Audit Scotland Finance Bulletin 2023-24 - Integration Joint Boards
Renfrewshire Council · 19 May 2025
Back to Audit, Risk and Scrutiny Board — 19 May 2025 and its agenda
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___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 19 May 2025 ___________________________________________________________________ Report by: Director of Finance and Resources ___________________________________________________________________ Heading: Audit Scotland Finance Bulletin 2023/24: Integration Joint Boards ___________________________________________________________________ 1. Summary 1.1 On 6 March 2025, on behalf of the Accounts Commission, Audit Scotland published a Finance Bulletin comprising an analysis of IJB annual accounts for 2023/24 and the corresponding annual audit reports undertaken by local auditors. The bulletin summarises the ongoing challenging financial position in which IJB’s across Scotland continue to operate. 1.2. Alongside this, Audit Scotland has published an interactive online tool utilising the data and analysis from the bulletin, which they anticipate will be a useful resource for IJBs, their stakeholders and members of the public. 1.3. The key messages in the bulletin are as follows: 1. Integration Joint Boards’ (IJBs) finances continue to be precarious. IJBs 2023/24 funding has increased in real terms compared to 2022/23, but there is a concerning picture of continued overspending, depletion of reserves and required savings being met through one-off rather than recurring savings. 2. The majority of IJBs reported a deficit on the cost of providing services requiring unplanned use of reserves and additional contributions from partner bodies, noting that:
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a) Total reserves held by IJBs have reduced by 40 per cent in 2023/24. Contingency reserves have almost halved, limiting IJBs’ ability to address future deficits. Nine IJBs now do not hold any contingency reserves, reducing their financial flexibility and increasing the risk to their financial sustainability. b) NHS boards and councils face significant financial challenges themselves and IJBs cannot continue to rely on their partners being able to find additional money to support them during the year. IJBs need to agree budgets that are realistic and transparent and to have strategies in place to manage in-year risks. 3. The majority of the total planned savings were achieved, but a substantial proportion were achieved on a one-off basis meaning these non-recurring savings need to be carried forward and covered each year to balance future budgets. 4. The financial position is set to worsen with a projected funding gap of £457 million in 2024/25. The budget process needs collaboration with partners and candid conversations with communities about the impact of the savings needed to set a balanced budget. The budgets and proposed savings need to be realistic and achievable. 5. A continued high turnover of chief officers and chief finance officers adds to the risks around effective strategic planning and decision- making. 6. IJBs need to be working collaboratively with each other and with their NHS and council partners to find ways to transform services so that they are affordable. Investment in prevention and early intervention is needed to help slow the ever-increasing demand for services, the cost of more complex care and, improve the experience and outcomes for people. 1.4. Further detail on these key messages is provided in the sections below. 1.5 This paper was presented to the IJB Audit, Risk and Scrutiny Committee on 14 March 2025. ___________________________________________________________________ 2. Recommendations 2.1 It is recommended that the Audit, Risk and Scrutiny Committee: Note the content of this report, and the full Audit Scotland bulletin as attached in Appendix 1. _________________________________________________________
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3. Background 3.1 In July 2024, the Accounts Commission published its Integration Joint Boards’ Finance and Performance 2024 briefing. The briefing developed upon reports previously issued in 2022 and 2023 by the Commission and provided a high-level independent analysis of IJBs, commenting on: the financial performance of IJBs in 2022/23 and the financial outlook for IJBs in 2023/24 and beyond; performance against national health and wellbeing outcomes and targets alongside other publicly available performance information; a ‘spotlight’ focus on commissioning and procurement of social care. 3.2 This updated bulletin summarises the Commission’s findings based on the 2023/24 annual accounts for 29 IJBs (27 audited and two unaudited), 2023/24 annual audit reports, as well as IJB budget documentation. 3.3 The Commission advises it has published the bulletin as early as possible to help inform budget-setting discussions. 4. IJB Financial Performance 4.1 Expanding on the findings of its Finance and Performance briefings of recent years, the Finance Bulletin 2023/24 outlines the challenging demographic context facing IJBs, including societal changes which have resulted in an increase in demand and complexity of health and care needs. Underlying factors identified in the report include a 27% increase in the percentage of people who reported having bad, or very bad health; and a 28% increase in the percentage of population that provide unpaid care, since the 2011 census. 4.2 The bulletin notes that, while there was a real-terms increase in IJB funding between 2022/23 and 2023/24, the financial health of IJBs continues to weaken and there are indications of further challenging times ahead. 4.3 Of the 29 IJBs included within the report, 24 (83%) reported a deficit on the cost of providing services in 2023/24, with 11 receiving additional contributions from partner bodies and 16 making unplanned drawdowns from reserves to cover year-end overspends.
