Summary of recent Audit Scotland publications FINAL
Renfrewshire Council · 19 August 2024
Back to Audit, Risk and Scrutiny Board — 19 August 2024 and its agenda
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___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 19 August 2024 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Summary of recent Audit Scotland Publications ___________________________________________________________________ 1. Summary 1.1 Audit Scotland regularly publish national reports on matters relating to local government in Scotland. This report provides an overview on a recent blog post from the Chair of the Accounts Commission and on two newly published, which officers have summarised for Board members. 1.2 The report on local government budgets summarises some of the challenges facing all local authorities in Scotland and is covered in Section 3. Audit Scotland have collated information to show the scale of budget gaps across the sector, and to show how the gaps are being addressed. 1.3 Section 4 gives an overview on the report on leadership is the first Best Value thematic report to be published since Audit Scotland adopted a new approach to Best Value in 2022. It draws out some commonalities arising from the focus on effective leadership in setting strategic priorities. 1.4 Section 5 of the report summarises a blog post was written by the Chair of the Accounts Commission highlighting the importance of the role of Chief Financial Officer in councils. It notes that these officers must have a leadership role that transcends the finance function, in order that all decisions are based on sound financial management. It also notes the importance of having sufficient capacity within finance teams to enable the level of information and support that is needed for good decision-making.
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2. Recommendations 2.1 It is recommended that members of the Audit, Risk and Scrutiny Board: • Note the content of this report. 3. Audit Scotland briefing on Local Government Budgets 2024/25 3.1 In May 2024, Audit Scotland produced a briefing summarising the key issues it identified after analysing the 2024/25 budgets for each of Scotland’s 32 local authorities. The briefing considers how Scottish councils are addressing the ongoing budget challenges and ensuring long-term financial sustainability. 3.2 The report notes that, although there was a real terms rise in the revenue settlement to local government in Scotland, much of the increase is funding which was previously ring-fenced but has transferred to the general revenue grant in line with the Verity House Agreement. The report also notes that the increase is largely to support pay awards, and to deliver Scottish Government priorities including the funding to support a Council Tax freeze. Audit Scotland considers that freezing Council Tax added complexity to budget setting by removing the main lever for income generation. 3.3 The cumulative budget gap for Scottish councils in 2024/25 is noted as being around £585 million, ranging from £3.1m in Glasgow to £65.6m in Highland. It notes that Glasgow City Council are taking a multi-year approach to their budget gap and so the figure is an outlier and not truly reflective of the actual position; the multi-year plan identifies £34.7m of savings due to be delivered in 2024/25. 3.4 The figure below shows the reported budget gap for each local authority, excluding any expected savings for 2024/25. Renfrewshire Council’s figure equates to the revised budget deficit of £4.3m, as reported to Council in May 2024, less mitigating savings of £8.8m. 3.5 Audit Scotland have also compiled information on how councils are addressing these budget gaps, and found that, as in Renfrewshire Council, the use of reserves and the agreement of recurring savings are making the biggest contribution. These are expected to generate £159m and £168m respectively across all Scottish councils. Non-recurring savings are expected to generate a further £45m. The report notes that the use of reserves and non-recurring measures is not sustainable. The report also notes the
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challenges some councils have faced in regard to public opposition to proposed savings measures. 3.6 Most councils have indicated the amount they expect to raise from fees and charges in 2024/25, which amounts to £1.3bn. This includes new charges for garden waste, bulk uplifts, harbour fees and low emission zones.
