Agenda Document Pack - Audit, Risk and Scrutiny Board - 22/10/2024
Renfrewshire Council · 22 October 2024
Back to Audit, Risk and Scrutiny Board — 22 October 2024 and its agenda
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Notice of Special Meeting and Agenda Audit, Risk and Scrutiny Board Date Time Venue Tuesday, 22 October 2024 15:30 Council Chambers (Renfrewshire), Council Headquarters, Renfrewshire House, Cotton Street, Paisley, PA1 1AN MARK CONAGHAN Head of Corporate Governance Membership Councillor Andy Doig (Convener): Councillor Janis McDonald (Depute Convener): Councillor Jennifer Adam: Councillor Chris Gilmour: Councillor John Gray: Councillor Lisa-Marie Hughes: Councillor Robert Innes: Councillor James MacLaren: Councillor Ben Smith: 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 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. Hybrid Meeting Please note that this meeting is scheduled to be held in the Council Chambers. However, it is a hybrid meeting and arrangements have been made for members to join the meeting remotely should they wish.
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Webcasting of Meeting This meeting will be filmed for live or subsequent broadcast via the Council’s internet site – at the start of the meeting the Convener will confirm if all or part of the meeting is being filmed. To find the webcast please navigate to https://renfrewshire.public-i.tv/core/portal/home
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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. AUDIT 1 Azets Report to those charged with governance - Renfrewshire Council Group Annual Accounts 2023/24 Report by Director of Finance & Resources. 1 - 92 2 Audited Annual Accounts 2023/24 - Renfrewshire Council Group Report by Director of Finance & Resources. 93 - 218 3 Azets Report to those charged with governance - Coats Observatory Trust Annual Accounts 2023/24 Report by Director of Finance & Resources. 219 - 250 4 Audited Financial Statements 2023/24 – Coats Observatory Trust Report by Director of Finance & Resources. 251 - 266
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1 ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 22 October 2024 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Azets Report to those charged with governance - Renfrewshire Council Group Annual Accounts 2023/24 ___________________________________________________________________ 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 external auditor, Azets, is obliged to report to those charged with the governance of the organisation matters which have arisen in the course of the audit. 1.3 The attached ISA260 report from Azets outlines their findings from the audit of the 2023/24 the Renfrewshire Council Group 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 Audit, Risk and Scrutiny Board meeting to present their reports. 1.6 There was one material adjustment made to the annual accounts over the course of the audit, which amended the value of the Council’s pension asset disclosed in the 2022/23 Balance Sheet, owing to the exclusion of unfunded liabilities. Further detail is included in Azets’ Annual Audit report, Item 1 Page 1 of 266
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2 presented at agenda item 1. Other minor and presentational changes were also agreed. ___________________________________________________________________ 2. Recommendations 2.1 Members are requested to consider the attached report from Azets. ___________________________________________________________________ Implications of the Report 1. Financial The 2023/24 Annual Accounts demonstrate the Council continues to operate services within the resources available, and in line with the relevant legislation. 2. HR & Organisational Development There are no direct implications arising from the recommendations in this report. 3. Community/Council Planning Community Plan Our Renfrewshire is thriving The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Our Renfrewshire is well Our Renfrewshire is fair Our Renfrewshire is safe Council Plan Reshaping our place, our economy and our future The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Building strong, safe and resilient communities Tackling inequality, ensuring opportunities for all Creating a sustainable Renfrewshire for all to enjoy Ongoing revenue and capital budget monitoring is a tool to enable good financial management so that the Council has resources now and in the future for continued service delivery. Working together to improve outcomes 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. Page 2 of 266
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3 5. Property/Assets There are no direct implications arising from the recommendations in this report. 6. Information Technology There are no direct implications arising from the recommendations in this report. 7. Equality & Human Rights There are no direct implications arising from the recommendations in this report. 8. Health & Safety There are no direct implications arising from the recommendations in this report. 9. Procurement There are no direct implications arising from the recommendations in this report. 10. Risk There are no direct implications arising from the recommendations in this report. 11. Privacy Impact There are no direct implications arising from the recommendations in this report. 12. Cosla Policy Position There are no direct implications arising from the recommendations in this report. 13. Children’s Rights There are no direct implications arising from the recommendations in this report. 14. Climate Change There are no direct implications arising from the recommendations in this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 3 of 266
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OFFICIAL Renfrewshire Council 2023/24 Annual Audit Report to the Council and the Controller of Audit October 2024 Page 4 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 2 Table of Contents Key messages 3 Introduction 14 Annual accounts audit 16 Wider Scope 36 Best Value 58 Appendices 65 Page 5 of 266
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Renfrewshire Council: 2023/24 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 2024. This section summarises the key findings and conclusions from our audit. Financial statements audit Audit opinion The annual accounts are to be considered and approved by the full Council on 24 October 2024. Our audit is substantially complete, subject to finishing work on reconciliation of trial balances to accounts, creditors testing checks on the final set of accounts. Based on our audit work to date we anticipate issuing an unqualified independent auditor’s report. Key audit findings The Council has appropriate administrative processes in place to prepare the annual accounts and supporting working papers. 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. Audit adjustments We identified one material prior year restatement of £73.5 million in relation to the recognition of the unfunded element of the pension liability. This has been adjusted in the revised accounts. This issue emerged following the receipt of the 2024 actuary’s report which provided new information on this aspect of the pension liability for the first time. This amendment does not impact on useable reserves. 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. Page 6 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council 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 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 Section102 School accommodation for Dargavel Village - Follow Up Review In January 2024 the Accounts Commission (“the Commission”) considered the S102 report by the Controller of Audit on School Accommodation for Dargavel Village. Following this, the Commission asked the Controller of Audit to provide an update on the Council’s progress in responding to the Commission’s findings. The update report was presented to the Accounts Commission in August 2024. The follow up report concluded that the Council continues to demonstrate that it is taking action to respond to the issues highlighted in the Bowles report. The auditor carried out further work to look at Council actions and progress in the five particular areas of concern identified by the Commission and the Controller of Audit was satisfied that the actions being taken by the Council are timely and appropriate. The Council carried out its consultation on the proposed new primary school in line with statutory requirements and the independent consultant found that the process was robust. The consultation found significant support for a new school, however, there is no clear consensus on the proposed site and some respondents continued to highlight high school provision as a pressing issue although that was outwith the consultation scope. The Council has recognised that there is still work to do and reports it has developed plans for ongoing community engagement on the design and planning of the new school. The auditor will continue to monitor progress and developments in this area. The Council has now concluded its review of risk management and has largely completed the actions arising from its review of governance arrangements. It has also completed its review of its Dargavel consultation and community engagement activity. The Council has made progress in its response to the issues raised in the Bowles report, but it is too early to conclude on the impact and effectiveness of some of the actions taken by the Council. The auditor will continue to monitor the impact of Page 7 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 5 changes to governance and scrutiny arrangements, the leadership programme, and the council’s response to the review of its community engagement activity. There continues to be a public interest in the Council’s response to the Bowles report. It is critical that the Council is as transparent as possible about how it reaches key decisions and that appropriate records are kept. The auditor will provide further updates through Best Value reports. The current capital cost of the new primary school in Dargavel is estimated at c£45million, with the capital cost of the secondary school extension at Park Mains High School (PMHS) at c£37million. The Council’s S75 Agreement with the Developer (BAE Systems) includes a requirement for a Developer contribution of approximately half of the costs associated with the PMHS extension. At this point, the estimated net capital cost to the Council associated with the provision of education in Dargavel is c£63million. These costs are expected to be met from the application of the Council’s existing capital fund (reserves) for the new primary school and from borrowing for the secondary school extension, resulting in anticipated annual interest payments of c£1.2 million per annum as the schools are constructed. The costs do not include the running costs of the new school which the Council estimates, on a net basis, will be c£1.6 million per annum for the new Dargavel Primary school and Park Mains High School extension. These costs are early estimates and will crystallise once the additional schools buildings are complete and at full capacity which is expected within the next 5-10 years. The estimated combined annual revenue impact associated with the Council’s failure to properly estimate the school roll impact of the Dargavel development currently c£2.8 million and these additional costs will be borne over the lifetime of the schools currently estimated at 40 years. 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 identifies a budget gap of up to £47million between existing expenditure plans and available funding. We note that the Council has now approved that the new Dargavel Primary School to be funded from its Investment Capital Fund. This fund is held by the Council to support the Council’s capital investment programme and to support the Council manage its long term debt position. This will therefore help the Council avoid c£3million in borrowing interest annual cost. However, using £45million of the fund to finance the new Dargavel School displaces the ability of the Council to apply that fund to support other capital projects. The Council has implemented the significant majority of Bowles Report recommendations and is making good progress in delivering all remaining actions. Page 8 of 266
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Renfrewshire Council: 2023/24 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 Risk exists to the achievement of operational objective Like all local authorities, financial management continues to remain challenging in the current funding and post- pandemic environment. The Council reported a General Fund overspend of approximately £3.5 million for the year ending 31 March 2024, driven primarily by inflationary pressures and increased costs in various services, particularly within Children’s Services, and Environment, Housing and Infrastructure services. The Council's revised budget was £513.6 million, with actual spend reaching £517 million. To manage the overspend, the Council applied reserves from its Financial Sustainability Fund. Capital spending was within approved limits, although inflation and contractor availability affected the cost of projects and progress in delivering planned projects. The Housing Revenue Account reported a break even position after utilising £0.3 million of reserves. Council tax collection decreased slightly from 95.5% to 94.3% but exceeded revenue expectations. The Council’s Treasury management strategies focused on mitigating risks amid economic uncertainty, resulting in a £13 million net increase in external borrowing, while temporary investments decreased by £81.2 million reflecting budget requirements. The Council has appropriate financial monitoring arrangements in place and our audit has not identified any significant weaknesses in financial controls. Page 9 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 7 Financial Sustainability Financial sustainability looks forward to the medium and longer term to consider whether the Council is planning effectively to continue to deliver its services and the way in which they should be delivered. Auditor judgement The Council approved its 2024/25 revenue budget at its meeting in February 2024 and agreed a freeze in council tax, which will provide the Council with £4.9 million of additional funding from Scottish Government, equivalent to a 4.4% council tax increase. The Council is currently projecting an overspend of £3.3million (or 1% of the budget) for the 2024/25 financial year. Medium term financial sustainability remains challenging as the Council is estimating a budget deficit of between £47 million and £74 million for the forecast period from 2024/25 and 2027/28. These already challenging savings targets are inclusive of the additional revenue costs associated with the Dargavel Primary school issue. The Council has reported cost savings of over £182 million since 2011 and further savings will be challenging to achieve without a detrimental impact on service provision. The Council must now make difficult decisions on spending priorities if it is to remain financially sustainable. The Council has clarified it will potentially utilise its Financial Sustainability Fund (reserves) to cover £31 million of the budget gap. The application of reserves does not provide a long term financially sustainable solution to the Council’s current budget position and the Council is developing savings options for members approval and to be considered later this year. The Council has an ambitious £730 million capital programme in place over the next five years for both housing and non-housing programmes. Since the pandemic, a number of factors have impacted the Council’s ability to fully deliver its capital programme within the originally planned timescales. This has been due to a number of factors, including the complexity of the works, the cost of materials, supply chain issues and availability of contractors. Given the scale of the Council’s ongoing capital programme delivery of this programme is likely to remain a continuing area of challenge. Page 10 of 266
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Renfrewshire Council: 2023/24 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 In June 2023, the Council agreed a refreshed Council Plan with refined priorities actions and indicators, in response to external audit feedback. The plan articulates the Council’s vision, priorities and strategic objectives. The Plan has five main strategic outcomes: Place, Economy, Fair, Green and Living our values. The Council has taken a number of steps to improve its governance and scrutiny arrangements over the year. It has completed a self-assessment against CIPFA guidance for local authority audit committees, benchmarked its governance against practice in other councils, established a cross-party working group to review governance and scrutiny arrangements and undertaken a review of risk management arrangements. The Council continues to ensure its governance and scrutiny arrangements, including its culture, values and behaviours, are sufficient to prevent a recurrence of the historic issues identified in the Bowles Report. The Council has approved and adopted a Local Code of Corporate Governance and complies with that Code. Page 11 of 266
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Renfrewshire Council: 2023/24 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 Like all local authorities, the Council has been impacted by a high inflation economy and a challenging local government funding settlement which presents challenges for financial and service sustainability. The Council has generally good arrangements for performance management and operates a layered performance management framework aligned to its strategic objectives. Performance reports are presented to policy boards and published on the Council’ website using a wide range of user friendly and easy to follow presentations, dashboards and narrative. Some of this information may need updating to reflect the most recent performance results. Performance in Education remains good, with the Council exceeding the national average and receiving positive reports from Education Scotland on all school inspections undertaken during 2023/24. Page 12 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 10 Best Value Appointed auditors have a duty to be satisfied that local government bodies have made proper arrangements to secure Best Value. Workforce innovation We have considered the effectiveness of council workforce innovation in accordance with the national thematic review programme set out by Audit Scotland. Our key findings and conclusions are reported in a separate report to the Council and summarised below. Workforce innovation - how councils are responding to workforce challenges Auditor judgement We have concluded that the Council has appropriate workforce planning strategies and other policies in place with a flexible approach to new ways of working. The Council works collaboratively with its partners and continues to explore opportunities for working together. Through collaborative working, the Council shares knowledge and learns from partners, leading to enhanced service delivery and outcomes. The Council actively engages with its communities to deliver services in more innovative ways and to tackle digital exclusion. The Council’s work has been recognised as a best practice example in the recent Accounts Commission report on Tackling digital exclusion. There is awareness of the need, and drive for continuous improvement in this area. We noted some improvements are required in how the Council tracks benefits of new ways of working and how it tracks progress against both its strategy and individual service plans. Page 13 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 11 Best value Leadership thematic review follow-up 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. Council leadership in developing new local strategic priorities Auditor judgement Last year we have performed a review of Council’s arrangements in leadership and developing new local strategic priorities. We have concluded that the Council has a clear strategic ambition, supported by an appropriate strategic plan. We have also raised two recommendations. 1. To consider further priority setting to allow effective delivery of the Council’s key outcomes. 2. The Council set a clear performance framework and service tracking of Council Plan objectives; The Council might want to revisit the way it tracks Plan objectives progress to ensure reporting is accurate Both of these recommendations have been implemented. Page 14 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 12 Best value follow up 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 The Council’s BVAR identified eight recommendations and further progress has made against each recommendation during the 2023/24 financial year. We note however that some of the recommendations are no longer relevant due to changed circumstances since the report was published. Page 15 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 13 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 / needs to be extended further 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 the achievement of operational objectives Effective and appropriate arrangements are in place Pace and depth of improvement are effective Risks to the achievement of objectives are managed Page 16 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 14 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 looking, by identifying areas of improvement and by recommending and encouraging Page 17 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 15 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 18 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 16 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 27 June 2024. We anticipate issuing unqualified audit opinions. We identified one material adjustment 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 19 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 17 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. Opinions prescribed by the Accounts Commission: • Management Commentary • Corporate Governance Statement • Remuneration 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 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 20 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 18 Opinion Basis for opinion Conclusions • the Local Authority Accounts (Scotland) Regulations 2014 (remuneration report) 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 2024. 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. We carried out a further review of our risk assessment following receipt of the unaudited annual report and accounts. Our risk assessment was then updated as follows: • Risk of fraud in revenue recognition was focussed on the occurrence of grant revenue. • Risk of fraud in expenditure was focussed on expenditure completeness. 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 Page 21 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 19 to draw conclusions. We obtain evidence through performing a review of the significant accounting systems, substantive procedures and detailed analytical procedures. Page 22 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 20 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. Risk area 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 23 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 21 Risk area 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 24 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 22 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 occurrence risk over grant income, 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): 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 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. Page 25 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 23 Key risk area Fraud in revenue recognition • 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 Our work in this area is complete. We did not identify any indication of fraud in revenue recognition and any significant issues in respect of this risk. Key risk area Fraud in non-pay expenditure recognition 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 expenditure on non-pay transactions during our fieldwork we narrowed this risk to expenditure completeness as we regarded this aspect of expenditure to be at the highest risk for potential fraud or manipulation. Expenditure completeness was therefore considered to be a significant risk and Key Audit Matter for the audit. Inherent risk of material misstatement: • Non-pay expenditure (completeness): High • Accruals (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 risk associated with the recording of accruals and expenditure around the year end. Audit procedures Page 26 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 24 Key risk area Fraud in non-pay expenditure recognition • 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. Key risk area 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 £733.9 million and land and buildings with a net book value of £375 million at 31 March 2024. The Council revalues land and buildings and council dwellings 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 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. 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 Page 27 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 25 Key risk area Valuation of land and buildings and council dwellings (key accounting estimate) 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 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. Page 28 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 26 Key risk area Valuation of land and buildings and council dwellings (key accounting estimate) Key observations Our audit has included a detailed assessment of the Council’s approach to assessing the carrying value of assets not revalued in the year. Our work focused on assets revalued on depreciated replacement cost basis and on any significant movements in valuations we identified and further tested. We are satisfied that the value of assets presented in the financial statements is reasonable. We have identified a minor point in relation to the reclassification of investment properties of £0.9 million which has been corrected in the final accounts. Key risk area 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 Page 29 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 27 Key risk area Valuation of defined benefit pension asset (key accounting estimate) • 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. • 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 £567.3 million (£434.1 million in 2022/23). Actuaries calculate the year end position based on a number of assumptions and, in recent years, increases in the discount rate assumption is the main factor in the pension asset calculation outcome following many years where a pension liability outcome was expected. Accounting standards require the Council to review the pension surplus and only recognise the lower of the surplus or an ‘asset ceiling’. The pension asset ceiling for this year limited the asset value to Nil and this has been correctly presented in the balance sheet. Prior year figures have been adjusted to show £73.5 million of the unfunded pension liability which needed to be separated from the funded position. Page 30 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 28 Key risk area Valuation of defined benefit pension asset (key accounting estimate) We are satisfied that we have obtained reasonable assurance over the disclosures in the financial statements relating to the pension asset. Page 31 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 29 Key risk area Provision for doubtful debts (key accounting estimate) Significant risk description The Council in its annual accounts provides for material doubtful debts over sundry debtors. 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 for sundry debtors 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 £18.1 million and the Council’s financial statements was £18 million. On receipt of the unaudited financial statements, we reassessed materiality and kept it at the same level. We consider that materiality levels have remained appropriate throughout our audit. Page 32 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 30 Group £million Council £million Overall materiality for the financial statements 18.1 18.0 Performance materiality 13.5 13.5 Trivial threshold 0.500 0.500 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 2% of gross expenditure as disclosed in the 2023/24 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 33 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 31 Common Good Funds materiality Our initial assessment of materiality for the Paisley Common Good Fund financial statements was £0.180 million. On receipt of the unaudited financial statements, we reassessed materiality and updated it to £0.190 million. Our initial assessment of the Johnstone Common Good Fund materiality remained unchanged from the planning stage. Our initial assessment of materiality for the Renfrew Common Good Fund financial statements was £1.010 million. On receipt of the unaudited financial statements, we reassessed materiality and updated it to £1.090 million. We consider that our updated assessments have remained appropriate throughout our audit. Overall materiality (£) Performance materiality (£) Trivial threshold (£) Paisley £190,000 £142,500 £9,500 Johnstone £1,560 £1,170 £100 Renfrew £1,090,000 £817,500 £54,500 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 applicable financial reporting framework. The following table sets out the components within the group. Page 34 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 32 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 AMIDS (Renfrewshire) LLP 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 35 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 33 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 relate to the pension fund adjustment identified above: • £73.5 million reduction in the pension reserve • £73.5 million reduction to pension liabilities. 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. Other points, including recommendations on payroll recommendations and related parties are included in Appendix 3. Recommendation 1 &2 Follow up of prior year recommendations Page 36 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 34 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 4. 