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4.4 The bulletin also notes that there was a 154% increase in the savings target between 2022/23 and 2023/24, and a substantial proportion of this was achieved on a non-recurring basis. Only seven IJBs achieved their full savings target, of which Renfrewshire IJB was one. 4.5 Financial sustainability risks have been identified by auditors in 26 out of 27 (96%) of IJBs where Annual Audit Reports were available, and over half of all IJBs reported turnover in senior officer roles (Chief Officer/Chief Finance Officer). 4.6 The projected funding gap is expected to worsen, with IJB annual accounts and budget papers identifying a 28% increase in the overall projected funding gap between 2023/24 and 2024/25. 4.7 The bulletin, consistent with the narrative of previous Audit Scotland reports, concludes that the reliance on non-recurring sources of income to fund recurring budget pressures is unsustainable in the medium to long term, and the identification and delivery of recurring savings and a reduced reliance on drawing from reserves to fund revenue expenditure will be key to ensuring long-term financial sustainability. ___________________________________________________________________ Implications of the Report 1. Financial – none 2. HR & Organisational Development - none 3. Community/Council Planning – none 4. Legal – none 5. Property/Assets - none 6. Information Technology - none 7. Equality & Human Rights -The Recommendations contained within this report have not been assessed in relation to their impact on equalities and human rights as it summarises another publication and is for noting only. 8. Health & Safety - none 9. Procurement – none 10. Risk - the report summarised in this paper sets out a range of challenges facing the Scottish Government and Health Boards across
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Scotland. Related risks for the IJB and HSCP are captured through ongoing risk management activity and reported to the IJB Audit, Risk and Scrutiny Committee at each scheduled meeting. 11. Privacy Impact – not applicable 12. Climate Risk –not applicable. 13. Children’s Rights –not applicable. 14. COSLA Policy Position –not applicable. _______________________________________________________ List of Background Papers None ___________________________________________________________________ Author: Alastair MacArthur, Director of Finance and Resources
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Integration Joint Boards Finance bulletin 2023/24 Prepared by Audit Scotland March 2025 APPENDIX
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Integration Joint Boards | 2 Contents Key messages 3 Introduction 5 Context 6 Financial performance 7 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility
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Key messages | 3 Key messages 1 Integration Joint Boards’ (IJBs) finances continue to be precarious. IJBs 2023/24 funding has increased in real terms compared to 2022/23 but there is a concerning picture of continued overspending, depletion of reserves and required savings being met through one-off rather than recurring savings. 2 The majority of IJBs reported a deficit on the cost of providing services requiring unplanned use of reserves and additional contributions from partner bodies: • Total reserves held by IJBs have reduced by 40 per cent in 2023/24. Contingency reserves have almost halved, limiting IJBs ability to address future deficits. Nine IJBs now do not hold any contingency reserves reducing their financial flexibility and increasing the risk to their financial sustainability. • NHS boards and councils face significant financial challenges themselves and IJBs cannot continue to rely on their partners being able to find additional money to support them during the year. IJBs need to agree budgets that are realistic and transparent and to have strategies in place to manage in-year risks. 3 The majority of the total planned savings were achieved, but a substantial proportion were achieved on a one-off basis meaning these non-recurring savings need to be carried forward and covered each year to balance future budgets. 4 The financial position is set to worsen with a projected funding gap of £457 million in 2024/25. The budget process needs collaboration with partners and candid conversations with communities about the impact of the savings needed to set a balanced budget. The budgets and proposed savings need to be realistic and achievable. 5 A continued high turnover of chief officers and chief finance officers adds to the risks around effective strategic planning and decision-making.
