Agenda Document Pack - Risk and Audit Scrutiny Committee - 25/08/2026
South Lanarkshire Council · 25 August 2026
Back to Risk and Audit Scrutiny Committee — 25 August 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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Council Offices, Almada Street Hamilton, ML3 0AA Monday, 17 August 2026 Dear Councillor Risk and Audit Scrutiny Committee The Members listed below are requested to attend a meeting of the Committee to be held as follows:- Date: Tuesday, 25 August 2026 Time: 10:00 Venue: Hybrid - Committee Room 1, Council Offices, Almada Street, Hamilton, ML3 0AA The business to be considered at the meeting is listed overleaf. Yours sincerely Paul Manning Chief Executive Members Elaine McDougall (Chair), Mary Donnelly (Depute Chair), Ralph Barker, Mathew Buchanan, Colin Dewar, Monique Equi, Alistair Fulton, Ross Gowland, Richard Lockhart, Fiona McDermott Substitutes Julia Marrs, Bert Thomson, Helen Toner 1
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BUSINESS 1 Declaration of Interests 2 Minutes of Previous Meeting Minutes of the meeting of the Risk and Audit Scrutiny Committee held on 26 May 2026 submitted for approval as a correct record. (Copy attached) 5 - 10 3 Minutes of Special Meeting Minutes of the special meeting of the Risk and Audit Scrutiny Committee held on 23 June 2026 submitted for approval as a correct record. (Copy attached) 11 - 14 Item(s) for Noting 4 Internal Audit Activity Report Report dated 31 July 2026 by the Internal Audit Manager. (Copy attached) 15 - 26 5 Audit Scotland – ‘Annual Report and Accounts 2025/2026’ and ‘Code of Audit Practice 2026’ Report dated 23 July 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 27 - 34 6 Financial Resilience and Sustainability Report dated 30 July 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 35 - 44 7 Local Government Budgets 2026/2027 – Summary of Audit Scotland Bulletin Report dated 14 July 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 45 - 62 8 2024 National Fraud Initiative Exercise Report dated 28 July 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 63 - 74 9 Fraud Statistics Annual Report 2025/2026 Report dated 28 July by the Executive Director (Finance and Corporate Resources). (Copy attached) 75 - 98 10 Forward Programme for Future Meetings Report dated 3 August 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 99 - 102 Urgent Business 11 Urgent Business Any other items of business which the Chair decides are urgent. 2
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For further information, please contact:- Clerk Name: Ishara Opatha Clerk Telephone: 07385370069 Clerk Email: ishara.opatha@southlanarkshire.gov.uk 3
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RISK AND AUDIT SCRUTINY COMMITTEE Minutes of meeting held via Confero and in Committee Room 1, Council Offices, Almada Street, Hamilton on 26 May 2026 Chair: Councillor Colin Dewar Councillors Present: Councillor Ross Gowland, Councillor Gavin Keatt (substitute for Councillor Celine Handibode), Councillor Susan Kerr, Councillor Richard Lockhart, Councillor Julia Marrs (substitute for Councillor Mary Donnelly) Councillors' Apologies: Councillor Mathew Buchanan, Councillor Mary Donnelly (Depute), Councillor Alistair Fulton, Councillor Celine Handibode, Councillor Elaine McDougall (Chair) Attending: Finance and Corporate Resources J Taylor, Executive Director; Y Douglas, Internal Audit Manager; A Norris, Administration Assistant; L O’Hagan, Head of Finance (Strategy); I Opatha, Administration Officer; S Somerville, Administration Manager; I Strachan, Head of Administration and Legal Services Also Attending: Audit Scotland A Barclay, J Boyd and K Tonner, External Auditors Appointment of Chair In terms of Standing Order No 34(b), Councillor Dewar was appointed Chair for this meeting. 1 Declaration of Interests No interests were declared. 2 Minutes of Previous Meeting The minutes of the meeting of the Risk and Audit Scrutiny Committee held on 10 March 2026 were submitted for approval as a correct record. The Committee decided: that the minutes be approved as a correct record. 3 Internal Audit Activity Report A report dated 27 April 2026 by the Internal Audit Manager was submitted:- providing an update on the progress, performance and output from the Internal Audit Service in the period 14 February to 24 April 2026 providing a summary of activity to assess compliance with the Global Internal Audit Standards (GIAS) at 31 March 2026 2 5
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presenting the Scottish Local Authority Chief Internal Auditors’ Group (SLACIAG) Annual Report for 2025 presenting a proposed training approach to support members’ scrutiny activity The Committee had approved the Internal Audit Plan for 2025/2026 in February 2025. Information was provided on the work undertaken since the last progress report, which was considered by the Committee on 10 March 2026. The report highlighted that, as at 24 April 2026, 100% of the 2025/2026 Internal Audit Plan had been progressed and 98% of assignments had reached at least draft report stage. One remaining assignment would be carried forward into 2026/2027 to be completed in that year. The level of progress was considered sufficient to support the audit opinion to be presented in the Annual Assurance Report in June 2026. It was anticipated that performance would be reported positively against the full suite of indicators for the year ended 31 March 2026. A summary of the audit output from assignments completed between 14 February and 24 April 2026 was detailed in Appendix 1 to the report. Six assignments from the 2025/2026 Plan had been completed during the period, as detailed in the table at paragraph 4.2 of the report. GIAS required re-consideration of the Internal Audit Plan as the year progressed to ensure that it continued to be risk-based and aligned with the organisation’s objectives. This review had been undertaken periodically throughout the year and, where required, proposed amendments to the Internal Audit Plan had been presented to the Committee for approval. Details were also provided on:- Internal Audit Plan recommendations, as detailed in Section 5 of the report emerging risks and issues, as detailed in Section 6 of the report an update on compliance and standards, including information on a Quality Assurance and Improvement Programme (QAIP), which was a mandatory framework used to evaluate and ensure that an Internal Audit function conformed to GIAS, as detailed in Section 7 of the report governance and Committee engagement, as detailed in Section 8 of the report Throughout the year, the internal audit function in the Council had continued to form part of the SLACIAG in Scotland. The Group had convened meetings during 2025/2026 that had allowed the sharing of best practices and provided opportunities to attend presentations on topical issues. A copy of the SLACIAG 2025 Annual Report was attached at Appendix 2 to the report. The Chartered Institute of Public Finance and Accountancy (CIPFA) recognised that Audit Committee effectiveness depended on members having, and maintaining, the right knowledge and skills. The Council had in place a structured induction programme for all elected members, which was supplemented with specific training for members of this Committee. The objective of that training was to ensure that members of the Committee understood the purpose and remit of the Audit Committee, the difference between scrutiny and assurance and how internal audit, external audit, risk management and governance interacted. Those principles were embedded in CIPFA’s Position Statement - Audit committees in Local Authorities and Police, which was published in 2022. Using that guidance, a checklist had been prepared that would be shared with members to allow them to self-assess their current role as a member of the Council’s Audit Committee and, based on responses, would inform a wider training programme to support scrutiny activity within the Council, as fully detailed in paragraphs 10.4 to 10.9 of the report. The Internal Audit Manager responded to a member’s question on the proposed training arrangements, including the use of online learning resources to support members’ development and scrutiny activity. 6
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The Committee decided: (1) that progress with the delivery of the 2025/2026 Internal Audit Plan be noted; (2) that output from internal audit assignments completed in the period 14 February to 24 April 2026, as detailed in Appendix 1 to the report, be noted; (3) that the content of the Scottish Local Authority Chief Internal Auditor’s Group (SLACIAG) Annual Report for 2025 be noted; and (4) that the proposed training approach to support members’ scrutiny activity be noted. [Reference: Minutes of 18 February 2025 (Paragraph 4) and 10 March 2026 (Paragraph 4)] 4 Accounts Commission - Code of Audit Practice Consultation A report dated 1 May 2026 by the Executive Director (Finance and Corporate Resources) was submitted providing a summary of the Council’s response to the Accounts Commission consultation on the new Code of Audit Practice, which would be effective from 2027/2028. In February 2026, Audit Scotland, on behalf of the Auditor General and the Accounts Commission, intimated that they were opening a consultation on the revised Code of Audit Practice (the Code) that governed all appointed auditors, performance auditors and Best Value auditors in Scotland. The Code was reviewed every 5 years to ensure it remained fit for purpose and was aligned to legislation, contemporary audit expectations, and the changing public service landscape. Stakeholder feedback had indicated that the current 2021 Code was broadly effective but required important refinements in areas such as proportionality, Best Value, assurance standards and clarification of core concepts. Responses to the consultation were invited by 27 March 2026 and the Council submitted a response by the due date. A summary of the response to the consultation, submitted by the Council, was detailed in Appendix 1 to the report. The Committee decided: that the Council’s response to the Accounts Commission consultation on the Code of Audit Practice, submitted in March 2026, be noted. 5 Audit Scotland – Annual Assurance and Risks Report 2024/2025 A report dated 27 April 2026 by the Executive Director (Finance and Corporate Resources) was submitted providing a summary of the information contained within the Audit Scotland Annual Assurance and Risks Report 2024/2025, published in March 2026. The Annual Assurance and Risks Report was an Annual Report by the Controller of Audit to the Accounts Commission, made public for the first time since 2021. It brought together a wealth of evidence from annual audit reporting. The Audit Scotland report highlighted recurring themes across 2024/2025 audits, helping support individual bodies and the wider sector to plan and deliver improvements. Alongside wider audit intelligence, it also helped inform the Accounts Commission’s selection of a Best Value theme for 2026/2027. 7
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The report had been divided into 2 parts:- an overview of audit delivery and highlights the key risks raised in the 2024/2025 annual audit reports for councils and Integration Joint Boards (IJBs) the processes in place to identify emerging risks and address those through timely and high-quality audit work An Executive Summary of the Report was provided in Section 4 of the Executive Director’s report. The key messages from each of the 2 parts were detailed in Sections 5 and 6 of the report, together with comments, where appropriate, in relation to the Council’s position on those matters. Further information on relevant, recent publications was detailed in appendices 1 and 2 of the report. The Committee decided: (1) that the key messages and recommendations of the Audit Scotland Annual Assurance and Risks Report 2024/2025, as detailed in Sections 4 and 5 of the Executive Director’s report, be noted; and (2) that the information on relevant recent publications, as detailed in appendices 1 and 2 to the report, be noted. 6 Financial Resources Scrutiny Forum Activity A report dated 20 April 2026 by the Executive Director (Finance and Corporate Resources) was submitted on reports considered by the Financial Resources Scrutiny Forum in the period from May 2025 to April 2026. A report on the business considered by the Financial Resources Scrutiny Forum Activity would continue to be submitted to the Risk and Audit Scrutiny Committee on an annual basis. The Committee decided: that the summary of reports considered by the Financial Resources Scrutiny Forum for the period May 2025 to April 2026, as detailed in Appendix 1 of the report, be noted. [Reference: Minutes of 6 May 2025 (Paragraph 5)] 7 Forward Programme for Future Meetings A report dated 30 April 2026 by the Executive Director (Finance and Corporate Resources) was submitted on the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 23 March 2027. As part of future arrangements, members were invited to suggest topics for inclusion in the Committee’s forward programme. The Committee decided: that the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 23 March 2027 be noted. [Reference: Minutes of 10 March 2026 (Paragraph 10)] 8
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8 Urgent Business There were no items of urgent business. 9
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RISK AND AUDIT SCRUTINY COMMITTEE Minutes of special meeting held via Confero and in Committee Room 1, Council Offices, Almada Street, Hamilton on 23 June 2026 Chair: Councillor Elaine McDougall Councillors Present: Councillor Ralph Barker, Councillor Colin Dewar, Councillor Ross Gowland, Councillor Julia Marrs (substitute for Councillor Mary Donnelly) Councillors’ Apologies: Councillor Matthew Buchanan, Councillor Mary Donnelly (Depute), Councillor Monique Equi, Councillor Alistair Fulton, Councillor Richard Lockhart Councillor Also Present: Councillor Gerry Convery Attending: Chief Executive’s Service P Manning, Chief Executive Finance and Corporate Resources J Taylor, Executive Director; Y Douglas, Internal Audit Manager; S Jessup, Administration Assistant; I Opatha, Administration Officer; L O’Hagan, Head of Finance (Strategy); I Strachan, Head of Administration and Legal Services Also Attending: Audit Scotland A Barclay and J Boyd, External Auditors 1 Declaration of Interests No interests were declared. 2 Internal Audit Annual Assurance Report 2025/2026 A report dated 29 May 2026 by the Internal Audit Manager was submitted providing:- an update on Internal Audit’s compliance with the Global Internal Audit Standards (GIAS) a summary of the progress and performance of Internal Audit in the provision of Internal Audit services in 2025/2026 details of the output and overall findings from the delivery of an approved programme of work in 2025/2026 an independent conclusion and opinion on the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements for the year ended 31 March 2026 Internal Audit was noted as forming part of the Council’s wider governance framework, with its primary objective being to evaluate and improve the effectiveness of governance, risk management and control processes. As a function, it did this by delivering a programme of audit assignments and using the output from those reviews to inform an annual audit opinion on the effectiveness of the Council’s framework of governance, risk management and control arrangements. 3 11
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Details were provided on:- the purpose of Internal Audit a link to the Council’s objectives and top risks approach of the Service compliance with GIAS Internal Audit workload and performance areas of assurance relating to government, risk management, and internal control summary of overall assurance and annual audit opinion The annual self-assessment exercise for 2025/2026, detailed in Appendix 1, concluded that the Service complied with the principles and requirements of GIAS, with no impairment to the function's objectivity or independence during the year. As the Standards had only been introduced at the start of 2025/2026, opportunities remained to further embed compliant processes. The next External Quality Assessment, to be undertaken by Argyll and Bute Council on a reciprocal, no-fee basis, had been scheduled for 2028/2029. Section 4 of the report detailed Internal Audit's progress with delivering the 2025/2026 Internal Audit Plan and its performance in the provision of Internal Audit services during the year. Progress with the delivery of the 63 assignments in the 2025/2026 Audit Plan was provided, with one assignment still in progress on 30 April 2026. Each audit undertaken in the year had been conducted in conformance with GIAS, and no planned assignments had required to be deferred to a future year to accommodate unplanned work. The output and overall findings from Internal Audit work across governance, risk management and internal control were outlined in Section 5 of the report, including work on the Annual Governance Statement, compliance with recent fraud and procurement legislation, progress on top risks including business continuity, cyber security and sustainability, and findings from audits including early years fees, self-directed support, overtime processes, licensing and stores. Twelve investigative assignments had been completed, with most having found substance to the concerns raised. Section 6 of the report, together with Appendix 3, detailed Internal Audit's conclusions on the level of assurance being provided in 2025/2026, based on delivery of the approved Internal Audit Plan. There were no impairments to the independence or objectivity of Internal Audit activity during the year, and no restrictions had been placed on scope, access or reporting. The Internal Audit Manager responded to members’ questions on various aspects of the report. Following the discussion, officers undertook to ensure that cyber security and systems training would be included in the 2026/2027 training programme, following the Members’ Training Needs Assessment. The Chair, on behalf of the Committee, thanked the Internal Audit Manager and wider team for the extensive Internal Audit work undertaken in 2025/2026. The Committee decided: (1) that the assessed level of Internal Audit’s compliance with the Global Internal Audit Standards (GIAS), as set out at Section 3 and Appendix 1 of the report, be noted; (2) that Internal Audit’s progress with delivering the 2025/2026 Internal Audit Plan, as outlined at Section 4 of the report, be noted; (3) that Internal Audit’s performance, as set out in Section 4 of the report, be noted; 12
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(4) that the output and overall findings from Internal Audit work, as outlined in Section 5 of the report, be approved for inclusion in South Lanarkshire Council’s 2025/2026 governance statement; and (5) that Internal Audit’s conclusions on the level of assurance being provided in 2025/2026, as outlined in Section 6 and Appendix 3 of the report, be noted. [Reference: Minutes of 25 June 2025 (Paragraph 3) and 30 December 2025 (Paragraph 3)] 3 Annual Governance Statement for 2025/2026 and Significant Governance Areas Quarter 4 Progress Report A report dated 3 June 2026 by the Executive Director (Finance and Corporate Resources) was submitted on the proposed Annual Governance Statement for 2025/2026 for inclusion in the Council’s 2025/2026 Annual Accounts, and a progress update on significant governance areas for Quarter 4. Each year, the Council undertook a review of the governance arrangements required to support its financial and operational controls. That review provided the basis for the Annual Governance Statement, which was included in the Council’s Annual Report and Statement of Accounts. The Council’s governance assurance framework was detailed in Appendix 1 to the report. The resulting Annual Governance Statement for 2025/2026, attached as Appendix 2 to the report, provided information on the Council’s compliance during 2025/2026. The annual review of governance arrangements across the Council demonstrated sufficient evidence that the principles of delivering good governance in local government, contained in the Local Code of Corporate Governance, operated effectively and that the Council complied with its Code. Progress on the significant governance areas highlighted within the Annual Governance Statement 2025/2026 was attached as Appendix 3 to the report. The Committee decided: (1) that the Annual Governance Statement, attached at Appendix 2 to the report, which would be included in the Council’s 2025/2026 Annual Report and Statement of Accounts, be approved; and (2) that progress against the significant governance areas identified within the Annual Governance Statement 2025/2026, attached at Appendix 3 to the report, be noted. [Reference: Minutes of 25 June 2025 (Paragraph 4)] 4 Unaudited Annual Accounts 2025/2026 A report dated 5 June 2026 by the Executive Director (Finance and Corporate Resources) was submitted on the requirement to consider the unaudited Annual Accounts of the Council and related Charitable Trusts. The Council’s Unaudited Annual Accounts detailed key information on the Council’s expenditure and income for the financial year ended 31 March 2026. The accounts also covered the Charitable Trusts managed by the Council. 13