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 internal 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. Confirmations from third parties Page 37 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 35 All requested third party confirmations have been received. Page 38 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 36 Wider Scope Dargavel Primary School Our 2022/23 external audit report highlighted the issues raised by the Bowles Report in relation to failures to adequately assess the impact on the school estate from the Dargavel development. This resulted in the Council commissioning a new primary school that was too small for the needs of the Dargavel community and limiting developer contributions to the costs of that school. This has required the Council to commission the building of an additional new primary school at Dargavel with the costs of this new build falling on council tax payers. As noted below, these matters were the subject of a Controller of Audit S102 Report in January 2024 with a further follow up report in August 2024. The cost to address this error for the Council will be significant and is currently estimated at up to £82 million in gross capital costs (c£64 million net cost after taking into account expected developer contributions) for building a second primary school in Dargavel and building a larger than planned secondary school extension to Park Mains High School to accommodate the increased need for pupil places. More detailed financial impact assessment is noted below. Controller of Audit reports Our prior year reporting on Dargavel was followed by two Controller of Audit reports presented to the Accounts Commission (“the Commission”): • the S102 report on School Accommodation for Dargavel Village presented to the commission in January 2024; and • the Update report on school accommodation for Dargavel Village presented to the Commission in August 2024. The Update report from August had the following key messages for which the Council has put their responses. Exhibit 1 Accounts Commission Update report summary of findings Accounts Commission finding Renfrewshire Council response The Commission welcomed the increase in community engagement undertaken by the council since January 2024 and its ongoing commitment to improve its engagement with affected communities. However, it Council officers will share the detail of engagement that is progressed with the Dargavel and Park Mains High School communities with the Council’s auditors as well as wider work being progressed to develop the Council’s corporate Page 39 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 37 also recognised that rebuilding trust takes time, and noted the breadth and strength of views expressed by the community in the recent statutory consultation. The council must continue to demonstrate and evidence that engagement with communities is robust, inclusive, and meaningful, and that feedback received is reflected in decision-making processes. approach to consultation, communication, and engagement. Auditors found no evidence of negative impacts on wider council services from the miscalculation in school roll data in the council’s performance information reported in June. While the Controller was not asked to follow up on financial management issues, the Commission was concerned that uncertainty remains around the financial implications of previous planning failures relating to Dargavel and their impact on council services. The Council must set out clearly and transparently the financial implications associated with the new primary school and secondary school extension in its budget monitoring and financial planning and should continue to work with community planning partners to mitigate any potential impact on relevant services. The financial consequences of addressing Dargavel have been reported by the Director of Finance and Resources in several Education and Children’s Services Policy Board reports and Council reports since November 2022. It has been set out clearly and transparently that the estimated net financial impact will require to be addressed as part of the Council’s medium term financial planning arrangements, which has identified a requirement to address much wider savings of approximately £50 million (note that this is inclusive of the unplanned costs associated with addressing Dargavel requirements). We note that the Council does not anticipate reporting separately on the financial impact of decisions linked to school provision in Dargavel in future wider budgetary reporting in line with its normal practice. The Commission will therefore maintain a close interest in how the council moves forward with the development and publication of its Medium-Term Financial Plan, the actions it puts in place Officers will continue to support the local audit team to understand the Council’s progress in managing delivery of its wider medium term financial plan, the latest update of which is provided to the full Council in September 2024. Page 40 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 38 to mitigate the additional costs arising, and the wider impacts on service provision. The Commission asked the Controller of Audit to monitor this through the annual audit and keep the Commission informed accordingly. The Commission supports the Controller’s conclusion that a contemporaneous record of decision-making in relation to a supplementary report provided by David Bowles should have been kept by officers and reiterate again the importance of transparency and good governance. Council officers accept the Commission’s view and while the internal review into the handling of specific planning applications related to Dargavel was thorough and detailed, the review should have been appropriately recorded. The Commission welcomed the council’s development of a leadership programme for officers. However, it is vital that this programme is extended to include the political leadership of the council. Elected members have a key leadership role and must be supported to fulfil their scrutiny and decision making responsibilities effectively. It is crucial that historic failures of leadership and governance referred to in the Bowles report are not repeated. The Commission encouraged the council to consider making full use of the external improvement resources available to them. An annual development week is provided to support Elected Member’s development in addition to specific sessions provided over the course of the year. The Head of Corporate Governance will continue to liaise with Elected Members to identify additional areas of development to inform the proposed programme. Training may be delivered internally or by external providers as appropriate The Commission noted the auditor’s conclusion that the council continues to demonstrate that it is taking action to respond to the issues highlighted in the Bowles report, and that Officers will continue to support the local audit team and Controller of Audit throughout the Best Value Audit process to better understand the culture and values of the Council, and the commitment to effective corporate working across the council and how this is evidenced. Page 41 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 39 behaviours have continued to improve since January 2024. The Commission recognised the challenges the council faces in balancing competing priorities and making difficult decisions and expect it to keep up the work it has done to actively and openly learn lessons from previous challenges and amend behaviours accordingly. As part of this, the Commission expects the council to demonstrate effective cross-council working and decision-making. Overall, the Commission maintains a strong interest in the culture of the council and whether it can demonstrate sustained change and improvement in the longer term. As such, the Commission expects that organisational culture will be an area of focus in the accelerated Best Value report due for consideration by the Commission. Further update on the financial impact Capital cost The gross capital cost of building a new primary school is now expected to be c.£82 million, with c.£18 million of contribution expected from the developer, reducing to net capital cost of £64million. The gross cost is allocated as follows: • £45 million for new Dargavel Primary School • £37 million for the Park Mains High School extension. The gross cost increased from £75 million reported previously due to the degree of changes required to the existing Park Mains High School and in order to arrive at appropriate and consistent school design has been updated to £82 million (c.10% of Council’s capital plan for the next 5 years) The new estimate covers both the costs of the new build extension, and the costs of remodelling within the existing school in order to support subject adjacencies and the continued effective operation of the school. The degree of intervention and remodelling within the existing school Page 42 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 40 footprint is more substantial in order to ensure the expanded school when complete, still feels from an educational standpoint like a single school. Revenue cost These capital costs are expected to be partly met from new borrowing and will add c£1.2 million per annum in additional revenue costs to meet interest and principal repayments. Initially, the additional revenue costs of c£4million for borrowing interest cost had been factored into the Council’s medium term financial plans. However, the Council is now proposing to borrow only for the Park Mains High School extension, and to fund the build of the new Dargavel Primary School from the investment capital fund (reserves). This fund has reserves at £86 million and is held by the Council to support the Council’s capital investment programme and to support the Council manage its long-term debt position. The Council provided us with a detailed breakdown of other net running costs associated with operating the new and expanded schools presented below and totalling to net of c£1.6 million. These costs are early estimates and will likely start to be impacting the budget when the school is built and full pupil roll is achieved, which is expected over the next 5-10 years. In total the expected revenue impact, after adding annual cost of borrowing, is estimated at £2.8 million and represents 0.5% of annual Council spend. Exhibit 2 Additional estimated revenue cost Additional cost item Dargavel new Primary School £ million Park Mains High School extension £ million Total £ million Staff cost 2.8 3.1 5.9 Other cost 0.9 0.9 1.8 Total cost 3.7 4.0 7.7 Expected associated increase in revenue grant income (3.1) (3.0) (6.1) Net additional running cost 0.6 1.0 1.6 Borrowing cost -* 1.2 1.2 Net additional cost 0.6 2.2 2.8 (*) This does not include consideration of the impact of use of the capital reserve to fund Dargavel School build Source: Renfrewshire Council estimates Page 43 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 41 Instead of borrowing the Council applied their Investment Capital Fund to fund the capital costs of the new Dargavel primary school. This was done after reviewing the capital funding requirements, future loans charges requirements and how these will impact on the Council’s future revenue position, and available capital reserve balances. Had the Dargavel issue not required the Council to bear the cost of building of a new primary school, it could have applied available reserves to other aspects of its capital programme. We note in context that the Council’s existing medium term financial plan highlights the need to make savings of over £47 million for the period to the 2027-2028. The revenue costs associated with the Dargavel issues identified above added to that already challenging savings target and were incorporated into the Council’s medium term financial plans in due course. 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. Page 44 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 42 Financial management Our detailed findings on the Council’s financial management arrangements are set out below. Financial performance The Council reported a General Fund overspend of c£3.5 million at 31 March 2024. The revised budget is £513.6 million while the actual outturn is £517.0million. Significant additional spend was incurred due to inflationary pressures during the year. The Council used its Financial Sustainability Fund (reserves) as planned to cover shortfalls in the year end position and to achieve breakeven; these included: £1 million for parking income loss, £3 million for childcare placements, and a further £0.5 million for Proactive Tree Management. Capital spending of £23 million for housing and £102 million for non-housing projects was managed within the overall expenditure control limits approved by Council. Planned spend was impacted by inflationary pressures and the availability of contractors. The 2024/25 capital plan has been adjusted accordingly. The Council’s in-year council tax collection performance for 2023/24 was 94.3%, a reduction on the 95.5% collected in 2022/23. However, actual Council tax revenues performed above expectation, returning an over recovery of £0.420 million compared to budget. This sum also includes recovery of prior year arrears. Revenue performance against budget The General Fund overspend of £3.5 million including an overspend in Adult Services of £0.8 million was mainly due to inflationary cost pressures. Excluding the Adult Services position, which is managed by the HSCP, the overspend on Council services was £2.7 million. The remaining c£2.7 million overspend are a combination of the following: • £5.3 million overspend of Environment, Housing and Infrastructure Services; • £1.0million overspend of Children’s Services; and • £3.4 million underspend of Miscellaneous Services. Page 45 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 43 Housing revenue account (HRA) The Housing Revenue Account (HRA) broke even at year-end after using £0.3 million from unallocated reserves, which is £0.9 million less than the £1.3million originally budgeted. The remaining £6.2 million in reserves is considered a prudent amount to handle inflation and other costs, such as the ICT Housing System replacement. The £0.3million overspend was mainly due to higher-than-expected demand for repairs and maintenance, especially in vacant properties, and additional Council Tax costs. This was offset by higher-than-budgeted interest earnings. Capital expenditure Non-Housing Capital Budget Performance In 2023/24, non-housing capital expenditure was £102.5million. Asset sales generated £0.5million in capital receipts, bringing the total of Capital Receipts Reserve to c£8.7million. Of this, £1.2million was used for current year investments, leaving c£7.5million committed to future projects. The expenditure stayed within the Council’s approved limits. Housing Capital Budget Performance Housing capital expenditure for 2023/24 was £22.995m, with £1.286m generated from asset sales. Treasury management The Council actively manages treasury risks to minimise its exposure to financial market volatility and protect funding for services. It follows CIPFA’s Code of Treasury Management and has policies covering credit, liquidity, and market risks. The Council approves a Treasury Management Strategy that outlines how to manage risks related to financial instruments, including an Investment Strategy that prioritizes security and liquidity over yield, in line with Scottish Government guidance. The strategy aims to balance risk with returns or costs. The strategy for 2023/24 was approved by Council on 2 March 2023. Based on the Council’s planned programme of investments and interest rate forecasts for the year, the Council’s borrowing strategy was to firstly use internal cash balances to finance the Capital Investment Programme. This approach was prudent as borrowing rates remained high throughout the year. During 2023/24, the Council was under-borrowed relative to its needs for the capital investment programme by £144 million. The Council takes advice from its Treasury advisers regarding the most appropriate timing of borrowing, and the appropriate duration of this borrowing. At the end of 2023/24, the Council's liquidity position Page 46 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 44 reduced, owing to some fixed term investments, so a decision was taken to borrow £20 million to close the under-borrowed gap. As a council with significant HRA capital financing requirement, it was able to take advantage of the HRA Certainty Rate offered by the PWLB and was able to borrow at 0.4% less than standard PWLB rates. This resulted in an investment benefit compared to the rate at which the sum was invested; however, our understanding is this was not (and never is in the Council’s view) the primary driver for the borrowing decision. Overall, the Council’s total external borrowings increased by £13.01 million. Temporary investments held by the Council decreased by £81.2 million. The decrease in investments is attributable to several factors, including spending pressures linked to the capital programme, backdated pay awards, and Non- Domestic Rates refunds following the retrospective revaluation of some accounts. 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. 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 The Council is responsible for establishing arrangements for the prevention and detection of fraud, error and irregularities, bribery and corruption. We have reviewed the arrangements and concluded that there are appropriate arrangements for the prevention and detection of fraud, error and irregularities. National fraud initiative The National Fraud Initiative (NFI) 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 was for 2022/23. There has been a good level of follow-up activity at RC with 100% of VHR matches processed in most areas. As of March 2024, all reports have been closed except for two which the Council is waiting for further information from. The audited body has engaged well with the NFI exercise. The Council had a good level of follow up activity, meaning that most matches have been closed down. In addition, the body has strong governance arrangements in relation to communication and transparency of NFI. Page 47 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 45 Financial sustainability Significant audit risk Our audit plan identified a significant risk in relation to financial sustainability under our wider scope responsibilities. We continue to recognise it as a significant risk and so is the Council as this as one of its highest risks in the corporate risk register. Financial sustainability considers its medium-term financial planning through its Financial Sustainability and General Fund Financial Outlook report regularly presented to the full Council. The current expected budget gap prior to any decisions on council tax would add up to £74 million over the period between 2024/25 and 2027/28. Assuming 6.5% council tax increases in last three of those years the funding gap reduces to £47 million and would require the Council to identify c.£12million of savings and efficiencies each year (an increase from £8million/year estimated a year ago in similar analysis). However, such council tax increases would be subject to prior Council vote and approval. The Council has a Financial Sustainability reserve of £13.2 million which it plans to utilise over the coming years. Various commitments to utilise this reserve and expected reduction in employer pensions contributions will result in a balance of c. £19 million in this reserve at the end of 2024/25. Further £12 million from the reduced contributions will grow that reserve to £31 million the following year. After that year the pension contributions are expected to increase closer to the previous levels and savings from this source will be limited. Even with the minimum budget gap of £47 million, use of reserves would not be sufficient and requires identification of savings during that period of c.£5 million per annum. However, this also depends on the decision on council tax levels. The Council maintains a policy of minimum £10 million of unallocated reserves (just over 2% of net expenditure) held for emergency purposes. The Council reviewed its budget planning assumptions to reflect the financial challenges impacting on the external environment which the Council operates in. Due to the timing of the Scottish Government budgets there is a level of uncertainty on the funding provided. Councils estimate there is a minimum of £585 million of difference in their anticipated expenditure and the funding and income they expect to receive for 2024/25. The key assumption used for the next years by Renfrewshire Council is a flat cash allocation for 2025/26, although now seen as an ‘optimistic’ assumption. From year 2026/27 and following this the assumption changes into a 0.5% increase. Page 48 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 46 Financial sustainability The Council highlights the fact that there is a timing disconnect between the Council’s ability to develop and deliver recurring savings to match the spend pressures which are emerging, resulting in a growing recurring financial gap. It becomes more likely that the council will utilise reserves in the short and medium term to achieve financial balance. In addition to the council tax, other assumptions included pay and contractual inflation cost pressures. The continuing 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. Our detailed findings on the Council’s arrangements for achieving long term financial sustainability are set out below. 2024/25 revenue budget The Council approved its 2024/25 revenue budget at a meeting in February 2024. The Council voted to freeze council tax and agreed utilisation of non-recurring reserve funding up to £4.3 million to achieve a break even position. The expected compensatory funding from Scottish Government in relation to agreeing a council tax freeze is £4.9 million and equivalent to 4.4% council tax increase. The projected outturn at June 2024/25 is a deficit of £9.4 million against its total budget of £523.2 million. The main items driving the deficit are Education and Children’s Services with £3 million and Adult Services with £6.1 million in relation to care packages. This is consistent with the approved budget for 2024/25 which outlined anticipated draws on reserves of £4.3 million for Council general services and £7.5 million for Adult Social Care. There are a number of financial risk areas that provide a level of uncertainty as to the final outturn: • finalisation of the pay offer for 2024/25, currently with an additional 0.2% funding required over the 3% pay increase assumed in the budget; • the teachers’ pay offer, assumed to be 3% in the budget, has been settled at 4.27%. Funding from the Scottish Government to support the offer has not yet been confirmed; • increase in employer pension contributions for teachers from 23.6% to 28.6%. The increase has resulted from the outcome of the valuation of the teachers’ pension scheme at a UK level; and • specific grant funding in relation to the maintenance of teacher numbers is yet to be released by the Scottish Government. Page 49 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 47 Cost improvement plans The Council re-commenced its service transformation programme in 2022, including progressing 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 and in the three years post-pandemic the Council delivered £27 million of savings, and with a significant part of it coming from the Finance and Resource service and Chief Executive service and included reviews of the Operations and Infrastructure service within Environment, Housing and Infrastructure to generate savings over 2022/23 to 2024/25. Generating further savings of this scale will be challenging. The Council achieved cumulative savings of £182 million since 2011/12 as presented in the table below. Exhibit 4 Savings achieved Source: Financial Outlook and Medium Term Financial Plan at September 2024 The approach to the delivery of savings over this time has been to try and protect education and social care services as much as possible and driven by national policy choices with a range of conditions and controls exercised by the Scottish Government as well as by local policy choices. This included consideration of debt levels, as additional debt creates ongoing interest liabilities to be paid every year and therefore reduces the amount of funds available to be spent on individual services. Renfrewshire has one of the lowest ratios of debt financing cost to net revenue ratios in Scotland at 3.1% (against national average of 5.5%). Council has previously agreed an £8 million per annum departmental savings target each year for the three years from 2025/26. Each Service Director and their management teams are in the process of developing and finalising options to deliver these planned savings. This work will continue over the coming months with update Page 50 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 48 reports to be provided to Council and Policy Boards, including consideration at the Council budget setting meeting planned February 2025. Medium term financial plan The medium-term financial challenge and financial gap has been considered by the Council numerous times as the budget gap poses an increasing risk to the Council’s delivery of services over the medium-term. The Council has moved into a position of using its reserves in the medium term to cover budget gaps but recognises this is not sustainable. The Council hopes this will allow to support a smooth delivery of savings to help support service deliver, manage the pace at which recurring savings are required and to protect the capacity of the council to deliver savings. The current medium-term forecast is as follows. Exhibit 5 Medium term financial plan Item 2024/25 2025/26 2026/27 2027/28 Total £m £m £m £m £m Opening budget gap 0.6 2.3 8.3 14.5 25.7 New pressures 56.7 25.5 18.3 18.8 119.3 Savings (8.9) (6.2) (1.8) (0.8) (17.7) Movement in SG revenue grant (41.2) (6.1) (3.0) (3.0) (53.3) Budget gap prior to council tax decisions 7.2 15.5 21.8 29.5 74 CT increase (0%, 6.5%, 6.5%, 6.5%) (4.9) (7.2) (7.3) (7.5) (26.9) Remaining budget gap 2.3 8.3 14.5 22.0 47.1 Use of reserves (5.3)* (8.3) (14.5) (22.0) (50.1) (*) includes one off commitment of £2 million in that year Source: Financial Outlook and Medium-Term Financial Plan at September 2024 The medium-term position is based on a number of assumptions and uncertainties, including: • finalisation of pay increase agreement for teaching and non-teaching staff; 1% of increase is equivalent to £3.2 million of additional cost; • impact of inflation is uncertain, and previous years have seen significant increase in electricity and fuel cost; Page 51 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 49 • adult and social care delivery through the Renfrewshire HSCP relies significantly on use of reserves; £7.2 million of reserves will be applied in 2024/25, from a total reserve balance of £14.7 million; and • expected increased cost or overspends in early years and school transport, lifecycle maintenance and net zero impact. 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 largest capital projects over the next 5 years include the School Estate Programme, 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. These projects are supported by asset lifecycle maintenance programmes. Exhibit: Capital programme 2024/25 (£m) 2025/26 (£m) 2026/27 (£m) 2027/28 (£m) 2028/29 (£m) Non- housing 147.8 151.0 83.5 55.7 12.4 Housing 41.2 77.7 62.0 62.2 38.2 Total 189.0 228.7 145.5 117.9 50.6 Projected outturn at March 2024/25 is a break-even position. The total borrowing and long-term debt over the next three years is expected to increase by 31% from £595 million in 2024/25 to £782million in 2026/27 and new borrowing will need to be financed, therefore reducing revenue available to fund other services. Since the pandemic, a number of factors have impacted the Council’s ability to fully deliver its capital programme within the originally planned timescales. This was due to a number of factors, including the complexity of works, 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. Given the scale of the Council’s ongoing programme this is likely to remain a continuing area of challenge. Housing Revenue Account Page 52 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 50 The Council plans to deliver total housing capital investment of £281.3million over the 5-year period up to 2028/29. The Council expects that £35.3million of the total will be financed from government grant. The HRA 2023/24 budget of £41.3million 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 and 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. To ensure sufficient funding in the long term, an assumption of 1% above CPI as an uplift to rents is assumed for every year across the 30-year plan. Page 53 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 51 Vision, leadership and governance Our detailed findings on the Council’s arrangements are set out below. Vision The Council approved its 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. The Council Plan was subject to a review in early 2024 and a refreshed plan with refined priorities, actions and indicators was recently approved by the Leadership Board in June 2024. Corporate leadership team The Council senior team consists 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). 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 (ARSB) is chaired by an independent member and comprises 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 and Counter Fraud 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. Governance reviews and updates Page 54 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 52 Our prior year audit recommended that the Council undertake a review of the effectiveness of the ARSB against the CIPFA good practice guidance for audit committees and to consider it scrutiny arrangements. The Council has taken the following steps to review its governance and scrutiny arrangements: • a self-assessment against CIPFA guidance for local authority audit committees; • an exercise benchmarking the council’s governance arrangements against other councils; • a cross-party working group review of governance arrangements; • a review of the council’s risk management arrangements. At its meeting in May 2024, the Council considered the results of the ARSB’s self- assessment against CIPFA good practice on audit committees. The self-assessment identified a number of areas of good practice and 11 action points, including proposed changes to the governance of the ARSB. The Council approved the results of this review, the action plan and a number of changes to the way the ARSB operates in relation to its terms of reference, guidance and role descriptions. All the action points were implemented by the end of June. The cross-party review of governance also identified a number of actions, including a review of the Council’s Scheme of Delegation. An action plan was developed compiling actions from the reviews, with progress against actions monitored by the ARSB. All but one of the actions have now been delivered, with the final action to be completed by December 2024. The Council has developed a leadership programme in conjunction with SOLACE. The programme covers areas including risk management, good governance and engaging with the public. The Council initially plans to run the programme in three cohorts. The first cohort, consisting of the extended Corporate Management Team has completed the programme and the second cohort began in April in 2024. The programme is ongoing so it is too early to reach a conclusion on its effectiveness. SOLACE has collated feedback from the first cohort and the council has used this to update the programme for subsequent cohorts. The scope and timing of the programme is appropriate. A corporate self-assessment involving all senior managers across the organisation was also undertaken during 2023/24 and the Corporate Management Team have agreed an improvement plan which will be communicated to staff and elected members. 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 ‘Risk Matters’, last revised in November 2023. Page 55 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 53 The strategic risk management objectives refer to: • Leadership and management; • Policy and strategy; • People; • Partnership and resources; • Processes; • Risk handing and assurance; and • Outcomes and delivery. To support the implementation of ‘Risk Matters’ and the continuous improvement of risk management practice within the council, a Strategic Risk Management Development Plan is in place, outlining key actions that require to be completed over the life cycle of Risk Matters. Performance against these key actions is reported as follows: • YEAR 1, 2022-23 Key performance figure - 100%, (30 of 30 actions) complete, against an 85% in-year target. • YEAR 2, 2023-24 Key performance figure - 88%, (14 of 16 actions) complete, against an 85% in-year target. • FULL PLAN, 2022-24 Key performance figure - 96%, (44 of 46 actions) complete, against an 85% target. Updates on progress reports and monitoring of risks are reported to the ARSB on a six-monthly basis. Each Council department has at least one representative on the Corporate Risk Management Group (the Group). The Group now includes at least one Head of Service for each department, and has overseen reporting of the 2023/24 strategic and corporate risk, monitoring progress on behalf of the Council. 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 ARSB as planned. 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. Page 56 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 54 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 2023/24 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. This opinion is consistent with prior years. Internal audit presented results of their activity for 2023/24; 92% of the internal audit plan was completed against a target of 95%, which is a slight decline on 93% in the prior year due to higher than anticipated unplanned absence. The outstanding work is planned to be completed in 2024/25. We consider internal audit work during our risk assessment and on ongoing basis One out of the 21 engagements delivered in the year by internal audit had a ‘no assurance’ conclusion. 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 57 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 55 Use of resources to improve outcomes Our detailed findings on the Council’s arrangements are set out below. Performance management framework The Council has a performance framework to measure against its 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 each 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 CMT would also review a number of performance reports, scorecards, people metrics and have ‘deep dives’ into specific areas on a quarterly basis. Page 58 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 56 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 2023/24 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 2023/24. 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. 