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Key messages | 4 6 IJBs need to be working collaboratively with each other and with their NHS and council partners to find ways to transform services so that they are affordable. Investment in prevention and early intervention is needed to help slow the ever-increasing demand for services, the cost of more complex care and, improve the experience and outcomes for people.
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Introduction | 5 Introduction 1. Integration Joint Boards (IJBs) are responsible for the governance, planning and resourcing of social care, primary and community healthcare and unscheduled hospital care for adults in their local area. The Public Bodies (Joint Working) (Scotland) Act 2014 (the Act) requires the 32 Scottish councils and 14 territorial NHS boards to work together in partnerships to integrate how social care and community healthcare services are provided. IJBs were created as part of the Act. More information about the role of IJBs is set out in a short video available on our website What are Integration Joint Boards? 2. On behalf of the Accounts Commission, Audit Scotland has undertaken an analysis of the IJB annual accounts for 2023/24 and the annual audit reports produced by local auditors. The data and analysis is published on the Audit Scotland website as an interactive online tool – The IJB Finance bulletin 2023/24. 3. The interactive online tool allows users to explore the financial performance of their local IJB, as well as compare individual IJBs. We anticipate this will be a useful resource for IJBs, their stakeholders and members of the public. It includes data on the funding and income and reserves position, outturn budget position, savings performance and financial outlook. The tool also includes local and national contextual data from the 2022 census that illustrates the increasing population pressures nationally and the significant variation across Scotland. Accompanying guidance on how to use the online tool is also available on the Audit Scotland website. 4. This document provides a summary of the national level messages from the online Finance bulletin. 5. Our findings are based on the 2023/24 annual accounts for 29 IJBs (27 audited and two unaudited), 2023/24 annual audit reports, as well as IJB budget documentation. The accounts for East Dunbartonshire IJB were unavailable at the time of publication. 6. We have published the Finance bulletin as early as possible to help inform budget-setting discussions. Further information will be added to the data tool as it becomes available. By Autumn 2025, it will also include performance and outcome data.
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Context | 6 Context Demographic shifts are driving an increase in the demand and complexity of health and care needs 7. The pressures on Scotland's social care and healthcare services are escalating, with higher demand, workforce difficulties, and financial strains, further aggravated by inflationary cost pressures. 8. Scotland’s wide-ranging population density also presents different logistical and workforce challenges, along with associated cost pressures, to providing services. 9. The 2022 Census sets out how the underlying factors impacting on the demand for social care and healthcare services have changed since 2011. 2022 Census data Movement since 2011 census/range Population 5.4 million 2.7% increase Proportion of population aged over 65 20% Increasing from 17% Population density (residents per km2) 70 Varying from 9 (Eilean Siar) to 3,555 (Glasgow) Percentage of people who reported having bad or very bad health 7% 27% increase Percentage of people with a long-term illness, disease or condition 21% Increasing from 19% Percentage of population that provide unpaid care 12% 28% increase Source: Scotland’s Census 2022 10. These societal changes result in an increased resource demand for social care and healthcare services and impact on the financial sustainability of these services as we set out later in this report.