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The full Unaudited Annual Accounts would be circulated to all elected members following their submission to the External Auditor by 30 June 2026 and would be advertised as being available for public inspection on the Council’s website from 1 July 2026 until the date the Audited Accounts would be published. The information contained in the Unaudited Accounts took into account the final outturn position, as detailed in Appendix 2 to the report, which would be submitted for approval to the Executive Committee meeting on 24 June 2026. Appendix 2 also provided an Expenditure and Funding Analysis, as required by the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Accounting Practice. Following the audit of the Accounts over the summer months, the Audited Annual Accounts would be brought back to the Committee at its meeting on 29 September 2026 for approval. The Chair thanked the Executive Director (Finance and Corporate Resources), the Head of Finance (Strategy) and the wider team for the comprehensive work that had been undertaken to prepare the annual accounts. The Committee decided: that the unaudited Annual Accounts of the Council and related Charitable Trusts, to be submitted to Audit Scotland by the deadline of 30 June 2026, be noted. [Reference: Minutes of 25 June 2025 (Paragraph 5) and Minutes of the Executive Committee of 24 June 2026 (Paragraph 3)] 5 Urgent Business There were no items of urgent business 14
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Internal Audit Manager Subject: Internal Audit Activity Report 1. Purpose of Report 1.1. The purpose of the report is to:- provide assurance regarding Internal Audit’s independence and ongoing objectivity report on the level of compliance with the Global Internal Audit Standards (GIAS) update the Committee on the progress, performance and output from Internal Audit in the period 25 April to 31 July 2026 in delivery of the 2026/2027 Internal Audit Plan summarise internal audit work that has been reported to the Glasgow City Region City Deal Cabinet in May 2026 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that Internal Audit’s independence and ongoing objectivity be noted; (2) that the level of compliance with the GIAS be noted; (3) that progress with delivering the 2026/2027 Internal Audit Plan be noted; (4) that performance in the period to 31 July 2026, as detailed in Appendix 1, be noted; (5) that output from internal audit assignments completed in the period 25 April to 31 July 2026, as summarised at Appendix 2, be noted; and (6) that the output from internal audit work reported to the Glasgow City Region City Deal Cabinet be noted. 3. Executive Summary Area Status Comment Audit Plan Delivery 65% in progress, 8% at report stage. Audit Recommendations See Section 8. Audit Opinion Outlook No issues likely to impact audit opinion. Independence and Objectivity No impairments identified. GIAS Compliance Compliance maintained. Quality Improvement Actions New practices being embedded. Resourcing Position No vacancies. 4. Compliance and Standards Update 4.1. As an audit committee, the Risk and Audit Scrutiny Committee (RASC) has a key role to play in ensuring that the internal audit function adheres to the Global Internal Audit Standards (GIAS) and is fulfilling its mandate effectively and efficiently. The 4 15
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role of audit committees is set out in some detail in Domain Three of the Standards, “Governance of the Internal Audit function”. The RASC can demonstrate support for the Service by engaging constructively with Internal Audit’s findings, conclusions and advice and through this be ensured that the Service is complying with the Standards and fulfilling its mandate. 4.2. The Code of Practice for the Governance of Internal Audit in UK Local Government further assists with the interpretation of the new GIAS. Specifically, in relation to these activity updates, ensuring content is such to allow Audit Committees to effectively scrutinise and challenge. 4.3. In the period being reported, Internal Audit has maintained organisational independence with there being no actual or perceived conflicts of interest impairing audit work. In undertaking audit work the function has retained unrestricted access to records, personnel and property. 4.4. The level of the Service’s compliance with the Standards are assessed using a Quality Assurance and Improvement Program (QAIP). The status of each element of the QAIP is set out in the table below:- Activity Status Comment Ongoing Monitoring Routine review processes. Annual Self-Assessment Completed at year end (next due March 2027). Stakeholder Feedback Head of Service questionnaire issued August 2026. Findings to be reported to RASC November 2026. Improvement Actions Continuing to embed new practices in 2026/2027. External Quality Assessment Argyll and Bute Council will review South Lanarkshire Council (SLC) in 2028/2029. 4.5. The 2025/2026 Internal Audit Annual Assurance Report, presented to this Committee in June 2026, confirmed that this program had concluded that, in 2025/2026, Internal Audit generally conforms to the Global Internal Audit Standards and had met its approved performance objectives. Ongoing monitoring has confirmed this position as being unchanged in the period to 31 July 2026. 4.6. Members are asked to note the update on compliance with GIAS and the current status of monitoring activity. 5. Audit Plan: Progress and Performance Audit Plan: Progress 5.1. The Internal Audit Plan for 2026/2027 was approved by the Risk and Audit Scrutiny Committee (RASC) in March 2026. A copy of this plan can be found here. This the first progress report to the RASC on the 2026/2027 Internal Audit Plan and reports on the work completed in the period 25 April to 31 July 2026. A summary of the progress, delivering this Plan, to date is as follows:- 65% of 2026/2027 Internal Audit Plan is in progress 8%1 of assignments are at draft report stage 94%2 of performance indicators are meeting target 1 A further 15% are anticipated to be at draft report stage by November 2026 with a further 38% relating to assignments that run through the year 2 Of reportable performance indicators at 31 July 2026 16
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5.2. GIAS requires re-consideration of the Plan as the year progresses to ensure that it continues to be risk-based and aligns to the organisation’s objectives. Throughout the year there remains a risk of unforeseen service demands and, though a less significant risk, challenges around responding timeously to team up-skilling requirements, particularly around the development of digital skills. These risks are mitigated by inclusion of contingency time within the annual plan, a focus on coaching and training and setting realistic expectations around the extent to which data analytics can begin to be incorporated more widely within audit assignments. 5.3. There is also a wider, more strategic risk of significant, subsequent amendments to the Plan, arising from a change in the Council’s priorities or risks. This is managed by a regular re-assessment of capacity to allow incremental adjustments to the content of the Audit Plan and reporting to the RASC as the year progresses. 5.4. Although most of the available contingency time has been allocated by July 2026, there are no significant concerns, at this point in the year, around the overall deliverability of the Plan ahead of presenting an annual report in June 2027. Audit Plan: Performance 5.5. Having provided the mandate for an internal audit service to be delivered within South Lanarkshire Council (SLC), that includes the authority, role and responsibilities under which Internal Audit operates, the Committee should satisfy itself that the function is fulfilling its mandate. One way in which this can be done is to review how the Service is performing. 5.6. Performance indicators for the period to 31 July 2026 are set out in Appendix 1 alongside targets and an overall assessment as to whether it is anticipated that these will be met by 31 March 2027. All indicators have been included for completeness but some are not reported until the end of the financial year. The table notes how these will be progressed to provide assurance that all aspects of performance are being managed. 5.7. Members are asked to note progress with delivering the approved Plan in the reporting period, and that overall performance against delivery targets is positive in the period to 31 July 2026. 6. Audit Plan: Output and Key Findings 6.1. Six assignments, conducted in conformance with GIAS, have been concluded in the period 25 April to 31 July 2026:- Audit Assignment Scope of Assignment 2025/2026 City Deal Governance Statement Provide an assurance statement to inform Glasgow City Region’s Governance Statement for 2025/2026. 2025/2026 South Lanarkshire Council Governance Statement Assist with the preparation and drafting of South Lanarkshire Council’s Governance Statement for 2025/2026. 2025/2026 Annual Report Prepare and present annual statement of assurance and express an audit opinion for the year ended 31 March 2026. 2024 National Fraud Initiative (NFI) Exercise Conclude investigations and report on outcome of the 2024 NFI Exercise. Freedom Of Information Request Respond to a freedom of information request 17
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Freedom Of Information Request Respond to a freedom of information request. 6.2. A summary of the audit output for each of these assignments is detailed in Appendix 2. 6.3. In addition to completing work across these audit areas, audit work for external clients has been progressed in the period, with 2025/2026 annual reports being presented to the relevant external Committee or Board. 6.4. Members are asked to note the assignments completed and closed in the period. 7. Wider Assurance Activity: Glasgow City Region City Deal 7.1. At the May 2026 Cabinet meeting of the Glasgow City Region City Deal, internal audit reports were presented on audits of the levels of compliance with the Fair Work First (FWF) policy and Clyde Mission Heat Decarbonisation Fund (CM-HDF) governance arrangements along with a proposed programme of audit work for 2026/2027. As has been previous practice, a summary of these reports is included within this update report. A copy of the full reports can be found here. 7.2. The report on the FWF policy reported on a review of compliance with the Scottish Government’s FWF policy across the City Deal Programme. It was reported that there was a reasonable level of assurance that controls were adequate and effective but highlighted some scope for improvement in the existing arrangements. Whilst there were 2 separate recommendations, neither of these related specifically to SLC. 7.3. Separately, a review of the CM-HDF governance arrangements within the Glasgow City Region reported that controls in operation within the Fund were adequate and effective and, as such, there were no recommended areas for improvement. 7.4. The final report presented was the proposed 2026/2027 Internal Audit Plan. At the meeting in May 2026, the Cabinet approved the proposed programme of work, which is to review the arrangements in place for managing the Community Benefits Hub; provide advice and guidance throughout the year to the Programme Management Office; undertake Phase 2 of the review of the CM-HDF fund and to follow up on progress in implementing previous audit recommendations. 7.5. Members are asked to note the content of these reports and that a summary of Internal Audit reports presented to the Glasgow City Region Cabinet will continue to be reported once published. 8. Audit Plan: Recommendations 8.1. Across all of the assignments concluded in the period, Council Resources have demonstrated a good level of engagement and, where required, an action plan has been developed and agreed to address areas for improvement. These actions are logged together with a ‘responsible owner’ and a due date. Verbal updates are obtained when the action falls due. This is classed as informal follow up and performance data included within routine indicators reported to RASC. Separately, actions are formally followed up to confirm that there is evidence of action being taken and the findings of these reviews reported to RASC throughout the year. 8.2. Five internal audit actions fell due in the period to 30 June 2026. 40% have been verbally advised as implemented on time. The remaining 3 actions that are outstanding are anticipated to be implemented by September 2026. Progress with 18
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delivering audit recommendations will continue to be monitored and performance for 2026/2027 will be reported as part of the annual report presented in June 2027. 9. Emerging Risks and Issues 9.1. The Council’s top risks were reviewed and reported to the RASC in September 2025. These revised risks have been mapped to the approved 2026/2027 Internal Audit Plan with 9 from 16 of the top risks (categorised as very high or high) within the scope of planned assignments in 2026/2027. 9.2. New and emerging risks will continue to develop as the year progresses and there are periodic re-assessments of the Plan to ensure that it remains risk-based and aligned to the organisation’s objectives. Any proposed amendments to the Plan will be presented to RASC for approval. 10. Governance and Committee Engagement 10.1. The Council’s Internal Audit Manager attends all meetings of the RASC. The authority of the internal audit function is established through its direct reporting relationship to the Council’s audit committee that allows for unrestricted access. 10.2. Plans are being put in place for members of the RASC to meet privately with the Internal Audit Manager, as required by GIAS, in November 2026. 11. Members Training 11.1. The Standards reference key tasks for an audit committee across any year. Opportunities to further support Members are being considered alongside the continuation of one-to-one or group support for members to ensure appropriate scrutiny by them in their role. 11.2. A summary of the main tasks for the audit committee in 2026/2027 and progress to date is set out in the table below:- Activity Status Comment Audit Plan approved 2026/2027 Audit Plan approved March 2026 Charter reviewed Charter reviewed March 2026 Mandate reviewed Mandate reviewed March 2026 Self-Assessment completed Issued August 2026 Private Sessions Held Planned November 2026 Member Training Delivered Plan being developed. Outline approach reported May 2026. 11.3. The purpose of training is to ensure that members of the RASC understand the purpose and remit of the audit committee, the difference between scrutiny and assurance and how internal audit, external audit, risk management and governance interact. 11.4. A checklist has been developed and issued to Members to allow members to self- assess their own role on the Council’s RASC and responses will inform a wider training programme to support scrutiny activity. 11.5. As previously reported, it is intended that this training will cover governance (the roles and responsibilities of the RASC and the annual governance statement process); Internal and External Audit functions and the requirements of GIAS; risk management arrangements and financial reporting. 19
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11.6. Specifically, in relation to GIAS, this will include a clear understanding of members’ roles in approving the Internal Audit Charter and Mandate and having oversight of Internal Audit’s strategy, resourcing and QAIP. 11.7. Regular updates will be provided within these activity reports as training arrangements are developed and delivered during 2026/2027. 12. Employee Implications 12.1. There have been no changes to the team in the period to 31 July 2026 and there are no vacancies within the Service. Training arrangements includes regular team briefs, internal training sessions, attendance at professional body conferences and external seminars and briefings. Further online resources have been secured to support team training throughout the year. 13. Financial Implications 13.1. The Internal Audit plan for the year aligns to the budget that has been set, and sufficient resources are in place to deliver the approved programme of audit assignments. 14. Climate Change, Sustainability and Environmental Implications 14.1. There are no Climate Change, Sustainability or Environmental implications in terms of the information contained within this report. 15. Risk and Other Implications 15.1. There are no risk implications in terms of the information contained within this report. 16. Integrated Impact Assessment and Consultation Requirements 16.1. This report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment or consultation is required. 16.2. There was no requirement to undertake any consultation in terms of the information contained in this report. 16.3. Heads of Service are consulted on each and every audit assignment. Yvonne Douglas Internal Audit Manager 31 July 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk Audit Scrutiny Committee – 10 March 2026 (2026/2027 Internal Audit Plan Report) List of Background Papers Figtree extracts of Action Plans 20
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Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Internal Audit Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 21
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Key audit performance indicators for the period to 31 July 2026 Appendix 1 Measures reported during financial year No Area Monthly Measure Target Actual Status 1 Operation Number of open vacancies 0 0 2 Operation Employees holding a qualification from a recognised CCAB body or Institute of Internal Auditors 75% 88% 3 Operation Number of audits completed that comply with the requirements of Global Internal Audit Standards 100% 100% 4 Operation Number of processes in year where we use continuous control monitoring 5 3 Anticipate target met by March 2027 5 Operation Plan completed to draft report stage by 30 April 100% 8% Anticipate target met by March 2027 6 Performance Internal Audit recommendations delivered on time 80% 40% Outstanding actions implemented by September 2026 7 Performance Utilisation of contingency time by 30 April 100% 81% Anticipate target met by March 2027 8 Performance Planned assignments deferred to a future year to accommodate unplanned work 0 0 9 Performance Draft reports issued by target date 80% 100% 10 Performance Audit assignments completed within budget days 80% 100% 11 Performance Top risks covered in the audit plan on an annual basis 33% 56% 12 Performance Number of Council Services covered by Audit Plan on an annual basis 33% 60% 13 Strategic Number of audits where objectivity or independence is impaired 0 0 14 Strategic Audits that align to the Council's values 100% 100% 15 Strategic Internal Audit Manager attendance at meetings of the RASC 100% 100% 16 Strategic Number of formal complaints about the Service 0 0 22