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; and • 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 has made proper arrangements for preparing and publishing its 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. However, we note that a lot of the information on this section of the Council website has not been updated to the newest available. This includes reporting against service outturn reports, summarising findings in relation to BV work and progress against those, including leadership work from last year. We recommend the Council updates this section of their website on regular and at least annual basis. Recommendation 3 Education performance Due to interest in the Education services performance arising from reporting on Dargavel issue we had looked specifically into performance reporting of this service. Page 59 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 57 Performance indicators The 2023/24 annual performance outturn report was presented to the Education and Children’s Service’s Policy Board in May 2024. The Children’s Services reported on 19 performance indicators relevant to education. When looked at the performance: one performance indicator has been on target, seven were below target and 11 were within 10% of the target, but still below it. When considering long term trends of those indicators, 13 report a downward trend, 4 an upward trend, with the remaining two either not comparable or without any change. Local Government Benchmarking Framework This performance should not be however looked at in isolation and should be complemented by the wider local government performance in education services. This could be done via Local Government Benchmarking Framework. Service performance in this area remains significant challenge in post-COVID environment for all local authorities in Scotland. Compared to other councils, Renfrewshire Council remains in the top ten councils in 14 out of 18 of LGBF education performance measures, and in the four of the remaining indicators the Council place is better than or close to the national average. Renfrewshire Council leads on the indicator measuring the cost per secondary school pupil in Scotland. School reports We have also reviewed the Education Scotland reports presented to the Council during 2023/24 to identify any potential issues at individual school level. Education Scotland performed a number of quality reviews at Renfrewshire schools as a part of its programme of inspections and uses a six-point scale when assessing schools: excellent, very good, good, satisfactory, weak, unsatisfactory. During the financial year there were eight inspections performed and with the positive results as follows: • very good for two schools and one early learning and child class; • good for three schools; • an even mix of very good and good scores against indicators assessed for two schools. One of the Education Scotland inspections covered Bishopton Primary School, for which concern might have existed as to the potential impact on this school from relieving capacity at the existing Dargavel Primary school. Bishopton School however scored ‘very good’ in 3 indicators assessed by Education Scotland and ‘good’ in one indicator. Overall, Education performance remains a strong point of the Council activity with positive regulator inspection results and strong performance against national average when compared to other local authorities. Page 60 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 58 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 Workforce Innovation – how councils are responding to workforce challenges. We present the findings in a separate report with a summary set out below: How effectively are the council’s workforce plans integrated with its strategic plans and priorities? Renfrewshire Council has a comprehensive high level workforce strategy and People Strategy supported by a number of other high level policies and strategies. The Council adopted a flexible approach to its strategy, by setting clear priorities for the first two years and by delegating the responsibility and ownership for workforce management to the individual Services to better meet their needs. Therefore, the workforce risk assessment, operational priorities and implementation, and monitoring are done at service level though Service Improvement Plans. How effectively has digital technology been used to support workforce productivity and improve service quality and outcomes? Appropriate arrangements are in place to enable the delivery of the Council’s digital strategy. The Council implemented a number of automatic processes to drive efficiency and innovation in its workforce. A key challenge for the Council is the creation of capacity within its workforce to enable the review, exploration and development of digital opportunities. The Council actively engages with its communities to deliver services in more innovative way to tackle digital exclusion. The Council’s work has been recognised as best practice example in Accounts Commission report Page 61 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 59 on digital exclusion. There is awareness of the need, and drive for continuous improvement in this area. How effectively is the council using hybrid and remote working and other innovative working practice such as a four-day week to achieve service and staff benefits? The Council continuously reviews its approach to flexible working and provides staff with support and guidance. Staff feedback is obtained in variety of ways and considers impact of flexible working on staff wellbeing. The Council considers staff benefits and wider sociological changes when considering new ways of working. Evidence of measurable efficiencies tracking has been limited and the Council has not been able to demonstrate efficiencies from flexible working through, for example, an impact on productivity. What innovative practice is the council using to develop its future workforce capacity and skills needs and manage staff reductions in line with its priorities? The Council makes good use of its existing workforce and is developing the skills needed to deliver future services. The Council engages with the local education providers to develop and support its workforce skills. The Council has to yet develop comprehensive measurable performance indicators to demonstrate the benefits it provides through its work on developing workforce skills and capacity. What progress has the council made with sharing roles or functions across its services and/or with other councils and partners? The Council works collaboratively with its partners and continues to explore opportunities for working together. Through collaborative working, the Council shares knowledge and learns from partners, leading to enhanced service delivery and outcomes. The Council works collaboratively with its partners and continues to explore opportunities for working together. Through collaborative working, the Council shares knowledge and learns from partners, leading to enhanced service delivery and outcomes. Page 62 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 60 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 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: A range of effective cross-party working arrangements can continue to be evidenced - particularly in relation to high-priority areas identified. In recent years this included the development of both the Council and Community Plans by the Cross-Party Sounding Board and the review of governance undertaken on a cross party basis and reported through the Audit Risk and Scrutiny Board and full Council. A Fairer Renfrewshire Sub-Committee of the Leadership Board was also established in 2023 which allows members to consider some of the issues relating to poverty and inequality in Renfrewshire on a cross party basis. Auditor conclusion: 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: The Council uses a combination of a targeted annual development programme for Elected Members alongside bespoke training opportunities throughout the year. This approach is regularly reviewed - the current approach and draft programme for the Members Development Week due to take place later this year has recently been Page 63 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 61 Best value Assurance Report – follow up Auditor judgement reviewed and enhanced by the Corporate Management Team, to keep pace with the changing context and key areas of interest identified by Elected Members. Training opportunities are also offered in different formats – in person, hybrid, online and as a recorded training seminar available at a time to suit. A suite of training materials are also provided to enhance the content, and opportunities for training and development through organisations such as the Improvement Service are also shared and promoted. Auditor conclusion: appropriate training is delivered to members, monitored by the Council and 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: The Council’s monitoring officer for One Ren has continued to work with the Chief Executive (One Ren) to strengthen quarterly performance monitoring reports and meeting arrangements. Auditor conclusion: 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: Notes from auditors reflect the current position. A number of improvement actions have been identified within the thematic review of workforce innovation which the organisation will seek to address. These include improvements in relation to linking workforce planning priorities to corporate and service level plans, and developing performance measures and outcomes against which progress can be tracked going forward. Auditor conclusion: we have concluded in our thematic review on Workforce Innovation that Renfrewshire Council has a comprehensive high level workforce strategy and People Strategy supported by a number of other high level policies and strategies. The Council adopted a flexible approach to its strategy, by setting up clear priorities for the first two years and by delegating the responsibility and ownership for workforce management to the individual Services to better meet their needs. Therefore, the workforce risk assessment, operational priorities and implementation, and monitoring are done at service level though Service Improvement Plans. We have identified a number of improvements as noted in the response above. Page 64 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 62 Best value Assurance Report – follow up Auditor judgement 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: regular reports are made to Council on the financial outlook - behind this sits an extensive, cross-service Financial Sustainability programme. Auditor conclusion: 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. Following this session in 2023, Community Planning Partners agreed to work together on a number of targeted projects, including in relation to child poverty, with a community impact assessment underway in relation to Gallowhill currently. Community Planning Partners are also due to undertake their annual horizon scan/review meeting in early October, with a specific session planned on exploring how we as partners work together to prioritise early and intervention activities, given the financial challenges being experienced by all. At a national level, it has been agreed that self-assessments of community planning partnerships will be progressed during 2024/25. A core element of this process will require partners to focus on the effective deployment of resources across Renfrewshire in order to target our key shared priorities. Auditor conclusion: The Council continues to make improvements and progress in this area. Recommendation 7: The Council and its partners need to continue to involve communities and work together on joint priorities and to strengthen partnership working. This will provide a positive base to ensure the Community Empowerment (Scotland) Act 2015 is fully implemented. Progress: Council services have worked very hard with partners to embed the requirements of this legislation, with engagement processes developed in relation to key aspects such as asset transfer, community planning, and participatory budgeting. A range of initiatives continue to be supported which support local capacity building in communities, and promote participation and engagement. These include campaigns and engagement programmes such as Team up to Clean Up, Page 65 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 63 Best value Assurance Report – follow up Auditor judgement housing regeneration programmes and specific engagement with people with lived or living experience, such as the Fairer Renfrewshire lived experience panel. 7 Local Partnerships continue to develop and following a review in early 2024 we have launched a new development phase - Local Plans, Local Priorities and Local Voices which will enhance and further strengthen our approach to partnership working with the community. All Local Partnerships are currently being supported to review their priorities and develop refreshed action plans. Auditor conclusion: there was progress made in this area in relation to development of new local partnerships and through the Connected Communities programme. As noted in the Update report on school accommodation for Dargavel Village the Accounts Commission welcomed the increase in community engagement undertaken by the council since January 2024 and its ongoing commitment to improve its engagement with affected communities. 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: Significant work to refine the existing performance management framework aligned to the Council Plan has taken place, including the ‘at a glance’ performance snapshot which gives an overview of progress against strategic outcomes. Council Plan progress continues to be reported 6-monthly, as does service performance via the Service Improvement Plans, again on a 6-monthly basis. Our performance reporting for both Council and Service Improvement Planning has been reviewed to ensure reports are accessible, engaging and suitable for a range of audiences. An overall picture of performance is reported annually in our Public Performance Report, which is available as an interactive ‘Storymap’ with the embedded functionality to analyse and compare data nationally and with family group Councils. Auditor conclusion: 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. Page 66 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 64 Leadership of the development of new local strategic priorities In 2022/23 we have reported on the effectiveness of the Council’s leadership of the development of the Council’s strategic priorities, following the recent local government elections. Overall, we have noted that the Council has a clear strategy and vision in place, engages with communities, has strong commitment to tackling climate change, has operational plans to deliver objectives and has improved significantly on cross party working. We have also identified two points for further improvement: on setting key priorities and on clarity of reporting against the Council plan. Progress on those actions is reported in Appendix 4. 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 67 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 65 Appendices Appendix 1: Responsibilities of the Council and the Auditor 66 Appendix 2: Audit differences identified during the audit 72 Appendix 3: Action plan 75 Appendix 4: Follow up of prior year recommendations 78 Page 68 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 66 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 69 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 67 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 and resources, and that proper procedures are established and operate satisfactorily. Page 70 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 68 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 71 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 69 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 72 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 70 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 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- 202223. 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 confirm that all threats to our independence have been properly addressed through Page 73 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 71 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 2024 was two years. Audit and non-audit services The total fees charged to the Council for the provision of services in 2023/24 were as follows. Prior year charges for the predecessor auditor are also shown for comparative purposes: 2023/24 2022/23 Auditor remuneration £316,514 £298,450 Pooled costs 10,490 - Contribution to PABV costs £82,680 £78,110 Audit support costs - £10,290 Sectoral cap adjustment £59,660 £55,800 Total audit fees £469,344 £442,650 Page 74 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 72 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 Dr / (Cr) £m Liabilities Dr / (Cr) £m Reserves Dr / (Cr) £m CIES Dr / (Cr) £m 1. Prior year restatement Correction of pension fund plan assets calculation to account for unfunded liability DR Pension reserve CR Pension liability (73.5) 73.5 2. Correction of incorrect manual adjustment to reduced doubtful debt DR Short-term debtors CR Cash 0.8 (0.8) 3. Classification of debtor type from Short-term debtors - non-trade: central government bodies to Short-term debtors - arrears of business rates Short term debtors Short term debtors 0.5 (0.5) Page 75 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 73 4. Classification of investment properties Investment properties Property, plant and equipment 0.9 (0.9) Net impact on usable reserve- General Fund Reserve 0 Net impact on unusable reserve- Pension Reserve 73.5 Net impact on net assets (73.5) Unadjusted misstatements We identified no unadjusted misstatements during our audit. 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 changes in external audit costs of fee payable to be £0.469million. 2. Disclosures in the remuneration report for pension entitlement and casting. 3. Pension liability disclosure after receiving the revised actuarial report. 4. Minor presentational and disclosure issues. Page 76 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 74 The audit team have raised minor and presentational issues with management, and we recommend that this is updated. 5. Presentational classification adjustment to Note 4. Overall, we found the disclosed accounting policies, significant accounting estimates and the overall disclosures and presentation to be appropriate. Page 77 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 75 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. Page 78 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 76 Current year action plan 1. Payroll reconciliation Medium Observation The Council has a number of payruns running at different frequencies. However, there is no year-end reconciliation in place between the ledger and payroll systems to ensure that the figures in the financial statements reconcile to the payroll system. Implication There is a risk that the ledger is not complete or accurate when reflecting payroll figures and impacting on the financial statements. Recommendation We recommend that the Council performs regular reconciliation between the ledger and payroll. Management response The Council’s payroll and ledger systems are fully integrated in its ERP system, Business World. This results in the risk of any disparity between the payrun batches and the General Ledger transactions being very low. However, officers recognise that testing this on an annual basis would be beneficial for control assurance and will undertake development of a process over the second half of 2024/25. Responsible officer: Director of Finance and Resources Implementation date: 31 March 2025 2. Related parties Medium Observation The Council should disclose intercompany transactions between group entities in the related parties note. Implication There is a risk that the disclosure is not complete. Recommendation We recommend that the Council makes the relevant disclosure in the 2024/25 financial statements. Page 79 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 77 2. Related parties Medium Management response The Related Parties Note will be updated in the 2024/25 accounts for relevant group transactions. Responsible officer: Head of Finance and Procurement Implementation date: 31 March 2025 3. Performance information Low Observation The performance information reported on the Council’s website is the Council’s response to meeting the requirements. However, we note that a lot of the information on this section of the Council website has not been updated to the newest available. This includes reporting against the council plan, service outturn reports, summarising findings in relation to BV work and progress against those, including leadership work from last year. We recommend the Council updates this section of their website on regular and at least annual basis. Implication The Council’s performance section on the website has been updated with most reports with a few update reports from May and June 2024 board cycles requiring to be updated Recommendation We recommend that the Council updates the information. Management response The Council regularly updates its performance information on the website. It is recognised several updates to board from May and June require to be updated and are scheduled to be so in line with existing processes. Responsible officer: Head of Policy and Partnerships Implementation date: 30 September 2024 Page 80 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 78 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. 1. Property, plant and equipment valuations Recommendation 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 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. 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 annual valuation information to allow increased clarity on the work undertaken in year. Responsible officer: Head of Economy and Development Page 81 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 79 2. Related party disclosures Recommendation 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 2024/25 accounts, as noted above. Responsible officer: Head of Finance and Procurement Page 82 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 80 3. Financial strategy to support financial sustainability Recommendation 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 26th September 2024. 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 83 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 81 4. Dargavel school response Medium Recommendation 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. Lack of clarity over the above points might lead to slow pace of remediating issue or re-occurrence in the future 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. Ongoing 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. Page 84 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 82 4. Dargavel school response Medium Management response Responsible officer: Chief Executive Implementation date: Ongoing 5. Financial sustainability High Recommendation 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. This poses an increasing risk to the Council’s delivery of services over the medium term and we would recommend addressing as a priority. To present the Council with a range of options and services implications. Ongoing Response: A Financial Outlook update has been reported to Council at each board cycle, the last being 26 September 2024. 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 Page 85 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 83 6. Cut off de minimis Low Recommendation 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. There could be inconsistent treatment of the transactions with no formal limit set leading to misstatements. To formalise arrangements around cut-off recording. Ongoing Response: This action is carried forward and a formal de minimis will be included in year-end guidance documents from 2024/25 onwards. Responsible officer: Head of Finance and Procurement Implementation date: 31 March 2025 7. Land valuations frequency Low Recommendation 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. Revaluations to be made with sufficient regularity to ensure that the carrying amount does not differ materially from current value. We recommend revaluing land values at least once in five years in line with standard industry practice and accounting requirements. Closed 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. Page 86 of 266
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Renfrewshire Council: 2023/24 Annual Audit Report to the Council and the Controller of Audit 84 7. Land valuations frequency Low Responsible officer: Head of Economy and Development Implementation date: 31 March 2024 Page 87 of 266
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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 2024. 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 88 of 266
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My Ref: AM/CB Contact: Alastair MacArthur Telephone Number: 0300 300 0285 E Mail: alastair.macarthur@renfrewshire.gov.uk Finance & Resources Director: Alastair MacArthur CPFA Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk Azets Audit Services Quay 2 139 Fountainbridge Edinburgh EH3 9QG Dear Sirs Renfrewshire Council Financial Statements for the year ended 31 March 2024 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 2023/24 (the 2023/24 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 2024. 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 2023/24 (the 2023/24 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 89 of 266
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My Ref: AM/CB Contact: Alastair MacArthur Telephone Number: 0300 300 0285 E Mail: alastair.macarthur@renfrewshire.gov.uk Finance & Resources Director: Alastair MacArthur CPFA 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 2024 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. Information Provided xv. I have provided you with: Page 90 of 266
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My Ref: AM/CB Contact: Alastair MacArthur Telephone Number: 0300 300 0285 E Mail: alastair.macarthur@renfrewshire.gov.uk Finance & Resources Director: Alastair MacArthur CPFA 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 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. 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 Page 91 of 266
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My Ref: AM/CB Contact: Alastair MacArthur Telephone Number: 0300 300 0285 E Mail: alastair.macarthur@renfrewshire.gov.uk Finance & Resources Director: Alastair MacArthur CPFA Renfrewshire House, Cotton Street, Paisley PA1 1TT www.renfrewshire.gov.uk 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 24 October 2024. Yours faithfully Signature:…………………………… Name: Alastair MacArthur Position: Director of Finance and Resources Date Page 92 of 266
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1 ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 22 October 2024 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audited Annual Accounts 2023/24 - Renfrewshire Council Group ___________________________________________________________________ 1. Summary 1.1 The 2023/24 unaudited Annual Accounts were approved by Council on 27 June 2024. 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 relevant regulations. 1.2 The audited annual accounts are now presented for members’ noting and further recommendation to the Council that the audited accounts be approved. 1.3 There was one material adjustment made to the annual accounts over the course of the audit, which amended the value of the Council’s pension asset disclosed in the 2022/23 Balance Sheet, owing to the exclusion of unfunded liabilities. 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 Members are requested to note the attached 2023/24 Audited Annual Accounts; and to recommend to Council that they be approved. Item 2 Page 93 of 266
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2 ___________________________________________________________________ Implications of the Report 1. Financial – The 2023/24 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 directly arising from this report. 3. Community/Council Planning – none directly arising 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 directly arising from this report. 6. Information Technology – none directly arising from this report. 7. Equality & Human Rights – none directly arising from this report. 8. Health & Safety – none directly arising from this report. 9. Procurement – none directly arising from this report. 10. Risk – none directly arising from this report. 11. Privacy Impact – none directly arising from this report. 12. Cosla Policy Position – none directly arising from this report. 13. Children’s Rights – none directly arising from this report. 14. Climate Risk – none directly arising from this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 94 of 266
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Renfrewshire Council Audited Accounts 2023–2024 Page 95 of 266
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Contents Management Commentary ................................................. 2 Statement of Responsibilities ............................................ 16 Annual Governance Statement ......................................... 17 Remuneration Report ........................................................ 25 Independent auditor’s report ............................................ 34 Comprehensive Income and Expenditure Statement ....... 38 Movement in Reserves Statement .................................... 39 Balance Sheet .................................................................... 40 Cashflow Statement .......................................................... 41 Note 1: Expenditure and Funding Analysis ........................ 42 Note 2: Financing and investment income & expenditure 44 Note 3: Taxation and non-specific grant income .............. 44 Note 4: Expenditure and income analysed by nature ....... 44 Note 5: Grant income ........................................................ 45 Note 6: Adjustment between accounting basis and funding basis under regulations ..................................................... 46 Note 7: Usable reserves ..................................................... 47 Note 9: Property, Plant and Equipment ............................ 54 Note 10: Heritage Assets ................................................... 57 Note 11: Investment properties ........................................ 57 Note 12: Assets held for sale ............................................. 58 Note 13: Intangible assets ................................................. 58 Note 14: Capital expenditure and capital financing .......... 59 Note 15: Service Concession Arrangements ..................... 60 Note 16: Leases ................................................................. 62 Note 17: Inventories .......................................................... 63 Note 18: Cash and cash equivalents .................................. 63 Note 19: Debtors ............................................................... 63 Note 20: Creditors ............................................................. 64 Note 21: Provisions ............................................................ 64 Note 22: Financial Instruments ......................................... 65 Note 23: Nature and extent of risks arising from Financial Instruments ....................................................................... 69 Note 24: External audit costs............................................. 72 Note 25: Agency services ................................................... 72 Note 26: Related parties .................................................... 73 Note 27: Pension schemes accounted for as defined contribution schemes ........................................................ 75 Note 28: Defined benefit pension schemes ...................... 76 Note 29: Contingent liabilities ........................................... 81 Note 30: Events after the balance sheet date ................... 81 Note 31: Accounting Standards Issued not Adopted ........ 81 Note 32: Accounting Policies – Renfrewshire Council ....... 82 Note 33: Judgements in Applying Accounting Policies ...... 94 Note 34: Assumptions made about the future .................. 95 Common Good Funds ........................................................ 96 Housing Revenue Account ................................................. 98 Council Tax Income Account ............................................ 100 Non-Domestic Rates Income Account ............................. 101 Group Accounts ............................................................... 103 Notes to the Group Accounts .......................................... 106 Group Accounting Policies ............................................... 118 Page 96 of 266
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2 Annual Accounts 2023/24 Management Commentary The purpose of the Management Commentary is to present an overview of Renfrewshire Council’s performance during the 2023/24 financial year and to help readers understand its financial position at 31 March 2024. 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 184,000 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 2023/24, Renfrewshire Council was organised into four directorate services, as follows: The kind of services that the Council provides includes: 0-15 - 16% 16-64 - 64% 65+ - 20% Women - 51.7% Population - 184,340 Men - 48.3% Page 97 of 266
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3 Annual Accounts 2023/24 Our Aims and Objectives The aims of the Council Plan 2022-2027 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. The new Council Plan presents the Council’s vision for the next 5 years as: It outlines five strategic outcomes, which the Council will work with partners, communities, and businesses to deliver, and one cross-cutting theme that 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 • 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 service plans of the Council support the delivery of the Council’s priorities outlined in the Council Plan. In order to achieve this, the financial strategy must ensure that 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 was reported to the Council on 14 December 2023, with a further update on 29 February 2024. These reports highlight the increasingly challenging financial and economic environment the Council is facing, predominantly linked to high levels of inflation, coupled with low income growth. The Council’s medium-term financial outlook continues to be based on an assumed flat-cash revenue settlement over the short term; 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 2027/28, and an assumed lower 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. This could reduce to c£30m if Council Tax was to increase by 19.5% over the four year period. The Council chose to freeze Council Tax in 2024/25 following the Scottish Government announcement of compensatory funding, which equated to a 4.4% increase. The Council is now targeting cost reductions and savings averaging at least £8m each year; however, this still leaves an £8m recurring financial gap at the end of 2027/28. For this reason, financial sustainability and stability risks remain high on the Council’s priorities going into 2024/25. Information on the year-end financial position of the Council at 31 March 2024 is detailed later in the Financial Performance section. Page 98 of 266