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Financial performance | 7 Financial performance The financial health of IJBs continues to weaken and there are indications of more challenging times ahead IJB funding has increased in real terms compared to 2022/23 11. IJBs receive their funding as annually agreed contributions from their council and NHS board partners. Funding is largely received to cover in- year expenditure on providing services but can also be received for specific services and national initiatives to be funded in future years. The funding split between NHS and council partners remains around 70 per cent from NHS boards and 30 per cent from councils. 12. There has been a four per cent real-terms increase in IJB funding between 2022/23 to 2023/24 (Exhibit 1). Exhibit 1 IJB Funding and income 2020/21 – 2023/24 Funding increased by four per cent in real terms in the past year Note: * Position/movement excluding East Dunbartonshire IJB as accounts are unavailable. Source: Audited accounts £10,577 £10,792 £9,996 £11,841 £507 £960 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 2020/21 2021/22 2022/23 2023/24* £ million Partner contributions Covid-19 funding
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Financial performance | 8 The majority of IJBs reported a deficit on the cost of providing services requiring additional contributions from partner bodies and the unplanned use of reserves 13. Twenty-four IJBs reported a deficit on the cost of providing services with the majority (18) reporting a deficit between zero and three per cent (Exhibit 2, page 9). 14. Of the 24 IJBs reporting an operating deficit, 11 received additional contributions from partner bodies to cover the year end overspend and 16 made an unplanned drawdown from reserves. A number of IJBs will have received additional partner contributions during the year that will not be captured by this analysis. These additional in-year contributions can arise for a variety of reasons, including specific one-off cost pressures not anticipated during budget-setting. 15. Five IJBs reported an operational surplus, down from 19 in 2022/23. Reasons reported for surplus’ included delays in the launch of some transformation and improvement projects and challenges in health and social care recruitment. 16. Recruitment and retention issues facing the sector persist, but the related savings from holding vacancies, that contributed to the majority of operational surpluses in 2022/23, are being outstripped by inflationary cost pressures and, reflecting the workforce pressures, a higher spend on agency/locum/bank staff. Other financial pressures driving the increase in the costs of providing services include increasing demand for services, prescribing costs and pay inflation.
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Financial performance | 9 Exhibit 2 Operational surplus/deficit as a proportion of the 2023/24 net cost of service The majority of IJBs reported a deficit on the cost of providing services in 2023/24 requiring additional contributions from partner bodies and the unplanned use of reserves. Note: * Comparable data for 2022/23 was not available for these IJBs. ** East Dunbartonshire IJB accounts unavailable. Source: Audited accounts, auditor returns The majority of the total planned savings were achieved, but a substantial proportion was achieved only on a one-off basis 17. There was a 154 per cent increase in the savings target between 2022/23 and 2023/24, increasing to £214 million. Overall, IJBs achieved 79 per cent of their planned savings targets in 2023/24. This was down -10% -5% 0% 5% 10% Shetland Orkney* Dumfries & Galloway* Falkirk Eilean Siar Midlothian Aberdeen East Renfrewshire Fife Aberdeenshire Scottish Borders East Ayrshire Perth and Kinross North Ayrshire Moray East Lothian Glasgow Dundee Clackmannanshire & Stirling Edinburgh* West Dunbartonshire Inverclyde West Lothian Renfrewshire East Dunbartonshire** Argyll & Bute South Lanarkshire Angus North Lanarkshire South Ayrshire 2022/23 2023/24
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Financial performance | 10 from 84 per cent in 2022/23. Only seven IJBs achieved all of their savings target with three IJBs achieving less than half their target (Exhibit 3, page 11). 18. Fifty-seven per cent of savings were achieved on a recurring basis with the remaining 43 per cent being achieved on a non-recurring basis. The non-recurring savings will be carried forward to be found again in future years.