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No Area Monthly Measure Target Actual Status 17 Strategic Audit Plan presented to Risk and Audit Scrutiny Committee March 2026 10 March 2026 18 Strategic Annual Internal Audit Report presented to Risk and Audit Scrutiny Committee June 2026 23 June 2026 Measures to be reported later in the year No Area Monthly Measure Target Actual Status 19 Strategic Meeting with members of the Risk and Audit Scrutiny Committee (in private and without senior management) 1 - Reported December 2026 20 Strategic Meetings with five Executive Directors and Chief Executive 1 - Reported December 2026 21 Performance Internal Audit recommendations followed up 80% - Reported March 2027 22 Performance Meetings with Heads of Service during each audit 2 - Reported March 2027 23 Operation Number of training days per employee 5 - Reported March 2027 24 Strategic Audit Strategy presented to Risk and Audit Scrutiny Committee March 2027 - Reported March 2027 25 Operation Number of key performance indicators achieved 100% - Reported March 2027 26 Performance Planned annual audit days delivered by 30 April 100% - Reported March 2027 27 Strategic Issue of Service questionnaires to support audit planning process and assess levels of satisfaction with the Service March 2027 - Reported March 2027 23
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Definition of Measures AREA DEFINITION Operation measures that assess day to day operational targets for the Service Performance measures the effectiveness of the Service in its delivery of core objectives Strategic measures as to how activity aligns to wider organisational objectives STATUS DEFINITION anticipate that target will not be met by 31 March 2027 anticipate that target will be met by 31 March 2027 but some slippage that requires corrective action anticipate that target will be met by 31 March 2027 24
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Assignments completed 25 April to 31 July 2026 Appendix 2 Number Assignment name Draft Issue Final Issue Audit Conclusion I100001 2025/2026 City Deal Governance Statement 21/05/2026 21/05/2026 Provision of governance statement for City Deal I200001 2025/2026 South Lanarkshire Council Governance Statement 23/06/2026 23/06/2026 Participation in process to develop and draft South Lanarkshire Council’s 2025/2026 Governance Statement. Draft version presented to the RASC 23 June 2026. I200005 2025/2026 Annual Report 23/06/2026 23/06/2026 Preparation and presentation of 2025/2026 Annual Report. Presented to RASC 23 June 2026. I600002 2024 National Fraud Initiative Exercise 31/07/2026 31/07/2026 Completion of the 2024 National Fraud Initiative Exercise. Concluded investigations and reported to RASC 25 August 2026. I600009 Freedom Of Information Request 27/07/2026 27/07/2026 Responded to FOI. I600019 Freedom Of Information Request 24/07/2026 24/07/2026 Responded to FOI. No assignment generated an action plan 25
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland – ‘Annual Report and Accounts 2025/2026’ and ‘Code of Audit Practice 2026’ 1. Purpose of Report 1.1. The purpose of the report is to:- provide the Committee with a summary of the Audit Scotland reports: ‘Annual Report and Accounts 2025/2026’ and ‘Code of Audit Practice 2026’ 2. Recommendation(s) The Committee is asked to approve the following recommendation(s):- (1) that Audit Scotland’s output against its 5 strategic priorities be noted (Section 4); and (2) that the responsibilities of Audited Bodies, as set out by the Code of Audit Practice 2026, be noted. 3. Background 3.1. Audit Scotland is the public body responsible for providing independent assurance on how effectively public money is managed and spent across Scotland’s public sector. Its work supports the Auditor General for Scotland and the Accounts Commission in holding public bodies, including councils, to account. In addition, Audit Scotland makes an important contribution by providing independent assurance, insight and reporting in public interest. 3.2. Their work includes auditing public bodies’ financial statements, assessing governance and financial management arrangements, and examining how effectively public bodies use their resources to deliver outcomes. In recent years, their work has contributed to a greater focus on public service reform, with an emphasis on the need to move from short-term approaches towards longer-term, systemic planning. 3.3. Each year Audit Scotland publishes an annual report on their own performance, activities and impact over the financial year. The report sets out the contributions Audit Scotland makes to improving the management, oversight and reporting of £60 billion of public spending, and how they will deliver their ambitions for the future of public audit in Scotland. The annual report also includes an Accountability Report as well as Audit Scotland’s Financial Statements. Since 2023/2024, the outputs covered by the annual report have been directly linked with the vision and mission as set out by the paper Public Audit in Scotland. 5 27
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3.4. In June 2026, Audit Scotland published their 2025/2026 annual report (Annual Report and Accounts 2025/2026), as well as the Code of Audit Practice 2026, which sets out the principles and expectations for public audit in Scotland. 3.5. A summary of the Audit Scotland Annual Report and Accounts 2025/2026 is included in Section 4. Section 5 provides a summary of the updated Code of Audit Practice. 4. Audit Scotland Annual Report and Accounts 2025/2026 4.1. The Audit Scotland report is structured around their 5 Strategic Priorities for 2023 to 2028. Throughout the report, examples are included to show how Audit Scotland’s work is making a difference. Each priority is taken in turn below, concluding with a brief summary of the corresponding ‘Making a Difference’ example:- 4.2. Priority 1: Timely and Impactful Public Audit in 2025/2026, Audit Scotland delivered a substantial audit and assurance programme, auditing 253 sets of accounts covering around £60 billion of public spending it published 17 national performance audits, 9 local government Best Value reports and 12 statutory reports on significant public interest issues, with evidence given to the Scottish Parliament for 9 reports all audited accounts were judged true and fair, and 90% of audited bodies accepted or partially accepted annual audit recommendations, though the report notes slow progress in delivering change Best Value audit is now integrated into annual audit work, with thematic reviews since 2022 covering leadership, workforce challenges and local transformation the 2025/2026 Best Value theme is asset management, including how councils use assets to support corporate priorities, changing population needs and net zero targets. South Lanarkshire Council has received an information request on this topic from Audit Scotland and work is ongoing to provide the relevant documentation Making a Difference 1: Using statutory reporting to highlight risks and drive change Statutory reports not only highlight specific concerns at public bodies but can also provide early warning of emerging risks across organisations and sectors. 4.3. Priority 2: Performance Audit Programme Audit Scotland’s 2025/2026 performance audits found that public services remain financially unsustainable, with rising costs, demand pressures and constrained funding continuing to affect delivery the report recommends stronger long-term financial planning, improved governance and accountability, and greater investment in prevention and service redesign public audit supported parliamentary scrutiny through independent insight, 68 engagements and 10 consultation submissions, alongside coordinated work with other scrutiny bodies the National Fraud Initiative identified £21.5 million of fraud and payment errors through the 2024 data matching exercise, with all councils participating every two years Making a Difference 2: The sustainability of public services From individual public bodies to sectors to the national level, Scotland’s public services are not financially sustainable. Public audit has a role in not only highlighting the problems but in recommending how to address financial sustainability. 28
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4.4. Priority 3: Enhanced Public Audit Approaches Audit Scotland’s Strategic Improvement Portfolio is transforming audit scope, delivery and organisational design to make its work more proportionate, impactful and efficient, with the right skills in place and greater use of technology, including Artificial Intelligence (AI) a central component of this work is the updated Code of Audit Practice, which sets out the scope and expectations of the annual audit (section 5) the Audit Modernisation Project is improving audit delivery through risk-based approaches, upgraded systems, stronger workforce capability, and greater use of AI and automation feedback from public bodies indicates a score of 4.2/5 regarding the usefulness of annual audits and overview reports. Performance audits scored lower in terms of perceived usefulness with a score of 3.9/5 some common areas of good practice identified by the 2025/2026 audits were strong evidence of effective scoping, and accessible records management; good standard of planning files, clear oversight by engagement leads, and scrutiny of key judgements; individual skills and expertise strengthen efficiency and performance of teams; and no common or consistent areas needing improvement Making a Difference 3: A Code for delivering high-quality, proportionate public audit Over the past year, Audit Scotland conducted a root-and-branch review of public audit, supported by extensive internal and external consultation. The outcome is a new Code of Audit Practice, effective from 2027/2028. It sets out a future model that is agile, impactful, proportionate and delivers value for money, while allowing flexibility to reflect ongoing public sector reform and support auditors’ professional judgement. 4.5. Priority 4: Developing Our People and Our Business financial pressures and evolving audit demands are creating challenges staff feedback highlights concerns about resourcing constraints and their impact on performance and wellbeing which is being addressed by improving support and resources a future operating model has been developed, guiding decisions on roles, skills, technology, processes, behaviours, and investment priorities introduction of an integrated business, workforce, and financial plan marks a significant step forward key supporting projects include strategic workforce planning, a new resource management approach, audit modernisation and development of the future audit model, alongside AI and data governance work recruitment controls have been strengthened through a corporate recruitment board and a maintained vacancy factor to manage budgets a new Diversity, Equality and Inclusion (DEI) strategy is progressing, with evidence of improved disclosure rates and increasing representation across some workforce characteristics the gender pay gap has shifted, with female staff earning slightly more on average than male staff in 2025/2026 learning and development remain central, supported by tailored training programmes, leadership development and a large trainee scheme, with high exam pass rates and significant investment in training days environmental performance shows emissions below target for the year but still above longer‑term targets, reflecting a return to normal working patterns and expanded office use 29
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Making a Difference 4: Supporting diversity, equality and inclusion Audit Scotland’s Diversity, Equality and Inclusion (DEI) Strategy 2025 to 2029 sets out an ambitious vision: to be leaders in the Scottish public sector, with a workforce reflective of Scotland’s people and an inclusive culture that delivers audit work addressing inequalities and supporting human rights. In 2025/2026, the first year of delivery, strong progress was made. Of 18 priority actions, 13 are advancing well. 4.6. Priority 5: Insights Driving Innovation and Improvement a mid-term evaluation of the 4 Public Audit in Scotland outcomes assessed progress against intended outcomes, impact and performance monitoring, and led to updates to Audit Scotland’s Corporate Plan a focus on putting AI to practical use where it can enhance insights and efficiency, while maintaining strong controls over data security stakeholder engagement is central to audit effectiveness and ensures that findings and recommendations reach the people they affect, and that Audit Scotland can track and understand the work’s impact received items of public correspondence increased to the highest level in 10 years and 49% of these related to concerns about local government whistleblowing activity has risen by around 84%, with 48 disclosures in 2025/2026 international work is ongoing to help support effective public sector governance and accountability in Scotland and overseas work on human rights and audit includes collaboration with national and international bodies and the development of tools linking budgeting to explore how human rights frameworks can strengthen audit methodologies Making a Difference 5: Evaluating Public audit in Scotland Public audit in Scotland 2023 to 2028 set out the vision and mission for public audit. In it, Audit Scotland described the measurable impact they aim to have in four outcome areas. The mid-term evaluation considered the impact of their work, how this is monitored and evaluated and their contribution to change, and what needs to be improved. 5. Code of Audit Practice 5.1. A report to this Committee on 26 May 2026 noted that Audit Scotland, on behalf of the Auditor General and the Accounts Commission, were opening a consultation on the revised Code of Audit Practice (the Code). The Code governs all appointed auditors, performance auditors and Best Value auditors in Scotland. Stakeholder feedback had indicated that the 2021 Code was broadly effective but required important refinements in areas such as proportionality, Best Value, assurance standards, and clarification of core concepts. South Lanarkshire Council was one of the respondents to the consultation. 5.2. Following the consultation, several refinements have been made to the audit model, including:- a separate assurance framework for bodies with the lowest levels of expenditure; a stronger focus on Best Value in local government by requiring appointed auditors to focus on Best Value, and removing a perceived overlap with wider scope work that annual thematic reviews will continue but will be done on a sample basis and delivered by a central Audit Scotland team 30
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5.3. The Code sits at the centre of the arrangements for public audit in Scotland, and it is a condition of their audit appointment that auditors comply with its requirements. The Code:- sets out the framework for strong and effective public audit which supports accountability and provides independent assurance that public money is spent and reported properly applies to all audit work undertaken by appointed auditors and by performance auditors, including the audit of the annual accounts, which has a wider scope than the private sector, performance auditing and auditing Best Value arrangements reflects the legal requirements for audit, as well the professional standards with which auditors must comply sets out the arrangements which promote auditor independence and monitor audit quality 5.4. Each section of this Code (2026) sets out the responsibilities of audited bodies as required by legislation, other codes, or manuals as summarised below (comments in italics refer to the Council’s position on these key responsibilities): 5.5. Assurance on the Annual Accounts Audited bodies are responsible for preparing and publishing annual accounts and related governance and performance reports that provide a true and fair view of financial performance and position, maintaining adequate financial records and internal controls, ensuring the legality of transactions, assessing going concern, and providing auditors with access to the information required to support independent audit and public accountability. 5.6. The publication of the annual accounts is an essential means by which the audited body accounts for its stewardship and use of the public money at its disposal. The Council prepares its Annual Accounts in line with the Accounting Code of Practice and in line with statutory deadlines set. 5.7. Assurance on Wider Scope Reporting Areas Audited bodies are responsible for ensuring effective governance, sound financial management, financial sustainability, fraud prevention, internal audit, and Best Value arrangements, enabling them to demonstrate proper stewardship of public funds, deliver continuous improvement, and make effective use of resources in achieving their objectives. 5.8. Those with a management role in an audited body and those charged with governance who have oversight of management make a vital contribution to discharging these responsibilities. The Council’s Accounts are approved for issue by the Risk and Audit Scrutiny Committee, and are signed by the Leader of the Council, the Chief Executive and the Council’s Section 95 Officer (Executive Director of Finance and Corporate Resources). 5.9. Assurance on Best Value Arrangements Local government bodies have a statutory duty to secure Best Value through continuous improvement in service delivery and must maintain effective arrangements across the 7 Best Value themes of:- 31
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1. Vision and leadership 2. Governance and accountability 3. Effective use of resources 4. Partnership and collaborative working 5. Working with communities 6. Sustainable development 7. Fairness and equality 5.10. Best Value is defined in the Local Government in Scotland Act 2003 as continuous improvement in the performance of the body’s functions. In the Council’s 2024/2025 Annual Audit, Audit Scotland concluded that the Council had effective and appropriate arrangements in place for securing Best Value, and highlighted the Transformational Change Programme which was clearly linked to our updated Council Plan, financial plans and digital strategy. At least once over the 5-year appointment, the Controller of Audit will report to the Accounts Commission on the Council’s performance in meeting its Best Value duties. The fourth year of this programme runs from October 2026 to August 2027. The Council is included in the coming year of the programme, with a planned reporting date of 2027. 5.11. Planning Audit Work and Reporting Results This section of the Code relates solely to how appointed auditors should plan their audits and reports; however audited bodies still have a key role in facilitating this. Audited bodies are responsible for supporting the external audit process, providing auditors with the information required to undertake their work, considering and implementing audit recommendations, and ensuring appropriate governance oversight of audit findings to promote accountability and transparency. The Council supports the external audit process, providing information as requested, and responding to queries during the audit. Any audit recommendations are reported to Committee and monitored until achieved. 5.12. Assurance on Specific Areas Audited bodies are responsible for preparing and submitting required claims, returns and financial information. In the case of Councils, these are required to submit claims and returns to central government bodies, including claims for housing benefit subsidy and returns for non-domestic rates. Councils are also required to publish Statutory Performance Information (SPI) in accordance with the SPI Direction. 5.13. In addition, local government bodies have a statutory responsibility to make arrangements for public inspection of their accounts, books and records, and that members of the public have a right to lodge a written objection to the accounts. The Council complies with this requirement by advertising the public inspection period and making their Accounts available online. The 2024/2025 audit work assessed that the arrangements the Council has in place for preparing and publishing SPIs, including how we have responded to assessments, were effective and appropriate with the Council website covers all the requirements set out in the SPI direction:- a suite of Public Performance Reports (PPR). Each PPR relates to a service area and are then grouped on the council website by Connect outcome. The reports include information on targets, where applicable, with performance from the prior 32