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4 Annual Accounts 2023/24 Review of the Year The Council publishes updates on progress delivering the Council Plan every six months, and the most recent report will be reported to the Leadership Board on 19 June 2024. The December report can be found here. The Council also publishes an annual Public Performance Report, which gives residents an overview of how the Council performs in relation to its key priorities, and how we perform in terms of the 108 indicators included in the Local Government Benchmarking Framework (LGBF). Scottish local authorities continue to operate in a very challenging financial environment, and this has been highlighted by the Improvement Service in its annual LGBF overview report. This report notes that it is becoming increasing difficult for local authorities to maintain good levels of performance. A detailed report on Renfrewshire’s performance in 2022/23 was presented to Council’s Audit, Risk and Scrutiny Board on 20 May 2024 and is available here. Key Achievements 2023/24 Place • We delivered two key buildings within our ambitious Cultural Infrastructure Investment programme. The refurbished Paisley Town Hall reopened in October 2023 and the new Paisley Learning and Cultural Hub opened in November 2023. • We secured £2m from Transport Scotland’s Active Travel Transformation Fund, and £540,000 will be used to improve active travel infrastructure around Inchinnan Business Park. • We delivered another year of successful events, including gala days, the hosting of the Royal National Mod and Paisley’s Halloween festival. Economy • Our employability services worked with over 1,500 people in 2023/24. Over 600 people gained new qualifications and 528 were supported into paid employment. • Our Procurement and Economic Development teams are developing our approach to Community Wealth Building, which focuses on inclusive growth. The teams have already taken part in a Scottish Government pilot and will finalise our future plans once legislation is published. • We have Developing the Young Workforce Coordinators in all of our secondary schools, as part of our partnership with Invest in Renfrewshire, Skills Development Scotland and West College Scotland. Fair: • We launched a Tenant Support Fund in October 2023 to provide support with rent payments for those who meet the criteria, and in the first six months of operation we have supported 161 tenants. • We supported 520 families who were not accessing all the benefits they were entitled to, with our advice services helping them raise their collective income by £109,000. • We won a COSLA Excellence Award for our interactive Alcohol and Substance Education Awareness programme, which is being implemented across our schools. Green: • Our District Heating Network (DHN) at Inchinnan is the first of its kind in Scotland, and provides an energy solution that produces 90% less carbon than conventional heating. • Our new build housing Zero Carbon Innovation Project, a partnership with John Gilbert Architects and the University of Strathclyde was shortlisted for a national award for its theoretically net zero build specification. • Our Team Up to Clean Up initiative now has over 5,000 Facebook members Living Our Values: • We launched a new Customer Strategy which sets out our plans to make the most of technology to Page 99 of 266
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5 Annual Accounts 2023/24 help improve our engagement with our customers. • Our People and Organisational Development team produced an updated suite of HR policies with a clear focus on staff wellbeing, including a refreshed Carer’s Policy, new Equality, Diversity and Inclusion Plan, and a new Health and Wellbeing Plan. • We undertook a corporate self-assessment exercise and refreshed our performance management approach. Improving Outcomes for Children and Young People: • As part of Renfrewshire Council’s commitment to The Promise, we have recruited 266 Promise Keepers from across our staff, acting as local champions and helping improve services for care experienced people. • Our Promise Arts and Cultural Engagement programme delivered opportunities for care- experienced young people to participate in a range of activities, from co-designing installations at two of Paisley’s biggest public events, creating a mural, taking part in arts sessions and contributing to Youth Service’s LOVE2CARE week. Performance Indicators Our Council Plan is one way in which we report to elected members and Renfrewshire residents on our performance. The Council Plan reports on 39 indicators, of which 22 have a target. In 2023/24, six of our indicators met or exceeded their target, five narrowly missed the target and four were behind target. There are seven indicators for which 2023/24 data is not yet available. Our areas of strong performance include: • Helping our citizens back into work, with 268 people supported by our employability service this year sustained in work for at least six months; • Tackling homelessness, with the timescales for completion of cases still well within target despite increasing demands; • Keeping our looked after children in family settings wherever possible, with 90.9% looked after in the community; • Contributing to our goal of net zero by 2030 by having 30% of our vehicle fleet running on alternative fuel sources; • Making our public spaces a nice place to be, with 93.3% of streets assessed as clean when independently checked; • Promoting Renfrewshire as a great place to live, work and visit with extensive media reach for council activity and local events. We narrowly missed our annual targets in the following areas: • Responding to frontline complaints within the required timescale; • Responding to Freedom of Information requests within the required timescale; • Supporting new businesses through to launch; • Reducing the level of CO2 emissions from our vehicle fleet; • Upgrading our housing stock to meet the latest energy efficiency requirements. 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. These are: • Encouraging uptake of free school meals within primary schools; • Encouraging uptake of free school meals in secondary schools; Page 100 of 266
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6 Annual Accounts 2023/24 • The percentage of Council housing stock which meets the Scottish Housing Quality Standard; • The average days lost to sickness absence per employee. We do not yet have data for the number of affordable housing completions, the number of private housing completions, the percentage of household waste recycled, or the percentage of procurement spend with local businesses. Data in relation to educational attainment and accredited awards are based on academic years (August to July) so 2023/24 figures are not yet available. Findings from the independent review into capacity issues at Dargavel Primary school 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, and the Council’s 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. During 2023/24 there have been regular updates to the Audit, Risk and Scrutiny Board on progress against these actions. At its meeting on 28 September 2023, the Council approved a capital budget of £45m to build a second primary school in the Dargavel area, and a further £30m to extend the associated secondary provision at Park Mains High School. 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 Working Towards Net Zero by 2030 Renfrewshire Council’s Public Bodies Climate Change Duties reported a 17.2% emissions reduction compared with the previous year, and overall annual emissions reduction of 63.6% against the 2012/13 baseline. Activity in 2023/24 includes delivering change across Council operations, and large-scale projects with local benefits aligned to the five themes of Renfrewshire’s Plan for Net Zero, which are Clean Energy, Sustainable Transport, Circular Economy, Connected Communities and Resilient Place. Further detail of activity within each theme is set out in the following sections. Clean Energy: • AMIDS District Heating Network (operational May 2023) provides low carbon heating, cooling and hot water to businesses at Paisley’s Advanced Manufacturing Innovation District site, with an estimated 95% emissions reduction over its 40-year lifetime, compared to gas boilers. • Approval of Renfrewshire’s Local Heat and Energy Efficiency Strategy: a data-driven, area-based approach to fuel poverty, energy efficiency and the decarbonisation of heat. The Strategy was approved by the Infrastructure, Land and Environment Board on 24th January 2024, and the Delivery Plan is currently in development. Sustainable Transport: • Successful trials of hydrotreated vegetable oil (HVO) as alternative fuel for bin lorries and large fleet - reducing CO2 emissions by up to 90% and contributing to improved air quality. Page 101 of 266
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7 Annual Accounts 2023/24 • Infrastructure Investment: active travel networks to link key destinations, e.g. the 5km Paisley to Renfrew route, connecting the towns by a direct link; and electric vehicle charging infrastructure – with 148 public EV chargers and 102 fleet charging bays to reduce reliance on fossil fuels. Circular Economy: • Maximising recycling opportunities across 56 Renfrewshire schools and nurseries, resulting in reducing residual waste by 59,000 litres per week and increasing recycling by 93,000 litres per week in 2023/24. • A Reuse Hub for working small waste electricals launched at Paisley Recycling Centre. Items are collected and sold by the Salvation Army, with profits reinvested in local community initiatives. Connected Communities: • Sustainable Communities Fund Launch: to build community capacity, identify opportunities within local areas and develop local projects to benefit those who live there – connecting people through regenerated local spaces and tackling inequality through community collaboration. • Climate Engagement: Community Climate Conversations - Key Stakeholder event with attendees from 57 local, regional and national bodies; and internal workshop with 70 officers from across the Council to optimise climate opportunities, priorities, partnership working and collaboration. Resilient Place: • Offsetting: a specialist feasibility evaluation identified 216 hectares at West Tandlemuir for peatland restoration, sequestering 556 tonnes of carbon. Consents for the work are now being secured. • Tree Planting: delivery of initial phases of the Clyde Climate Forest, planting c3,000 trees to bring climate and ecological benefits to Renfrewshire and the wider Glasgow City Region. Work continues on developing costed delivery plans to identify project opportunities for carbon reduction, cost savings and revenue generation, alongside wider community benefits; and finalising a proposed Carbon Budget for Renfrewshire Council. Development of an Adaptation Plan for Renfrewshire, including an Offsetting Strategy will commence in the coming year. 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. At 31 March 2024, the mean gender pay gap for Renfrewshire Council was 0.44% (0.48% at 31 March 2023). Page 102 of 266
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8 Annual Accounts 2023/24 Key Financial Ratios The following tables provide information regarding the financial performance of the Council in 2023/24 and the affordability of its ongoing commitments: 2022/23 Estimate Actual Actual Reserves Uncommitted General Fund reserves as a % of budgeted net expenditure 2.1% 2.0% 2.1% Reflects the level of funding available to meet unplanned expenditure and manage financial risk Movement in uncommitted General Fund balance n/a -0.4% -4.4% Reflects Council spending decisions during the financial year Council Tax In-year collection rate 95.5% 94.3% 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 19.7% 19.8% 17.6% 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) £552.0m £510.1m £442.1m External debt £382.9m £386.1m £374.9m Ratio of financing costs to net revenue stream (General Fund) 3.6% 3.1% 3.0% Financial Indicator 2023/24 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 the June Council meeting each year. Financial Performance Primary Financial Statements The annual accounts summarise the Council’s transactions for the year, its financial position at 31 March 2024, 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 services in 2023/24 along with the income available to fund those services. The outturn explained in the following section differs from the accounting deficit 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 Page 103 of 266
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9 Annual Accounts 2023/24 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. In setting its 2023/24 General Services revenue budget, the Council anticipated a deficit position in-year of £7.5m, arising from increases in the cost of pay, food, fuel, energy, construction and other contracts, details of which have featured in regular budget monitoring reports throughout the financial year. This has culminated in a year-end overspend against budget of £2.6m. 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; • 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. These pressures were offset by underspends within the Miscellaneous Service in the following areas: a £1.2m VAT recovery received, relating to a historic claim which has now been settled by HMRC; Non-Domestic Rates payments across the Council’s estate (£0.9m); devolved Empty Property Relief (£0.7m); and Council Tax Reduction (£0.8m). 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 2023/24 a national pay settlement of 6.05% was agreed for local government workers. In recognition of the exceptional inflationary environment, the Scottish Government provided councils with additional funding in support of the 2023/24 pay settlements. For Renfrewshire, this amounted to £7.7m. Adult Services experienced a year-end overspend of £0.8m which decreased the reserves of the Renfrewshire Health and Social Care Partnership, who operates these services. The Council fell just short of its target in-year Council Tax collection rate of 95.9% in 2023/24, instead returning a creditable 94.3% in light of the prevailing cost of living crisis on household finances. Income from Council Tax actually over-recovered by £0.4m compared to budget, owing mainly to more prior year arrears being collected than had been anticipated. As planned and reported through the year, £4.4m was drawn from the Financial Sustainability Fund at year-end to cover overspends in Children’s residential care (£3m), car-parking income loss (£1m) and Proactive Tree Management (£0.5m). After adjusting for this, as well as the Adult Services overspend and the over-recovery in Council Tax revenues, the final position for the Council’s General Fund balance at 31 March 2024 was an overspend of £2.6m Page 104 of 266
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10 Annual Accounts 2023/24 Revised Budget Actual Variance £m £m £m Chief Executive's Service 28.872 28.749 0.123 Children's Services 251.415 252.456 (1.041) Environment, Housing and Infrastructure 68.929 74.227 (5.298) Finance and Resources 48.691 48.972 (0.281) Miscellaneous Services 17.809 14.373 3.436 Adult Services* 98.765 98.765 0.000 Net Expenditure 514.481 517.542 (3.061) Revenue Support Grant (280.920) (280.920) 0.000 Council Tax Income (95.108) (95.528) 0.420 Non-Domestic Rates Income** (131.323) (131.323) 0.000 Funding (507.351) (507.771) 0.420 Use of General Fund Balances 7.130 9.771 (2.641) 2023/24 *Adult Services overspent against budget in the year by £0.9m; this was transferred from HSCP reserves and does not impact on the Council’s General Fund balance. **The Council collected £108.7m directly from local businesses with £22.6m due from the Scottish Government National Non-Domestic Rates Pool at 31 March 2024. 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 2023 Usable Reserves As at 31 March 2024 £m £m 127.391 General Fund Balance 117.620 6.497 Housing Revenue Account 6.164 8.184 Capital Receipts Reserve 7.518 93.979 Other Statutory Funds 90.917 236.051 Total 222.219 The General Fund balance of £117.6m will be carried forward to 2024/25. Of this balance, £107.3m has been earmarked for a particular purpose, as outlined in Note 7: Usable reserves. This leaves unallocated reserves of £10.3m (2.0% 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 2024 has reduced to £6.2m. 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, as well as a drawdown from reserves of £0.3m. Infrastructure Assets The Scottish Government published a Statutory Override in August 2022, to allow councils to continue the current Page 105 of 266
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11 Annual Accounts 2023/24 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 2 March 2023, the Council approved the housing capital investment programme for 2023/24 of £30m; and the General Fund capital investment programme for 2023/24 of £146m. 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 £23m for housing capital investment and £105m 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 2023/24 capital programme. During the course of 2023/24 there was new long-term external borrowing from the Public Works Loans Board (PWLB) of £20m 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 2023 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 that opened in October 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 Council sets its capital financing requirement (CFR) for Page 106 of 266
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12 Annual Accounts 2023/24 the forthcoming year in its Treasury Management Strategy Statement (TMSS), approved by the Council on 2 March 2023 with a mid-year update on 14 December 2023. The TMSS for 2023/24 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 2024 was £510.1m, within the authorised limit of £571.0m. The Council’s external borrowings have only been applied for capital investment purposes, with the Council’s net external debt being £358.0m at 31 March 2024 compared to the operational boundary of £553.0m. 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 3.1% as a proportion of the Council’s non-housing net revenue stream. Housing related financing costs as at 31 March 2024 were 27.7% of net housing revenues, lower than the mid-year forecast of 29.0%. 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 £59.7m in their assessment of the Council’s share of the actuarial position of the local government pension fund as at 31 March 2024. 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 2024 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 2023/24, this has adjusted the value of the pension asset shown in the balance sheet to nil (£102.4m in 2022/23). This nil value only relates to pension obligations funded through the LGPS, so the balance sheet shows a pension liability of £74.5m to reflect the Council’s unfunded pension obligations. 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 £2.9m 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; • the Common Good Funds; • the Coats Observatory Trust; • Park Lane Developments (Renfrewshire) LLP; and • Paisley Museum Reimagined Limited. The Group Accounts also consolidate the Council’s share of five other entities treated as associates or joint ventures: Page 107 of 266
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13 Annual Accounts 2023/24 • Strathclyde Partnership for Transport; • Strathclyde Concessionary Travel Scheme Joint Committee; • Renfrewshire Valuation Joint Board; • Renfrewshire Health and Social Care Integration Joint Board; and • AMIDS Renfrewshire LLP. 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 throughout 2023/24 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 2023/24. The Council continued to feel the impact of the UK’s exit from the EU and the war in Ukraine during 2023/24, though general inflation did reduce over the latter part of the year. Certain areas of supplies, such as energy, food and provisions and fuel, retained very high levels of inflation. 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. An updated MTFS is expected in summer 2024. 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 2023/24, 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 February 2024, the current 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. 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 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. Page 108 of 266
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14 Annual Accounts 2023/24 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 109 of 266
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15 Annual Accounts 2023/24 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 £2.8m which is added to the previous surplus brought forward. The total net asset value increased by £2.8m, including an increase in investments of £1.7m. 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 ongoing inflationary risk. 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 110 of 266
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16 Annual Accounts 2023/24 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 for signature by the Council at its meeting on 24 October 2024. 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 2024. Alastair MacArthur Director of Finance and Resources Page 111 of 266
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17 Annual Accounts 2023/24 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. A mid-term review of the Community Plan was also undertaken in 2022 in tandem with the development of the new Council Plan, which identified three key areas of focus which should be progressed by partners. • 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 Page 112 of 266
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18 Annual Accounts 2023/24 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 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 makes a range of performance information available on its website, including the publication of its public performance report “How are we doing?”, in line with statutory requirements. • 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 6 monthly to the Audit, Risk and Scrutiny Board and a Risk Management Annual Report is also provided to Board in respect of corporate risk management arrangements. In 2023/24 the Council launched its self-developed Business as Usual Risk Assurance Model. All Heads of Service self-assessed their levels of assurance in relation to implementing risk controls covering various aspects of governance, risk and internal control. The Corporate Management Team are required to confirm the overall assurances for their service areas. • 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 Page 113 of 266
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19 Annual Accounts 2023/24 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 delegated to each Local Partnership through a Lead Officer appointed by the Council, through the Chief Executive. This governance framework has been in place at Renfrewshire Council for the year ended 31 March 2024. 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; • to 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 Page 114 of 266
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20 Annual Accounts 2023/24 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 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 and how the organisation manages its risks is reviewed annually by the Corporate Management Team, including the use of an annually updated self-assessment tool covering twelve key areas of governance, internal control and risk as follows: • Asset Management • Complaints, Comments and Claims • Financial Control and Governance • Health and Safety, and managing adverse events • Information Handling • Organisational Resilience • Partnership Management • People, Wellbeing and Development • Programme Management • Service Performance • Community and Public Safety 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 Corporate Management Team introduced an updated programme of corporate self-assessment in 2023 linked to the previous EFQM/PSIF model used across the public sector. All Chief Officers participated in this programme initially before it was further extended to a wider group of senior leaders across the Council. The outputs from this are informing an improvement plan led by the Corporate Management Team. 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, and the resulting Action Plan contains 59 improvement actions with target dates ranging until 2025. Work to refresh the initial engagement will be undertaken by the end of 2025 to ensure that improvement work continues to be focused, relevant and effective. The Council continues to manage a number of very significant challenges and is operating within a context of new and emerging challenges which require the Council to respond very flexibly to the changing needs of Page 115 of 266
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21 Annual Accounts 2023/24 local businesses, communities and citizens. These factors include: • Ongoing economic uncertainty, which has significantly increased costs and impacted supply chains utilized by the Council and its partners. The linked cost of living crisis has also required the Council to respond in new ways with partners to meet the needs of those most vulnerable across Renfrewshire through our Fairer Renfrewshire Programme. • New and developing demand pressures continue to impact the Council, including in relation to issues such as migration and asylum, in relation to support for Ukrainian Displaced Persons, Unaccompanied Asylum Seeking Children and Young People and more recently the widening out of the asylum dispersal programme. • 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 continued 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 2024 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 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 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 2024/25. Audit Scotland has introduced a new approach to auditing Best Value in local government which 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 (2023), this examined the effectiveness of leadership within Councils across Scotland, with a separate thematic report published for Renfrewshire Council in September 2023 alongside the Annual Audit Report. For 2024, the national theme will be Workforce Innovation. Alongside the ongoing Best Value auditing and this new approach with annual themes, there will also be further external audit activity as requested by the Accounts Commission following the Section 102 report instructed in response to the Dargavel School pupil roll forecast error. It is expected a Best Value report will be produced by the end of 2024 for Renfrewshire Council. The action plan arising from the Independent Review of the Dargavel School Project is reported to and monitored by the Audit, Risk and Scrutiny Board. The Council undertook a comprehensive review of its governance arrangements through a member led cross party working group, the recommendations arising were reported to and approved by the Council on 29 February 2024. A separate self-assessment against the CIPFA guidance for effective Audit Committees was undertaken with the members of the Audit, Risk and Scrutiny Board and actions for improvement were identified and have been progressed. A leadership Page 116 of 266
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22 Annual Accounts 2023/24 development programme was also delivered to support senior managers and comprehensive financial governance training was undertaken across the Council’s senior and middle managers. The external auditors, Azets, provided an unqualified and unmodified audit opinion on the 2022/23 annual accounts. Regular reviews of the Council’s arrangements are undertaken by Internal Audit. Two specific areas were identified in the 2022/23 governance statement as impacting on the overall internal control, risk management and governance arrangements. These were: • Business continuity plans – All services now have up- to-date business continuity plans, with a programme of quality assurance being undertaken. • Manual creditor payments – A corporate project to address this area is currently underway. The programme of work undertaken by Internal Audit in 2023/2024 identified 8 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, 6 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 control and action plans are in place to address the risk identified. The remaining three areas identified as impacting on the overall internal control, risk management and governance arrangements are: • Disaster recovery – The Council’s critical systems are increasingly moving to a Software as a Service (SaaS) operating model and, as these systems are externally hosted, the Council’s role in relation to disaster recovery differs from traditional, on- premises solutions, where IT would have a more active role. Nonetheless it is important that the Council has adequate arrangements in place for obtaining assurance from SaaS providers that disaster recovery will be handled in a timely manner, with minimum business impact, should an event occur. The review identified that improvements were required, including formal identification of critical systems and formalising the procurement guidance to ensure that services procured meet the required disaster recovery arrangement. An action plan is in place to ensure that the required actions are implemented. • Health and Safety – The corporate arrangements for health and safety require to be improved. It was identified that procedures require to be reviewed and updated. Improvements are required in terms of corporate oversight, compliance and performance reporting. • Purchasing processes (corporate credit cards) - Compliance against the corporate procedures requires to be improved, the main areas for improvement included eliminating off-contract spend and improving the authorisation process to ensure that all purchases are properly authorised. The Corporate Procurement Unit has reminded all relevant employees of the requirement to comply with the established procedures. 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 88% of recommendations were implemented by the due date. 9% had passed their original due date and revised implementation dates have now been set and 3% were superseded. Of the 44 recommendations followed up that were deemed to be critical, 41 have been fully implemented and 3 have been partially 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 Page 117 of 266
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23 Annual Accounts 2023/24 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 Implement improvement plan arising from the Corporate Self-Assessment Exercise. Head of Policy and Partnerships December 2024 Agreed action Responsible person Date The recommendations arising for the review of the corporate health and safety internal audit report, will be considered and an action plan developed will be agreed for implementation. Director of Finance and Resources December 2024 The agreed actions will be subject to review to identify the progress being made in implementing them. Update on the 2022/23 Action Plan Agreed action Progress Update 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 All service areas have updated their business continuity plan templates. These plans are currently being externally quality assured Service Directors December 2024 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. A Strategic P2P Lead officer was appointed in November 2023. The programme’s Strategic and Operational Governance boards have now been established and meet on a monthly basis to discuss key decision points, with regular updates to the Corporate Management Team. Nine Project Workstreams have been established, with lead officers appointed to progress these and as part of this, the No PO No Payment initiative will be taken forward, it is now expected to be implemented by December 2024. Strategic Lead (P2P) December 2024 Page 118 of 266
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24 Annual Accounts 2023/24 Assurance Subject to the above, and on the basis of the assurances provided, we consider the governance and internal control environment operating during 2023/24 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 119 of 266
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25 Annual Accounts 2023/24 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 6.05% pay award in 2023/24 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 2023/24 was £40,205 per annum (£39,148 in 2022/23) and the salary for the Provost was £30,154 per annum (£29,361 in 2022/23). 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 2023/24 being £351,766 per annum; and whose salaries individually must be on a specified scale, in 2023/24 £20,099 to £30,154. 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 £28,951 per annum in 2023/24); four Regulatory Board Conveners (salary of £24,032 in 2023/24); Chair of OneRen Board; Chair/Vice-Chair of Integration Joint Board and one Leader of the Opposition (salary of £24,032 in 2023/24). 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 2024, 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 2023/24, nor any remuneration in connection with election activities (this totalled £4,509 in 2022/23). Page 120 of 266
