023 ................................... 5 NOTES TO THE FINANCIAL STATEMENTS ................................................ 6 Page 256 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 1 Trustees’ Report 1. INTRODUCTION Renfrewshire Council acts as sole trustee for the Coats Observatory Trust Fund which has charitable status and is registered with the Office of the Scottish Charity Regulator (OSCR). The financial statements of the Trust are included in this report: The principal address of the Trust Fund is: Renfrewshire Council Finance and Resources Renfrewshire House Cotton Street Paisley PA1 1JB Renfrewshire Council administers the Trust Fund and separately accounts for it. Renfrewshire Council was established by the Local Government (Scotland) Act 1994 and came into being on 1 April 1996. The Council provides a wide range of public services such as education, social services, environmental services, council housing and economic regeneration. The Trust Accounts do not form part of Renfrewshire Council’s single entity balance sheet, although under s222 of the Local Government (Scotland) Act 1973, the property of the Trust “vest[s] in” the relevant local authority. However, the Trust Fund accounts are included within the group accounts of the Council. A copy of the group accounts can be obtained from the address above. Independent Auditors: Azets Titanium 1 King's Inch Place Renfrew Glasgow PA4 8WF Page 257 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 2 TRUSTEES In terms of the “Trustees” of the Trust, the guidance provided by OSCR is that those who have “general control and management” of the charity are the charity trustees. Decisions regarding the general control and management of the Trust Fund are made by the Finance, Resources and Customer Services Policy Board (FRCSPB), which has delegated authority from the Council in this regard; but ultimately control rests with the full Council of elected members. We have therefore interpreted the above guidance as meaning all elected members are charity trustees. The following individuals were the Trustees of the Trust Fund in their capacity as elected members of Renfrewshire Council during the 2022/23 financial year: Jennifer Adam Bruce MacFarlane Fiona Airlie-Nicolson James MacLaren Stephen Burns Kenny MacLaren Jacqueline Cameron Mags MacLaren Lorraine Cameron Colin McCulloch Michelle Campbell Janis McDonald Graeme Clark Cathy McEwan Carolann Davidson David McGonigle Eddie Devine Jamie McGuire Andy Doig Marie McGurk Audrey Doig Iain McMillan Alison Ann-Dowling John McNaughtan Chris Gilmour Kevin Montgomery Edward Grady Sam Mullin Gillian Graham Will Mylet Neill Graham Iain Nicolson John Gray Jim Paterson Anne Hannigan Emma Rodden John Hood John Shaw Lisa-Marie Hughes Ben Smith Robert Innes Andy Steel Alec Leishman Day to day management of the Trust Fund is delegated to the Director of Finance and Resources of Renfrewshire Council. All the trustees for the accounts are normally elected or re-elected at local government elections. By-elections are held to elect new members in the event of existing members vacating their position. New members automatically become trustees. 2. STRUCTURE, GOVERNANCE AND MANAGEMENT The Coats Observatory Fund was inherited by the local authority in early 1963 from the Paisley Philosophical Society. The Council as Trustees own the buildings comprising the Coats Observatory. These buildings are leased to Renfrewshire Leisure Ltd for zero consideration. Page 258 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 3 HISTORY The original purpose of the Trust when it was set up was: “for the upkeep of Coats Observatory equipment”. This purpose was relevant while there were cash funds available; however these funds have been exhausted, and only the property assets remain. GOVERNANCE AND MANAGEMENT The Council is required to make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. The Director of Finance and Resources has been designated as that officer in Renfrewshire Council. They manage the affairs of the Council to secure the economic, efficient and effective use of resources and safeguard its assets and those of any charitable trust it controls. Given the Trust Fund is controlled by the Council, these specific provisions are supplemented by general provisions relating to the administration of local authority monies, i.e., the duty to obtain best value. The Director of Finance and Resources has responsibility for ensuring an effective system of internal financial control is maintained and operated. This system of internal financial control can only provide reasonable and not absolute assurance that assets are safeguarded, transactions are recorded and properly authorised, and that material errors or irregularities are either prevented or would be detected within a timely period. The system of internal financial control is based on a framework of regular management information, financial regulations, administrative procedures and a system of delegation and accountability. The Director of Finance and Resources is responsible for keeping proper accounting records which are up to date, and which ensure that the financial statements comply with the Charities Accounts (Scotland) Regulations 2006(as amended) and Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard for Smaller Entities published on 16th July 2014. Decisions regarding the operation, assets, processes or policies of the Trust Fund are delegated by the Council to the Finance, Resources and Customer Services Policy Board (FRCSPB). RISK The Trustees have overall responsibility for the Trust Funds’ system of internal control. This system is designed by senior management to ensure effective and efficient operation, including financial reporting and compliance with laws and regulations. The Trustees acknowledge that such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. 