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2 financial years detailed for both the council and the Scotland average to allow comparison. Annual Performance Spotlights; 'bite-sized' performance information, per Connect Outcome which include, a case study to illustrate how the council is working towards achieving outcomes, infographics giving a visual presentation of performance, identifying whether or not performance is improving, and links to additional more detailed information. 5.14. Insights, Intelligence and other Support Audited bodies have a duty of care to meet their reporting and regulatory responsibilities and ensuring communication with the appointed auditor about timing of regulatory announcements. 5.15. Audited bodies may seek auditors’ views before proceeding with transactions or proposed courses of action but remain responsible for their decisions. Auditor responses do not prevent future challenge by auditors or others entitled to object. 5.16. Assurance on Smaller Audited Bodies Smaller audited bodies remain responsible for maintaining sound governance, financial management, accountability and Best Value arrangements, but are subject to a proportionate audit framework designed to provide appropriate assurance while reflecting the scale, complexity and expenditure of the organisations. The Council also prepares the Accounts for the Lanarkshire Valuation Joint Board and Clyde Valley Learning and Development Joint Committee. These bodies are subject to their own proportionate audits. 5.17. Performance Audits This section of the Code covers the responsibilities of the Auditor General, the Accounts Commission, performance auditors, and appointed auditors for performance audits undertaken by Audit Scotland. 5.18. Audited bodies are responsible for supporting this performance audit activity through the provision of information and evidence, responding to audit findings and recommendations, implementing improvement actions where required, and demonstrating continuous improvement. 6. Employee Implications 6.1. There are no employee implications identified to date. 7. Financial Implications 7.1. There are no financial implications identified to date. 8. Climate Change, Sustainability and Environmental Implications 8.1. There are no implications as a result of this review. 9. Risk and Other Implications 9.1. There are no risk and other implications as a result of this review. 10. Integrated Impact Assessment and Consultation Requirements 10.1. This report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no integrated impact assessment is required at present. 33
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10.2. There was no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 23 July 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Ambitious, self-aware and improving Previous References Risk and Audit Scrutiny Committee, 26 May 2026 (Accounts Commission – Code of Audit Practice Consultation) List of Background Papers None Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Lorraine O'Hagan, Head of Finance (Strategy) Ext: 2601 (Tel: 01698 452601) lorraine.o'hagan@southlanarkshire.gov.uk 34
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Financial Resilience and Sustainability 1. Purpose of Report 1.1. The purpose of the report is to:- provide a position on the Council’s Financial Outlook, financial resilience and sustainability, and how we can respond to the risks posed by the financial challenges ahead 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the Financial Position and Plan for 2027/2028 and 2028/2029 (Section 4), be noted; and (2) that the Financial Resilience Framework (Section 5 and Appendix 1), be noted. 3. Background 3.1. An annual report on the Council’s Financial Resilience and Sustainability is presented to the Risk and Audit Scrutiny Committee. The last report in September 2025 provided a summary of the 2025/2026 to 2026/2027 Budget Strategy, demonstrating the Council’s understanding of the medium-term financial outlook and providing information on the Council’s Financial Resilience and Sustainability. 3.2. A report titled 2027/2028 to 2028/2029 Revenue Budget Strategy was presented to the Executive Committee on 24 June 2026. 3.3. Section 9 of the June 2026 Revenue Budget Strategy report to Executive Committee (link above) noted that an annual update on the Council’s financial sustainability would be presented to the Risk and Audit Scrutiny Committee later in the year. 3.4. This report will, therefore, provide a summary of the 2027/2028 to 2028/2029 Budget Strategy reported in June demonstrating the Council’s understanding of the medium- term financial outlook (Section 4), and Section 5 will provide information on the Council’s Financial Resilience and Sustainability. 4. Financial Position and Plan for 2027/2028 to 2028/2029 4.1. The report to the Executive Committee in June covered the current estimates and assumptions resulting in the budget gap of £26.500 million for the next 2 years. This gap is the result of estimations around grant levels, cost increases, and the impact of temporary solutions previously put in place to manage pressures. This gap did not include any assumption around an increase in Council Tax. 6 35
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4.2. The June 2026 paper highlighted other areas from horizon scanning that could affect the budget gap in the future such as Teacher Numbers / Reduced Contact Time (RCCT), Packaging Extended Producer Responsibility (pEPR) and Emissions Trading Scheme (ETS) with updates to be provided when further information is known. This demonstrates the Council’s understanding of the medium-term financial outlook. 4.3. The June 2026 paper also highlighted that one way of managing the Budget Gap is the programme of Transformational Reviews ongoing across the Council. The 2026/2027 approved Budget included savings of £4.503 million arising from completed Reviews. In addition, two of the savings approved for 2026/2027 have an impact of £0.162 million on the Budget Gap in 2027/2028. 4.4. As the Transformational Reviews continue to progress, proposals will be presented to Members for approval as part of the Budget setting process for 2027/2028 and 2028/2029. This demonstrates a structured approach to identifying savings proposals for members’ consideration and will assist in managing the Budget Gap. 4.5. While any savings from the majority of the Reviews have still to be confirmed, it is unlikely that that they would cover the full extent of the Budget Gap over the next 2 years, currently estimated at over £26 million, without impacting / reducing services provided. 4.6. The June 2026 paper outlined another of the levers available to the Council to reduce the Budget Gap is an increase in Council Tax levels. 4.7. In South Lanarkshire, the comparatively low level of Council Tax we charge sets us apart from other councils and provides options for consideration when addressing the significant budget gap for future years. 4.8. Illustrative increases were provided in the June 2026 paper so that Members can see the impact that Council Tax has on reducing the 2 year cumulative Budget Gap. This again demonstrates the potential structured approach for Members’ consideration as part of assisting in managing the Budget Gap. 4.9. As part of the process of managing the Council’s finances over the coming 2 years, especially given the financial challenges that lie ahead and the Budget Gaps being faced by the Council, consideration again must be given to the Council’s position on resilience. More than ever, the Council needs to be able to demonstrate our strong financial management and how we will manage financially in these difficult times. Financial resilience is covered in the next Section of this report. 5. Financial Resilience 5.1. It is acknowledged that financial resilience is a crucial aspect of financial management and is particularly important in light of the financial pressures facing local government especially following years of inflationary cost increases. It is recognised that this is about more than the reliance on usable reserves, and that councils need to be more comprehensive in their assessment of their level of financial resilience. 5.2. This paper will detail how councils can demonstrate financial resilience, by explaining key aspects of financial strength as well as highlighting the areas that should continue to be monitored or examined further. 5.3. The financial resilience of the Council looks at its ability to anticipate and respond to changes in the internal and external financial environment. In order to do that, it is important to know what resources are available in a time of crisis, and not just 36
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reserves. It is also important to understand the Council’s exposure to loss of income, your level of commitment to expenditure, and to know what flexibility the Council has in terms of accessing funds when they are required. Appendix 1 provides a framework which looks at:- a Review of the Balance Sheet (Appendix 1, Sections 4 to 17 including Council Reserves and Liquidity, Debt and Investment) exposure to Risk (Appendix 1, Sections 18 to 23 including Significant Income Areas, Top Expenditure Commitments and Group Risk) 5.4. A summary of the Council’s performance in terms of the Financial Sustainability element of the Local Government Benchmarks is also included in Appendix 1 (Sections 24 to 30) for consideration. 5.5. As with any set of indicators, there is not necessarily a right or a wrong answer. It is more important that they are used to provide financial context, and it may be that the trend in these figures over a number of years is more of an indicator for action as on an annual basis only, an issue might not be visible or may be overlooked. These indicators will continue to be monitored across time and we will report these to the Risk and Audit Scrutiny Committee on an annual basis. 5.6. Summary of Financial Resilience Framework: The financial resilience framework demonstrates the level of the Council’s financial resilience in a number of ways. The Council holds an uncommitted General Fund Reserve to protect against unforeseen events. This sits alongside a level of earmarked reserves which can be used in a managed way to smooth the impact of pressures across years – for example the Loans Fund Review, Service Concessions and the reduced Pension Fund Contributions. This aligns to the Council’s medium term financial strategy which has been approved by members and demonstrates good financial management through planning and managing key budget pressures. 5.7. The framework shows that the level of debt costs compared to the net income for the Council’s General Fund has remained in line with the previous year with the HRA increasing, reflecting borrowing decisions that are managed within the longer-term HRA business plan. An important point to note that these debt costs are the result of the planned borrowing undertaken by the Council and that the debt repayments are considered affordable as part of our revenue budget. 5.8. As well as looking at what resources are available in times of crisis, the financial resilience of the Council also looks at its ability to anticipate and respond to changes in the internal and external financial environment. In order to do that, it is important to understand the Council’s exposure to loss of income and key areas of budget pressure. The financial resilience framework details the significant income areas and also the areas of high spend / high risk that the Council acknowledges and will continue to monitor. 5.9. The Council participates in the Local Government Benchmarking Framework in relation to assessing sustainability. The Improvement Service note that a direct comparison cannot be drawn due to the nuances of individual councils and their own financial plans. However, reviewing the trend in the Council’s position over time will give context. From the Council’s own perspective analysis of the ratios demonstrates the level of reserves held by the Council was lower than the Scottish average, as is the unearmarked element. However, at a value of £13.043 million, this is deemed an appropriate level but will continue to be monitored. As detailed within their Annual 37
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Audit Review for 2024/2025, Audit Scotland were also satisfied with the Council’s approach to reserve levels and the monitoring process in place which ensures they remain at an appropriate level. The sustainability indicators also note that the Council finished its year-end in a break-even outturn position, which is a positive outturn. 5.10. This paper demonstrates the Council’s financial resilience by explaining its detailed financial planning, its level of reserves and its key financial strengths in term of its balance sheet position. Any risks identified through horizon scanning are mitigated where appropriate through the Budget Strategy, a key part of the Council’s financial resilience framework. 6. Employee Implications 6.1. There are no direct employee implications from this report. 7. Financial Implications 7.1. The financial implications are summarised within the report. 8. Climate Change, Sustainability and Environmental Implications 8.1. There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 8.2. Climate Change targets will have an impact on the Council’s future financial strategies. This will be included in future Budget Strategy papers as appropriate. 9. Risk and Other Implications 9.1. The review of financial resilience is a way of understanding the key financial risks to the Council. The financial strategy is the way in which the Council can manage a number of these key risks which directly impact on the money available to deliver Council outcomes. 9.2. We will continue to monitor and report on these resilience indicators as appropriate. 10. Integrated Impact Assessment and Consultation Requirements 10.1. This report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment is required. 10.2. There is no requirement to undertake any consultation in terms of the information contained in this report. 10.3. However, as the process to identify savings continues, and with proposals to be presented to members later in the year, stakeholder consultation and equality impact assessments will be carried out. The results will be provided to members to inform their decision-making process. Jackie Taylor Executive Director (Finance and Corporate Resources) 30 July 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent 38
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Previous References Risk and Audit Scrutiny Committee, 30 September 2025 (Financial Resilience and Sustainability report) Executive Committee, 24 June 2026 List of Background Papers None Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Jackie Taylor, Executive Director (Finance and Corporate Resources) Ext: 4637 (Tel: 01698 454637) E-mail : jackie.taylor@southlanarkshire.gov.uk 39
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Appendix 1 Financial Resilience – A Framework 1. It is acknowledged that financial resilience is a crucial aspect of financial management, and is particularly important in light of the financial pressures facing local government especially following years of inflationary increases in costs. It is recognised that this is about more than the reliance on usable reserves, and that councils need to be more comprehensive in their assessment of their level of financial resilience. 2. This paper will detail how councils can demonstrate financial resilience, by explaining key aspects of financial strength as well as highlighting the areas that should continue to be monitored or examined further. 3. The financial resilience of the Council should look its ability to anticipate and respond to changes in the internal and external financial environment. In order to do that, it is important to know what resources are available in a time of crisis, and not just reserves. It is also important to understand the Council’s exposure to loss of income, your level of commitment to expenditure, and to know what flexibility the Council has in terms of accessing funds when they are required. 4. A Review of the Balance Sheet: Taking information from the Council’s Balance Sheet at the end of the financial year is a way to assess resilience. Maintaining a strong balance sheet provides the assurance that the Council can respond in the time of crisis and that it can meet its obligations. It is proposed that a Balance Sheet Review would consider the following: • Council Reserves and Liquidity and • Debt and Investment. 5. Council Reserves and Liquidity: It is the responsibility of the Executive Director (Finance and Corporate Resources) to advise the Council on the level of reserves it should hold and to ensure that there are clear protocols for their establishment and use. 6. The Local Authority Accounting Panel (LAAP) provide guidance to the Council’s Section 95 Officer (the Executive Director of Finance and Corporate Resources), on the establishment and maintenance of local authority reserves and balances. The LAAP Bulletin does not prescribe a minimum level of reserves which should be held by a council. It is for the Council to consider an appropriate level of reserves taking cognisance of strategic, operational and financial risks facing the authority at a local level. It does, however, say that Reserves should not be held without a clear purpose. 7. The Council keeps an Uncommitted General Fund Reserves to protect against the risk of unforeseen events. This is considered best practice and demonstrates sound financial planning. As has been advised to members previously, the use of Reserves is not a permanent budget solution but can be used to smooth the impact of pressures across years – for example as we have employed with the monies released by the Loans Fund Review, Service Concessions and the reduced Pension Contributions. If necessary, Reserves can be used to absorb one-off costs to avoid an impact on Resource budgets in-year or can facilitate the rollover of unused elements of grant into the next financial year. 8. Table 1 provides information on the level of Reserves across the past 3 years and looks at these Reserve levels in light of total expenditure commitments. It also looks at the ratio of current assets to current liabilities (Liquidity) in order to determine whether the Council 40
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could use its current assets to cover its current liabilities, if required. Table 1: Reserves and Liquidity 2025/2026 2024/2025 2023/2024 General Fund Useable Reserves (exc. HRA) £170.066m £137.128m £120.467m Movement in Useable Reserves (exc. HRA) £32.938m £16.661m (£43.613m) Useable Reserves / Net Revenue Stream 17.08% 14.61% 14.13% Level of Uncommitted General Fund Reserve £13.043m £13.043m £13.043m Level of Committed Reserves (exc. HRA) £157.023m £124.085m £107.424m Housing Revenue Account Reserve Useable Reserves £6.660m £10.440m £13.221m Movement in Useable Reserves (£3.780m) (£2.781m) £0.360m Useable Reserves / Net Revenue Stream 5.44% 9.14% 12.52% Liquidity Current Assets to Current Liabilities £140.182m/ £564.062m = 0.25 £129.484m/ £435.737m = 0.30 £119.471m/ £277.436m = 0.43 9. Table 1 shows the movement in the Total Useable Reserves of the Council (exc. HRA) as well as the HRA Reserve. The level of committed reserves for the General Fund has increased across years, with the HRA decreasing. At the end of 2025/2026, the General Fund increase reflects the net position from approved transfers to reserves in year, mainly for future budget strategies and timing of investment funding, partially offset by the planned use of reserves in year as part of the budget strategy. The HRA decrease reflects the planned use of reserves as part of the medium term business plan. 10. As a proportion of the Net Revenue Stream, General Fund Reserves have increased over time. While the Council’s Net Revenue Stream (Council Tax and Government Grant) has increased, there has also been an increase in useable reserves reflecting approved transfers to reserves for future budget strategies and the timing of investment funding. As a proportion of the Net Revenue Stream, HRA Reserves have increased over time. Similar to General Fund, the HRA Net Revenue Stream has increased, however there has been a decrease in useable reserves reflecting the planned use of reserves as part of the medium term business plan. 11. In terms of the Council’s liquidity position, the ideal would be that current assets exceed current liabilities. In 2025/2026, the ratio has dipped further due to a planned increase in short term borrowing (as opposed to long term borrowing) while interest rates remain high. In reality, this indicator reflects the Council’s position at a point in time, and there are no concerns regarding the Council’s liquidity position. 12. Debt and Investment: The Council’s Balance Sheet provides information on Debt (borrowing) and Investment levels. It shows whether the Council’s liabilities are short or long term. 13. The Council already prepares a suite of ratios to meet the obligations of the Prudential Framework. The ratios that relate to Debt and Investment are provided in Table 2. Table 2: Debt and Investment 2025/2026 2024/2025 2023/2024 Borrowing 1,012.109 1,030.762 1,034.532 PPP Liability 326.001 323.255 172.036 Gross Debt 1,338.110 1,354.017 1,206.568 General Fund 1,281.946 1,268.007 1,102.027 HRA 335.036 323.678 307.217 41