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Financial performance | 11 Exhibit 3 2023/24 Savings performance 79 per cent of total planned savings were achieved in 2023/24, compared to 84 per cent in 2022/23. Note: * In the absence of the 2023/24 East Dunbartonshire IJB accounts, the 2022/23 Net Cost of Service was used. Source: 2023/24 Audited accounts, auditor returns 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% North Lanarkshire Angus Inverclyde Perth and Kinross Renfrewshire Clackmannanshire & Stirling South Ayrshire Orkney Scottish Borders East Ayrshire East Dunbartonshire* Glasgow North Ayrshire Moray East Renfrewshire Fife Dundee Shetland Aberdeen West Lothian Argyll & Bute Edinburgh West Dunbartonshire Eilean Siar Falkirk Dumfries & Galloway Savings target as a proportion of the net cost of service Savings achieved Savings target + target amount £23.2m £1.4m £13.5m £7.9m £20.7m £8.9m £6.6m £9.4m £2.0m £5.1m £21.4m £7.1m £4.1m £5.0m £21.5m £3.9m £5.2m £2.5m £2.4m £2.4m £2.5m £3.3m £4.4m £1.3m £0.9m £2.7m 85% 59% 146% 71% 106% 83% 97% 79% 57% 100% 53% 39% 66% 94% 100% 64% 61% 100% 85% 31% 95% 85% 75% 100% 100% 57% 100%
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Financial performance | 12 19. IJBs achieved 79 per cent of their planned savings target in 2023/24. Over two-fifths of this were achieved on a non-recurring basis. This means that these savings will be carried forward to be found again in future years. Identifying and achieving savings every year on a recurring basis, and moving away from relying on one-off savings, is essential for IJBs to maintain financial sustainability. Total reserves held by IJBs have reduced by 40 per cent in 2023/24. 20. By the end of 2023/24, IJBs reported a reduction in their total level of reserves, decreasing by 36 per cent between 2022/23 and 2023/24 (40 per cent real-terms reduction). Part of the reduction relates to the use of ringfenced reserves to support Scottish Government national policy objectives (Exhibit 4). Exhibit 4 Total reserves by year Total reserves held by IJBs have reduced by 40 per cent in real terms in 2023/24. Note: * 2023/24 position/movement excludes the East Dunbartonshire IJB position. Source: Audited accounts £- £200.00 £400.00 £600.00 £800.00 £1,000.00 £1,200.00 £1,400.00 2020/21 2021/22 2022/23 2023/24 Millions Ringfenced/Earmarked reserves Contingency reserves Covid reserves
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Financial performance | 13 Contingency reserves have almost halved, limiting IJBs ability to address future deficits 21. Contingency reserves have almost halved (49 per cent real-terms reduction) and now represent 0.8 per cent of the total Net Cost of Services (down from 1.6 per cent). These are reserves that are held but have not been earmarked for a specific purpose and are often used to mitigate the financial impact of unforeseen circumstances (Exhibit 5). Exhibit 5 2023/24 year end IJB reserves as a proportion of the net cost of services Over half of all IJBs had contingency reserve levels of less than one per cent of net cost of services. Source: Audited and unaudited accounts 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Aberdeenshire Midlothian Fife East Lothian Shetland Edinburgh East Renfrewshire Moray Perth and Kinross North Ayrshire Dumfries & Galloway Aberdeen West Lothian East Ayrshire Clackmannanshire & Stirling Scottish Borders Argyll & Bute Dundee Glasgow Orkney South Lanarkshire South Ayrshire Renfrewshire Falkirk West Dunbartonshire North Lanarkshire Angus Inverclyde Eilean Siar Ringfenced/Earmarked reserves Contingency reserves
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Financial performance | 14 22. One IJB (Aberdeenshire) utilised all their reserves in year, meaning that any future overspend position would require additional funding from partner bodies. 23. Four IJBs utilised all their contingency reserve in year, bringing the total number of IJBs without any contingency reserves, at the end of 2023/24, to nine. Financial sustainability risks have been identified by auditors in the vast majority of IJBs 24. The majority of auditors raised financial sustainability risks as part of their annual audits of IJBs. The risks identified included the reliance on non-recurring sources of income, such as reserves and one-off savings, to meet overspends. 2023/24 Audit Financial management risks identified* 22% Financial sustainability risks identified* 96% Medium-term financial plan in place** 90% Accounts presented within agreed timetable** 83% Unmodified opinion* 100% IJBs reporting turnover in senior officer roles (CO/CFO)** 57% IJBs who agreed their 2024/25 budget prior to the start of the financial year** 87% Note: * Based on 27 IJBs, where Annual Audit Reports were available. ** Based on all IJBs. Turnover figures include IJBs with interim Chief Officers (CO)/Chief Finance Officers (CFO) in place. Source: Annual Audit Reports, IJB budget papers, Medium-term financial plans 25. Other financial sustainability risks highlighted by auditors included: • Reserves level falling below minimum required as per their individual reserves policies. In one case, the general reserve has been depleted in full. • Undeveloped/underdeveloped plans for the achievement of recurring savings to allow IJBs to reach a balanced financial position.