3. FINANCIAL REVIEW The Trust Fund has no explicit reserves policy. The Trust Fund is not in deficit and no donations to the Fund are solicited. Page 259 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 4 4. FUTURE PLANS Given there are no cash funds remaining, nor are any anticipated, the Council will explore with OSCR the future of the charity, always considering the ongoing sustainability of the Observatory and ensuring appropriate governance arrangements remain in place. CONCLUSION The Trustees wish to thank the Renfrewshire Council officers involved in producing the Report and Financial Statements. Signed: Date: Alastair MacArthur Director of Finance and Resources Renfrewshire Council On behalf of the Trustees: Date: Councillor John Shaw Convener – Finance, Resources and Customer Services Policy Board Renfrewshire Council Page 260 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 1 Independent Auditor’s Report to the Trustees of Coats Observatory Trust Fund and the Accounts Commission for Scotland Reporting on the audit of the financial statements Opinion on financial statements We certify that we have audited the financial statements in the statement of accounts of Coats Observatory Trust Fund for the year ended 31 March 2023 under Part VII of the Local Government (Scotland) Act 1973 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005. The financial statements comprise the Statement of Receipts and Payments, the Statement of Balances 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 a receipts and payments basis. In our opinion the accompanying financial statements: • properly present the receipts and payments of the charity for the year ended 31 March 2023 and its statement of balances at that date; and • have been prepared in accordance with the requirements of the Charities and Trustee Investment (Scotland) Act 2005, and regulations 9(1),(2) and (3) of The Charities Accounts (Scotland) Regulations 2006. Basis for opinion We conducted our 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. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the charity in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the trustees for the financial statements The trustees are responsible for the preparation of financial statements that properly present the receipts and payments of the charity, and for such internal control as the trustees determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibilities for the audit of the financial statements Our 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 our 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 Page 261 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 2 reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with [my/our] responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using our understanding of the local government sector and charity sector to identify that the Local Government (Scotland) Act 1973, Charities and Trustee Investment (Scotland) Act 2005 and The Charities Accounts (Scotland) Regulations 2006 are significant in the context of the charity; • inquiring of the Trustees as to other laws or regulations that may be expected to have a fundamental effect on the operations of the charity/charities; • inquiring of the Trustees concerning the charity’s policies and procedures regarding compliance with the applicable legal and regulatory framework; • discussions among our 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 our procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the charity’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 our auditor’s report. Reporting on other requirements Other information The trustees are responsible for the other information in the statement of accounts. The other information comprises the Trustees’ Annual Report. Our 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 our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material Page 262 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 3 misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except on the Trustees’ Annual Report to the extent explicitly stated in the following opinion prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Trustees’ Annual Report In our opinion, based on the work undertaken in the course of the audit, the information given in the Trustees' Annual Report 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 Charity Accounts (Scotland) Regulations 2006. Matters on which we are required to report by exception We are required by The Charity Accounts (Scotland) Regulations 2006 to report to you if, in our opinion: • proper accounting records have not been kept; or • the financial statements are not in agreement with the accounting records; or • we have not received all the information and explanations we require for our audit. We have nothing to report in respect of these matters. Use of our 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, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Gary Devlin, (for and on behalf of Azets Audit Services), Exchange Place 3 Semple Street Edinburgh EH3 8BL Date: Azets Audit Services is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006 Page 263 of 268
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 4 Trust Accounts Financial Statements Overview 1. INTRODUCTION The following pages detail the Statement of Receipts and Payments, the Statement of Balances and relevant Notes to the Accounts, as required by the Charities Accounts (Scotland) Regulations 2006. A Cash Flow Statement is not required as the charity is classified as a small charity as defined in the Charities Statement of Recommended Practice (SORP) and therefore is exempt from producing a Cash Flow Statement. 2. STATEMENT OF RECEIPTS AND PAYMENTS The Statement of Receipts and Payments provides an analysis of the incoming and outgoing cash and bank transactions for the period. If applicable, the Statement would also show any cash movements in relation to fixed assets. In the case of the Trust Fund, there have been no purchases or sales of fixed assets. 3. STATEMENT OF BALANCES The Statement of Balances reconciles the cash and bank balances at the beginning and end of the financial year with the surpluses or deposits shown in the Statement of Receipts and Payments. The Statement of Balances also summarises final closing balances at the end of the period. 4. NOTES TO THE ACCOUNTS Notes to the accounts expand on or explain the information contained in the Statement of Receipts and Payments and the Statement of Balances. Page 264 of 268