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2025/2026 2024/2025 2023/2024 Total Capital Financing Requirement 1,616.982 1,591.685 1,409.244 Under / (Over) Borrowed 278.872 237.668 202.676 Investments 60.043 23.582 13.475 General Fund Financing Costs 46.821 45.164 31.249 Net Revenue Stream 995.500 938.760 852.568 Financing Charges to Net Revenue Stream 4.70% 4.81% 3.67% HRA Financing Costs 13.992 10.662 8.155 Net Revenue Stream 122.513 114.273 105.649 Financing Charges to Net Revenue Stream 11.42% 9.33% 7.72% 14. Table 2 shows that the Council’s Gross Debt has decreased since last year reflecting anticipated debt repayment profiles. The Capital Financing Requirement (the level of debt that we need to finance our assets) has increased over the 3 years and this is because our in-year borrowing has been higher than the level of debt repayments made. 15. Comparing the Gross Debt to the Capital Financing Requirement gives a position of under or over borrowing. The Council has under-borrowed. This is a favourable position and is because we did not need to borrow as much as predicted due to the level of cash reserves held. In terms of investments (deposits) – there was an increase in 2025/2026, and this reflects the higher level of cash balances. 16. Finally, the ratio of debt costs to net financing stream for the General Fund and the HRA are sitting at 5% and 11% respectively. This is an increase on the previous year for the HRA and generally reflects the increase in debt payments partially offset by the increase in revenue income. 17. An important point to note is that the borrowing undertaken by the council is planned and the repayments on these debts are considered as affordable as part of our revenue budget. 18. Exposure to Risk: A review of Revenue expenditure and income over time ensures that we know the areas that we need to focus our attention on to ensure we can pre-empt any potential financial pressures. A review of the exposure to risk would look at: • Significant Income Areas and • Top Expenditure Commitments 19. Significant Income Areas: Looking at the Council’s Budget, there are a number of significant high value Income areas outwith the Government Grant / NNDR Income budgets. These are noted in Table 3 as appropriate, giving context on each. Table 3: Significant Income Areas 2025/2026 2024/2025 2023/2024 Council Tax Income 171.929 161.060 159.053 Council Tax Income as a percentage of Net Revenue Stream 17.27% 17.16% 18.70% Parking Income 2.647 2.234 2.031 42
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School Meals Income 3.491 3.585 3.213 Bereavement Income 2.950 2.908 2.979 Planning and Building Standards Income 4.267 3.289 2.885 Early Years Fee Income 2.579 2.387 1.990 Licensing and Registration Income 2.007 1.676 1.503 20. Table 3 shows that as a percentage of the Council’s Total Budget, the level of Council Tax Income has remained in line with 20204/2025. This mainly reflects the increase in both Council Tax and Government Grant in 2025/2026. In financial terms, the level of Council Tax income received in 2025/2026 is actually £11 million higher than the previous year – a positive position reflecting the approved increase in Council Tax and property numbers. 21. The table also shows some significant income budgets and the pattern over recent years. With the exception of School Meals and Bereavement income, these areas are seeing an increase in income year on year. School meals income is affected by changing eligibility criteria and Bereavement income is an area that is under recovering due to demand as well as policy change. They will continue to be monitored to identify whether the pressure reduces. 22. Top Expenditure Commitments: Similarly, there are a number of significant Council budget areas that can be highlighted for a trend analysis, on the basis that they are demand lead, high value budgets and are, therefore, a risk area for the Council. These are noted in Table 4 which notes the actual spend and the variance across years to show the pressure in those areas. Top expenditure commitment areas feature as part of the Council’s considerations when looking at future budget strategies. Table 4: Top Expenditure Commitments 2025/2026 2024/2025 2023/2024 Adult and Older People Social Care - delegated to the IJB 192.502 (breakeven) 181.334 (0.010 under) 182.657 (breakeven) Children and Family Services 54.108 (1.289 over) 50.031 (0.813 over) 47.160 (0.468 over) Waste Services - Facilities, Streets, Waste and Grounds 81.267 (1.297 over) 80.963 (0.176 under 82.954 (0.097 under) * All figures are after approved Transfers to Reserves 23. Table 4 shows that the spend on these areas is increasing over time mainly due to changes in demographics and socio-economic factors which lead to increased demand. Policy changes, both local and national, will also impact spend. For Children and Families and also for Adults and Older People (albeit the services are delegated to the Integration Joint Board (IJB)), the Services continue to manage budget pressures through budget planning. In the same way as the Council, the IJB identify budget gaps, and solutions as part of their medium-term financial planning process. The cost of the Waste Service (as part of the Facilities, Streets, Waste and Grounds) continues to experience high demand and income pressures. These Services will continue to be monitored. 24. Local Government Benchmark Framework: The Local Government Benchmarking Framework includes ratios to assess sustainability. The 2024/2025 data is shown in Table 5. 43
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Table 5: Sustainability – Local Government Benchmark Framework Council Scotland What proportion of my income does the council hold in reserves? 14.5% 19.3% What proportion of my council's revenue is not committed to a specific theme/project? 1.3% 1.9% How much of my council's income is used to service debt? 4.8% 6.0% How much of my council's housing income is used to service debt? 9.3% 20.7% What proportion of my council's budgeted spend is spent in practice? 100.0% 100.1% How much does my council rely on reserves? 0.3% 0.6% 25. Table 5 shows that the Council’s results alongside the national position. It is noted that a direct comparison cannot be drawn due to the nuances of individual councils and their own financial plans. However, reviewing the trend in the Council’s position over time will give context. The data over years since 2013/2014 are included in the Improvement Service website. This data shows the positive position across the Council’s Financial Sustainability indicators. 26. The financial resilience framework and the Local Government Benchmarks detailed above can be used as a basis for assessing the financial resilience of the Council. The aim of the first indicator is to show how much money the Council holds in reserves. At the end of 2024/2025 the Council was lower than the Scottish average. While the significance of the level of reserves held is acknowledged, it must also be acknowledged that most of these reserves are committed. 27. In terms of the uncommitted revenue monies, that refers to the unearmarked general fund and while it is lower than the Scottish average, at a level of £13.043 million, this is deemed appropriate but is kept under review. 28. The third indicator (and the fourth relation to the HRA) refers to the level of loan charges compared to the overall budget. Again, the General Fund loan charges are lower than the Scottish average, and similarly for the HRA. The relevance of this indicator is to consider affordability. The Council and the HRA have planned for the debt, ensuring repayments are sustainable. 29. The fifth indicator looks at the year-end position and as the Council had a breakeven position after approved transfers to reserves (the full budget is spent or committed in year) this is a positive outturn. 30. Finally, the last indicator is new from 2024/2025 and refers to the reliance on reserves in the Council’s budget. The important factor to consider is the purpose and use of reserves, and the fact is that the council is clear on what reserves we have, and the purpose of them. 31. As with any set of indicators, there is not necessarily a right or a wrong answer. It is more important that they are used to provide financial context, and it may be that the trend in these figures over a number of years is more of an indicator for action as on an annual basis only, an issue might not be visible or may be overlooked. 44
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Local Government Budgets 2026/2027 – Summary of Audit Scotland Bulletin 1. Purpose of Report 1.1. The purpose of the report is to:- to provide a summary of the key findings from the Audit Scotland bulletin on local government budgets for 2026/2027 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the summary of the Audit Scotland report (Section 4) be noted; (2) that the progress on the expectations of the 2025/2026 local government budgets report (Section 5 / Appendix 1) be noted; and (3) that the Checklist for elected members (paragraph 5.3 / Appendix 2) be noted. [1rec 3. Background 3.1. In June 2026, on behalf of the Accounts Commission, Audit Scotland published the bulletin ‘Local Government Budgets 2026/2027’ as well as the supplementary paper ‘Checklist of elected members.’ The Local Government Budgets bulletin is divided into 3 parts:- 1. Part 1: Scottish Government Funding to Councils 2. Part 2: Council Budgets 3. Part 3: Consulting with Communities 3.2. The key messages from each of the 3 parts are outlined in Section 4 of this report. Comments in relation to the Council’s position on these are included in italics below the Audit Scotland message where appropriate. 3.3. Section 5 notes progress made against the expectations in the previous report, Local Government Budgets 2025/2026. The expectations are listed in Appendix 1, with accompanying comments in relation to the Council’s position on each. Finally, the checklist for elected members is outlined in paragraph 5.3 and Appendix 2. 4. Part 1: Scottish Government Funding to Councils 4.1. A number of key messages are presented by Audit Scotland in their report in relation to 2026/2027 Council funding. Comments in relation to the Council’s position on these are included in italics alongside the Audit Scotland key messages where appropriate:- 7 45
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4.2. Scottish Government Funding to Councils The Scottish Government will provide a total of £15.7 billion of funding (revenue and capital) to local government in 2026/2027, a 1% real terms increase compared to 2025/2026. However, 28 councils are receiving a lower capital allocation in 2026/2027 compared to the previous year, impacting their ability to invest in local infrastructure, including increasing the pressures on future revenue budgets. The base grant position for the Council for 2026/2027 was £876 million, a cash increase of £52.417 million compared to 2025/2026. After adjustments (required to take this to a year on year / like for like comparison), this was an increase in grant of £12.912 million. 4.3. The Scottish Spending Review projects that revenue funding for councils will decline in real terms by £528 million (4%) between 2026/2027 and 2028/2029. Councils will therefore continue to face significant challenges including where to stop, reduce or significantly redesign services in order to remain financially sustainable. South Lanarkshire Council is already delivering a number of transformation programmes that have the potential to significantly change how services are delivered and how the Council operates. These programmes span organisational redesign, the Council’s property estate, digital development, system modernisation and partnership working. More recent initiatives include participation in the Marmot programme, the Third Sector Review and significant systems developments, as well as the programme of service reviews contributing towards efficiency and savings targets. Outcomes of the Transformational Review Programme and the future Programme Pipeline were reported to the Executive Committee on 24 June 2026. 4.4. The Review also shows that the capital pressures facing councils are set to continue. Capital funding from the Scottish Government to councils is expected to decrease in real terms by £28 million (4%) from 2026/2027 to 2029/2030. 4.5. Between 2024/2025 and 2026/2027, the General Revenue Grant (GRG) has increased in real terms by £869 million (8%). There has been a modest increase in GRG funding to councils over the last year, with a real terms increase of £89 million (0.8%). 4.6. The report notes that much of the new funding is required to meet existing commitments, such as teacher pay increases. Councils must continue using GRG funding for these obligations, limiting flexibility in spending plans. 4.7. Part 2: Council Budgets For 2026/2027, councils reported a General Fund revenue budget of around £18.9 billion, increasing from around £18.3 billion in 2025/2026. Following approval by elected members on 25 February 2026, South Lanarkshire Council’s Revenue Budget for 2026/2027 was set at £1,086.714m. 4.8. Councils are allocating £4.3 billion of revenue funding to Integration Joint Boards (IJBs) in 2026/2027. This represents around 24% of the combined 2026/2027 revenue budgets for all councils and a £220 million real terms increase since last year. 46
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4.9. 20 councils were able to provide information on savings required by IJBs in 2026/2027. Overall, those IJBs are expected to deliver £179 million of savings in 2026/2027, with £103 million from within social care services (57% of all savings required by IJBs). Individual IJBs are acting in response to the significant financial pressures accumulating from rising demand and constrained funding settlements. The Council’s approved Revenue Budget for 2026/2027 includes a Budget for Social Work Resources. This includes budget for the delegated services of the IJB (Adults and Older People), as well as non-delegated services such as Children and Families. The IJB was allocated an additional £2.3 million of funding from the Council’s settlement for 2026/2027. 4.10. Budget Gap At the time of setting their budgets, councils identified a combined budget gap of £528.6 million, representing a gap of around 3% of councils’ total combined General Fund revenue budgets for 2026/2027. 31 Councils reported a Budget Gap in 2026/2027 with only South Lanarkshire Council reporting a surplus (£1.5 million). Before the 2026/2027 Local Government Settlement was received, the Council’s Budget Gap was £14 million (and this included the planned use of reserves). The Council’s Budget Strategy assumed a grant reduction in 2026/2027, therefore the increase in grant of circa £13 million, and other budget areas considered, was a benefit of £15.5 million to the Budget Strategy. This contributed towards the Council reporting a surplus of £1.5 million for 2026/2027. 4.11. At the time of setting their budgets, councils approved measures of around £626.4 million to meet the £528.6 million budget gap and to fund £97.8 million of revenue investment. South Lanarkshire Council set a balanced budget for 2026/2027 on 25 February 2026. This included approved savings of £4.503 million, recurring investment of £3.534 million and non-recurring investment of £31.959 million. 4.12. Councils are planning £179.6 million worth of saving measures through 2026/2027 budgets, representing 1% of the General Fund revenue budget for all councils. Around £168.1 million are recurring savings. 4.13. The Audit Scotland report shows that corporate services have the most individual saving measures across all councils, amounting to around £66.7 million and representing over a third of the total value of all 2026/2027 saving measures. Around 74 individual saving measures are within culture and leisure, economic development and environmental services. This represents around £46.6 million of saving measures. Elected members approved savings totalling £4.503 million as part of the 2026/2027 Budget Setting process. £3.938 million (87%) of these savings were Management and Operational in nature. 4.14. All councils increased their council tax rates in 2026/2027. The average cumulative council tax increase over the last 2 years is 18%. There is no clear link between council size and the level of council tax increase. Overall, percentage increases were lower in 2026/2027 than in 2025/2026. South Lanarkshire Council increased council tax by 6% in 2025/2026 and by 6.5% in 2026/2027, resulting in a cumulative increase of 12.5%. At this level, South Lanarkshire has the lowest level of Council Tax in Scotland. 47
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4.15. In addition, Councils now have the power to set the amount of an additional premium on the council tax rate for empty properties and second homes and several councils plan to make use of the new power in 2026/2027. At a meeting of the Council’s Executive Committee in March 2024, it was agreed that second homes in South Lanarkshire would be subject to the then maximum premium, capped at 100%. As of April 2026, this cap has now been removed, allowing councils to set unlimited premiums. Options for future surcharge levels are being considered and the proposed policy will be brought to the Executive Committee for approval once finalised. 4.16. All councils will increase fees and charges in 2026/2027 and expect to receive £1.2 billion from these increases, representing around 6.7% of the combined revenue budgets. The largest percentage rises are concentrated in environmental services. Income is largely equivalent to the estimated income received in 2025/2026. 4.17. Six councils approved tighter eligibility criteria for certain services i.e. in Glasgow City Council, non-residents will face higher charges (approximately double) for accessing bereavement services compared to those living in the area. 4.18. Seventeen councils are introducing new fees and charges in 2026/2027, mostly within environmental services and economic development and planning. Three councils are removing certain fees and charges in 2026/2027. In line with forecast inflation, South Lanarkshire Council increased all charges that the Council is able to change by 3.3%, generating £0.200 million. An annual increase to planning and building warrant fees, and the introduction of charges for advice and support within the Planning and Regulatory Service generated a further saving of £0.272 million. 4.19. At the end of 2025/2026, councils estimated a total of £2.6 billion in their General Fund, with £2 billion committed. When setting 2026/2027 budgets, councils approved the use of £0.19 billion of General Fund reserves. The Council’s approved Revenue Budget for 2026/2027 includes the planned use of £25.939 million of reserves as approved at the meeting of South Lanarkshire Council on 25 February 2026. 4.20. Capital Budgets The total General Fund capital budget for all councils in 2026/2027 is £3.5 billion, representing a real terms increase of £0.3 billion (9.3%) over the last year. However, 14 councils are reducing their General Fund capital budgets in 2026/2027. The Council received of General Capital Grant funding of £20.951 million. The Council’s Capital Programme, totalling £105.247 million was approved on 25 February 2026. 4.21. Councils intend to borrow £2.48 billion in 2026/2027 to fund local infrastructure projects, a real terms increase of £0.41 billion from the previous year. The Council’s Treasury Management Strategy for 2026/2027 covers the Council’s borrowing strategies and the Executive Director of Finance and Corporate Resources ensures that borrowing is taken at the most appropriate time to ensure best value and that the requirements of the Prudential Code are met. 48