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3.7 Information on the expected budget gap for the next two years was available for 30 councils, and Audit Scotland have calculated this to be £393m in 2025/26 and £387m in 2026/27. Although Glasgow City has the highest cumulative gap in monetary terms, Shetland and Clackmannanshire have the largest gap as a proportion of their revenue budget, at 22% and 12% respectively. Renfrewshire Council’s budget gap for the three years is £25.29m, which equates to 4.6% of the revenue budget. This figure, for planning purposes, assumes Council Tax increases of 6% in 2025/26 and 5% in 2026/27, and that £8m savings will be delivered in each of these years. The outlook will be updated and reported to Council in September 2024. 3.8 The report highlights an overall rise in capital budgets but with considerable variation; 18 councils increased the capital budget and 13 reduced it. The proportion of capital spend funded by borrowing grew from 53% to 64% and the proportion funded by the Scottish Government fell from 27% to 20% in one year. The allocation of capital funding from the Scottish Government decreased by 23.6% in real terms from 2023/24. 3.9 Audit Scotland, in the report, draw attention to the importance of consulting with residents as part of the budget setting, and note that 24 councils (including Renfrewshire) did undertake some form of consultation on financial pressures. The importance of carrying out equality impact assessments on budget proposals is also noted, to support compliance with the general equality duty. 3.10 In terms of identifying issues with the budget process, the timing of the Council Tax freeze is highlighted as having limited the time available to adapt budget plans and proposals. The timing of the publication of the Scottish Government Financial Circular also created a challenge for some councils as it was released on 29 February, after many budget meetings had already taken place. 4. Audit Scotland: Delivering for the Future – why leadership matters 4.1 As part of the new approach to Best Value Audit, Audit Scotland are carrying out a thematic audit of all 32 councils each year. The first such thematic report was published in July 2024 and focuses on leadership. Specifically, auditors were asked, as part of their annual work, to consider the effectiveness of leadership in the development of the council’s strategic priorities. This took place in the second half of 2022. The findings were included in each Council’s Annual Audit reports, and this new summary report highlights some areas of commonality. In Renfrewshire, findings were reported to the Audit, Risk and Scrutiny Board in November 2023 as part of
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the wider Best Value reporting. Given the time that has elapsed between the audit work and the publication of the report, the position in many councils may have changed. 4.2 The report finds that all councils have a clear vision, with most revising their Council Plans after the 2022 election. All councils also have clear plans for tackling poverty and inequalities, and reflect environmental sustainability in their priorities. There was evidence that all councils had included the views of citizens and communities when setting priorities. 4.3 Performance management was in need of further development in around one- third of councils. In Renfrewshire Council, we have long-standing arrangements for regular reporting to elected members and citizens through our Council Plan, Service Improvement Plans, annual Public Performance report and many other operational and strategic reports considered at Boards. 4.4 The report notes that aligning financial strategies to priorities is important, as is aligning resources, which includes the workforce. The way in which councils direct and develop their workforce will be the focus for the second thematic review report, and work is underway on this at present. 4.5 Audit Scotland stress the importance of collaborative leadership and effective working between officers and members. The significant turnover in senior officers across councils is noted, as are the challenges and risks that can bring. Auditors reflected the work of many councils to support new elected members in 2022 and restate the importance of elected members making use of opportunities provided for training and development. 4.6 Most councils had cited community empowerment as a priority, and auditors highlight the need for engagement to be meaningful, and to understand the reasons for low take-up of engagement opportunities. They also note that allocating 1% of revenue budgets to participatory budgeting is aspirational for many councils, though there is good work being done to include citizens in the budget-setting process. 4.7 The report identifies common improvement actions which apply to multiple councils: • Clarifying outcome measures and targets for council priorities; • Improving arrangements for monitoring and reporting on progress to elected members; • Making performance reporting more accessible to the public; • Ensuring workforce, assets, digital, capital and service plans are aligned to corporate priorities;
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• More encouragement and support for citizens to engage meaningfully; • Ensuring equality impact assessments are undertaken at an early stage to inform strategy and decision making, and that these assessments are published; • Building on Net Zero plans, with more detail on project costs and budgets; • Demonstrating how budget decisions and financial plans align to priorities; • Reviewing the affordability of proposed capital plans and their revenue implications. 4.8 The publication of the report was accompanied by a blog from a member of the Accounts Commission. This re-iterated the findings that local government had a clear vision with priorities that are shaped by the views of the communities served. However, it also notes that “financial pressures and increasing demand mean continuing as we are is not sustainable, and therefore not an option.” It highlights the criticality of effective collaboration between officers and elected members, and of workforce planning to ensure the capacity and capability of the local government workforce into the future. For this reason, workforce innovation is the focus of the current thematic review. 4.9 The report on Renfrewshire Council concluded “We are satisfied that the Council has appropriate arrangements in place to demonstrate Best Value under each reported area of the 2022/23 thematic review.” The table below provides information on practice within Renfrewshire Council in relation to each of the national leadership themes. National leadership theme Renfrewshire Council Practice Clarifying outcome measures and targets around Council priorities Following work with the Corporate Management Team from February 2024 onwards, and as reflected as minor action in our own local audit report last year, a refreshed Council Plan was approved by Leadership Board in June 2024, with significantly reduced and refined priorities, actions and indicators. The refreshed Council Plan, clarifies Council priorities, particularly reflecting the current context locally and for local government more broadly.