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Renfrewshire Council Trust Funds Financial Statements P a g e | 5 Statement of Receipts and Payments for the year ended 31 March 2023 2021/22 2022/23 Total Unrestricted Restricted Total £ £ £ £ 0 Total receipts 0 0 0 0 Total payments 0 0 0 0 Surplus / (deficit) for period 0 0 0 Statement of Balances as at 31 March 2023 As at 31 March 2022 As at 31 March 2023 Total Unrestricted Restricted Total £ £ £ £ Cash balances held with Renfrewshire Council 0 Opening balance 0 0 0 0 Surplus / (deficit) for period 0 0 0 0 0 0 0 Other assets (at current valuation) Land and buildings: 700,213 Coats Observatory, Paisley 0 677,143 677,143 700,213 0 677,143 677,143 Signed Signed Alastair MacArthur Councillor John Shaw Director of Finance and Resources Convenor, Finance, Resources and Customer Services Policy Board Renfrewshire Council Renfrewshire Council Date: Date: Page 265 of 268
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Renfrewshire Council Trust Funds Financial Statements P a g e | 6 Notes to the Financial Statements 1. ACCOUNTING POLICIES INTRODUCTION The Financial Statements for the year ended 31 March 2023 have been prepared in accordance with the Accounting and Reporting by Charities : Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard 102, the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006 (as amended).They are designed to give a true and fair view of the financial performance and position of the Trust Fund and comparative figures for the previous financial year are provided. There are no significant departures from accounting standards other than that outlined specifically below. The accounting concepts of “materiality” and “going concern” have been considered in the application of accounting policies. In this regard the materiality concept means that information is included where the information is of such significance as to justify its inclusion. The accounts have been prepared on a going concern basis. The going concern concept assumes that the Trustees will not significantly curtail the scale of the charities’ operations, however it is anticipated that the Observatory Fund will not continue indefinitely. This has no impact on the financial statements as the assets of the Fund comprise solely of the Observatory buildings which are independently valued. The accounting concept of "accruals" is not relevant to these statements, which have been prepared on a receipts and payments basis. The accounts have been prepared under the historic cost convention, other than changes resulting from the revaluation of certain categories of assets. The following accounting policies used in its preparation have been reviewed following the introduction of Financial Reporting Standard 18 “Accounting Policies” (FRS18). Fund Accounting Unrestricted funds can be used in accordance with the charitable objectives at the discretion of the trustees. Restricted funds can only be used for particular restricted purposes within the objects of the charity. Restrictions arise when specified by the donor or when funds are raised for particular restricted purposes. Further explanations of the nature and purpose of each fund is included in the notes to the financial statements. The 2021/22 comparative figures have been brought forward unchanged. Page 266 of 268
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Renfrewshire Council Trust Funds Financial Statements P a g e | 7 INCOMING/OUTGOING RESOURCES Recognition of incoming resources All income is recognised and included in the Statement of Receipts and Payments (SoRP) when the money is actually received. Recognition of expenditure Expenditure is recognised and included in the Statement of Receipts and Payments (SoRP) when it is paid for. Charitable Activities Decisions regarding the way the Trust Funds’ income is spent are taken by the Finance, Resources and Customer Services Policy Board, whose membership comprises 15 of the trustees of the Trust Fund. Costs of Generating Funds The cost of administering the Trust Fund is borne entirely by Renfrewshire Council. Governance Costs Governance costs, where applicable, include the: • costs of the preparation and examination of statutory accounts; • cost of any legal advice to trustees on governance or constitutional matters; and • cost of administering grants. ASSETS The Fund includes the land and buildings of Coats Observatory, Paisley. The latest valuation was carried out in 2021/22 and was based on fair value, determined as the market value that would be paid for the asset in its current use. Valuations are provided by the Council Valuer who is MRICS qualified, and are updated as a minimum every five years. The Observatory building is being depreciated on a straight-line basis over 30 years. 2. ANALYSIS OF RECEIPTS/PAYMENTS No income was received in the year. 3. TRUSTEES’ REMUNERATION AND EXPENSES Neither the trustees of the Trust Fund nor any associated person connected with them have received any remuneration for their services. Further, no directly incurred expenses were reimbursed to the trustees during the period (2022/23 nil). 4. RELATED PARTIES During the period, the Council also acted as the banker for the Trust Fund and all transactions, incoming and outgoing, are made via the Council’s bank accounts. There are no outstanding balances due to or from Renfrewshire Council nor were there any cash transactions during 2022/23. Page 267 of 268
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