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The financial impact from treasury activity and borrowing for capital expenditure has been built into the long-term revenue budget strategy. 4.22. Four councils say they are planning an innovative approach to fund local infrastructure projects in 2026/2027. The report includes reference to South Lanarkshire Council investing £2 million to cover the upfront costs of creating commercial spaces for local organisations, which was approved as part of the package of investments agreed by members in setting the 2026/2027 Budget. This funding allows the Council to access more than £11 million of total investment in commercial properties, which will be paid for over time through rental income. 4.23. Reference is made to the 26 councils who own and maintain Council housing, with the report noting that the Auditor General and Accounts Commission are undertaking a report on housing services across Scotland. This report is due for publication in early 2027. 4.24. Councils are committing a combined £1.5 billion from their capital budgets to the Housing Revenue Account (HRA) in 2026/2027, a £20.8 million (1.4%) real terms increase compared to the previous year. Despite this, 9 councils are reducing capital funding to their HRA in 2026/2027. 4.25. Borrowing is the major source of finance for councils’ HRA capital budgets, accounting for around 74% in 2026/2027. This is a slightly higher proportion than in 2025/2026. 4.26. In addition:- all councils with an HRA are planning expenditure on new builds in 2026/2027. Councils expect to spend £0.66 billion on new housing this year, a real terms increase of £74.5 million compared to 2025/2026 councils are planning to increase spending in real terms on refurbishment and repair and maintenance costs by £23.1 million (3.1%) between 2025/2026 and 2026/2027 councils are also planning around £113 million in other areas of expenditure, such as buying back former Council housing The Council’s Housing Revenue Account and Housing Capital Programme for 2026/2027 were approved by elected members on 25 February 2026. The Housing Capital Programme for 2026/2027 is £90.434 million. £59.583 million of this is budgeted for the provision of Council Housing and £30.851 million for refurbishment works. Borrowing (£31.389 million) accounts for 35% of the total funding of the Housing Capital Programme. 4.27. Factors Considered by Councils When Projecting Future Revenue Budget Gaps:- fewer than half of councils considered potential changes to employer pension contributions. Where these were considered, most councils assumed no imminent change. The most recent Scottish Local Government Pension Scheme triennial valuation was undertaken in March 2026 and will set contribution rates from 1 April 2027 onwards 49
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approximately one-third of councils considered potential changes to Non- Domestic Rates (NDR). Some councils that did not factor in changes noted that NDR decisions are determined by the Scottish Government and are therefore outside local control more than half of councils considered the risk of savings plans not being fully delivered. While councils acknowledged that failure to achieve planned savings could affect services, most assumed that approved savings would be delivered in full, or that alternative measures would be identified where necessary Other factors noted, and that most, or all councils took into consideration, were future pay settlements, inflation, service demand increasing and considering the costs of borrowing and debt servicing. The Council continues to monitor pension contribution rates and utilises any benefit in its Budget Strategy where possible. There is also a benefit in terms of the Rates valuation, and again, this has been taken into account when setting Budget Strategies. Finally, savings achievement continues to be monitored as part of the routine financial monitoring, and corrective action taken if there is any risk of non-achievement. 4.28. Councils are projecting they will continue to have gaps in their revenue budgets; £486.9 million in 2027/28 and £488.4 million in 2028/2029. Although some pressures in these forecasts are expected to be resolved or reduce over time, the report notes that councils still face a combined revenue gap of £975 million across the next two years. The previously reported Budget Gap for 2027/2028 and 2028/2029 was £42.819 million (South Lanarkshire Council, February 2026). The 2027/2028 – 2028/2029 Revenue Budget Strategy (Executive Committee, 24 June 2026) updated it to reflect the impact of Budget Decisions taken during the 2026/2027 Budget Setting process, as well as changes to the Budget Strategy in relation to assumptions on grant movement, pay award and pension, contract impacts and other inflation and Council Tax property numbers. Taking these factors into account leaves a revised Budget Gap of £26.500 million across 2027/2028 and 2028/2029. 4.29. Part 3: Consulting with Communities Twenty-seven councils consulted with residents on their 2026/2027 budget. Most councils consulted clearly with residents on the funding pressures they are facing and on possible actions to close their budget gap. 4.30. There was some variation in how councils consulted on their 2026/2027 budgets, but most did so through online public consultations and surveys. Some councils also used community engagement methods such as community meetings, roadshows or workshops. Some councils provided evidence of new ways they undertook engagement as part of their 2026/2027 budget-setting process, examples including QR codes added to posters to make it easier for people to access online surveys directly. The Audit Scotland report noted that South Lanarkshire Council consulted separately with children and young people on budget proposals, recognising that the views of young people are often missed in normal budget consultation processes 50
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4.31. Fifteen councils engaged with the business community and 7 councils engaged with other users of services or stakeholders, including third-sector partners and charities such as Women’s Aid. 4.32. The Accounts Commission explained within the 2025/2026 budget bulletin, its expectations around councils fully and transparently explaining the impact budget decisions may have on those with a protected characteristic. This information, including the actions to mitigate potential discrimination, should be clearly accessible for everyone. 31 councils carried out Equality Impact Assessments. South Lanarkshire Council use integrated impact assessments (IIAs) when planning and reviewing services to make sure our decisions are fair, informed and consider the needs of our communities. They help us understand how new plans, policies and proposals may affect different people before we make a decision. IIAs bring together earlier equality impact assessments (EQIAs) and other legal checks into one clear process. IIAs were prepared for all savings proposals included in the 2026/2027 Budget Strategy, as well as for the overall impact of the Budget Strategy, and are published on the Council’s website. 5. Progress on the 2025/2026 Report’s Expectations 5.1. The Audit Scotland report notes the progress made on the expectations set out in the same report from the previous year (Local Government Budgets 2025/2026). This is summarised in Appendix 1. Comments in relation to the Council’s position on these are included under the heading ‘SLC Position.’ 5.2. While noting that councils are making good progress against most areas, Audit Scotland highlight that, collectively, local authorities could make further improvements to the transparency of budget papers and the financial monitoring provided to elected members, and how communities are consulted about budget decisions. 5.3. With this in mind, the report therefore sets out the commission’s expectations for councils’ annual budget-setting as a checklist for elected members. The questionnaire is a self-assessment tool for elected members to assist them when making decisions on setting budgets. Officers have added responses to these questions for members’ assistance. This is included in Appendix 2. 6. Employee Implications 6.1. There are no employee implications as a result of this report. 7. Financial Implications 7.1. There are no financial implications as a result of this report. 8. Climate Change, Sustainability and Environmental Implications 8.1 There are no Climate Change, Sustainability or Environmental implications in terms of the information contained within this report. 9. Risk and Other Implications 9.1. There are no other implications as a result of this report. 10 Integrated Impact Assessment and Consultation Requirements 10.1. This report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment is required. 51
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10.2. There was no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 14 July 2026 Link(s) to Council Values/Priorities/Outcomes All council objectives Previous References None List of Background Papers None Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Lorraine O'Hagan, Head of Finance (Strategy) Ext: 5637 (Tel: 01698 455637) E-mail: lorraine.o'hagan@southlanarkshire.gov.uk 52
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APPENDIX 1 Progress Against the Expectations in the Local Government Budgets 2025/2026 Report Audit Scotland Feel Councils Should Audit Scotland View on Progress/Status SLC Position Budget papers and financial monitoring reports provided to elected members include clear and understandable headline figures that state the impact of specific budget decisions on the overall financial position of the council Mixed progress There is mixed progress in how effectively councils are presenting key financial information in budgetary reports that are also publicly available. Savings are presented to members as part of the Budget Setting process, and a defined process is in place to allow members to ask questions prior to budget setting. The Management Commentary in the Accounts includes reference to the level of savings achieved in year. The most recent savings package considered by members can be found here. Budgets should link back to the council’s corporate plan to allow elected members to make spending choices better informed by, and based upon, the council’s priorities Progress Thirty-one councils linked their 2026/2027 budget back to its corporate plan. Linking key financial plans back to corporate plans ensures that resources are targeted towards key strategic priorities. Audit Scotland noted, as an outcome of the 2024/2025 audit work that, that the Council’s medium and longer term financial planning aligns with our strategic priorities. It was also noted that the Council’s Transformational Change Programme is clearly linked to our updated Council Plan, financial plans and digital strategy. The report, Transformational Review Programme – Summary of Outcomes Report 2025/2026 and Future Pipeline to the Executive Committee in June 2026, links the transformation programme to the ambition set out in the Council Plan and is structured around key themes which reflect the Council’s priorities and the scale of change required 53
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Fundamental information, such as the forecast budget gap, is clearly presented as part of the consultation process with residents Progress A sample review of budget consultations indicates most councils clearly identify their budget gaps, with some also providing detail over multiple financial years. When the public consultation was announced, the council stated that it was seeking views on 17 savings proposals that would help bridge a £36 million gap over the next two years, with £14 million needed in 2026-27 alone. Budget Strategy papers are prepared in advance of each new financial year and are publicly available. These papers detail the Budget Gap for the medium term. Reports to the Performance and Review Scrutiny Forum are also publicly available and detail the impact of Transformational Reviews and the financial savings that can be achieved. Estimated costings of how specific proposals will contribute to managing the budget gap are made available to residents, including the potential contribution of any proposed increase to council tax and the anticipated impact on levels of service delivery Progress A sample review indicates that most councils make estimated costings available for proposed measures, including indicative savings or income from council tax increases, with high-level information on the anticipated impact on service delivery, though the level of detail can vary. The survey asked what level of Council Tax increase participants would support if it meant services could be protected or other increases in charges could be avoided. A range of 0% to 12% was offered. In addition, Budget Strategy papers are prepared in advance of each new financial year and are publicly available. These papers detail the Budget Gap for the medium term and how the proposed savings will contribute to managing it. 54
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General public consultations are supplemented by targeted consultations with groups most impacted by changes to specific services and that consideration is given to how to encourage participation Mixed progress Thirty councils consulted to some extent on their 2026/2027 budget. Most councils consulted with local IJBs and residents on budget proposals, but there is a mixed approach in how councils engaged with targeted groups. The Council’s public consultation was launched via www.southlanarkshireview.scot and press releases and frequently promoted through social media. Posters and postcards were issued to council and SLLC buildings and NHS clinics and through community networks. The council’s Community Engagement Team made extensive efforts to encourage individuals and organisations on their networks to participate in the consultation exercise and encouraged participation at regular meetings with community groups. A separate consultation was held with children and young people, in recognition of the fact that their views have been historically more difficult to capture as part of the wider budget consultation. The ongoing impact of budget decisions are fully assessed, including through Equality Impact Assessments, to enable elected members to make informed decisions. Progress Thirty-one councils confirmed they carried out an EQIA on their 2026/2027 budgets. EQIAs are a statutory requirement to ensure decision-makers are aware of the impact on groups with a protected characteristic. IIAs (including EQIAs) were prepared for all savings proposals included in the 2026/2027 Budget Strategy, as well as for the overall impact of the Budget Strategy, and are published on the Council’s website. 55
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APPENDIX 2 Checklist for Elected Members Questions to consider What do I know? Do I need to ask any further questions? Do I have enough detailed information to effectively scrutinise the financial health of the council? Am I aware of the current underlying financial performance of the council against its annual revenue and capital budget limits? Annual revenue and capital budget monitoring is reported to Members through regular Revenue and Capital Budget Monitoring reports. The most recent Revenue Monitoring report considered by Members can be found here. The most recent Capital report can be found here. The final outturn position for Capital Budget Monitoring for the year 2026/2026 can be found here. The 2025/2026 year-end Revenue Budget report can be found here. Does the council have a detailed three-year financial plan in place setting out the projected position at the end of each year? The Council has a strong budget planning process led by our Budget Strategy which sets out a detailed medium-term forecast for the financial resources required to meet the aims of the council. The Medium-term Budget Strategy is updated every year. The latest report can be found here and covers the years 2027/2028 and 2028/2029. Am I aware of all significant cost and demand pressures facing the council and their implications? Members are presented with a series of Budget Strategy papers in advance of each new financial year. These papers detail the Budget Gap for the medium term. Do I know the extent to which the council is using short-term approaches / one-off measures to achieve financial balance? Savings are presented to Members are part of the Budget Setting process, and a defined process is in place to allow members to ask questions prior to budget setting. This discussion covers whether the saving is recurring or non-recurring. 56
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The report to Members ‘Overall Position of Revenue Budget and Level of Local Taxation for 2026/2027,’ detailed one-off funding, available for use for one- off investments or to reduce the Budget Gap from 2027/2028. These investment opportunities were not assumed in balancing the Council’s budget. Am I satisfied that appropriate action is being taken to address potential future budget gaps? Members receive Budget Strategy papers setting out the medium- term Budget Gap, and the Performance and Review Scrutiny Forum receives regular reports on Transformational Reviews and the financial savings that can be achieved. The Council also adopts a longer- term outlook, considering the Budget Gap across the next 10 years, totalling £180 million. The Budget Gap will continue to be met from efficiencies, savings from Transformational Reviews and the consideration of levels of Council Tax. In addition, the Council currently holds monies in Earmarked Reserves for use in the Long-Term Financial Strategy. Do I have a good understanding of the current condition and future investment needs of the councils assets? The Council has an overarching Corporate Asset Management Plan as well as individual Asset Management Plans that cover our Properties, Information and Communication Technology (ICT), Fleet and Roads. An update to the General Fund capital programme for 2026/2027 was presented to Members in February 2026, detailing investment across priorities consistent with the objectives of the Council Plan. Before the start of each financial year, the Prudential Indicators, Treasury Management Strategy and Annual Investment Strategy report is presented to Members. The latest report for 2026/2027 can be found here. 57
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Do the budget papers and financial monitoring reports provided to me include: Clear and understandable headline figures that state the impact of specific budget decisions on the overall financial position of the council? Savings are presented to Members as part of the Budget Setting process, with a defined process in place to allow Members to ask questions before budget setting. The Management Commentary in the Accounts includes reference to the level of savings achieved in-year. Clear and transparent forecasts of the income that the council expects to generate from fees and charges? Savings resulting from increases in charges are presented to Members as part of the Budget Setting process. This covers the impact of the increase on each charge, and charging increases are included in the most recent savings package considered by Members which can be found here. Clarity about how the council plans to use reserves, including for what purpose and the likely impact in future years? The Council’s Reserves Strategy was reported to Finance and Corporate Resources Committee on 10 September 2025. It provides details of all reserves and notes that they are all committed, except the Unearmarked / Uncommitted General Fund Balance of £13.043 million. Does the council have a robust process for identifying and reporting on efficiencies and savings? Where savings are identified, do plans demonstrate how savings will be achieved within the timescales given? The savings package, presented to Members as part of the 2026/2027 budget setting process, details the year of delivery for each saving and how the saving will be achieved. Reports on the Council’s Transformation Programme to the Performance and Risk Scrutiny Forum, ensure Members are informed as to how any savings will be delivered. Given the importance of prioritising recurring savings to ensure the sustainability of the Savings are presented to Members as part of the Budget Setting process and that this discussion covers whether the 58