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Financial performance | 15 • Additional contributions being required from IJB partners to meet cost pressure. • Inability to reduce reliance on agency and locum staff due to ongoing recruitment challenges. 26. Financial management risks identified included: • Inaccurate information provided or not presented in line with regulations. • Insufficient detail provided to allow the reader to fully assess the board’s overall performance. • Financial forecasting requiring more accuracy. • Requirement to enhance the reporting to provide greater clarity regarding the underlying IJB budget and performance against the budget during the year. Instability of leadership continues to be a challenge for IJBs 27. Over half of IJBs reported a change of Chief Officer or Chief Finance Officer in 2023/24. We previously reported that half of IJBs reported a change in senior leadership across 2021/22 and 2022/23. 28. The leadership and strategic vision of senior officers is crucial in the strategic planning and decision making required to drive much needed transformation change. Instability in leadership teams has the potential to disrupt strategic planning and the leadership capacity to bring about the fundamental change required to address the growing scale of challenges facing IJBs. The projected financial position is set to worsen 29. 2024/25 budget-setting revealed that the projected funding gap for IJBs has increased again to £457 million (£357 million for 2023/24) (Exhibit 6, page 16). 30. For 2024/25, 16 of the 30 IJBs agreed a balanced budget before the start of the financial year. Delays in the agreement of savings plans and NHS partner funding were the most common reasons for balanced budgets not being agreed at the start of the financial year.
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Financial performance | 16 Exhibit 6 IJB funding gaps as a proportion of 2023/24 net cost of services IJB annual accounts and budget papers identify a 28 per cent increase in the overall projected funding gap between 2023/24 and 2024/25. Note: * In the absence of the 2023/24 East Dunbartonshire IJB accounts, the 2022/23 Net Cost of Service was used. Source: IJB budget papers, auditor returns Reliance on non-recurring sources of income is not sustainable 31. At the time of the 2024/25 budget-setting, nine per cent of the projected funding gap was planned to be bridged using non-recurring reserves (Exhibit 7, page 17). 0% 2% 4% 6% 8% 10% 12% Scottish Borders South Ayrshire Angus West Lothian North Ayrshire Perth and Kinross Argyll & Bute East Dunbartonshire* West Dunbartonshire Orkney East Lothian Fife Falkirk Moray Eilean Siar 2024/25 gap as proportion of Net Cost of Service 2023/24 gap as proportion of Net Cost of Service
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Financial performance | 17 32. A proportion of the funding gap did not have planned savings agreed against it at the time of budget-setting. These unidentified savings made up 13 per cent of the total projected funding gap and were the result of 12 IJBs starting the 2023/24 financial year with an unbalanced budget. Exhibit 7 2024/25 IJB funding gap planed action The use of non-recurring reserves makes up nine per cent of plans to bridge the funding gap. Source: IJB budget papers, auditor returns 33. The proposed savings contain both recurring and non-recurring savings. The reliance on non-recurring sources of income to fund recurring budget pressures is unsustainable in the medium to long term. The identification and delivery of recurring savings and a reduced reliance on drawing from reserves to fund revenue expenditure will be key to ensuring long-term financial sustainability. Agreed savings 76% Use of reserves 9% Other 2% Remaining gap 13% Agreed savings Use of reserves Other Remaining gap
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Integration Joint Boards Finance bulletin 2023/24 Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot ISBN 978 1 915839 65 7 AS.5.0