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26 Annual Accounts 2023/24 2022/23 Total Remuneration Total Remuneration £ £ 160,779 Alan Russell Chief Executive 167,893 129,136 Mary Crearie Director of Communities and Housing Services until 2 April 2023 2,839 126,216 Alastair MacArthur Director of Finance and Resources 136,907 129,936 Gordon McNeil Director of Environment, Housing & Infrastructure until 23 May 2023 then Director of Environment, Housing & Infrastructure from 24 May 2023 136,924 129,436 Steven Quinn Director of Children's Services until 11 August 2023 Full-year equivalent £136,924 51,508 0 Janie O'Neil Director of Children's Services from 04 December 2023 Full-year equivalent £130,138 41,002 675,503 Total 537,073 Senior employees Name Post held 2023/24 2022/23 2023/24 Total Remuneration Total Remuneration £ £ 108,924 Victoria Hollows 115,493 108,924 115,493 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 2024, 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. The following table reports on remuneration related to senior councillor positions only. Page 121 of 266
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27 Annual Accounts 2023/24 2022/23 2023/24 Total Remuneration Name Position held Total Remuneration £ £ 2,589 Cathy McEwan Policy Board Convener 0 2,175 Jennifer Adam Chair/Vice Chair IJB (2) 0 2,357 Bill Binks Regulatory Board Convener 0 2,175 Andy Steel Regulatory Board Convener 0 2,589 Jacqueline Cameron Chair/Vice Chair IJB 0 2,141 Eddie Devine Leader of largest opposition group 0 2,175 Neill Graham Leader of 2nd largest opposition group 0 23,753 Michelle Campbell Policy Board Convener 28,868 23,753 Emma Rodden Policy Board Convener 28,868 23,753 Andy Steel Policy Board Convener 28,868 19,637 Andy Doig Regulatory Board Convener 23,963 19,637 Stephen Burns Regulatory Board Convener 23,963 13,197 Cathy McEwan Regulatory Board Convener (1) 23,963 21,573 Jennifer Adam Chair/Vice Chair IJB (2) 28,868 19,637 Iain McMillan Leader of largest opposition group 23,963 36,821 Iain Nicolson Leader Of the Council 40,089 27,580 Lorraine Cameron Provost 30,067 26,341 Marie McGurk Policy Board Convener 28,868 26,341 Jim Paterson Policy Board Convener 28,868 26,341 John Shaw Policy Board Convener 28,868 21,812 John McNaughtan Regulatory Board Convener 23,963 23,796 Lisa-Marie Hughes Chair, OneRen (3) 28,868 370,173 420,915 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 No payments were made in connection with loss of employment or office, nor were any other payments made which are not included in the table. Page 122 of 266
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28 Annual Accounts 2023/24 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 2022/23 Up to £25,300 5.5% Up to £23,000 £25,301 to £31,000 7.25% £23,001 to £28,100 £31,001 to £42,500 8.5% £28,101 to £38,600 £42,501 to £56,600 9.5% £38,601 to £51,400 Over £56,601 12% Over £51,401 Tiered contribution rates on whole time pay 2023/24 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 2024 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 123 of 266
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29 Annual Accounts 2023/24 2023/24 2022/23 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Alan Russell Chief Executive 32,403 30,560 80 101 11 6 Mary Crearie Director of Communities and Housing Services until 2 April 2023 548 24,923 65 86 2 3 Alastair MacArthur Director of Finance and Resources 26,423 24,167 62 78 9 6 Gordon McNeil Director of Environment, Housing & Infrastructure until 23 May 2023 then Director of Environment, Housing & Infrastructure from 24 May 2023 26,426 24,923 50 36 8 1 Steven Quinn Director of Children's Services until 11 August 2023 9,941 24,923 29 0 6 0 Janie O'Neil Director of Children's Services from 04 December 2023 7,913 0 n/a n/a n/a n/a 103,654 129,496 286 301 36 16Total Senior Employees Name Post held In-year pension contributions by Renfrewshire Council Accrued pension benefits as at 31 March 2024 Change in accrued pension benefits since 31 March 2023 2023/24 2022/23 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Victoria Hollows Chief Executive, OneRen 22,290 21,022 41 48 0 0 22,290 21,022 41 48 0 0 Senior Employees of Subsidiary Bodies Name Post held In-year pension contributions by Renfrewshire Leisure Accrued pension benefits as at 31 March 2024 Change in accrued pension benefits since 31 March 2023 Total Page 124 of 266
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30 Annual Accounts 2023/24 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. 2023/24 2022/23 Pension Lump Sum Pension Lump Sum £ £ £000 £000 £000 £000 Iain Nicolson Leader Of the Council 7,737 6,944 13 3 2 0 Cathy McEwan Policy Board Convener/ Regulatory Board Convener 787 2,870 9 0 3 0 Marie McGurk Policy Board Convener 5,571 5,015 5 0 1 0 Jim Paterson Policy Board Convener 5,571 5,015 4 0 0 0 John Shaw Policy Board Convener 5,571 5,015 5 0 1 0 Emma Rodden Policy Board Convener 5,571 3,943 4 0 1 0 Michelle Campbell Policy Board Convener 5,571 3,943 4 0 1 0 Andy Steel Regulatory Board Convener/Policy Board Convener 5,571 4,918 4 0 1 0 John McNaughtan Regulatory Board Convener 4,625 4,180 4 0 1 0 Jennifer Adam Regulatory Board Convener/Chair/Vice Chair Integration Joint Board 5,571 4,370 4 0 1 0 Jacqueline Cameron Chair/Vice Chair Integration Joint Board until 5 May 2022 0 642 4 0 0 0 Lisa-Marie Hughes Chair, OneRen 5,571 4,393 5 0 1 0 Stephen Burns Regulatory Board Convener 4,625 3,359 3 0 n/a n/a Andy Doig Regulatory Board Convener 4,625 3,359 3 0 n/a n/a Eddie Devine Leader of largest opposition group until 5 May 2022 0 642 8 1 0 0 Neill Graham Leader of 2nd largest opposition group until 5 May 2022 0 642 2 0 0 0 Iain McMillan Leader of opposition group from 19 May 2022 4,625 3,989 1 0 1 0 Total 71,592 63,239 82 4 14 0 Name Post held In-year pension contributions by Renfrewshire Council Accrued pension benefits as at 31 March 2024 Change in accrued pension benefits since 31 March 2023 Note: Councillor McEwan left the pension scheme in May 2023. Page 125 of 266
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31 Annual Accounts 2023/24 6. Councillors’ remuneration The Council paid the following amounts to its elected members (councillors) during the year. 2022/23 2023/24 £ £ 948,984 Salaries 987,073 2,129 Travel costs – reimbursed 1,915 4,480 Travel costs – paid directly by the Council 5,971 200 Subsistence expenses - accommodation 0 0 Training and Conferences 1,802 4,649 Telephone and information technology expenses – paid directly by the Council 2,870 960,442 Total 999,631 The public record of members' salaries, allowances and expenses for 2023/24 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, was in excess of £50,000 during 2023/24, in bands of £5,000; and also details of the number of those employees highlighted who left the employment of the Council during 2023/24. 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 92 43 135 £50,000 to £54,999 113 116 229 131 80 211 £55,000 to £59,999 85 60 145 96 18 114 £60,000 to £64,999 116 58 174 64 11 75 £65,000 to £69,999 67 24 91 20 20 40 £70,000 to £74,999 52 30 82 9 2 11 £75,000 to £79,999 10 6 16 5 7 12 £80,000 to £84,999 4 10 14 4 6 10 £85,000 to £89,999 2 5 7 1 1 2 £90,000 to £94,999 8 5 13 2 10 12 £95,000 to £99,999 1 4 5 0 1 1 £100,000 to £104,999 2 4 6 0 3 3 £105,000 to £109,999 0 3 3 0 0 0 £110,000 to £114,999 0 1 1 0 0 0 £115,000 to £119,999 0 4 4 0 3 3 £125,000 to £129,999 0 0 0 0 0 0 £135,000 to £139,999 0 2 2 0 1 1 £155,000 to £159,999 0 1 1 424 206 630 460 333 793 2022/23 2023/24 Of the staff noted above, 26 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 2022/23). Page 126 of 266
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32 Annual Accounts 2023/24 8. Exit Packages The Council has agreed a number of exit packages in 2023/24 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: 2023/24 2022/23 Future Life expectancy at age 65 – males 20.6 years 20.5 years Future Life expectancy at age 65 – females 24.2 years 24.2 years Pension increase rate 2.80% 2.95% Discount Rate 4.80% 4.75% Value Value £m £m £0 - £20,000 2 0.024 4 0.065 £20,001 - £40,000 4 0.111 5 0.112 £40,001 - £60,000 1 0.055 2 0.107 £60,001 - £80,000 3 0.204 6 0.420 £80,001 - £100,000 2 0.187 4 0.351 £100,001 - £150,000 2 0.230 17 2.082 £150,001 - £200,000 2 0.318 11 1.808 £200,001 - £250,000 2 0.411 3 0.604 £300,001 - £350,000 2 0.621 3 0.989 Total 20 2.161 55 6.538 Exit Package Cost 2023/24 2022/23 Number of Employees Number of Employees Page 127 of 266
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33 Annual Accounts 2023/24 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. 29 Total cost of facility time £273,142 Total pay bill £351,322,677 FTE employee number 28.03 Percentage of the total pay bill spent on facility time 0.08% Number of representatives % time 24 1% - 50% 39.82% 3 51% - 99% 2 100% 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 128 of 266
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34 Annual Accounts 2023/24 Independent auditor’s report to the members of Renfrewshire Council and the Accounts Commission Reporting on the audit of 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 2024 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the group and council 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 Income Account, the Common Good Income and Expenditure Statement, the Common Good Funds Balance Sheet and notes to the financial statements, including material accounting policy information. 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 2023/24 (the 2023/24 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 2024 and of the income and expenditure of the Council and its group for the year ended; • have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2023/24 Code; and • have been prepared in accordance with the requirements of the Local Government (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 Page 129 of 266
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35 Annual Accounts 2023/24 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. 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 Council 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; • discussions among our audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and Page 130 of 266
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36 Annual Accounts 2023/24 • 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 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: Page 131 of 266
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37 Annual Accounts 2023/24 • 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. 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) Quay 2 139 Fountainbridge Edinburgh EH3 9QG Date: 24 October 2024 Page 132 of 266
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38 Annual Accounts 2023/24 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 294.465 (38.357) 256.108 298.501 (39.097) 259.404 174.401 (63.762) 110.639 Environment, Housing and Infrastructure 251.324 (142.398) 108.926 109.077 (48.963) 60.114 Finance and Resources 105.680 (59.449) 46.231 37.895 (9.097) 28.798 49.507 (12.629) 36.878 17.692 (14.653) 3.039 Miscellaneous Services 19.641 (13.728) 5.913 260.152 (161.744) 98.408 Adult Services 144.335 (44.290) 100.045 893.682 (336.576) 557.106 868.988 (311.591) 557.397 0.103 0.000 0.103 (Gain)/Loss on the disposal of non-current assets 0.000 (0.302) (0.302) 24.322 (6.646) 17.676 Financing and investment income and expenditure 2 21.333 (16.863) 4.470 0.000 (505.934) (505.934) Taxation and non-specific grant income 3 0.000 (513.914) (513.914) 918.107 (849.156) 68.951 890.321 (842.670) 47.651 (104.500) 8 (33.187) 0.469 8 (0.030) (196.368) 28 185.455 (300.399) Other comprehensive (income) and expenditure 152.238 (231.448) Total comprehensive (income) and expenditure 199.889 (Surplus)/Deficit on the revaluation of non-current assets (Surplus)/Deficit from investments in equity instruments designated as Fair Value through Other Comprehensive Income Actuarial (gain)/loss on pension assets and liabilities 2022/23 (restated) 2023/24 Children's Services Chief Executive's Service Deficit/(Surplus) on the Provision of Services Cost of Services Figures shown in brackets represent income or gains and figures without brackets represent expenditure or losses. During the year the Council restructured, with services in Communities and Housing moving to Chief Executive’s Service (Community Learning and Development) and Environment and Infrastructure (Housing and Public Protection), now called Environment, Housing and Infrastructure. There is no resulting change to the 2022/23 Deficit on the Provision of Services, or Total Comprehensive Income. Page 133 of 266
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39 Annual Accounts 2023/24 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. 2023/24 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 2023 127.391 6.497 3.095 99.068 236.051 1,488.674 1,724.725 Movement in reserves during the year (31.647) (16.004) 0.000 0.000 (47.651) (152.238) (199.889) 21.356 14.832 0.000 0.000 36.188 (36.188) 0.000 Transfers to / (from) other statutory reserves 7 (0.333) 0.000 0.333 0.000 0.000 0.000 0.000 Adjustment for Service Concession Arrangements 1.597 0.000 0.000 0.000 1.597 (1.597) 0.000 Adjustments between accounting basis and funding basis under regulations 6 (0.746) 0.839 0.000 (4.061) (3.968) 3.968 0.000 (9.773) (0.333) 0.333 (4.061) (13.834) (186.055) (199.889) Balance at 31 March 2024 117.618 6.164 3.428 95.007 222.217 1,302.619 1,524.836 Increase / (Decrease) in year Total Comprehensive Income and Expenditure Adjustments to Usable Reserves permitted by accounting standards Comparative movements in 2022/23 (restated) 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) 300.399 231.448 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) 21.594 209.854 231.448 Balance at 31 March 2023 127.391 6.497 3.095 99.068 236.051 1,488.674 1,724.725 Increase / (Decrease) in year Total Comprehensive Income and Expenditure Adjustments to Usable Reserves permitted by accounting standards Page 134 of 266
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40 Annual Accounts 2023/24 Balance Sheet The balance sheet shows the value as at 31 March 2024 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 2023 (restated) As at 31 March 2024 £m Note £m 1,797.350 Property, plant and equipment 9 1,858.221 44.186 Heritage assets 10 44.186 1.593 Investment property 11 0.000 2.524 Intangible assets 13 1.724 4.157 Long-term investments 22 4.321 2.582 Long-term debtors 19 2.365 102.398 Other long-term assets 28 0.000 1,954.790 1,910.817 0.100 Assets held for sale 12 0.100 166.751 Short-term investments 22 67.755 1.314 Inventories 17 1.287 67.422 Short-term debtors 19 66.354 11.632 Cash and cash equivalents 18 29.461 247.219 164.957 (93.653) Short-term borrowing 22 (65.492) (89.147) Short-term creditors 20 (83.332) (0.252) Short-term provisions 21 (0.721) (183.052) (149.545) (65.690) Long-term creditors 20 (63.352) (4.942) Long-term provisions 21 (4.630) (223.600) Long-term borrowing 22 (258.931) 0.000 Other long-term liabilities 28 (74.480) (294.232) (401.393) 1,724.725 1,524.836 Alastair MacArthur (236.051) Usable reserves 7 (222.219) (1,488.674) Unusable reserves 8 (1,302.617) (1,724.725) (1,524.836)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 27 June 2024 and the audited accounts were authorised for issue on 24 October 2024. Page 135 of 266
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41 Annual Accounts 2023/24 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. 2022/23 2023/24 £m £m (68.951) Net surplus/(deficit) on the provision of services (47.651) Adjustment for non-cash movements: 51.918 Depreciation, amortisation, impairment and revaluations 97.867 18.982 Increase/(decrease) in creditors (1.423) 14.628 (Increase)/decrease in debtors 1.285 (0.282) (Increase)/decrease in inventories 0.027 38.749 Pension (liability)/asset (8.576) 0.610 Carrying amount of non-current assets sold 1.531 (0.163) Other non-cash items charged to the net surplus or deficit on the provision of services 0.157 (44.807) Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities (30.658) 10.684 Net cash flows from operating activities 12.559 Net cash flows from investing activities : (87.082) Purchase of property, plant and equipment, investment property and intangible assets (128.149) (1.697) Proceeds from the sale of property, plant and equipment, investment property and intangible assets (1.832) 22.188 Proceeds from short-term and long-term investments 98.862 46.504 Other receipts from investing activities 32.490 Net cash flows from financing activities (3.220) Cash payments for the reduction of the outstanding liability relating to finance leases and on-balance sheet PFI /PPP contracts (3.271) 5.438 Repayment of short-term and long-term borrowing 7.170 (7.185) Net increase/(decrease) in cash and cash equivalents 17.829 18.817 Cash and cash equivalents at the beginning of the reporting period 11.632 11.632 Cash and cash equivalents at the end of the reporting period 29.461 The Net cash flow from operating activities above includes the following elements of interest paid and received: 2022/23 2023/24 £m £m (6.646) Interest received (16.863) 11.660 Interest paid 11.347 4.923 Interest element of finance lease and PPP payments 4.976 9.937 (0.540) Interest Paid and Received Page 136 of 266
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42 Annual Accounts 2023/24 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. 2023/24 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 252.456 (9.362) 16.310 259.404 Environment, Housing and Infrastructure 74.560 18.753 15.613 108.926 Finance & Resources 48.972 (4.796) 2.055 46.231 Chief Executive's Service 28.749 5.791 2.000 36.878 Miscellaneous Services 14.373 (8.670) 0.210 5.913 Adult Services 98.765 1.280 0.000 100.045 Net cost of services 517.875 2.996 36.188 557.397 Other income and expenditure (507.771) (1.975) 0.000 (509.746) (Surplus) / Deficit 10.104 1.021 36.188 47.651 Opening General Fund and HRA balance (133.888) Less (Surplus) / Deficit in the year 10.104 Closing General Fund and HRA at 31 March 2024 (123.784) 2023/24 Adjustments for capital purposes Net change for the pensions adjustments Other differences Total Adjustments £m £m £m £m Children's Services 17.796 (0.830) (26.328) (9.362) Environment, Housing and Infrastructure 17.542 (0.518) 1.729 18.753 Finance & Resources 1.846 (0.500) (6.142) (4.796) Chief Executive's Service 5.206 (0.178) 0.763 5.791 Miscellaneous Services (0.433) 2.286 (10.523) (8.670) Adult Services 0.003 (0.475) 1.752 1.280 Net cost of services 41.960 (0.215) (38.749) 2.996 (32.792) (8.361) 39.178 (1.975) Total adjustments between accounting basis and funding basis 9.168 (8.576) 0.429 1.021 • 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 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. Page 137 of 266
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43 Annual Accounts 2023/24 • 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. 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 2.433 20.390 256.108 Communities and Housing Services 10.897 (12.289) 11.799 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 (17.959) 0.203 3.039 Adult Services 93.580 4.828 0.000 98.408 Net cost of services 491.318 28.610 37.178 557.106 Other income and expenditure (486.441) (1.714) 0.000 (488.155) (Surplus) / Deficit 4.877 26.896 37.178 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 Page 138 of 266
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44 Annual Accounts 2023/24 Note 2: Financing and investment income & expenditure 2022/23 2023/24 £m £m 22.338 Interest payable and similar charges 21.333 1.984 Net interest on the net defined benefit liability (8.360) (6.646) Interest receivable and similar income (8.503) 17.676 Total 4.470 Note 3: Taxation and non-specific grant income 2022/23 2023/24 £m £m (80.713) Income from Council Tax and community charge (95.528) (108.076) Distribution from the national non-domestic rate pool (131.322) (270.144) General Revenue Grant from the Scottish Government (254.574) (47.001) Capital grants and contributions (32.490) (505.934) Total (513.914) 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. 2022/23 2023/24 £m Note £m Expenditure 383.749 Employee benefits expenses 369.489 420.837 Other service expenses 401.632 89.096 Depreciation, amortisation, impairment 97.867 24.322 Interest Payments 2 21.333 918.107 Total expenditure 890.321 Income (336.576) Fees, charges and other service income (311.591) (6.646) Interest and investment income 2 (16.863) 0.000 Gain on the disposal of assets 9 (0.302) (188.789) Income from council tax and non-domestic rates 3 (226.850) (317.145) Government grants and contributions 3 (287.064) (849.156) Total income (842.670) 68.951 (Surplus) or deficit on the provision of services 47.651 Page 139 of 266
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45 Annual Accounts 2023/24 Note 5: Grant income The Council credited the following grants, contributions and donations direct to services in the CIES during 2023/24. 2022/23 2023/24 £m £m 40.841 Housing benefit 39.996 0.549 Housing benefit and Council Tax administration 0.638 0.687 Discretionary Housing Payment 0.937 0.200 Private sector housing grant 0.600 0.491 Education Maintenance Allowance 0.554 0.061 Gaelic Education 0.050 4.663 Pupil Equity Fund 4.663 18.716 Early Years Expansion 18.430 7.772 Other Education 6.833 3.203 Children's Services 3.203 12.254 Adult Services 12.257 3.406 Employability 4.809 3.415 Other grants 8.040 96.258 Total 101.010 Page 140 of 266
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46 Annual Accounts 2023/24 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 (44.202) (16.610) 0.000 0.000 60.812 Amortisation of intangible assets (0.866) 0.000 0.000 0.000 0.866 Capital grants and contributions applied 30.424 2.066 0.000 0.000 (32.490) Revenue expenditure funded from capital under statute (0.793) 0.000 0.000 0.000 0.793 Amounts of non-current assets written off on disposal or sale as part of the gain or loss on disposal to the CIES 0.145 0.157 0.000 0.000 (0.302) Insertion of items not charged to the CIES: Statutory provision for the repayment of Loans Fund & Finance Lease principal 3.708 9.747 0.000 0.000 (13.455) Capital expenditure charged against the General Fund and HRA Balances 3.285 3.924 3.395 0.000 (10.604) Transfer of cash sale proceeds credited as part of the gain or loss on disposal to the CIES 0.000 0.000 0.000 (1.832) 1.832 Use of the Capital Receipts Reserve to finance new capital expenditure 0.000 0.000 0.000 2.498 (2.498) Amount by which finance costs charged to the CIES are different from finance costs chargeable in the year in accordance with statutory requirements 0.176 0.077 0.000 0.000 (0.253) Reversal of items relating to retirement benefits debited or credited to the CIES (31.271) 0.050 0.000 0.000 31.221 Employer’s pension contributions and direct payments to pensioners payable in the year 40.027 (0.230) 0.000 0.000 (39.797) 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 0.113 (0.020) 0.000 0.000 (0.093) Total adjustments 0.746 (0.839) 3.395 0.666 (3.968) Usable reserves Unusable reserves2023/24 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 141 of 266
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47 Annual Accounts 2023/24 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 (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 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 reserves2022/23 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 98. Page 142 of 266
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48 Annual Accounts 2023/24 As at 31 March 2023 (restated) As at 31 March 2024 £m £m (127.391) General Fund Balance (117.620) (6.497) Housing Revenue Account Balance (6.164) (8.184) Capital Receipts Reserve (7.518) (93.979) Other Statutory Funds (90.917) (236.051) Total (222.219) 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 2023/24. Balance at 1 April 2022 Transfers out Transfers in Balance at 31 March 2023 Transfers out Transfers in Balance at 31 March 2024 £m £m £m £m £m £m £m Insurance Fund 2.653 0.000 0.115 2.768 0.000 0.133 2.901 DHN Repair and Renewal Fund 0.000 0.000 0.000 0.000 0.000 0.186 0.186 Reservoir Repair Fund 0.321 0.000 0.006 0.327 0.000 0.014 0.341 Revenue statutory funds 2.974 0.000 0.121 3.095 0.000 0.333 3.428 Education Capital Items Fund 2.269 (0.509) 0.346 2.106 (0.883) 0.231 1.454 Investment Capital Fund 90.456 (2.175) 0.497 88.778 (2.743) 0.000 86.035 Capital statutory funds 92.725 (2.684) 0.843 90.884 (3.626) 0.231 87.489 Total 95.699 (2.684) 0.964 93.979 (3.626) 0.564 90.917 • 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 DHN Repair and Renewal Fund is earmarked for future component replacement of the District Heating Network at the Advanced Manufacturing Innovation District Scotland (AMIDS). • 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 2022 Sale proceeds Capital exp funded Balance at 31 March 2023 Sale proceeds Capital exp funded Balance at 31 March 2024 £m £m £m £m £m £m £m Capital Receipts Reserve 7.594 1.697 (1.107) 8.184 1.832 (2.498) 7.518 Page 143 of 266
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49 Annual Accounts 2023/24 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 £10.308m represents 2.0% of the Council’s net annual running costs. Balance at 1 April 2022 Transfers out Transfers in Balance at 31 March 2023 Transfers out Transfers in Balance at 31 March 2024 £m £m £m £m £m £m £m COVID-19 General Recovery Fund 9.160 (1.780) (7.380) - - - - COVID-19 Education Recovery Fund 6.328 (0.403) (5.925) - - - - COVID-19 Recovery Construction Fund 10.000 (2.735) (7.265) - - - - Inflation Mitigation 4.990 - (4.990) - - - - Financial Sustainability Fund - (6.054) 27.560 21.506 (8.262) - 13.244 Social Renewal Plan 1.795 (1.180) (0.615) - - - - Tackling Poverty 1.402 (0.770) (0.632) - - - - Fairer Renfrewshire Programme - (1.584) 6.081 4.497 (1.642) - 2.855 Climate Change Action Fund 0.611 (0.256) (0.355) - - - - Community Empowerment Fund 0.339 (0.038) (0.301) - - - - Sustainable Communities Fund - - 0.656 0.656 (0.262) - 0.394 PPP Schools Replacement Fund 12.670 - (12.670) - - - - Loan Charges Flexibility Fund - - 44.759 44.759 - 4.000 48.759 Alcohol and Drugs Commission 1.804 (0.601) 0.100 1.303 (0.536) - 0.767 British Sign Language 0.001 (0.001) - - - - - City Deal 1.750 (0.237) 0.106 1.619 (0.716) 1.000 1.903 Civil Contingencies Shared Service - - 0.114 0.114 (0.026) 0.038 0.126 Culture Bid Legacy 3.567 (0.869) 0.395 3.093 (1.084) - 2.009 Development – Paisley Town Centre 1.057 - - 1.057 (0.538) - 0.519 Digital Infrastructure 2.389 - 0.033 2.422 (0.981) - 1.441 Discretionary business grants 0.392 - - 0.392 (0.392) - - Early Years Change Fund 1.900 - 1.000 2.900 (1.112) 0.312 2.100 Employability 9.481 (0.171) - 9.310 (1.355) 2.635 10.590 Environment & Infrastructure 1.015 (0.500) 0.045 0.560 (0.510) 0.740 0.790 Fly Tipping Enforcement - (0.208) 0.450 0.242 (0.242) - - Local Authority Economic Recovery Fund - 0.305 - 0.305 (0.800) 0.595 0.100 Leisure: Inclusive Play Facility 0.050 (0.043) - 0.007 - - 0.007 Local Heat and Energy Efficiency Strategy - - 0.075 0.075 (0.075) - - Memorial Headstone Safety 0.625 (0.511) - 0.114 (0.114) - - Paisley Town Centre Heritage Asset Strategy 1.254 (0.369) - 0.885 (0.551) - 0.334 Private Sector Housing Grant 2.206 (0.167) - 2.039 (0.231) 0.500 2.308 Pupil Equity Fund 1.259 (0.599) 0.370 1.030 (0.506) - 0.524 Rapid Rehousing Transition Plan - (0.114) 0.154 0.040 (0.040) - - Resettlement and Asylum Fund - - 0.585 0.585 (0.398) 1.242 1.429 School Music Participation 0.285 (0.125) 0.062 0.222 - 0.054 0.276 Service Modernisation & Reform 11.059 (0.225) 0.185 11.019 (1.331) 0.974 10.662 Town Centre Public WiFi 0.033 (0.033) - (0.000) - - Villages Improvement Fund 0.133 (0.133) - (0.000) - 0.200 0.200 Welfare Reform 1.033 (0.447) 0.493 1.079 (0.780) 0.700 0.999 Year-end flexibility: Children's Svc 5.291 (2.645) 2.597 5.243 (1.365) 1.127 5.005 General Fund: Ring-fenced 93.879 (22.493) 45.687 117.073 (23.849) 14.117 107.341 Unallocated Balance 10.788 (0.470) - 10.318 (0.039) - 10.279 Total General Fund Balance 104.667 (22.963) 45.687 127.391 (23.888) 14.117 117.620 Ring-fenced elements of the General Fund Balance Page 144 of 266
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50 Annual Accounts 2023/24 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 2023 (restated) As at 31 March 2024 £m £m (772.123) Revaluation Reserve (768.193) (102.399) Pension Reserve 74.480 (631.565) Capital Adjustment Account (625.941) 10.941 Financial Instruments Adjustment Account 10.688 (0.528) Financial Instruments Revaluation Reserve (0.558) 7.000 Employee Statutory Adjustment Account 6.907 (1,488.674) Total Unusable Reserves (1,302.617) 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 145 of 266
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51 Annual Accounts 2023/24 As at 31 March 2023 As at 31 March 2024 £m £m (705.624) Balance at 1 April (772.123) (104.500) Upward revaluation of non-current assets (33.185) 37.178 Difference between fair value depreciation and historic cost depreciation 36.188 0.823 Accumulated (gains) / losses on disposal of non-current assets transferred to the Capital Adjustment Account 0.927 (66.499) Movement in Year 3.930 (772.123) Balance at 31 March (768.193) 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 2023 (restated) As at 31 March 2024 £m £m 55.220 Balance at 1 April (102.399) (528.066) Actuarial (gains) / losses on pension assets and liabilities 258.948 331.698 Restriction to Asset Ceiling (73.493) 74.465 Reversal of items relating to retirement benefits debited or credited to the surplus or deficit on the provision of services in the CIES 31.221 (35.716) Employer’s pension contributions payable in the year (39.797) (102.399) Balance at 31 March 74.480 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 146 of 266
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52 Annual Accounts 2023/24 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 2023 As at 31 March 2024 £m £m (646.538) Balance at 1 April (631.565) Reversal of items relating to capital expenditure charged to the CIES: 51.055 Charges for depreciation, impairment and revaluation losses of non-current assets 60.812 0.863 Amortisation of intangible assets 0.866 0.000 Revenue expenditure funded from capital under statute 0.793 1.697 Non-current assets sale proceeds 1.832 0.103 (Gain)/Loss on disposal of non-current assets charged to the CIES (0.302) (0.823) Adjusting amounts written out of the Revaluation Reserve (0.927) 52.895 Net written out amount of non-current assets consumed in the year 63.074 Capital financing applied in the year: (1.107) Use of the Capital Receipts Reserve to finance new capital expenditure (2.498) (47.001) Capital grants and contributions credited to the CIES that have been applied to capital financing (32.490) (13.249) Loans Fund and Finance Lease principal repayments (13.455) (4.166) Capital expenditure charged against the General Fund and Housing Revenue Account balances (10.604) 27.601 Adjustment for Service Concession Arrangements 1.597 (37.922) (57.450) (631.565) Balance at 31 March (625.941) 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 four ‘lender option borrower option’ (LOBO) loans for which the interest rate was fixed for an initial period, and at a pre-agreed later date the interest rate changed. Generally accepted Page 147 of 266
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53 Annual Accounts 2023/24 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 2023 10.078 0.845 0.018 10.941 Premiums incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements (0.470) 0.000 0.000 (0.470) 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 0.221 (0.004) 0.217 Balance at 31 March 2024 9.608 1.066 0.014 10.688 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 2023 As at 31 March 2024 £m £m (0.997) Balance at 1 April (0.528) 0.469 Downward/(Upward) revaluation of investments (0.030) (0.528) Balance at 31 March (0.558) Financial Instruments Revaluation Reserve Page 148 of 266
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54 Annual Accounts 2023/24 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 2023 As at 31 March 2024 £m £m 7.682 Balance at 1 April 7.000 (7.682) Settlement or cancellation of accrual made at the end of the prior year (7.000) 7.000 Amounts accrued at the end of the current year 6.907 7.000 Balance at 31 March 6.907 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 149 of 266
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55 Annual Accounts 2023/24 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 2023 714.690 343.150 371.154 222.732 124.526 21.098 1,797.350 127.539 Reclassified (to)/ from Assets Held for Sale 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Other Reclassifications 8.153 35.812 2.612 5.519 (51.856) 1.353 1.593 0.000 Additions 17.184 5.469 14.554 10.393 77.025 0.000 124.625 1.735 Disposals (1.094) (0.035) (0.063) 0.000 0.000 (0.339) (1.531) 0.000 Depreciation (23.823) (10.408) (45.885) (10.608) 0.000 (0.088) (90.812) (9.585) Revaluation adjustments taken to the Revaluation Reserve 18.798 4.538 8.814 0.000 0.000 1.035 33.185 (10.185) Revaluation adjustments recognised in the CIES 0.000 (3.504) (2.041) 0.000 0.000 (0.644) (6.189) (1.996) Balance sheet net carrying amount at 31 March 2024 733.908 375.022 349.145 228.036 149.695 22.415 1,858.221 107.508 Gross carrying amount at 31 March 2024 733.908 398.942 626.536 n/a 149.695 27.551 1,936.632 123.901 Accumulated depreciation at 31 March 2024 0.000 (23.920) (277.391) n/a 0.000 (5.136) (306.447) (16.393) Infrastructure Assets 0.000 0.000 0.000 228.036 0.000 0.000 228.036 0.000 Balance sheet net carrying amount at 31 March 2024 733.908 375.022 349.145 228.036 149.695 22.415 1,858.221 107.508 Movements in 2023/24 Page 150 of 266