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A new overview dashboard of progress towards the Strategic Outcomes was also included in the 6-month performance update, also approved by the June 2024 Leadership Board. Renfrewshire’s Community Plan priorities were also refreshed last year, providing some assurance that the organisation continues to focus on the right areas, while recognising these need to remain flexible and agile. Monitoring and reporting progress to elected members Renfrewshire Council’s clear performance framework was positively highlighted by the thematic audit work – the organisation has a well established and robust calendar of progress reporting to Elected Members, including 6 monthly updates on Council Plan progress, Service Improvement Plan progress and also operational performance as appropriate to the service area. Accessibility of performance reporting Renfrewshire Council has used Storymaps with embedded PowerBI functionality to present the annual performance reporting, underpinned by the Local Government Benchmarking Framework data, showing a mix of interesting case studies, images and videos, alongside the ability to drill down into the local, family group and national data. Given this is now established practice, we will commit to testing this with citizens over the coming year, to ensure it covers the areas of most interest to our communities and is inclusive and accessible. Since 2022, and aligned to the Council Plan approach, 6-montly performance reporting on the Council Plan and on SIPs has used a much more attractive and accessible format, with a mixture of case studies and infographics alongside the full suite of actions and performance indicators. As noted above, a new overview dashboard of progress towards the Council Plan Strategic Outcomes has also been developed to a give a ’one glance’ picture of overall progress.
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Alignment of key plans to corporate priorities The thematic audit work highlighted the alignment of Renfrewshire Council’s key plans to the Council Plan. There is a clear golden thread between the Service Improvement Plans as a delivery element of the Council Plan alongside the financial planning, to deliver the key priorities. Following the refresh of the Council Plan noted above, further work (including the development of a plan on a page approach) is being planned to raise awareness, and mainstream cross- service understanding, of the corporate priorities and to ensure continued close alignment of future plans and strategies. We will also seek to continue to strengthen the ‘golden thread’ approach, particularly in relation to our people and workforce planning. Citizen engagement There are a range of good practice examples across Council services demonstrating the Council’s commitment to effective citizen engagement, which was highlighted in the thematic audit work. As well as the overall commitment through the Fairer Renfrewshire and the Connecting Communities programmes, some service specific examples including You Decide, Celebrating Renfrewshire, Local Partnerships, the work of the Lived Experience Panel, Local Development Plan and Housing Regeneration engagement and Ren Zero engagement including the citizens’ panel. As part of our self-evaluation activities and also the lessons learned from Renfrewshire’s Section 102 Audit, we have reflected on our practice and recognised the need to continue to develop and strengthen our approach. Extensive work is currently underway to develop a Council-wide Consultation and Engagement strategy, building on best practice to create an accessible, contemporary source of advice and best practice for all Council areas that plan and run these types of exercises. Equality impact considerations The Council has a range of processes and resources in place to support officers and Elected Members to consider equality impacts as part of planning and subsequent decision-making processes. This
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includes a toolkit and training for staff and Elected Members. There are a number of more recent developments including the UNCRC, alongside our corporate self- assessment undertaken which identified a need to continue to build and develop our approaches, recognising factors such as turnover in staff, for example, may mean there is a need for more training and development in this area. Work is therefore currently underway to strengthen the Council’s approach to equality considerations, with recent training to the Corporate Management Team and a ‘rapid review’ of current practice being undertaken across each service area. A strengthened approach is also being progressed, working alongside the Director of Finance and the wider CMT, to integrate equality assessments more robustly within the Financial Sustainability and Transformation programme and this will link with the enhanced governance arrangements (see below). A dedicated resource is also being recruited to support the strengthened approach to equalities within the organisation. Building on Net Zero plans The thematic audit work highlighted the Council’s clear commitment to tackling the climate crisis and the development of Renfrewshire’s Plan for Net Zero, which represented phase 1 of our approach. Phase 2 builds on those plans, with a costed delivery plan and route map to net zero. Both elements of this work were underpinned by community engagement through surveys, workshops and Renfrewshire’s Climate Panel. Aligning budget decisions and financial planning to Council priorities The thematic audit highlighted the well-established financial sustainability and transformation programmes, which are cross-cutting and aligned to Council priorities. This work is ongoing and extensive, with a recent enhancing of the governance support for this area - one Corporate Management Team meeting per