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council's financial position, am I confident that the council has an appropriate balance between recurring and non-recurring savings to ensure future savings targets will be met? saving is recurring or non- recurring. The Management Commentary in the Accounts also includes reference to the level of savings achieved in-year. Is the following information set out clearly in publicly available budget papers? The annual revenue budget, comprising funding and income, prior to savings and other ‘bridging’ actions The Annual Revenue Budget 2026/2027 presents expenditure and income, together with the funding sources that support the budget. Appendix 2 of the report provides a summary of the revenue budget before savings are applied. The associated budget gap, prior to ‘bridging’ actions such as savings and use of reserves. Members are presented with Budget Strategy papers in advance of each new financial year, and these papers detail the Budget Gap for the medium term. The latest report on the budget strategy details the Budget Gap before and ‘bridging’ actions. The savings plan, clearly setting out the split between recurring and non-recurring actions. Savings are presented to Members as part of the Budget Setting process, and the discussion covers whether each saving is recurring or non- recurring. One-off funding, available for use for one-off investments or to reduce the Budget Gap from 2027/2028, is noted as such in reports to Members. Projected revenue budget gaps, both annual and cumulative. Budget gaps are shown for each year, and cumulative totals are provided through multi-year "Total" columns. The papers to Members present both individual- year and overall multi-year budget gap figures. The assumptions used in calculating projected budget gaps. Budget papers set out assumptions relating to government grant levels, pay awards, pensions, inflation, 59
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contract costs, council tax growth and other key variables. The projected budget gaps are noted within the context of assumptions. Is the council engaging with the public, stakeholders and staff about the need for change when setting budgets? Am I aware of what the council is doing to engage with the public, stakeholders and staff about the need for, and the benefits of, changing how services are provided? The Council is participating in the SOLACE / Improvement Service work on Transforming Public Services in order to respond to financial challenges. It also notes that relevant reports are provided to the Performance and Review Scrutiny Forum, including the November 2025 Revenue Budget Strategy paper and the most recent Transformational Reviews update report. Are public consultations supplemented by targeted consultations with the groups most impacted by changes to specific services, and is consideration given to how to encourage participation? The Council’s public consultation on the budget was launched via www.southlanarkshireview.scot and press releases and frequently promoted through social media. Posters and postcards were issued to council and SLLC buildings and NHS clinics and through community networks. A separate consultation was held with children and young people, in recognition of the fact that their views have been historically more difficult to capture as part of the wider budget consultation. Are consultations with communities carried out in the most effective way and are you satisfied that consultation with communities is meaningful? The council’s Community Engagement Team made extensive efforts to encourage individuals and organisations on their networks to participate in the consultation exercise and encouraged participation at regular meetings with community groups. Are you satisfied that the ongoing impacts of budget decisions are fully assessed, including through Equality Impact Assessments? IIAs (including EQIAs) were prepared for all savings proposals included in the 2026/2027 Budget Strategy, as well as for the overall impact of the Budget Strategy, and are published on the Council’s website. 60
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Any and all Employee, Financial, and Climate Change, Sustainability and Environmental implications, as well as any Other implications are monitored and captured as part of the standard reporting process. 61
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director Finance and Corporate Resources Subject: 2024 National Fraud Initiative Exercise 1. Purpose of Report 1.1. The purpose of the report is to:- advise the Committee of the outcome of investigations undertaken as part of the 2024 National Fraud Initiative (NFI) exercise set out the revised approach that removes elements of the Single Person Discount (SPD) match from the next NFI Exercise starting in 2026 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendations:- (1) that South Lanarkshire Council’s outcomes from the 2024 NFI Exercise be noted; and (2) that the removal of some elements of SPD match investigations from the 2026 NFI Exercise be noted. 3. Background 3.1. The NFI is a counter fraud exercise, that cross matches data from councils and other public bodies. These bodies then investigate the matches. The Cabinet Office is responsible for the UK-wide delivery of the NFI exercise with Audit Scotland co- ordinating the exercise in Scotland. 3.2. South Lanarkshire Council (SLC) has taken part in NFI exercises since 2004/2005. These exercises are undertaken every 2 years and include data from benefits, payroll, creditors and blue badge holders along with a match of the electoral register to council tax records to detect where SPD has been claimed despite there being more than one person over 18 in the household. In addition to being matched to other benefits and payroll data, records are also matched to Department for Work and Pensions (DWP) deceased persons’ and HMRC (His Majesty's Revenue and Customs) data. 3.3. Internal Audit co-ordinates the delivery of the NFI exercise within the Council; however, each Resource is responsible for investigating matches relevant to them. The cost of participating is considered ahead of each new Exercise and the outcome from the latest review is set out in this report at Section 6. 3.4. Internal Audit reports progress with delivering the NFI Exercise to the Council’s External Auditors throughout the year. 8 63
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4. 2024 NFI Exercise: Results 4.1. There were initially 9 match areas within the current NFI exercise. An additional two areas were released later. A full list of these match areas is included at Appendix 1. 4.2. In June 2025, the Committee was advised that there were 32,675 matches across these match areas. Following further data refreshes and a subsequent release of additional matches, the final number of matches for the Council for the 2024 NFI Exercise is 34,635 (see Appendix 2). 4.3. From the total matches received, a target number of investigations was determined based on a risk assessment undertaken by Audit Scotland. There is no obligation to investigate every match but the decision to restrict investigations must be risk-based. This targeted group of matches was then passed to Resources to investigate with the NFI Website providing risk scoring to allow Services to prioritise high-risk matches for investigation. Throughout the Exercise, Internal Audit liaised with External Audit to ensure they were satisfied with the approach that had been taken. 4.4. It was originally intended that the Council would investigate 2,887 matches plus SPD matches (utilising an arrangement already in place with an external contractor). As additional matches were received, these targets were revised. This resulted in an amended target of 3,3741 (see Appendix 3) which was agreed with External Audit. A further 522 matches were investigated out-with this target number, which, in part, reflects responses to enquiries from other authorities/organisations participating in the same NFI Exercise. 4.5. Specifically, in relation to SPD, Benefits and Revenue use an external contractor to undertake rolling reviews of eligibility. To avoid duplication, reliance is placed on this ongoing work. A proposed new approach for the 2026 NFI Exercise, relative to SPD, is set out in Section 6. 4.6. As the Housing Benefit Fraud team has transferred to the DWP Fraud and Error Service (FES), initial NFI investigations in this area are undertaken by the Council. If this indicates a potential benefit fraud, the case is passed to FES. Matches are closed on the NFI website as ‘passed to DWP’. Any outcome, after investigation, is treated in the same way as any other overpayment/fraud and reflected within the fraud statistics reported to this Committee on a six-monthly basis. 4.7. Once the target matches had been investigated, a total of 161 recoverable fraud and errors were recorded as detected by the current NFI exercise, with an (actual) amount to be recovered of £137,486.66 (£188,537.09 when the late outcome2 for SBBS from the 2022 exercise of £51,050.43 [10 fraud/errors] is included). A summary of outcomes is set out below, with a more detailed summary of outcomes included at Appendix 3:- Area No of Fraud/Errors Amount Housing Benefit 1 46.54 Social Work 5 7,817.12 Council Tax Reduction Scheme 27 52,376.16 Single Person Discount 82 27,495.54 Blue Badges 27 03 Small Business Bonus Scheme 19 100,801.73 1 Including SPD, the number of matches investigated increased to 19,550. 2 Not reported by Audit Scotland in 2022 due to the late issue of matches to authorities and organisations 3 Although no financial loss to the Council, Audit Scotland will attach a notional value to each error when they report on the outcomes from the 2024 NFI Exercise Scotland-wide. 64
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TOTAL 161 188,537.09 4.8. Overall outcomes increased by 76.01% from the 2022 to the 2024 Exercise. However, once adjusted for the 2022 Small Business Bonus Scheme (SBBS) outcome figure that is reported in the 2024 Exercise, overall NFI outcomes have in fact reduced by 13.07% across the last two Exercises. A more detailed comparison of 2024 outcomes to that of the previous exercise in 2022 is included at Appendix 4. 4.9. In addition to the main NFI exercise, a match is undertaken with National Entitlement cardholders to the Disclosure of Death Registration Information (DDRI). This exercise is managed by Dundee City Council. The Council had 26 matches which were checked and results returned to Dundee. 5. 2024 NFI Exercise: Audit Scotland Report 5.1. At the conclusion of each main NFI exercise, Audit Scotland publishes an overview report that sets out NFI outcomes across Scotland, draws conclusions from these results and makes recommendations for consideration ahead of participation in the next NFI exercise. The report is usually published in the August following the close of the Exercise and will be reported separately to the Committee ahead of the new Exercise commencing. 6. 2026 NFI Exercise: Proposed Revised Approach 6.1. The next NFI exercise is due to commence in Autumn 2026, and it is anticipated that the matches will be issued to Authorities around December 2026 for targeted investigation in 2027/2028. 6.2. Ahead of each new Exercise commencing, participation is reviewed to ensure that NFI continues to deliver best use of resources relative to outcomes. This includes consideration of the time to deliver the Exercise across the Council, the level of fraud/error that is discovered and the extent to which participation acts as a deterrent. 6.3. The Exercise continues to deliver outcomes and act as a deterrent but, in one area, SPD, it does, in part, duplicate reviews that are undertaken by an external contractor that the Council employs to specifically review SPD. To address this issue, some work is required in each Exercise to remove common cases. Should SPD have been removed from the 2024 NFI, there would have been time savings to the Council (both in reviewing data and in the investigation of matches) but also, potentially, a loss of outcomes or, at least, a delay in securing these outcomes. 6.4. For the 2026 NFI Exercise it is intended to retain investigation of NFI reports 802, 804 and 815 (82% of outcomes in the most recent NFI Exercise) on the basis that these match reports are unique to NFI but that reports 801 and 803 will not be investigated (18% of outcomes) on the basis that these matches are covered by reviews undertaken by an external contractor. 6.5. The calculated cost of investigating SPD matches in the 2024 NFI Exercise was £25,2424 with approximately £12,621 attributable to reports 801 and 803 (which delivered combined outcomes of £5,021). 6.6. On this basis, the return from NFI is not commensurate with the resources required to secure outcomes and given alternative (and broadly effective) arrangements are in place, these elements of the SPD matches will not be investigated in the 2026 NFI Exercise. 4 Relates only to Benefit and Revenue employee costs 65
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6.7. In doing so, the Council would be following the approach of other Authorities[1] who have specifically removed elements of SPD from NFI, relying instead on rolling reviews undertaken by an external contractor. 6.8. This revised approach has been discussed with Audit Scotland. 6.9. To track the outcomes from these external reviews, Internal Audit will receive six monthly updates on the performance of the external contractor with the decision to continue to exclude elements of SPD data reviewed again ahead of the 2028 exercise. 6.10. Aside from this dataset, all other extracts will continue as before, and Internal Audit is liaising with Services around the provision of this data. The Committee are asked to note that the 2026 Exercise is commencing and the amended approach for elements of SPD matches for this Exercise. 7. Employee Implications 7.1. One Audit Assistant (with overview and management from an Audit Adviser) has been responsible for co-ordinating the SLC exercise, which has included facilitating the issue and receipt of information requests from other public bodies in relation to NFI cases, assisting with the recording of some or all Creditor, Procurement, Grants and SPD investigations and reporting on employee benefit fraud cases if required. In addition to the time required by Resources to investigate matches, a total of 86 days was used by Internal Audit in 2025/2026 to undertake the tasks listed (against a revised budget of 85 days). 8. Financial Implications 8.1 Other than employee time, there is no direct cost associated with participating in the NFI exercise. 9. Climate Change, Sustainability and Environmental Implications 9.1 There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 10. Risk and Other Implications 10.1. Fraud Risk is recognised as one of the top risks facing the Council. This risk is significant as it can adversely affect the delivery of Council objectives and erode valuable resources. It is therefore important that the risk of fraud is soundly managed. 10.2. The NFI exercise is a valuable counter fraud exercise which has continued to identify fraud and error within the Council. As well as the quantifiable financial return from participating in the Exercise, it is also recognised that the Council’s participation in the Exercise will continue to act as a deterrent to fraud. 10.3. When a fraud or overpayment occurs, steps will usually be taken to recover the loss. Services are expected to examine why the loss occurred and demonstrate a change in their processes and procedures accordingly. 10.4. There are no sustainability issues associated with the content of this report. [1] Around 13 other Local Authorities 66
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11. Integrated Impact Assessment and Consultation Requirements 11.1. As the risks associated with the NFI are carried by the Cabinet Office and the Council is bound by statute to participate, there is no need to undertake a separate integrated impact assessment. 11.2. SLC Employees and South Lanarkshire residents are informed of the commencement of the NFI exercise through a variety of sources. There is no requirement to undertake any further consultation in terms of the content of this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 28 July 2026 Link(s) to Council Values / Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk and Audit Scrutiny Committee, 25 June 2026 ( 2024 National Fraud Initiative Exercise) List of Background Papers NFI Portal Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Internal Audit Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 67
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Appendix 1 List of “matched” areas in the 2024 NFI Exercise No Match area Match between Purpose of Match/Fraud risk 1 Housing Benefits (HB) HB to Student Loans To identify individuals claiming benefits, whose student loan eligibility results in them being ineligible for those benefits. HB to HB (within SLC and between other authorities) To identify an individual that is claiming housing benefit from one or more local authority at the same time. HB to Housing Tenants (within SLC and between other authorities) To identify possible tenancy fraud and/or housing benefit fraud where an individual appears to be resident at two different addresses. HB to taxi drivers (within SLC and between bodies) To identify where housing benefit claimants have failed to declare income that may remove entitlement to benefit or reduce benefit payable. HB to CTRS To identify anyone claiming housing benefit and council tax reduction from one or more local authority at the same time. HB to DWP Deceased To identify where a claimant has passed away and who was in receipt of DWP benefits which would not have stopped. HB to Waiting List To identify where an individual appears to be resident at two different addresses as the address on the waiting list application is different to the address on the benefit system. 2 Council Tax Reduction Scheme (CTRS) CTRS to Payroll (within SLC and between other bodies) To identify where CTRS claimants have failed to declare income that may remove entitlement to benefit or reduce benefit payable. CTRS to pensions To identify where CTRS claimants have failed to declare pension income that might remove entitlement to benefit or reduce benefit payable. 68
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CTRS to CTRS (within SLC and between other authorities) To identify an individual claiming CTRS from one or more local authority. CTRS to HB (within SLC and between other authorities) To identify where an individual is in receipt of council tax reduction and housing benefit from one or more local authority simultaneously that may remove or reduce entitlement to the reduction. CTRS to Housing Tenants (within SLC and between other authorities) To identify possible cases of tenancy fraud and/or CTRS fraud where an individual appears to be resident at two different addresses. CTRS to taxi drivers(within SLC and between bodies) To identify where CTRS claimants have failed to declare income that may remove entitlement to benefit or reduce benefit payable. CTR Scheme to DWP deceased To identify where a person has passed away but may be in receipt of CTR after the date of death. CTR Scheme to HMRC To identify where CTRS claimants have been matched to household income and property owned. 3 Payroll Payroll to payroll (within SLC and between bodies) To identify individuals who may be committing employment fraud by failing to work their contracted hours because they are employed elsewhere or are taking long-term sickness absence from one employer and working for another employer at the same time. Payroll to Creditors To identify employees who are also creditors where there may be a conflict of interests or corruption. Payroll to Pensions To identify employees who have gone back into employment after drawing a pension that could result in an abatement of pension. 4 Housing Tenants (HT) HT (within SLC and between bodies) To identify where an individual appears to be resident at two different addresses suggesting possible cases of subletting or dual tenancies. HT to HB To identify possible cases of tenancy fraud and/or housing benefit fraud, where an individual appears to be resident at two different addresses. HT to CTR Scheme To identify possible causes of tenancy fraud and/or incorrect claims for CTR where an individual 69