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56 Annual Accounts 2023/24 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 151 of 266
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57 Annual Accounts 2023/24 Note 10: Heritage Assets 2022/23 2023/24 £m £m 44.186 Balance at 1 April 44.186 0.000 Revaluations to CIES 0.000 0.000 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 in 2021/22. In the five years prior to 2023/24, 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 87. 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. 2022/23 2023/24 £m £m (0.120) Rental income from investment property 0.000 (0.120) Net Loss / (Gain) 0.000 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: 2022/23 2023/24 £m £m 1.479 Opening balance at 1 April 1.593 0.178 Net gains or (losses) from fair value adjustments 0.000 (0.064) Transfers from inventories and property, plant and equipment (1.593) 1.593 Closing balance at 31 March 0.000 Fair Value of Investment Properties Page 152 of 266
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58 Annual Accounts 2023/24 Fair Value Hierarchy Detail of the authority's investment properties and information about the fair value hierarchy as at 31 March 2024 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 2024 £m £m £m £m Commercial Units 0.000 0.000 0.000 0.000 Office Units 0.000 0.000 0.000 0.000 Commercial Sites 0.000 0.000 0.000 0.000 Other 0.000 0.000 0.000 0.000 Total 0.000 0.000 0.000 0.000 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: 2022/23 2023/24 £m £m 0.922 Opening balance at 1 April 0.100 Assets reclassified as held for sale: (0.297) Surplus Assets 0.000 (0.525) Assets sold 0.000 0.100 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. 2022/23 2023/24 £m £m Balance at 1 April 6.061 Gross carrying amount 5.861 (2.712) Accumulated amortisation (3.337) 3.349 Net carrying amount at 1 April 2.524 0.038 Additions: purchases 0.066 (0.238) Disposals 0.000 0.238 Disposal amortisation 0.000 (0.863) Amortisation for the year (0.866) 2.524 Net carrying amount at 31 March 1.724 Comprising: 5.861 Gross carrying amount 5.927 (3.337) Accumulated amortisation (4.203) 2.524 Balance at 31 March 1.724 Purchased Software Licences There are no individual intangible assets that are material to the financial statements and there are Page 153 of 266
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59 Annual Accounts 2023/24 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 2023/24 total spending on capital projects was £125.484m (£119.061m in 2022/23) and was within the overall prudential limits approved by Council. Capital receipts of £2.498m (£1.107m in 2022/23) were used to fund spending on capital projects. The net capital expenditure for the year of £79.892m (£66.787m in 2022/23) 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 2023 As at 31 March 2024 £m £m 360.926 Opening Capital Financing Requirement 442.065 Capital investment: 119.023 Property, plant and equipment 124.625 0.038 Intangible assets 0.066 0.000 Revenue expenditure funded from capital under statute 0.793 Sources of finance: (1.107) Capital receipts – sale of council assets (2.498) (47.001) Government grants and other contributions (32.490) (4.166) Sums set aside from revenue – direct revenue contributions (10.604) (13.249) Loans Fund/Finance Lease principal repayments (13.455) 27.601 Adjustment for Service Concession Arrangements 1.597 442.065 Closing Capital Financing Requirement 510.099 Explanation of movements in year: 84.357 Increase/(decrease) in underlying need to borrow (unsupported by government financial assistance) 71.265 (0.114) Reduction in finance leases obligations (0.117) (3.104) Increase/(decrease) in PPP finance lease creditor (3.114) 81.139 Increase/(Decrease) in Capital Financing Requirement 68.034 Page 154 of 266
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60 Annual Accounts 2023/24 At 31 March 2024 the Council had commitments on capital contracts for non-housing projects of £29.164m (£89.723m in 2022/23) and for housing projects of £25.932m (£28.542m in 2022/23). 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 6.632 3.038 4.467 4.614 18.751 Payable within 2-5 years 28.951 13.106 15.546 20.578 78.181 Payable within 6-10 years 34.897 23.873 12.780 33.735 105.285 Payable within 11-15 years 34.066 20.218 3.312 26.798 84.394 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 104.546 60.235 36.105 85.725 286.611 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 155 of 266
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61 Annual Accounts 2023/24 Future Repayment Periods - Waste Facility Service Charges Liability Repayment Interest Repayment Total £m £m £m £m Payable within 1 year 4.392 0.134 0.267 4.793 Payable within 2-5 years 18.632 0.706 0.985 20.323 Payable within 6-10 years 26.738 0.511 1.022 28.271 Payable within 11-15 years 29.787 1.362 0.804 31.953 Payable within 16-20 years 34.163 1.706 0.387 36.256 Payable within 21-25 years 4.930 0.282 0.016 5.228 118.642 4.701 3.481 126.824Total Outstanding Service Concession Arrangements Schools Waste Facility Total £m £m £m Balance at 1 April 2022 (66.296) (5.016) (71.312) Additions during the year 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) Adjustment for Service Concession Arrangements 0.000 0.000 0.000 Payments during the year 3.114 0.157 3.271 Balance at 31 March 2024 (60.235) (4.701) (64.936) In accordance with Accounting Policy and in line with Finance Circular 10/2022, the Council 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 annuity charges based on the estimated useful life for the schools service concession arrangement have been compared against the liability repayment profile based on the estimated useful asset lives for the schools service The most appropriate asset life was considered to be 40 years which replicated 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. In addition to the one-off retrospective element, an in- year saving occurred in the scheduled debt repayments in 2023/24 of 1.597m (£1.539m in 2022/23). This will be followed by a reduction in the annual charges for a further 14 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 debt liability remains the same. Page 156 of 266
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62 Annual Accounts 2023/24 Prior Repayment Current Repayment (Cost)/Reduction £m £m £m Pre 2023/24 41.614 14.013 27.601 Paid in 2023/24 3.114 1.517 1.597 Payable within 1 year 3.038 1.632 1.406 Payable within 2-5 years 13.106 7.876 5.230 Payable within 6-10 years 23.873 13.745 10.128 Payable within 11-15 years 20.218 19.868 0.350 Payable within 16-20 years 0.000 28.722 (28.722) Payable within 21-25 years 0.000 17.590 (17.590) Total 104.963 104.963 0.000 PPP Service Concession Liability Repayment Note 16: Leases Renfrewshire Council as Lessee Operating Leases The Council has 26 properties classed as operating leases, with average lives of 13 years. The future minimum lease payments due under non-cancellable leases in future years are: As at 31 March 2023 As at 31 March 2024 £m £m 0.563 Not later than one year 0.934 0.966 Between one and five years 1.613 1.249 Later than five years 1.852 2.778 4.399 During 2023/24, there was £0.934m expenditure charged to the CIES in relation to these leases (£0.785m in 2022/23). 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 2024, outstanding obligations to make payments under finance leases are as follows: As at 31 March 2023 As at 31 March 2024 £m £m 0.118 Not later than one year 0.037 0.037 Between one and five years 0.000 0.000 Later than five years 0.000 0.155 0.037 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. Page 157 of 266
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63 Annual Accounts 2023/24 The future minimum lease payments receivable under non-cancellable leases in future years are: As at 31 March 2023 As at 31 March 2024 £m £m 0.169 Not later than one year 0.158 0.735 Between one and five years 0.511 6.215 Later than five years 6.112 7.119 6.781 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 2022/23 2023/24 £m £m 1.032 Balance at 1 April 1.314 9.136 Additions during the year 9.163 (8.852) Recognised as an expense during the year: inventories sold, exchanged or distributed (9.188) (0.002) Recognised as an expense during the year: inventories written down (0.002) 1.314 Balance at 31 March 1.287 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. 2022/23 2023/24 £m £m (3.216) Current account balances with the council's banker (7.653) 6.997 Euro account balances with the council's banker - sterling equivalent 3.707 1.714 Callable deposits with UK banks and building societies 13.263 6.086 Callable deposits in money market funds and ultra-short bond funds 20.101 0.051 Imprest accounts held at council establishments 0.043 11.632 Total cash and cash equivalents 29.461 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. Page 158 of 266
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64 Annual Accounts 2023/24 Short-term Long-term Short-term Long-term £m £m £m £m 21.141 0.000 Central government bodies (non-NHS) 22.904 0.000 7.793 1.080 Central government bodies (NHS) 5.075 0.990 3.316 0.000 Other local authorities 5.476 0.000 11.146 0.000 HM Revenue and Customs 5.170 0.000 0.005 0.030 Employees 0.084 0.029 19.819 0.000 Council Tax arrears 21.084 0.000 (11.911) 0.000 less impairment (13.296) 0.000 4.681 0.000 Rent arrears 4.939 0.000 (2.829) 0.000 less impairment (2.945) 0.000 31.645 6.005 Other entities and individuals 37.425 6.046 (17.384) (4.533) less impairment (19.562) (4.700) 67.422 2.582 Total Debtors 66.354 2.365 31 March 2023 As at 31 March 2024 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 (7.810) (0.150) Central government bodies (non-NHS) (7.510) (0.732) (1.549) 0.000 Central government bodies (NHS) (1.976) 0.000 (6.922) 0.000 Other local authorities (3.635) 0.000 (9.154) 0.000 HM Revenue and Customs (7.437) 0.000 (8.007) 0.000 Strathclyde Pension Fund and Scottish Public Pensions Agency (6.946) 0.000 (12.900) 0.000 Employees (10.440) 0.000 (3.114) (60.235) Service concession arrangements: schools (3.038) (57.197) (0.157) (4.701) Service concession arrangements: waste facility (0.134) (4.567) (0.118) (0.037) Finance lease liabilities (0.037) 0.000 (4.863) 0.000 Council Tax refundable to taxpayers (4.044) 0.000 (1.210) 0.000 Council Tax receipts in advance (1.018) 0.000 0.000 (0.003) Financial guarantees 0.000 0.000 (33.343) (0.564) Other entities and individuals (37.117) (0.856) (89.147) (65.690) Total Creditors (83.332) (63.352) As at 31 March 2023 As at 31 March 2024 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. Page 159 of 266
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65 Annual Accounts 2023/24 The movement in these short-term provisions is detailed below: Short Term Provisons Teachers’ maternity pay Other Total £m £m £m As at 1 April 2023 (0.122) (0.130) (0.252) Additional provisions made during the year (0.121) (0.600) (0.721) Amounts used during the year 0.122 0.130 0.252 As at 31 March 2024 (0.121) (0.600) (0.721) 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 2023 (0.445) (4.497) (4.942) Additional provisions made during the year 0.000 0.312 0.312 Amounts used during the year 0.000 0.000 0.000 As at 31 March 2024 (0.445) (4.185) (4.630) 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 £0.312m 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 and some which are Page 160 of 266
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66 Annual Accounts 2023/24 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 (223.600) (0.828) (238.592) (5.000) 0.000 (2.770) 0.000 (2.815) 0.000 0.000 0.000 0.000 (223.600) (3.598) (238.592) (7.815) 0.000 (52.916) (20.000) (26.766) 0.000 (0.871) 0.000 (0.864) 0.000 (0.845) (0.339) (0.262) 0.000 (54.632) (20.339) (27.892) 0.000 (35.423) 0.000 (29.785) (223.600) (93.653) (258.931) (65.492) 0.000 (49.657) 0.000 (49.988) (64.973) (3.388) (61.763) (3.210) (0.003) 0.000 0.000 0.000 (64.976) (53.045) (61.763) (53.198) As at 31 March 2023 As at 31 March 2024 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 EIR adjustments 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 0.000 165.000 0.000 66.000 0.000 1.751 0.000 1.755 0.000 0.000 0.000 0.000 4.157 0.000 4.321 0.000 4.157 166.751 4.321 67.755 0.000 (1.461) 0.000 5.617 0.000 0.012 0.000 0.048 0.000 (0.002) 0.000 (0.012) 0.000 13.083 0.000 23.808 0.000 11.632 0.000 29.461 1.093 78.842 1.030 74.996 4.986 0.057 4.826 0.054 1.037 0.000 1.208 0.000 (4.533) (20.213) (4.700) (21.739) 2.583 58.686 2.364 53.311 As at 31 March 2023 Financial Assets At amortised cost: Principal Accrued interest Accrued interest As at 31 March 2024 Loss allowance 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 161 of 266
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67 Annual Accounts 2023/24 Loans to other entities and individuals comprise a loan to Park Lane Developments (Renfrewshire) LLP of £0.275m (2022/23 £0.275m), a loan to Kilbarchan Amateur Athletic Club of £0.074m (2022/23 £0.075), home loans of £0.256m (2022/23 £0.335m), soft loans to employees of £0.021m (2022/23 £0.022m), social care charging order debtors of £0.736m (2022/23 £0.785m) and property charging order debtors of £0.025m (2022/23 £0.024m). Note that these balances are not principal 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 LGT Wealth Management. 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 £4.321m at 31 March 2024 (£4.157m as at 31 March 2023). 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 2024. 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, LGT Wealth Management. 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 2024, 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: • Level 1 – fair value is only derived from quoted prices in active markets for identical assets or liabilities, e.g. bond prices Page 162 of 266
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68 Annual Accounts 2023/24 • 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: (227.198) (222.758) Public Works Loan Board borrowing 2 (246.407) (220.126) (54.632) (61.519) Non-PWLB borrowing (“market debt”) 2 (48.231) (53.523) Other liabilities: (68.361) (126.783) Service Concession and Finance Lease liabilities 3 (64.973) (119.570) (0.003) (0.003) Financial guarantees 3 0.000 0.000 (350.194) (411.063) (359.611) (393.219) Financial liabilities measured at amortised cost: (35.423) n/a Borrowing from group entities (29.785) n/a (49.657) n/a Trade payables: short-term (49.988) n/a (85.080) (79.773) As at 31 March 2023 As at 31 March 2024 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 6.086 6.086 Callable deposits in money market funds and ultra-short bond funds 1 20.101 20.101 6.997 6.997 Euro current account balances with the council’s banker 2 3.707 3.707 4.157 4.157 Investments in pooled funds (insurance fund) 1 4.321 4.321 17.240 17.240 28.129 28.129 166.751 166.751 Fixed term deposits with UK local authorities 2 67.755 67.751 (1.502) (1.502) Callable deposits with UK banks and building societies (including sterling current account balances with the Council’s banker) 2 5.610 5.610 0.051 0.051 Imprest accounts held at council establishments 2 0.043 0.043 1.546 1.681 Loans made for service purposes 3 1.387 1.543 166.846 166.981 74.795 74.947 184.086 184.221 102.924 103.076 Financial assets measured at amortised cost: 1.092 n/a Trade receivables and prepayments: long-term 1.029 n/a 58.631 n/a Receivables and prepayments: short-term 53.259 n/a 59.723 54.288 As at 31 March 2023 As at 31 March 2024 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 163 of 266
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69 Annual Accounts 2023/24 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. 2022/23 Amortised cost Elected to Fair Value through Other Comprehensive Income Fair Value through Profit or Loss 2023/24 £m £m £m £m £m £m 16.583 Interest expense 0.000 0.000 0.000 16.323 16.323 0.000 Impairment losses 3.720 0.000 0.000 0.000 3.720 0.000 Fee expense 0.000 0.000 0.000 0.007 0.007 16.583 Total expense in the Surplus / Deficit on the Provision of Services 3.720 0.000 0.000 16.330 20.050 (4.306) Interest income (6.505) 0.000 (1.754) 0.000 (8.259) (0.110) Dividend income 0.000 (0.133) 0.000 0.000 (0.133) (0.196) Other income 0.000 0.000 0.000 0.000 0.000 (4.612) Total income in the Surplus/Deficit on the Provision of Services (6.505) (0.133) (1.754) 0.000 (8.392) (0.017) Net (gain) or loss on revaluation 0.000 (0.031) 0.039 0.000 0.008 (0.017) (Surplus)/Deficit on the revaluation of financial assets 0.000 (0.031) 0.039 0.000 0.008 11.954 Net (Gain)/Loss for the year (2.785) (0.164) (1.715) 16.330 11.666 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 164 of 266
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70 Annual Accounts 2023/24 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. 2022/23 2023/24 £m £m 6.037 AAA (money market funds and ultra-short bond funds) 20.015 0.000 A+ 6.736 0.500 A 0.000 1.204 A– 6.491 165.000 UK local authorities 66.000 172.741 Total 99.242 Total Investment Portfolio by Credit Rating The Council does not generally allow credit for customers such that, at 31 March 2024, £9.903m of sundry income debt is past its due date for payment (£8.932m as at 31 March 2023). The past due amount can be analysed by age as follows: 2022/23 2023/24 £m £m 1.684 Less than three months 2.258 1.515 Three to six months 0.635 0.965 Six months to one year 1.612 4.768 More than one year 5.398 8.932 Total 9.903 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 2024 the outstanding value of home loans advanced by the Council was £0.256m (£0.335m as at 31 March 2023). 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 165 of 266
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71 Annual Accounts 2023/24 The maturity analysis of the principal element of borrowing is as follows: £m % £m % 0.828 0.30% Less than one year 5.000 1.72% 5.000 1.80% Between one and two years 5.000 1.72% 5.016 1.81% Between two and five years 0.011 0.00% 266.500 96.09% More than five years 280.347 96.56% 277.344 100.00% Total 290.358 100.00% As at 31 March 2023 Principal Borrowing Maturity Analysis As at 31 March 2024 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 2023/24, with all other variables held constant. Decrease in the fair value of fixed rate loans and deposits Decrease in the fair value of fixed rate borrowing 0.196 (1.830) (1.634) (0.495) 0.014 45.820 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: As at 31 March 2024 £m Interest rate risk The impact of a 1% fall in interest rates would be as above but with the changes being reversed. Page 166 of 266
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72 Annual Accounts 2023/24 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 LGT Wealth Management 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 2023/24 the book cost of investments increased by £0.133m (£0.115m increase during 2022/23). 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 2024 would have resulted in a £0.081m gain or loss being recognised in Other Comprehensive Income and Expenditure for 2023/24. Market risk: foreign exchange risk As at 31 March 2024 the Council had a foreign currency deposit of €4.335m with the Council’s banker (€7.959m as at 31 March 2023). 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 2024, based on the euro to sterling exchange rate at that time, was £3.707m. 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 2024 would have resulted in a £0.037m gain or loss being recognised in Other Comprehensive Income and Expenditure for 2023/24. Note 24: External audit costs 2022/23 2023/24 £m £m 0.443 Fees payable with regard to external audit services carried out by the appointed auditor for the year 0.441 0.443 Total 0.441 Audit Fees 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. Page 167 of 266
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73 Annual Accounts 2023/24 2022/23 2023/24 £m £m 108.076 Scottish Government - Contributions (to)/from the non-domestic rates pool 131.322 13.640 Non-domestic rates collected: East Renfrewshire 14.880 0.066 Service income from East Renfrewshire Council for collection of non-domestic rates 0.070 (13.706) Cost of collection of Non-domestic rates from East Renfrewshire (14.950) 34.350 Domestic water and sewerage charges collected 34.461 (34.350) Domestic water and sewerage charges paid over to Scottish Water (34.461) 0.637 Service income from Scottish Water for collection of domestic water and sewerage charges 0.706 0.133 COVID-19 PPE and Testing kits issued to external providers 0.000 (0.133) COVID-19 PPE and Testing kits received from Scottish Government 0.000 9.540 Cost of Living Awards paid out 0.000 (9.540) Cost of Living Awards funding from the Scottish Government 0.000 0.911 Scottish Child Bridging Payments paid out 0.000 (0.911) Scottish Child Bridging Payments funding received from the 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 25. 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 2023/24, the Council made payments to the following bodies where councillors have declared a non-financial interest, either through non-remunerated positions held with the organisations, or through being a member of those bodies Page 168 of 266
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74 Annual Accounts 2023/24 Councillor Non-financial Interest / Position Organisation Council Spend in 2023/24 £ Alison Ann-Dowling Chair Renfrewshire Citizens' Advice Bureau 425,586 Lorraine Cameron Trustee Kibble Trust 2,400,756 Michelle Campbell Chairperson Erskine Arts Charity 55,700 Eddie Devine Director St Mirren Independent Supporters Association (SMISA) 0 Andy Doig Director Scotia Future Limited 0 Alec Leishman Chairperson Linthouse Housing Association 0 Director Shop Mobility UK 0 Director Fauldmore Limited 0 Chair from 23 May 2023 SME Taskforce In Collaboration with BiTC 0 Director Linwood Community Garden 0 Director from 6 November 2023 Linwood Men's shed and Community Men's shed 0 Jim Paterson Board Member Greater Pollock Citizens Advice Bureau 0 Kenny MacLaren David McGonigle 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. Councillor Remunerated Position Employer / Organisation Council Spend in 2023/24 £ Fiona Airlie-Nicolson Associate Director Quarriers - Charity Care Organisation 5,084,400 Jacqueline Cameron Board Member Public Health Scotland 14,712 Anne Hannigan Director Rain Room Limited 0 Janis McDonald Associate Director The Alliance - National Charity Intermediary 0 Marie McGurk Owner Marie McGurk Podiatry 0 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 • AMIDS (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 Page 169 of 266
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75 Annual Accounts 2023/24 • 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 103. 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 2023/24 was £40.6m (£41.4m in 2022/23). 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: Defined benefit pension schemes. 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 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, extended until 31 March 2024 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 9.4% 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 2023/24, Renfrewshire Council’s level of participation in the scheme is 3.0%. The Council paid £21.041m (£19.719m in 2022/23) for employer's contributions to the Scottish Public Pensions Agency. £0.401m of Page 170 of 266
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76 Annual Accounts 2023/24 expenditure (£0.444m in 2022/23) was charged to service revenue accounts in respect of “added years” pension enhancement termination benefits, representing 0.4% of teachers’ pensionable pay (0.5% in 2022/23). The estimated contribution for 2024/25 is £19.390m. 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 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. Page 171 of 266
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77 Annual Accounts 2023/24 The following transactions have been made in the CIES and the General Fund Balance via the movement in reserves statement during the year: 2022/23 (restated) 2023/24 £m £m Included within net cost of services: 69.403 Current service cost 31.776 3.078 Past service cost/(gain) 7.805 Included within Financing and Investment income and expenditure: 47.114 Interest cost 57.468 0.000 Interest on the effect of the asset ceiling 12.265 (45.130) Expected return on scheme assets (78.093) 74.465 Total of Post-employment benefits charged to the Surplus/Deficit on the Provision of Services 31.221 Included within Other Comprehensive Income and Expenditure: 71.373 Return on Assets excluding amounts included in net interest (84.242) (13.264) Actuarial gains and losses arising on changes in Demographic Assumptions (20.669) (672.239) Actuarial gains and losses arising on changes in Financial Assumptions (44.838) 86.064 Actuarial gains and losses arising on changes in Other Assumptions 111.846 0.000 Changes in effect of Asset Ceiling 296.851 (453.601) Total of LGPS post-employment benefits charged to the CIES 290.169 Movement in reserves statement: (528.066) Actuarial losses or (gains) 258.948 331.698 Restriction on pension asset to Asset Ceiling (73.493) 74.465 Reversal of items relating to post-employment benefits debited or credited to the Surplus/Deficit on the Provision of Services 31.221 (35.716) Employer contributions and direct payments to pensioners payable in the year (39.797) (157.619) Movement in the year on the Pension Reserve 176.879 The cumulative amount of actuarial gains and losses recognised in the CIES as at 31 March 2024 is a gain of £1,064.977m (£652.915m gain as at 31 March 2023). 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 2024, scheme assets exceeded the defined benefit obligation by £494.840m (£434.096m excess of obligations over assets as at 31 March 2023). 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 present value. The discount rate used at 31 March 2024 was 4.8% 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 2024, a net pension asset is Page 172 of 266
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78 Annual Accounts 2023/24 disclosed as a result of prevailing market conditions at that date. The net pension position of £494.840m represents an increase in asset of £58.744m between 31 March 2023 and 31 March 2024. The net pension liability has a substantial impact on the net worth of the Council as recorded in the balance sheet. The net pension asset 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 over the future working lifetime as at 31 March 2024. This has been calculated to be £0 for funded obligations. After adjusting for the asset ceiling, the balance sheet now reflects a pension liability of £74.480m, representing the unfunded obligations of the scheme. 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 2023/24 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). 2022/23 2023/24 £m £m 1,725.861 Balance at 1 April 1,211.991 69.403 Current service cost 31.776 3.078 Past service cost (including curtailments) 7.805 47.114 Interest cost 57.468 9.240 Member contributions 9.277 (599.439) Actuarial losses or (gains) 32.218 Losses or (gains) on curtailment (4.685) Estimated benefits paid: unfunded (5.157) (38.581) Estimated benefits paid: other (48.017) 1,211.991 Balance at 31 March 1,297.361 28e: Movement in scheme assets The following is a reconciliation of the 2023/24 opening and closing balances of the fair value of Renfrewshire Council’s share of the Strathclyde Pension Fund’s scheme assets. Page 173 of 266
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79 Annual Accounts 2023/24 2022/23 2023/24 £m £m 1,670.640 Balance at 1 April 1,646.087 45.130 Expected return on scheme assets 78.093 9.240 Member contributions 9.277 31.031 Employer contributions 34.640 4.685 Contributions in respect of unfunded benefits 5.157 0.000 Effect of other experience (14.121) (71.373) Actuarial (losses) or gains 84.242 (4.685) Estimated benefits paid: unfunded (5.157) (38.581) Estimated benefits paid: other (48.017) 1,646.087 Balance at 31 March 1,790.201 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 2023 to 31 March 2024 was 9.9%. 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 321.441 2.951 324.392 Equity instruments 361.564 0.392 361.956 0.000 404.589 404.589 Private Equity 0.000 427.395 427.395 0.000 135.719 135.719 Real Estate 0.000 140.763 140.763 7.090 743.114 750.204 Investment Funds 7.352 819.550 826.902 0.000 (0.001) (0.001) Derivatives 0.000 0.000 0.000 22.766 8.418 31.184 Cash and cash equivalents 2.789 30.397 33.186 351.297 1,294.790 1,646.087 Fair value of scheme assets 371.705 1,418.497 1,790.202 As at 31 March 2023 As at 31 March 2024 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: Page 174 of 266
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80 Annual Accounts 2023/24 As at 31 March 2023 As at 31 March 2024 £m £m (568.195) Current employee members (537.973) (57.322) Pre-local government reorganisation (1996) liabilities (53.892) (111.002) Deferred pensioners (128.007) (401.978) Pensioners (503.009) (1,138.497) Total Present Value of the Defined Benefit Obligation - Funded liabilities (1,222.881) 1,646.087 Fair value of scheme assets 1,790.201 507.590 Net Asset / (Liability) arising from funded obligations 567.320 (331.698) Restriction to asset ceiling (567.320) (66.196) Retirals from Renfrewshire Council (67.713) (7.298) Retirals pre-local government reorganisation (1996) (6.767) (73.494) Total Present Value of the Defined Benefit Obligation - Unfunded liabilities (74.480) 102.398 Net Pension Asset / (Liability) (74.480) The presentation of this table has been revised to better reflect the Unfunded Pension obligation. 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 2023/24, and the Council’s share of the Strathclyde Pension Fund’s defined benefit obligation (scheme liabilities) and scheme assets as at 31 March 2024: 2022/23 2023/24 4.8% Discount rate for defined benefit obligation 4.8% 2.7% Long-term expected rate of return on scheme assets* 2.7% 3.7% Rate of increase in salaries 3.5% 3.0% Rate of increase in pensions 2.8% 3.0% Rate of inflation 2.8% Mortality assumptions (years): Longevity at age 65 for current pensioners: 19.3 Men 19.6 22.2 Women 22.3 Longevity at age 65 for future pensioners: 20.5 Men 20.6 24.2 Women 24.2 Take up of option to convert annual pension into retirement lump sum 50% For Pre-April 2009 service 75% 75% For Post-April 2009 service 75% *The expected rates of return are set equal to the discount rate as per IAS19, 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 Page 175 of 266
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81 Annual Accounts 2023/24 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 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 6.5% for 2024/25 to 2025/26, rising to 17.5% from 2026/27. The total contribution expected to be made by the Council to the Strathclyde Pension Fund in the forthcoming year to 31 March 2025 is £10.026m. The weighted average duration of the defined benefit obligation is 17 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 0.1% of gross obligations, which equates to £1.297m 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 2024, 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 2024/25 Code: • IFRS 16 Leases • Classification of liabilities as Current or Non-current (Amendments to IAS1) • Lease liability in a Sale and Leaseback (Amendments to IFRS 16) • Non-current Liabilities with Covenants (Amendments to IFRS 16) Page 176 of 266
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82 Annual Accounts 2023/24 There is no material impact anticipated in future years from the implementation of these standards, other than IFRS 16 Leases. CIPFA LASAAC has issued a formal decision to defer the implementation of IFRS 16 until 1 April 2024 when the Council will apply IFRS 16 in the 2024/25 accounts. The impact of the new requirement is that arrangements previously accounted for as operating leases, a right of use asset and a lease liability will be brought into the balance sheet at 1 April 2024. IFRS 16 will be applied retrospectively but with the cumulative effect recognised at 1 April 2024. This means that right of use assets and lease liabilities will be calculated as if IFRS 16 had always applied but recognised in 2024/25 and not by adjusting prior year figures. The Council will apply recognition exemptions to short term leases and elected not to recognise right of use assets and lease liabilities that have a term of 12 months or less and leases of low value assets. It is anticipated that the application of the Code’s adaptation of IFRS 16 will result in the following additions to the balance sheet: • £3.502m Property, Plant and equipment (right of use assets) • £-3.202m Non-current creditors (lease liabilities) • £-0.300m Current creditors (lease liabilities) Note 32: Accounting Policies – Renfrewshire Council The Financial Statements for the year ended 31 March 2024 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 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 Page 177 of 266