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month has now been dedicated to the Financial Sustainability and Transformation Board. As noted above, financial planning aligns to the organisation’s overall strategic direction (as set by the refreshed Council Plan), and the delivery of these priorities, as detailed and monitored through the Service Improvement Plan process. Reviewing affordability of capital plans and revenue implications The affordability of capital plans is reflected in the ‘ratio of financing costs to net revenue stream’, which was reported at 31 March 2024 as 3.1%. This means that 3.1% of the 2023/24 General Services revenue budget was used to pay loan charges for existing borrowing related to capital projects. At capital planning stage, there is careful consideration of the impact on the revenue budget of potential borrowing costs or proposed capital spend, and these revenue implications are reported to Council where they arise. The Medium-term Financial Outlook also takes account of any future borrowing requirements, and their impact on the revenue budget. 4.9 In Renfrewshire Council, we have recently refreshed and streamlined our Council Plan priorities. As our overarching plan, the themes identified therein are reflected in other strategic documents, to make it clear the actions we are taking to deliver on our priorities, and the measures we will use to determine success. As noted above, our approach to performance has been to provide regular updates to elected members and this is done chiefly, but not solely, through six monthly progress updates on delivery of Service Improvement Plans. Senior management teams in services and the Corporate Management Team also consider performance regularly. 5. Audit Scotland view on the role of the Chief Financial Officer 5.1 On 16 July, the Chair of the Accounts Commission published a blog on the criticality of the role of Chief Financial Officer (CFO) in local authorities. The CFO is a statutory role set out in the Local Government (Scotland) Act 1973 – also referred to as section 95. The blog post notes that the CFO role requires the postholder to not only lead the finance function but to have a prominent
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leadership role across the organisation, in light of the growing complexity of public services and the ongoing financial challenges. The author states: “As the challenges across the public sector intensify, the role of CFOs is increasingly in the spotlight. As CIPFA highlight, with existing frameworks on governance and decision-making being pushed to their limits, with public services becoming more complex, the CFO is expected to take an active leadership role, not just within the finance function, but across their organisation, sector and public services as a whole.” 5.2 The Chair notes that corporate functions have been subject to budget reductions in recent years in order to protect frontline services but is clear that the CFO must be supported by a finance function that is suitable resourced. There is a clear direction to auditors that they should consider the capacity and skills of the CFO and finance teams during the annual audit process, given the need to provide timely and accurate financial information to inform and support decision-making. __________________________________________________________________ Implications of the Report 1. Financial – none arising from the report, but Audit Scotland publications note the financial challenges facing local government in Scotland. 2. HR & Organisational Development – none arising from the report but section 5 notes the importance of workforce planning. 3. Community/Council Planning – none arising from the report, though Section 5 notes the importance of aligning activity with Council and Community Plan strategic priorities. 4. Legal - none 5. Property/Assets – none 6. Information Technology - none 7. Equality & Human Rights – none arising from the report, though it notes that requirement for equality impact assessments to inform budget decisions. 8. Health & Safety – none 9. Procurement – none
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10. Risk – none arising, though the publications referred to highlight the challenges and risks in relation to budget gaps and financial sustainability. 11. Privacy Impact – none 12. COSLA Policy Position – none 13. Climate Risk- none arising from this report, though Audit Scotland in the leadership report welcome the inclusion of environmental sustainability by all councils in their strategic priorities. 14. Children’s Rights: none _______________________________________________________ List of Background Papers: Audit Scotland report: Local Government Budgets 2024/25 Audit Scotland report: Delivering for the future – why leadership matters Audit Scotland: The important role of the CFO __________________________________________________________________ Author: Lisa Fingland, Policy Manager Lisa.fingland@renfrewshire.gov.uk