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83 Annual Accounts 2023/24 accruals in respect of further material items provided the goods or services were received by 31 March 2024 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 2024 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. 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 Page 178 of 266
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84 Annual Accounts 2023/24 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. 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. Page 179 of 266
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85 Annual Accounts 2023/24 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. 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 Page 180 of 266
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86 Annual Accounts 2023/24 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 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 Page 181 of 266
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87 Annual Accounts 2023/24 • 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: Page 182 of 266
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88 Annual Accounts 2023/24 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. 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 Page 183 of 266
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89 Annual Accounts 2023/24 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 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, two 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). Page 184 of 266
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90 Annual Accounts 2023/24 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). 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. Page 185 of 266
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91 Annual Accounts 2023/24 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. 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. Page 186 of 266
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92 Annual Accounts 2023/24 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 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 based on useful lives of 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 Page 187 of 266
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93 Annual Accounts 2023/24 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. 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 188 of 266
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94 Annual Accounts 2023/24 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. 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. 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 revaluing 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 2023/24 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. Page 189 of 266
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95 Annual Accounts 2023/24 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 2024 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 £492.9m, before the asset cap, as at 31 March 2024 (asset of £434m as at 31 March 2023). Further detail can be found in Note 28: Defined Benefit Pension Schemes. The effects on the net pension asset of changes in individual assumptions can be measured. For instance, a 0.1% decrease in the discount rate assumption would result in a decrease in the pension asset of £22.0m. However, the assumptions interact in complex ways. At 31 March 2024, the Council’s actuaries advised that (before the asset cap is applied) the net pensions asset had decreased by £44.8m as a result of estimates being corrected as a result of experience; decreased by £20.7m as a result of updating demographic assumptions; and increased by £111.8m as a result of updating financial assumptions. Debt Impairment At 31 March 2024, the Council had a balance for long and short term debtors (including council tax, rent arrears and trade debtors) of £68m. A review of significant balances suggested that an impairment of doubtful debts of £39.7m was appropriate. However, in the current economic climate it is not certain that such an allowance would be sufficient. Over 2023/24, the principal debt impairment increases related to Council Tax and Other Entities & Individuals, which increased by £3.1m. 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 £4m to be set aside as an allowance. Page 190 of 266
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96 Annual Accounts 2023/24 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 0.260 0.000 0.786 1.046 Income (0.534) 0.000 (3.261) (3.795) (Surplus)/Deficit for the year (0.274) 0.000 (2.475) (2.749) (Surplus)/Deficit Brought Forward (6.099) (0.052) (33.703) (39.854) Accumulated (Surplus)/Deficit at 31 March 2024 (6.373) (0.052) (36.178) (42.603) Income and Expenditure Statement for the Year Ending 31 March 2024 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 Balance Sheet Paisley Johnstone Renfrew Total £m £m £m £m Tangible Fixed Assets 0.846 0.000 13.571 14.417 Heritage Assets 0.063 0.046 0.109 0.218 Investments 5.098 0.000 19.502 24.600 Debtors 0.000 0.000 0.133 0.133 Short-term deposits 0.371 0.006 2.892 3.269 Total assets 6.378 0.052 36.207 42.637 Creditors: Amounts Falling Due Within One Year (0.005) 0.000 (0.027) (0.032) Net Assets 6.373 0.052 36.180 42.605 Income Funds (3.629) (0.036) (21.330) (24.995) Revaluation reserve: Investments (1.309) 0.000 (4.570) (5.879) Revaluation reserve: Fixed Assets (1.435) (0.016) (10.280) (11.731) Total Reserves (6.373) (0.052) (36.180) (42.605) Balance Sheet as at 31 March 2024 Page 191 of 266
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97 Annual Accounts 2023/24 Balance Sheet as at 31 March 2023 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: Other Fixed Assets (1.436) (0.016) (9.313) (10.765) Total Reserves (6.099) (0.052) (33.703) (39.854) 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 a 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 ensure 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 £0.361m for Paisley Common Good and £1.387m for Renfrew Common Good. Page 192 of 266
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98 Annual Accounts 2023/24 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. 2022/23 2023/24 £m £m 19.851 Repairs and maintenance 22.753 14.852 Supervision and management 13.560 27.883 Depreciation and impairment of non-current assets 31.442 0.839 Increase/(Decrease) in the allowance for bad debts 0.900 3.208 Other expenditure 2.709 66.633 Total Expenditure 71.364 (48.115) Dwelling rents (50.701) (1.185) Non-dwelling rents (1.141) (1.616) Other income (1.864) (50.916) Total Income (53.706) 15.717 Net Cost of HRA services as included in the CIES 17.658 HRA share of the operating income and expenditure included in the CIES: 0.276 (Gain)/Loss on sale of HRA non-current assets (0.157) 4.110 Interest payable and similar charges 3.406 (1.704) Interest and investment income (2.787) 0.089 Pensions interest cost and expected return on pensions assets (0.050) (0.402) Taxation and non specific grant income (2.066) 18.086 Deficit for the year on HRA services 16.004 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 Note 6: Adjustment between accounting basis and funding basis under regulations on page 46. Page 193 of 266
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99 Annual Accounts 2023/24 2022/23 2023/24 £m £m (6.497) Balance on the HRA at 1 April (6.497) 18.086 Deficit for the year on the HRA income and expenditure statement 16.004 (6.302) Adjustments between accounting basis and funding basis under statute (0.839) (11.784) Adjustments to Usable Reserves permitted by accounting standards (14.832) 0.000 Net (Increase)/Decrease before transfers to or from reserves 0.333 (6.497) Balance on the HRA at 31 March (6.164) 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 12,305 dwellings during 2023/24 (12,216 in 2022/23). 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 419 £65.43 One-apartment 418 £67.46 3665 £75.85 Two-apartment 3,692 £78.62 5853 £88.19 Three-apartment 5,905 £91.75 2065 £100.16 Four-apartment 2,074 £105.12 214 £108.38 Five-apartment 216 £113.82 12,216 Total 12,305 As at 31 March 2023 As at 31 March 2024 Other information Dwellings Non-Dwellings Total as at 31 March 2024 Total as at 31 March 2023 £m £m £m £m Void Rent Loss 2.647 0.320 2.967 2.900 Rental Income Arrears 4.423 0.625 5.048 4.850 Provision for uncollectable rent arrears 3.448 0.370 3.818 3.676 Corporate and Democratic Core costs 0.038 0.033 Page 194 of 266
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100 Annual Accounts 2023/24 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. 2022/23 2023/24 £m £m 123.138 Gross council tax levied 131.897 (26.330) Other discounts and reductions (18.072) (13.143) Council tax reduction scheme (13.865) (2.707) Write-off of uncollectable debts and allowance for impairment (3.450) (0.245) Adjustment to previous years’ community charge and council tax (0.982) 80.713 Transfer to the Comprehensive Income and Expenditure Statement 95.528 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 2023/24 was £1,436.17 (£1,354.88 in 2022/23). 2022/23 2023/24 £ £ 903.26 A 957.45 1,053.79 B 1,117.02 1,204.34 C 1,276.60 1,354.88 D 1,436.17 1,780.17 E 1,886.97 2,201.69 F 2,333.78 2,653.31 G 2,812.50 3,319.46 H 3,518.62 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 195 of 266
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101 Annual Accounts 2023/24 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 2023/24 Band D equivalent 2022/23 Band D equivalent A 13,385 2,218 8 1,921 3,327 5,981 0.67 3,987 3,904 B 25,923 1,691 70 3,348 5,200 15,672 0.78 12,189 11,972 C 15,406 606 58 1,641 1,927 11,216 0.89 9,970 9,848 D 13,491 336 42 1,263 715 11,219 1.00 11,219 11,007 E 11,637 184 84 747 401 10,267 1.31 13,490 13,432 F 7,112 81 46 320 118 6,567 1.63 10,671 10,504 G 4,361 91 20 149 50 4,051 1.96 7,933 7,704 H 205 4 0 10 2 189 2.45 463 470 91,520 Band A dwellings subject to disabled relief 8 8 Class 17 and 24 dwellings 73 73 Sub-total 70,003 68,922 Less: Provision for non-payment and future award of discounts and reliefs -3,780 -4,017 Council Tax Base 66,223 64,905 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. Page 196 of 266
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102 Annual Accounts 2023/24 2022/23 2023/24 £m £m 147.870 Gross rates levied 143.620 (21.774) Reliefs and other deductions (23.339) (3.543) Write-off of uncollectable debts and allowance for impairment (2.015) 122.553 Net Non-Domestic Rates income 118.266 (1.692) Adjustment to previous years’ non-domestic rates (9.550) (12.785) Contribution (to)/from the National Non-Domestic Rate pool 22.606 0.000 Non-domestic rate income retained by authority (BRIS) 0.000 108.076 Transfer to the Comprehensive Income and Expenditure Statement 131.322 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 2023/24 the charge was 49.8 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 £100,000. Under the Small Business Bonus Scheme (SBBS), reformed for 2023/24, 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 £20,000 or less. Properties with a total rateable value up to and including £12,000 are entitled to a 100% reduction in their business rates. For those properties with a rateable value between £12,001 and £20,000 relief will be tapered. Relief will taper from 100% to 25% for those properties with rateable values between £12,001 and £15,000 and from 25% to 0% for those properties with rateable values between £15,001 to £20,000. Analysis of Renfrewshire Council’s rateable values 2023/24 £m 104.357 47.472 31.476 1.593 102.347 287.245 (8.678) 278.567 (1.580) 276.987Net 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 197 of 266
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103 Annual Accounts 2023/24 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 294.465 (38.357) 256.108 298.501 (39.097) 259.404 174.401 (63.762) 110.639 251.324 (142.398) 108.926 109.077 (48.963) 60.114 Finance and Resources 105.680 (59.449) 46.231 45.817 (14.132) 31.685 53.264 (18.141) 35.123 18.509 (14.725) 3.784 Miscellaneous Services 20.461 (14.898) 5.563 260.152 (161.744) 98.408 Adult Services 144.335 (44.290) 100.045 902.421 (341.683) 560.738 873.565 (318.273) 555.292 0.103 0.000 0.103 (Gain)/Loss on the disposal of non-current assets 0.000 (0.302) (0.302) 24.322 (8.244) 16.078 Financing and investment income and expenditure G6 21.333 (17.771) 3.562 0.000 (505.934) (505.934) Taxation and non-specific grant income 3 0.000 (513.914) (513.914) 926.846 (855.861) 70.985 894.898 (850.260) 44.638 8.553 G3 0.830 79.538 45.468 (105.285) (34.152) 3.514 G15 (1.993) (229.340) 183.067 0.917 G3 0.303 (330.194) Other comprehensive (income) and expenditure 147.225 (250.656) Total comprehensive (income) and expenditure 192.693 Share of other comprehensive (income) and expenditure of associates and joint ventures Actuarial (gain)/loss on pension assets and liabilities 2022/23 (restated) 2023/24 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 Environment, Housing and Infrastructure Figures shown in brackets represent income or gains and figures without brackets represent expenditure or losses. Page 198 of 266
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104 Annual Accounts 2023/24 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. 2023/24 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 2023 236.051 1,488.674 1,724.725 123.555 1,848.280 Movement in reserves during the year Total Comprehensive Income and Expenditure (47.651) (152.238) (199.889) (9.250) (209.139) Adjustments between Group accounts and Council accounts G5 0.000 0.000 0.000 16.446 16.446 Adjustments to Usable Reserves permitted by accounting standards 7 36.188 (36.188) 0.000 0.000 0.000 Adjustment for Service Concession Arrangements 1.597 (1.597) 0.000 0.000 0.000 Adjustments between accounting basis and funding basis under regulations 6 (3.968) 3.968 0.000 0.000 0.000 Increase / (Decrease) in year (13.834) (186.055) (199.889) 7.196 (192.693) Balance at 31 March 2024 222.217 1,302.619 1,524.836 130.751 1,655.587 Comparative movements in 2022/23 (restated) 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) 300.399 246.373 4.283 250.656 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 Transfers to / (from) other statutory reserves 7 0.000 0.000 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 21.594 209.854 231.448 19.208 250.656 Balance at 31 March 2023 236.051 1,488.674 1,724.725 123.555 1,848.280 Page 199 of 266
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105 Annual Accounts 2023/24 Group Balance Sheet The group balance sheet shows the value as at 31 March 2024 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 2023 (restated) As at 31 March 2024 £m Note £m 1,811.898 Property, plant and equipment G10 1,873.131 44.404 Heritage assets G11 44.404 2.014 Investment property G9 0.415 2.524 Intangible assets 13 1.724 27.008 Long-term investments G15 28.921 55.320 Investments in associates and joint ventures G3 54.187 2.307 Long-term debtors G15 2.090 129.983 Other long-term assets 31.574 2,075.458 2,036.446 0.100 Assets held for sale 12 0.100 166.751 Short-term investments G15 67.755 1.383 Inventories 1.352 67.366 Short-term debtors G12 67.406 13.511 Cash and cash equivalents G15 31.422 249.111 168.035 (94.161) Short-term borrowing G15 (64.348) (87.644) Short-term creditors G13 (82.432) (0.252) Short-term provisions 21 (0.721) (182.057) (147.501) (65.690) Long-term creditors 20 (63.352) (4.942) Long-term provisions 21 (4.630) (223.600) Long-term borrowing G15 (258.931) 0.000 Other long-term liabilities (74.480) (294.232) (401.393) Alastair MacArthur 1,848.280 1,655.587 (264.755) Usable reserves G7 (252.396) (1,583.525) Unusable reserves G8 (1,403.191) (1,848.280) (1,655.587) 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 27 June 2024 and the audited accounts were authorised for issue on 24 October 2024. Page 200 of 266
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106 Annual Accounts 2023/24 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. 2022/23 (restated) 2023/24 £m £m (79.538) Group surplus/(deficit) (45.468) 135.906 Adjustment for non-cash movements 88.767 (44.807) Adjustments for items included in the group surplus/deficit that are investing and financing activities (30.658) 11.561 Net cash flows from operating activities 12.641 (20.087) Net cash flows from investing activities 1.371 2.218 Net cash flows from financing activities 3.899 (6.308) Net increase/(decrease) in cash and cash equivalents 17.911 19.819 Cash and cash equivalents at the beginning of the reporting period 13.511 13.511 Cash and cash equivalents at the end of the reporting period 31.422 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. AMIDS (Renfrewshire) LLP is a joint venture arrangement. Page 201 of 266
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107 Annual Accounts 2023/24 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 2023/24 Renfrewshire Council provided additional funding of £0.500m to OneRen, as a pass- through of Scottish Government funding in support of the local government pay settlement. 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 25 Newton Place, Glasgow G3 7PY. The group comprehensive income and expenditure statement (CIES) includes total net comprehensive income for the year of £4.163m (2022/23 £30.105m restated) for OneRen, total net comprehensive income for the year of £2.751m (2022/23 net comprehensive expenditure of £1.607m) for the Paisley, Renfrew and Johnstone Common Good Funds, total net comprehensive expenditure for the year of £0.063m (2022/23 £0.033m) for Park Lane Developments (Renfrewshire) LLP, total net comprehensive income for the year of £1.501m (2022/23 £0.236m restated) for Paisley Museum Reimagined Limited and total net comprehensive expenditure for the year of £0.023m (2022/23 £0.023m) for the Coats Observatory Trust. The group balance sheet includes net assets of £32.128m (2022/23 £27.965m restated) for OneRen, net assets of £42.605m (2022/23 £39.854m) for the Common Good Funds, net assets of £0.013m (2022/23 £0.076m) for Park Lane Developments (Renfrewshire) LLP, net assets of £1.164m (2022/23 £0.337m net liabilities of restated) for Paisley Museum Reimagined Limited and net assets of £0.654m (2022/23 £0.677m) 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 2023/24, Renfrewshire Council contributed £0.332m or 8.02% of the committee’s estimated running costs (2022/23 £0.325m or 8.00%) and its share of the year-end net asset was £0.410m (2022/23 £0.402m) 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 202 of 266
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108 Annual Accounts 2023/24 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 £2.914m or 8.02% to the committee’s estimated running costs in 2023/24 (2022/23 £2.853m or 8.01%) and its share of the year-end net asset was £40.174m (2022/23 £37.564m restated) 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 317.094 25.387 Long-term assets 337.570 27.076 177.466 14.208 Current assets 194.589 15.607 (25.374) (2.031) Current liabilities (28.684) (2.301) 0.000 0.000 Long-term liabilities (2.597) (0.208) 469.186 37.564 Net assets 500.878 40.174 Income and Expenditure Summary 82.322 6.591 Income 120.503 9.665 79.755 6.385 Expenditure 84.622 6.787 2.567 0.206 Surplus for the year 35.881 2.878 As at 31 March 2023 (restated) As at 31 March 2024 2022/23 (restated) 2023/24 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 2023/24, Renfrewshire Council contributed £1.637m or 57.7% of the board’s estimated running costs (2022/23 £1.635m or 57.7%) and its share of the year-end net asset was £0.565m (2022/23 £0.537m 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 0.126 0.073 Long-term assets 0.099 0.057 0.886 0.511 Current assets 0.994 0.574 (0.082) (0.047) Current liabilities (0.115) (0.066) 0.930 0.537 Net assets 0.978 0.565 Income and Expenditure Summary 2.884 1.664 Income 2.917 1.685 3.031 1.749 Expenditure 2.807 1.621 (0.147) (0.085) Deficit for the year 0.110 0.064 As at 31 March 2023 (restated) As at 31 March 2024 2022/23 2023/24 Page 203 of 266
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109 Annual Accounts 2023/24 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 33.633 16.817 Current assets 26.077 13.038 33.633 16.817 Net assets 26.077 13.038 Income and Expenditure Summary 359.320 179.660 Income 395.015 197.507 376.736 188.368 Expenditure 402.571 201.286 (17.416) (8.708) (Deficit)/Surplus for the year (7.556) (3.779) As at 31 March 2023 As at 31 March 2024 2022/23 2023/24 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 £0.130m (3.3%) to the committee’s estimated running costs in 2023/24 (£0.126m in 2022/23). 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 £0.053m (12.5%) to the committee’s estimated running costs in 2023/24 (£0.068m in 2022/23). 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 204 of 266
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110 Annual Accounts 2023/24 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 (£13.038m + £41.149m = £54.187m) equates to the figure disclosed in the group balance sheet as ‘Investments in associates and joint ventures’. AMIDS (Renfrewshire) LLP is an arrangement set up as a 50:50 Joint Venture Development Partnership between Tarras Park Properties Limited (the Development Partner) and Renfrewshire Council, operating under the direction of an LLP Board, consisting of two Council officers and two representatives from Tarras Park Properties Limited. The LLP will be responsible for development progression, marketing, and general management of the Advanced Manufacturing Innovation District Scotland (AMIDS), as directed by the Board. Renfrewshire Council has not made any financial contribution during 2023/24. 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 33.633 16.817 Current assets 26.077 13.038 33.633 16.817 Net assets 26.077 13.038 Income and Expenditure Summary 359.320 179.660 Income 395.015 197.507 376.736 188.368 Expenditure 402.571 201.286 (17.416) (8.708) (Deficit)/Surplus for the year (7.556) (3.779) As at 31 March 2023 As at 31 March 2024 2022/23 2023/24 Joint ventures Aggregate of Associate results Renfrewshire Council’s Share Aggregate of Associate results Renfrewshire Council’s Share £m £m £m £m Balance Sheet Summary 317.219 25.460 Long-term assets 337.669 27.133 183.723 15.149 Current assets 201.399 16.648 (25.801) (2.106) Current liabilities (29.505) (2.424) 0.000 0.000 Pension asset / (liability) (2.597) (0.208) 475.141 38.503 Net assets 506.966 41.149 Income and Expenditure Summary 89.369 8.588 Income 127.838 11.705 86.520 8.433 Expenditure 91.762 8.756 2.849 0.155 Surplus for the year 36.076 2.949 As at 31 March 2023 (restated) As at 31 March 2024 2022/23 2023/24 Associates Page 205 of 266
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111 Annual Accounts 2023/24 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 2024 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 2024, 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. 2022/23 (restated) 2023/24 £m £m Share of (surplus) or deficit: 2.034 Subsidiaries: (3.013) (0.650) Paisley, Renfrew and Johnstone Common Good Funds 0.180 0.020 Coats Observatory Trust 0.020 2.867 OneRen (1.775) 0.033 Park Lane Developments (Renfrewshire) LLP 0.063 (0.236) Paisley Museum Reimagined Limited (1.501) (0.155) Associates: (2.949) (0.206) Strathclyde Partnership for Transport (2.878) (0.034) Strathclyde Concessionary Travel Scheme Joint Committee (0.007) 0.085 Renfrewshire Valuation Joint Board (0.064) Joint Venture: 8.708 Renfrewshire Health and Social Care Integration Joint Board 3.779 10.587 Aggregate share of (surplus) or deficit (2.183) Share of other comprehensive (income) and expenditure: (30.712) Subsidiaries: (5.316) 2.257 Paisley, Renfrew and Johnstone Common Good Funds (2.931) 0.003 Coats Observatory Trust 0.003 (32.972) OneRen (2.388) 0.917 Associates: 0.303 1.285 Strathclyde Partnership for Transport 0.268 (0.001) Strathclyde Concessionary Travel Scheme Joint Committee (0.001) (0.367) Renfrewshire Valuation Joint Board 0.036 (29.795) Aggregate share of other comprehensive (income) and expenditure (5.013) Material items of group income and expenditure Page 206 of 266
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112 Annual Accounts 2023/24 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: 2022/23 2023/24 £m £m 0.123 Grants made by the Paisley, Renfrew and Johnstone Common Good Funds to Renfrewshire Council in contribution towards the funding of community events and projects 0.101 0.059 Governance costs charged to the Paisley, Renfrew and Johnstone Common Good Funds by Renfrewshire Council 0.059 (0.040) Interest income received from Renfrewshire Council by the Paisley, Renfrew and Johnstone Common Good Funds (0.137) (15.629) Service charge and other expenditure payable by Renfrewshire Council to OneRen (16.319) 0.442 Expenditure payable by OneRen to Renfrewshire Council 0.512 0.120 Expenditure/(income) payable by/(to) Paisley Museum Reimagined Limited to/(by) Renfrewshire Council (0.662) (14.925) Total adjustments between Group accounts and Council accounts (16.446) Adjustments between Group accounts and Council accounts Note G6: Group financing and investment income and expenditure 2022/23 (restated) 2023/24 £m £m 22.298 Interest payable and similar charges 21.179 1.984 Net interest on the net defined benefit liability (1.086) (6.656) Interest receivable and similar income (8.551) (0.313) Income and expenditure in relation to investment properties and changes in their fair values (0.315) (1.235) Other investment income (0.414) 16.078 Total financing and investment income and expenditure 10.813 Group financing and investment income and expenditure Note G7: Group Usable reserves 2022/23 (restated) 2023/24 £m £m (236.051) Council Usable Reserves - Note 7 (222.248) Group Usable Reserves: (25.174) Paisley, Renfrew and Johnstone Common Good Funds: unrestricted funds (24.995) (0.218) Coats Observatory Trust: usable balances (0.195) (0.380) OneRen (0.554) 0.337 Paisley Museum Reimagined Limited (1.164) (3.269) Renfrewshire Health and Social Care Integration Joint Board (3.269) (264.755) Total Group Usable Reserves (252.425) Group Usable Reserves Page 207 of 266
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113 Annual Accounts 2023/24 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. 2022/23 (restated) 2023/24 £m £m (1,562.167) Council Unusable Reserves - Note 8 (1,303.410) Group Unusable Reserves: (3.915) Paisley, Renfrew and Johnstone Common Good Funds: financial instruments revaluation reserve (5.879) (10.765) Paisley, Renfrew and Johnstone Common Good Funds: revaluation reserve (11.731) (0.459) Coats Observatory Trust: revaluation reserve (0.459) (27.585) OneRen: pension reserve (31.574) (0.076) Park Lane Developments (Renfrewshire) LLP (0.013) Council share of the Reserves of associates and joint ventures: (37.564) Strathclyde Partnership for Transport (40.174) (0.402) Strathclyde Concessionary Travel Scheme Joint Committee (0.410) (0.537) Renfrewshire Valuation Joint Board (0.565) (13.548) Renfrewshire Health and Social Care Integration Joint Board (9.769) (1,657.018) Total Group Unusable Reserves (1,403.984) 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: 2022/23 (restated) 2023/24 £m £m (0.472) Rental income from investment property (0.315) (0.472) Net (gain) or loss (0.315) 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: 2022/23 2023/24 £m £m 1.906 Balance at 1 April 2.014 0.178 Net losses from fair value adjustments 0.000 (0.064) Transfers from inventories and property, plant and equipment (1.593) (0.006) Other changes (0.006) 2.014 Balance at 31 March 0.415 Group Investment Properties Page 208 of 266
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114 Annual Accounts 2023/24 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 2023 1,797.350 14.548 1,811.898 Other asset reclassifications 1.593 0.000 1.593 Additions 124.625 0.000 124.625 Disposals (1.531) 0.000 (1.531) Depreciation (90.812) 0.067 (90.745) Revaluation adjustments taken to the Revaluation Reserve 33.185 0.295 33.480 Revaluation adjustments recognised in the CIES (6.189) 0.000 (6.189) Balance sheet net carrying amount at 31 March 2024 1,858.221 14.910 1,873.131 Gross carrying amount at 31 March 2024 1,936.632 (4.211) 1,932.421 Accumulated depreciation at 31 March 2024 (306.447) 19.121 (287.326) Infrastructure assets 228.036 0.000 228.036 Balance sheet net carrying amount at 31 March 2024 1,858.221 14.910 1,873.131 Movements in 2023/24 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 Page 209 of 266
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115 Annual Accounts 2023/24 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 2024 was £44.404m (£44.404m in 2022/23). 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 2024 (£0.219 at 31 March 2023). 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 2023 (restated) As at 31 March 2024 £m £m 6.136 Trade receivables 5.871 4.311 Prepayments 6.008 56.919 Other receivables 55.527 67.366 Total 67.406 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 2023 (restated) As at 31 March 2024 £m £m (24.968) Trade payables (29.093) (62.676) Other payables (53.339) (87.644) Total (82.432) 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 2023 As at 31 March 2024 £m £m Amounts owing to Renfrewshire Council: 0.789 Other balances 1.703 0.789 Total 1.703 Amounts owed by Renfrewshire Council: (33.660) Liability for Renfrewshire Integration Joint Board’s retained underspend (26.103) (1.119) Other balances (0.962) (34.779) Total (27.065) Page 210 of 266
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116 Annual Accounts 2023/24 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 (223.600) (0.828) (238.592) (5.000) 0.000 (2.770) 0.000 (2.815) (223.600) (3.598) (238.592) (7.815) 0.000 (52.916) (20.000) (26.766) 0.000 (0.871) 0.000 (0.864) 0.000 (0.845) (0.339) (0.262) 0.000 (54.632) (20.339) (27.892) 0.000 (35.931) 0.000 (28.641) (223.600) (94.161) (258.931) (64.348) 0.000 (48.022) 0.000 (49.088) (64.973) (3.388) (61.763) (3.210) (0.003) 0.000 0.000 0.000 (64.976) (51.410) (61.763) (52.298) Service concession and finance lease liabilities Financial guarantees Financial Liabilities included in Creditors As at 31 March 2023 (restated) 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 As at 31 March 2024 Long-term Current Long-term Current £m £m £m £m 0.000 165.000 0.000 66.000 0.000 1.751 0.000 1.755 27.008 0.000 28.921 0.000 27.008 166.751 28.921 67.755 0.000 0.418 0.000 7.578 0.000 0.012 0.000 0.048 0.000 (0.002) 0.000 (0.012) 0.000 13.083 0.000 23.808 0.000 13.511 0.000 31.422 0.818 78.786 0.756 76.039 4.986 0.057 4.826 0.054 1.037 0.000 1.208 0.000 (4.533) (20.213) (4.700) (21.739) 2.308 58.630 2.090 54.354 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 At amortised cost: Accrued interest As at 31 March 2023 (restated) Financial Assets As at 31 March 2024 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 Note: the figures in this table include accrued interest where this is applicable Page 211 of 266
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117 Annual Accounts 2023/24 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, LGT Wealth Management. 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: (227.198) (222.759) Public Works Loan Board borrowing 2 (246.407) (220.126) (54.632) (61.519) Non-PWLB borrowing (“market debt”) 2 (48.231) (53.523) Other liabilities: (68.362) (126.783) Service concession and finance lease liabilities 3 (64.973) (119.570) (0.003) (0.003) Financial guarantees 3 0.000 0.000 (350.195) (411.064) (359.611) (393.219) Financial liabilities measured at amortised cost: (35.931) n/a Borrowing from group entities (28.641) n/a (48.022) n/a Trade payables: short-term (49.088) n/a (83.953) (77.729) Fair value level Total financial liabilities for which fair value is disclosed Total financial liabilities for which fair value is not disclosed As at 31 March 2023 (restated) As at 31 March 2024 Carrying Amount Fair value Financial Assets Carrying Amount Fair value £m £m £m £m 6.086 6.086 Callable deposits in money market funds 1 20.101 20.101 6.997 6.997 Euro account balances with the Council’s banker 2 3.707 3.707 27.008 27.008 Investments in pooled funds 1 28.921 28.921 40.091 40.091 52.729 52.729 166.751 166.751 Fixed term deposits with UK local authorities 2 67.755 67.751 0.377 0.377 Callable deposits with UK banks & building societies* 2 7.571 7.571 0.051 0.051 Imprest accounts held at council establishments 2 0.043 0.043 1.546 1.681 Loans made for service purposes 3 1.387 1.543 168.725 168.860 76.756 76.908 208.816 208.951 129.485 129.637 Financial assets measured at amortised cost: 0.817 n/a Trade receivables and prepayments: long-term 0.754 n/a 58.575 n/a Receivables and prepayments: short-term 54.302 n/a 59.392 55.056 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 As at 31 March 2023 (restated) As at 31 March 2024 Fair value level *includes current account balances with the Council’s banker. Page 212 of 266
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118 Annual Accounts 2023/24 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. 2022/23 (restated) Amortised cost Elected to Fair Value through OCI* Fair Value through Profit or Loss 2023/24 £m £m £m £m £m £m 16.543 Interest expense 0.000 0.000 0.000 16.186 16.186 0.000 Impairment losses 3.549 0.000 0.000 0.000 3.549 0.000 Fee expense 0.000 0.000 0.000 0.007 0.007 16.543 Total expense in the Surplus / Deficit on the Provision of Services 3.549 0.000 0.000 16.193 19.742 (4.193) Interest income (6.376) 0.000 (1.754) 0.000 (8.130) (0.794) Dividend income 0.000 (0.787) 0.000 0.000 (0.787) (0.870) Other income 0.000 0.209 0.000 0.000 0.209 (5.857) Total income in the Surplus/Deficit on the Provision of Services (6.376) (0.578) (1.754) 0.000 (8.708) 3.027 Net (gain) or loss on revaluation 0.000 (1.993) 0.039 0.000 (1.954) 3.027 (Surplus)/Deficit on the revaluation of financial assets 0.000 (1.993) 0.039 0.000 (1.954) 13.713 Net (Gain)/Loss for the year (2.827) (2.571) (1.715) 16.193 9.080 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. Page 213 of 266
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119 Annual Accounts 2023/24 The Council has effective control over OneRen, Paisley Museum Reimagined Limited, the Paisley, Renfrew and 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 sums due to date by the company to Renfrewshire Council for the provision of ongoing administrative support have been written off in 2023/24 (£0.768m). 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 214 of 266
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120 Annual Accounts 2023/24 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. 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 Page 215 of 266
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121 Annual Accounts 2023/24 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 216 of 266
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Finance and Resources, Renfrewshire House, Cotton Street, Paisley PA1 1JB Telephone: 0300 300 0285 www.renfrewshire.gov.uk Page 217 of 266
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1 ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 22 October 2024 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Azets Report to those charged with governance - Coats Observatory Trust Annual Accounts 2023/24 ___________________________________________________________________ 1. Summary 1.1 Each year the Council’s appointed external auditors carry out an audit of the financial statements of the 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), the external auditor, Azets, is obliged to report to those charged with the governance of the organisation matters which have arisen in the course of the audit. 1.3 The attached ISA260 report from Azets outlines their findings from the audit of the 2023/24 Coats 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 Audit, Risk and Scrutiny Board meeting to present their reports. ________________________________________________________________ 2. Recommendations 2.1 Members are requested to consider the attached report from Azets. ___________________________________________________________________ Item 3 Page 219 of 266
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2 Implications of the Report 1. Financial The 2023/24 Annual Accounts demonstrate the Council continues to operate services within the resources available, and in line with the relevant legislation. 2. HR & Organisational Development While staffing budgets form a significant proportion of the Council’s revenue budgets, there are no direct implications arising from the recommendations in this report. 3. Community/Council Planning Community Plan Our Renfrewshire is thriving The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Our Renfrewshire is well Our Renfrewshire is fair Our Renfrewshire is safe Council Plan Reshaping our place, our economy and our future The Council’s revenue and capital spend ensures that its facilities are fit for purpose and safe for the community, to maximise accessibility. Building strong, safe and resilient communities Tackling inequality, ensuring opportunities for all Creating a sustainable Renfrewshire for all to enjoy Ongoing revenue and capital budget monitoring is a tool to enable good financial management so that the Council has resources now and in the future for continued service delivery. Working together to improve outcomes 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 The capital expenditure noted in this report will result in lifecycle maintenance improvements to existing properties and replacement of ICT, infrastructure, and plant and equipment. Page 220 of 266
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3 6. Information Technology There are no direct implications arising from the recommendations in this report. 7. Equality & Human Rights While new areas of spend may impact on particular groups, any such impact would be assessed prior to the spend being incurred, therefore there are no direct implications arising from the recommendations in this report. 8. Health & Safety There are no direct implications arising from the recommendations in this report. 9. Procurement While Procurement is an important consideration prior to the Council incurring any revenue or capital spend, there are no direct implications arising from the recommendations in this report. 10. Risk The potential financial risk that the Council will overspend its approved revenue budgets for the year is managed at a Council-wide level by the Chief Executive and Directors. 11. Privacy Impact There are no direct implications arising from the recommendations in this report. 12. Cosla Policy Position There are no direct implications arising from the recommendations in this report. 13. Children’s Rights There are no direct implications arising from the recommendations in this report. 14. Climate Change There are no direct implications arising from the recommendations in this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 221 of 266
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Coats Observatory Trust Fund 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission September 2024 Page 222 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 2 Table of Contents Key messages 3 Introduction 4 Annual accounts audit 6 Appendices 16 Page 223 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 3 Key messages Financial statements audit Audit opinion The annual accounts are due to be considered by the Audit, Risk and Scrutiny Board on 22 October 2024 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 The financial statements have been updated for all the potential audit adjustments identified during the audit process. We also 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. 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 224 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 4 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 an accruals 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 225 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 5 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 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 226 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 6 Annual accounts audit 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. We identified material adjustment during our audit of the financial statements, as set out in Appendix 2. Management agreed to amend the draft financial statements for this change and related presentational points we identified. 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 227 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 7 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 2024. 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. Page 228 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 8 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 are 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 anticipated opinion on the annual accounts is not modified with respect to any of the risks described below. Page 229 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 9 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. Risk area 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 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 • Documented our understanding of the journals posting process and evaluated the design effectiveness of management controls over journals. • Analysed the journals listing and determined criteria for selecting high risk and / or unusual journals. • Tested high risk and / or unusual journals posted during the year and after the unaudited financial statements stage back to supporting documentation for appropriateness, corroboration and ensured approval has been undertaken in line with the Board’s journals policy. • Gained an understanding of the accounting estimates and critical judgements made by management. We Page 230 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 10 Risk area Management override of controls challenged key assumptions and considered the reasonableness and indicators of management bias which could result in material misstatement due to fraud. • Evaluated 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 in the year. Page 231 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 11 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 valuation of the office was 31 March 2022 and Coats 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 The assets have been completely refurbished and became unusable since the construction has commenced. According to the Local Authority Capital Accounting Manual, the Trust might consider transferring the value previously held under operational property, plant and Page 232 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 12 Key risk area Valuation of the Trust land and buildings equipment to assets under construction. The Trust has decided to use this option. As the assets are classified as assets under construction, they will be measured at historical cost. Prior year and current year figures have been adjusted to show the latest valuation amount, including construction spend. We are satisfied that we have obtained reasonable assurance over the classification in the financial statements relating to the asset. Page 233 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 13 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 PHS 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 PHS and management any uncorrected misstatements of lower value errors to the extent that our audit identifies these. Our initial assessment of materiality for the financial statements was £20,300. On receipt of the 2023/24 unaudited financial statements, we reassessed materiality and kept it at the same level as our initial assessment. We consider that our updated assessment has remained appropriate throughout our audit. £ Overall materiality for the financial statements 20,300 Performance materiality (75% of materiality) 15,200 Trivial threshold 1,000 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 3% of gross assets as disclosed in the 2023/24 unaudited annual accounts. 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. Page 234 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 14 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 aggregate and whether judged by any quantitative or qualitative criteria. Audit differences We identified a significant change to the draft financial statements during our audit, relating to the disclosure of capital spend on the Trust assets. This affected the prior year as well as 2023/24, and is set out in more detail in Appendix 2. Management agreed to amend the financial statements for this adjustment. The overall impact of the adjustments made on the financial statements of the Trust was: • £839,198 increase to reserve • £839,198 increase 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 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. Page 235 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 15 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 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 236 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 16 Appendices Appendix 1: Responsibilities of The Trust and the Auditor 17 Appendix 2: Audit differences identified during the audit 21 Page 237 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 17 Appendix 1: Responsibilities of The Trust and the Auditor The Trust’s responsibilities 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 238 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 18 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 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 239 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 19 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 Quality of public audit in Scotland: Annual report 2023/24 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 2024 was two years. Page 240 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 20 Audit fees The total fees charged to the entity for the provision of services in 2023/24 were as follows. Prior year charges are also shown for comparative purposes: Fee element 2023/24 2022/23 Auditor remuneration £6,300 £6,000 Total fees £6,300 £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 241 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 21 Appendix 2: Audit differences identified during the audit We are required to inform the Board of any significant misstatements within the financial statements presented for audit that have been discovered during the course of our audit. Adjusted misstatements Details of the item corrected following discussions with management is as below. No Detail Assets Dr / (Cr) £ Liabilities Dr / (Cr) £ Reserves Dr / (Cr) £ Statement of Financial Activities Dr / (Cr) £ 1. Prior year restatement Classification of buildings to asset under construction and adjustment to the asset value base on the latest valuation date. DR Asset under construction CR Restricted Funds CR Building 628,013 (604,943) (23,070) 2. Prior year restatement Correction of total receipted and payments which represents an estimate of in-year spend on the Paisley Museum Reimagined project that relates directly to the refurbishment of the Coats Observatory and associated buildings. The spend was directly incurred by Renfrewshire Page 242 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 22 No Detail Assets Dr / (Cr) £ Liabilities Dr / (Cr) £ Reserves Dr / (Cr) £ Statement of Financial Activities Dr / (Cr) £ Council, but the property is owned by the Trust, so corresponding income has been disclosed as though donated to the Trust to fund the related spend. DR Asset under construction CR Restricted Funds 337,791 (337,791) 3. Correction of total receipted and payments which represents an estimate of in-year spend on the Paisley Museum Reimagined project that relates directly to the refurbishment of the Coats Observatory and associated buildings for 23/24. DR Asset under construction CR Donation from Renfrewshire Council re refurbishment of Trust assets DR Expenditure relating directly to charitable activities CR Restricted Funds 455,269 (455,269) (455,269) 455,269 Page 243 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 23 No Detail Assets Dr / (Cr) £ Liabilities Dr / (Cr) £ Reserves Dr / (Cr) £ Statement of Financial Activities Dr / (Cr) £ 4. Depreciation to be reversed in 2023/24 due to Asset Under Construction classification DR Building CR Depreciation expense 23,068 (23,068) Net impact on reserve (839,198) Net impact on net assets 839,198 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 Trust. Details of disclosure changes amended by management following discussions are as below. No Detail 1. Accounting policies – asset disclosure 2. Accounting basis – The accounts have been prepared using the accruals basis whereby total income and expenditure have been recorded when they were earned or incurred. This was changed from the previous year audited Page 244 of 266
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Coats Observatory Trust Fund: 2023/24 Annual Audit Report to the Audit, Risk and Scrutiny Board and the Accounts Commission 24 account which have been prepared using the cash basis as the Trust has a gross annual income over £250,000 threshold in the current year. Overall, we found the disclosed accounting policies, significant accounting estimates and the overall disclosures and presentation to be appropriate. Page 245 of 266
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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 2024. 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 246 of 266
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Finance and Resources Director: Alastair MacArthur CPFA Renfrewshire House, Cotton Street, Paisley, PA1 1JB www.renfrewshire.gov.uk Your Ref: My Ref: AMacA/CB Contact: Alastair MacArthur Telephone Number: 0300 300 0285 Email: alastair.macarthur@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 2024 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 2023/24 (the 2023/24 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 2024. All representations are made to the best of our knowledge and belief. Financial Statements i. We have fulfilled our responsibilities as trustees under the 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,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 2023/24 (the 2023/24 Code), for being satisfied that they give a true and fair view and for making accurate representations to you. ii. All the transactions undertaken by Coats Observatory Trust Fund have been properly reflected and recorded in the accounting records. iii. All the accounting records have been made available to you for the purpose of your audit. I have provided you with unrestricted access to all appropriate persons within the charity, and with all other records and related information requested, including minutes of all management and trustee meetings and correspondence with the Office of the Scottish Charity Regulator. Page 247 of 266
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Finance and Resources Director: Alastair MacArthur CPFA Renfrewshire House, Cotton Street, Paisley, PA1 1JB www.renfrewshire.gov.uk iv. The financial statements are free of material misstatements, including omissions. Internal control and fraud 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. I have disclosed to you all instances of known or suspected fraud affecting the entity involving management, employees who have a significant role in internal control or others where fraud could have a material effect on the financial statements. vii. I have also disclosed to you all information in relation to allegations of fraud or suspected fraud affecting the entity’s financial statements communicated by current or former employees, analysts, regulators or others. Assets and liabilities viii. The Trust has satisfactory title to all assets and there are no liens or encumbrances on the charity’s assets. ix. All actual liabilities, contingent liabilities and guarantees given to third parties have been recorded or disclosed as appropriate. x. Where plans or intentions that may materially alter the carrying value and, where relevant, the fair value measurements or classification of assets and liabilities, these are fully reflected in the financial statements. xi. I confirm that the valuation of the Observatory asset has been assessed for impairment and I am comfortable that the valuation remains appropriate as at 31 March 2024. The assets are currently undergoing refurbishment and will be revalued once the work is complete. Accounting estimates xii. 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. Legal claims xiii. I have disclosed to you all claims in connection with litigation that have been, or are expected to be, received and such matters, as appropriate, have been properly accounted for and disclosed in the financial statements. Laws and regulations xiv. 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 the financial statements. Page 248 of 266
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Finance and Resources Director: Alastair MacArthur CPFA Renfrewshire House, Cotton Street, Paisley, PA1 1JB www.renfrewshire.gov.uk Related parties xv. Related party relationships and transactions have been appropriately accounted for and disclosed in the financial statements. I have disclosed to you all relevant information concerning such relationships and transactions and I am not aware of any other matters which require disclosure in order to comply with legislative and accounting standards requirements. Subsequent events xvi. All events subsequent to the date of the financial statements which require adjustment or disclosure have been properly accounted for and disclosed. Going concern i. 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. Grants and donations ii. All grants, donations and other income, the receipt of which is subject to specific terms or conditions, have been notified to you. There have been no breaches of terms or conditions in the application of such income. Approval 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. The approval of this letter of representation was minuted by Coats Observatory Trust Fund at its meeting on 24 October 2024. Yours faithfully Signature:…………………………… Name: Alastair MacArthur Position: Director of Finance and Resources Date……………………………. Page 249 of 266
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1 ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 22 October 2024 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audited Financial Statements 2023/24 – Coats Observatory Trust ___________________________________________________________________ 1. Summary 1.1 The 2023/24 unaudited financial statements were approved by Council on 27 June 2024. Each year the appointed external auditors carry out an audit of the financial statements of 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 are now presented for Members’ noting and further recommendation to the Council that they be approved. 1.3 The audited financial statements have been updated to show an estimated value of capital works undertaken in-year on the refurbishment of Trust properties as part of the Paisley Museum Reimagined project. Further detail is included in Azets’ Annual Audit report, presented at agenda item 3. ___________________________________________________________________ 2. Recommendations 2.1 Members are requested to note the attached 2023/24 audited financial statements for the Coats Observatory Trust; and to recommend to Council that they be approved. Item 4 Page 251 of 266
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2 Implications of the Report 1. Financial – The 2023/24 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 directly arising from this report. 3. Community/Council Planning – none directly arising 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 directly arising from this report. 6. Information Technology – none directly arising from this report. 7. Equality & Human Rights – none directly arising from this report. 8. Health & Safety – none directly arising from this report. 9. Procurement – none directly arising from this report. 10. Risk – none directly arising from this report. 11. Privacy Impact – none directly arising from this report. 12. Cosla Policy Position – none directly arising from this report. 13. Children’s Rights – none directly arising from this report. 14. Climate Risk – none directly arising from this report. ___________________________________________________________________ Author: Christine McCourt, Head of Finance and Procurement Page 252 of 266
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RENFREWSHIRE COUNCIL COATS OBSERVATORY TRUST FUND SC019454 AUDITED TRUSTEES’ REPORT AND FINANCIAL STATEMENTS 1 APRIL 2023 to 31 MARCH 2024 Page 253 of 266
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Contents TRUSTEES’ REPORT .........................................................................1 INDEPENDENT AUDITOR’S REPORT TO THE TRUSTEES OF COATS OBSERVATORY TRUST FUND AND THE ACCOUNTS COMMISSION.................................................3 TRUST ACCOUNTS FINANCIAL STATEMENTS OVERVIEW ................................3 STATEMENT OF FINANCIAL ACTIVITIES FOR THE YEAR ENDED 31 MARCH 2024 .....4 STATEMENT OF BALANCES AS AT 31 MARCH 2024 .....................................5 NOTES TO THE FINANCIAL STATEMENTS .................................................6 Page 254 of 266
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Renfrewshire Council Coats Observatory Trust Fund Trustees’ Report 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, children’s 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, or on the Council’s website at www.renfrewshire.gov.uk. Independent Auditors: Azets Titanium 1 King's Inch Place Renfrew Glasgow PA4 8WF Trustees Guidance provided by OSCR indicates 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 that all elected members of Renfrewshire Council are charity trustees. The following individuals were the Trustees of the Trust Fund in their capacity as elected members of Renfrewshire Council during the 2023/24 financial year: Page 255 of 266
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Renfrewshire Council Coats Observatory Trust Fund Trustees’ Report P a g e | 2 Jennifer Adam Neill Graham Jamie McGuire Fiona Airlie-Nicolson John Gray Marie McGurk Stephen Burns Anne Hannigan Iain McMillan Jacqueline Cameron John Hood John McNaughtan Lorraine Cameron Lisa-Marie Hughes Kevin Montgomery Michelle Campbell Robert Innes Sam Mullin Graeme Clark Alec Leishman Will Mylet Carolann Davidson Bruce MacFarlane Iain Nicolson Eddie Devine James MacLaren Jim Paterson Andy Doig Kenny MacLaren Emma Rodden Audrey Doig Mags MacLaren John Shaw Alison Ann-Dowling Colin McCulloch Ben Smith Chris Gilmour Janis McDonald Andy Steel Edward Grady Cathy McEwan Gillian Graham David McGonigle Day to day management of the Trust Fund is delegated to the Director of Finance and Resources of Renfrewshire Council. All of these trustees 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 of this fund. 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, owns the buildings comprising the Coats Observatory. These buildings are leased to OneRen at nil consideration. 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 Page 256 of 266
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Renfrewshire Council Coats Observatory Trust Fund Trustees’ Report P a g e | 3 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. Since 2021, the assets of the Trust have been under refurbishment as part of the Paisley Museum Reimagined project, funded by Renfrewshire Council. This is disclosed within the Statement of Financial Activities. 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. The £45m Paisley Museum Reimagined project will create a new, world-class museum space, shaped by and for the people of Paisley. As part of this project, expected to complete in 2025, the Observatory is currently under refurbishment and will open to the public with improved accessibility upon completion. A full revaluation of the Observatory will be carried out when it is reopened. The Trustees wish to thank the Renfrewshire Council officers involved in producing the Report and Financial Statements. Signed: Alastair MacArthur Director of Finance and Resources Renfrewshire Council Date: On behalf of the Trustees: Councillor John Shaw Convener – Finance, Resources and Customer Services Policy Board Renfrewshire Council Date: Page 257 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 3 Independent auditor’s report to the trustees of Coats Observatory Trust Fund 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 statement of accounts of Coats Observatory Trust Fund for the year ended 31 March 2024 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 Financial Activities, the Balance Sheet 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 the United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). In our opinion the accompanying financial statements: • give a true and fair view of the state of affairs of the charity as at 31 March 2024 and of its incoming resources and application of resources for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Charities and Trustee Investment (Scotland) Act 2005, and regulation 8 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. 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, Page 258 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 4 may cast significant doubt on the charity’ ability 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. Responsibilities of the trustees for the financial statements The trustees are 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 trustees determine 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 trustees are responsible for assessing the charity's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees intend to discontinue the charity's operations, or have no realistic alternative but to do so. 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 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, the 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; • 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 Page 259 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 5 • 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’ 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 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 Charities SORP (FRS 102). Page 260 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 6 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 261 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 3 Trust Accounts Financial Statements Overview 1. Introduction The following pages detail the Statement of Financial Activities, 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 Cashflow Statement. 2. Statement of Financial Activities The Statement of Financial Activities provides an analysis of the income and expenditure for the period. If applicable, the Statement would also show any movements in relation to fixed assets. In the case of these accounts, the Statement has been restated for 2022/23 to reflect refurbishment spend on the assets of the Trust. 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 Financial Activities. The Statement of Balances also summarises final closing balances at the end of the period. It has been restated for 2022/23 in recognition of the assets being reclassified as Assets Under Construction, which results in a pause in depreciation until the assets are back in use. 4. Notes to the accounts Notes to the accounts expand on or explain the information contained in the Statement of Financial Activities and the Statement of Balances. Page 262 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 4 Statement of Financial Activities for the year ended 31 March 2024 2022/23 (restated) 2023/24 Total Note Unrestricted Restricted Total £ £ £ £ Income (337,791) Donation from Renfrewshire Council re refurbishment of Trust assets 2 0 (455,269) (455,269) Expenditure Expenditure relating directly to charitable activities 0 0 0 337,791 Expenditure relating to Trust assets 2 0 455,269 455,269 0 Surplus / (deficit) for period 0 0 0 Page 263 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 5 Statement of Balances as at 31 March 2024 As at 31 March 2023 (restated) As at 31 March 2024 Total Note Unrestricted Restricted Total £ £ £ £ Fixed Assets Assets Under Construction Buildings at Coats Observatory, Paisley 628,013 Opening balance 0 965,804 965,804 337,791 Additions 1 0 455,269 455,269 965,804 Closing balance 0 1,421,073 1,421,073 Other Assets Land at Coats Observatory, Paisley 72,200 Opening balance 0 72,200 72,200 0 Additions 1 0 0 0 72,200 Closing balance 0 72,200 72,200 1,038,004 0 1,493,273 1,493,273 Represented By 1,038,004 Restricted Funds 0 1,493,273 1,493,273 1,038,004 0 1,493,273 1,493,273 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 264 of 266
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Renfrewshire Council Coats Observatory Trust Fund 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 2024 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 been no impact on the financial statements as the assets of the Fund comprise solely of the Observatory buildings which are independently valued. The accounts have been prepared using the accruals basis whereby total income and expenditure have been recorded when they were earned or incurred. 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. Incoming/Outgoing Resources Recognition of incoming resources All income is recognised once the charity has entitlement to the income, it is probable that the income will be received and the amount of income receivable can be measured reliably. Recognition of expenditure All expenditure is accounted for on an accruals basis. Page 265 of 266
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Renfrewshire Council Coats Observatory Trust Fund Financial Statements P a g e | 7 Charitable Activities Decisions regarding the way the Trust Funds’ income is spent are taken by the Finance, Resources and Customer Services Policy Board of Renfrewshire Council, 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 valuations were carried out in 2021/22 for the office and 2020/21 for the observatory. Depreciation is paused due to the asset being categorised as an Asset Under Construction during the period of refurbishment (commenced in June 2021) currently underway as part of the Paisley Museum Reimagined project. Refurbishment spend is disclosed as asset additions in the Statement of Balances. The assets will be revalued when the refurbishment is complete. 2. Analysis of income/expenditure The value of expenditure represents an estimate of in-year spend on the Paisley Museum Reimagined project that relates directly to the refurbishment of the Coats Observatory and associated buildings. The spend was directly incurred by Renfrewshire Council, but the property is owned by the Trust, so corresponding income has been disclosed as though donated to the Trust to fund the related spend. 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 (nil in 2022/23). 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 direct cash transactions during 2023/24. Page 266 of 266