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appears to be resident at two different addresses. HT to State Benefits To identify possible cases of tenancy fraud against the organisation i.e. where an individual appears to be resident at two different addresses. HT to DWP Deceased To identify where the tenant has died, but the DWP has not been informed. HT to HMRC To identify where a local authority tenant also owns a property and may not have been given a tenancy. 5 Waiting Lists Housing Waiting Lists to Housing Tenants (within SLC and between bodies) To identify where an individual appears to have registered on the waiting list using a different address to the one on the housing rents system suggesting possible undisclosed changes in circumstances or that false information has been provided. Housing Waiting List to Housing Waiting List (within SLC and between bodies) To identify where an individual appears to have registered on the waiting list using two different addresses. Housing Waiting Lists to Housing Benefit Claimants (within SLC and between bodies) To identify where an individual appears to have registered on the waiting list using a different address to the one on the housing benefit system. Waiting List to DWP deceased To identify an applicant who has died but is still shown on the waiting list. 6 Blue Badges Blue badge to blue badge To identify individuals who hold more than one Blue Badge. Blue badge to DWP deceased person To identify cases where a permit holder has died, but the local authority may not have been notified. 7 Procurement Procurement – payroll to Companies House (Director) To identify potential undeclared interests that have given a pecuniary advantage. 8 Creditors Duplicate creditors by Duplicate creditor payments and details To identify instances where the same supplier has been recorded against more than one reference number on the system thus increasing the potential for creditors to obscure fraudulent activity. To identify possible duplicate payments. VAT overpaid This test identifies instances where VAT may have been overpaid. 70
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9 Council Tax Single Person Discount Council Tax to Electoral register To identify where Single Persons Discount is being claimed and there is more than one person aged 18 or over registered within the property on the Electoral Register. Single Person discount award to other government bodies To identify individuals who have declared they are living alone but have not declared they are living with a partner or non-dependant in the household. Single Person discount to HMRC To identify individuals in receipt of SPD and who may have another person in the property based on HMRC information 10 SBBS Business Rates to Business Rates, same bank account, same company name within SLC and between bodies To identify those claiming multiple SBBS grants, those fraudulently in receipt of SBBS within and between authorities. 11 Social Care Private Residential Care Homes to DWP Deceased To identify cases where a resident has died, but the organisation may not have been notified so potentially continuing to make payments. Personal Budgets to DWP Deceased To identify instances where a personal budget recipient has died but the payment is still being made. 71
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Appendix 2 Update to matches previously reported Area/Matches Matches Reported to RASC June 2025 Additional Released Matches Final Number of Matches Housing Benefits 130 0 130 CTRS 1,625 967 2,592 Payroll 115 0 115 Housing Tenants 547 678 1,225 Waiting List 666 4 670 Blue Badge 1,365 0 1,365 Creditors 1,242 0 1,242 Procurement 39 0 39 Single Person Discount 26,946 57 27,003 SBBS (note 1) 0 166 166 Care Home/Personal Budgets (note 2) 0 88 88 Overall matches 32,675 1,960 34,635 Note 1: Late release of matches. Note 2: Late release of matches. Figure was not reported to RASC in June 2025 due to Audit Scotland waiting on appropriate legislation being passed to enable the matching to be undertaken. 72
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Appendix 3 Target Investigations and Actual Outcomes Area Total Matches Target to Investigate Additional Matches Reviewed Above Target Total matches Reviewed Fraud and Errors Value £ Housing Benefits 130 91 0 91 1 46.54 CTRS 2,592 493 92 585 27 52,376.16 Payroll 115 111 4 115 0 0 Housing Tenants 1,225 474 34 508 0 0 Waiting List 670 231 45 276 0 0 Blue Badge 1,365 1,365 0 1,365 27 0 Creditor 1,242 316 114 430 0 0 Procurement 39 39 0 39 0 0 SPD (note 1) 27,003 16,176 0 16,176 82 27,495.54 SBBS (note 2) 166 166 233 399 19 100,801.73 Care Home/Personal Budget 88 88 0 88 5 7,817.12 Total 34,635 19,550 522 20,072 161 188,537.09 Note 1: SPD cases were reviewed by an external contractor; therefore, only a small number of matches were investigated by SLC. Note 2: Includes the amount recovered from the 2022 exercise (233 matches and 10 fraud/errors, totalling £51,050.43) which was not reported in 2022 due to the late release of the matches. These will also be included in Audit Scotland’s report issued August 2026. 73
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Appendix 4 Comparison of Outcomes to last NFI Exercise Area Value (2024) £ Value (2022) £ Housing Benefits 46 7,514 CTRS 52,376 15,829 Creditors 0 1,182 SPD (note 1) 27,496 82,591 Care Home/Personal Budget 7,817 n/a SBBS (note 2) 100,802 n/a Total 188,537 107,116 Blue Badges (note 3) 21,438 20,150 Note 1: During the 2022 exercise, a gap in the external arrangement resulted in a higher number of matches being identified by the NFI exercise that had not previously been captured by an external review. This resulted in higher SPD outcomes than previous exercises. Note 2: £51,050 of these outcomes relates to the 2022 matches and outcomes but were not finalised or reported in 2022. Note 3: This assumes a notional loss of income of £794 per blue badge (a figure attributed by the Cabinet Office) due to fraud. 74
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Fraud Statistics Annual Report 2025/2026 1. Purpose of Report 1.1. The purpose of the report is to:- provide a summary of the fraud statistics and workload for the year to 31 March 2026 and a comparison to the same period in 2025 provide an update on anti-fraud activity during 2025/2026 report how the Council’s anti-fraud arrangements have been progressed in 2025/2026 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the contents of this report be noted. 3. Background 3.1. Collating and reporting fraud statistics and setting targets for improvement are considered best practice by the Chartered Institute of Public Finance and Accountancy and the Association of Local Authority Risk Managers. 3.2. This report provides information on the overall fraud workload in 2025/2026 together with a summary of the number, type and outcome of fraud investigations within South Lanarkshire Council (SLC) for the year, and a comparison to the statistics for the same period in 2025. 3.3. Although the responsibility for housing benefit fraud investigations has transferred to the DWP Fraud and Error Service (FES), SLC retains responsibility for the recovery of fraud overpayments from their own Housing Benefit claimants. Housing Benefit fraud data will therefore continue to be included within the fraud statistics reported, once information has been provided by FES. Given the transition to Universal Credit, cases of housing benefit overpayments are reducing. 3.4. Benefits and Revenue continue to deliver an annual programme of rolling reviews on Housing Benefit claimants based on risk-profiling that establishes the most likely areas of benefit fraud or overpayment. Information is also obtained from HMRC through the Verification of Earnings and Pensions arrangement, from DWP through the Housing Benefit Matching Service and from data gathered through the National Fraud Initiative (NFI). Where fraud is suspected, the case will be passed to FES for investigation and, if proven, returned to the Council to pursue recovery. Irrespective of whether a fraud is proven or not, the Council takes steps to recover any overpayment. 9 75
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3.5. The collection and reporting of fraud statistics assists in the management of fraud by identifying patterns and areas of high risk where preventative controls should be concentrated. However, in order to do this effectively, fraud statistics must be complete. Internal Audit will continue to highlight areas where practice could be improved to ensure that all instances of potential and actual fraud are reported to Internal Audit. 4. 2025/2026 Fraud Statistics, Workload and Outcomes Fraud Statistics 4.1. All concerns reported to Internal Audit are risk assessed with high risk areas investigated by Internal Audit, medium risks investigated by Resources and low risks registered for monitoring of trends. Internal Audit may also undertake joint investigations with Resources and the Fact-Finding team within Personnel Services depending on the nature of the fraud and the operational knowledge required. 4.2. Areas within the Council that have an inherently higher risk of fraud are considered for inclusion in the Annual Audit Plan. There have been no new, significant in-year trends or patterns identified in 2025/2026. 4.3. An analysis of the fraud caseload1 for the year to 31 March 2026 and the comparative period in 2025 is detailed in Table 1. Status Year to 31/03/2026 Year to 31/03/2025 Nos. £000 Nos. £000 Cases open as of 1 April 24 5 171 44 Concerns reported during financial year 24 54 30 9 SLC caseload for the year 48 59 201 53 Cases closed in period (see Table 2) (22) (1) (177)2 (48) Work in progress at 31 March 26 58 24 5 Table 1 4.4. In addition to those cases summarised above, a further 22 SLC investigations are being progressed by DWP with a potential cumulative housing benefit overpayment/fraud value of £3k. On conclusion of investigations, SLC will seek repayment in line with standard recovery procedures. 4.5. An analysis of closed cases in the year is detailed in Table 2:- Source of fraud Year to 31/03/2026 Year to 31/03/2025 Nos. £000 Nos. £000 Founded allegation (see Table 3) 7 0 14 11 Insufficient information 8 1 1 0 Unfounded allegations 7 0 44 37 No Housing Benefit in claim 0 0 118 0 Total 22 1 177 48 Table 2 1 Includes all frauds reported to Internal Audit, benefit frauds during this period passed to the Department for Work and Pensions (DWP) for investigation and insurance losses resulting from a failure in internal controls or which have been investigated by Internal Audit. 2 Cases where there is no housing benefit in the referral to DWP have been removed to reflect that these will be treated as DWP fraud and any identified fraud or overpayment will impact benefits paid by DWP, such as universal credit, rather than housing benefit administered by the Council. 76
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4.6. An analysis of founded allegations is detailed in Table 3:- Source of fraud Year to 31/03/26 Year to 31/03/25 Nos. £000 Nos. £000 External 7 0 13 8 Internal 0 0 0 0 Benefits 0 0 1 3 Total 7 0 14 11 Table 3 Wider Fraud Workload 4.7. Appendix 1 sets out a summary of the overall anti-fraud activity in 2025/2026. Time spent on investigative work was broadly in line with the planned split of days available across the year (64 days against a planned 57 days). Twelve separate investigative assignments were completed in the year covering financial, operational and contractual issues. The majority of investigations found substance to concerns or allegations and appropriate actions were agreed to address the issue and amend processes going forward. The nature of these concerns was wide-ranging. Each were investigated in line with established fraud procedures, reflecting the Council’s zero tolerance approach to fraud, and, where appropriate, referred to Personnel Services. 4.8. External auditors are required to report significant frauds, or suspected frauds, to Audit Scotland, where they were caused or facilitated by weaknesses in public bodies’ internal controls. Frauds and irregularities are considered significant where the value of the loss is over £5,000 or where it is of significance owing to the nature of the activity. SLC complied with this requirement in 2025/2026. 4.9. Audit Scotland routinely report these significant frauds within technical bulletins which also includes detail around improvements to controls to prevent similar frauds occurring. Bulletins are reviewed and cases shared with relevant Services to assess whether controls require amendment. 4.10. Of the 2 cases reported by Audit Scotland in their bulletins in 2025/2026, one related to payroll fraud where a part-time employee was paid for full-time work in error; and the second related to a bank mandate change from a person impersonating a foreign supplier. 4.11. The Council has system-embedded controls in place which manage payroll errors and standard procedures to mitigate against the risk of a bank mandate fraud occurring. No further action was considered necessary at this stage. 4.12. Internal Audit has also monitored fraud alerts through internal and external sources and disseminated information as appropriate. In 2025/2026 these have continued to relate to ad hoc issues and have been shared with Services as appropriate. National Fraud Initiative 4.13. Internal Audit coordinates the delivery of the NFI exercise3 within the Council, liaising with Resources responsible for investigating matches relevant to them. 85 days were included in the 2025/2026 Audit Plan to undertake this task (with 86 days actually required in the year). A total of 34,635 matches were received for the 2024 exercise, which concluded on 31 March 2026, of which 19,550 were targeted for 3 Undertaken every 2 years 77
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investigation. This resulted in 161 fraud and errors being detected by the matches investigated, with £188,537.09 to be recovered by the Council. This total includes the Small Business Bonus Scheme (SBBS) 2022 matches which were not reported in that year due to their late release for investigation. The SBBS 2022 exercise figure will also be included in Audit Scotland’s NFI report for 2024. 4.14. Preparation for the 2026 exercise has begun and the data extract and uploads will commence in September 2026. Matches are due to be released to the Council at the end of 2026 / early 2027. At the end of each NFI exercise, organisations are required to complete a questionnaire on the process to manage the exercise. Audit Scotland has reported that a 2024 Exercise questionnaire will not be required from SLC given they have already rated management arrangements as good. Fraud Risk Registers - Three Lines of Defence 4.15. Aside from investigative work and participation in the NFI Exercise, Resource Fraud Risk Registers have been reviewed and updated in 2025/2026 to analyse the controls that mitigate fraud risks using the Institute of Internal Auditors ‘three lines of defence’ methodology. This framework recognises that different parts and levels of the organisation play complementary roles in risk management. Controls that form the first line of defence sit at a Service level with the second line of defence being those that ‘oversee’ (Senior Management, Committees etc). The final line is that of independent assurance provided by internal audit. Good risk management will evidence controls across all ‘lines’. The new format was reviewed by Resources and updated at 31 March 2026. Going forward, the review of these registers will align to the timetable of that of the Council’s top risks. Conflict of Interest 4.16. A Conflict-of-Interest Declaration should be completed by all employees where a conflict or perceived conflict may arise whilst carrying out their role. Employees who receive gifts in their course of employment (over £25); and any hospitality gifts (which are not allowed to be accepted within the Council) must also be declared. Employees can work for another organisation out-with their hours of work with the Council but permission must be sought and a record retained. As part of the response to the new ‘Failure to Prevent Fraud’ offence, a single, online form has been devised by Internal Audit which incorporates all the above and is now available on the intranet for employees to use. The completed forms will be submitted to either a Head of Service or to an Executive Director and the process administered by Internal Audit. 4.17. To identify potential undeclared interests, a match is included in the NFI exercise (payroll data to Companies House then to Creditors data) that highlights employees who appear to be registered directors of companies that have traded with the Council and/or whose address links to a director or a company. 73 employees were matched by NFI and all were reviewed. A conflict of interest form was completed by all as a matter of best practice, although it was accepted that, for most, this related to a perceived, rather than an actual conflict of interest. The relevant managers are now aware of where a conflict or perceived conflict arose, and arrangements are in place to reduce any associated risks. Comparison of Fraud Risk Arrangements to Best Practice 4.18. Existing anti-fraud arrangements are periodically assessed by undertaking self- assessment exercises to compare existing fraud management arrangements to best practice to ensure these are robust and that the risk of fraud is being mitigated where possible. Appendix 2 and Appendix 3 detail the results of the self-assessment exercise completed in 2025/2026, with areas highlighted where action is ongoing. 78
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4.19. Although fraud control measures are embedded within processes, investigative work undertaken by Internal Audit has identified that levels of fraud awareness could be improved so that all employees are mindful of fraud risks, how these are managed and controlled and how concerns should be reported. A whistle-blowing process is included within the Counter Fraud, Bribery and Corruption Policy. We have identified a need to re-publicise this on a regular basis. A formal fraud awareness programme has been developed and will be rolled out in 2026/2027. Internal Audit are also developing anti-fraud training materials to create learn on line content and to present as targeted training to managers. 4.20. As well as actions being determined by self-assessment exercises, the need for other actions can also be highlighted by anti-fraud activity. Throughout the year, Services work with the Security Coordinator or with Internal Audit to review and address gaps in controls identified during the investigation of cases. Where appropriate, improvement plans are agreed with the relevant Heads of Service and the actions followed up by Internal Audit to ensure implementation. Outcomes for concluded investigations are then reported to the Committee as part of Internal Audit’s annual assurance report. Economic Crime and Corporate Transparency Act 2023 4.21. The Economic Crime and Corporate Transparency Act 2023 (ECCTA) came into effect in 2025 introducing new, statutory obligations around fraud prevention. 4.22. An action plan was devised by Internal Audit to address areas where the Council required to evidence more clearly the fraud prevention processes that were in place. Almost all actions have been addressed in 2025/2026 with remaining actions set out at Appendix 4. A further update will be provided to the Committee during 2026/2027. This action plan includes an action for all Resources to review their procedures to ensure they comply with the Act, that is, that all fraud risks have been identified and addressed where possible; referencing the Act in each procedure. As a matter of course, Internal Audit will also review procedural compliance when undertaking routine, planned audit assignments in 2026/2027. 4.23. In addition to the new ‘Failure to Prevent Fraud’ offence, ECCTA also expanded the powers to prosecute companies for economic crimes. Further amendments, effective from 29 June 2026, will introduce strict liability and possible prosecution for companies where senior managers commit economic crimes. This applies to all businesses regardless of size and has no ‘reasonable procedures’ defence, albeit strong prevention systems will mitigate the risk to an extent. This position will be kept under review in 2026/2027 to determine if any further action is required. Serious and Organised Crime Group 4.24. The multi-agency Lanarkshire Serious and Organised Crime (SOC) group agreed a new SOC Delivery Plan in 2025, which was launched at an awareness event for partners. The Delivery Plan highlights key issues and outcomes across the associated SOC themes of Divert, Deter, Detect and Disrupt. The Delivery Plan launch was supported by the Scottish Government, and its implementation is reviewed by the multi-agency Lanarkshire SOC Group on a six-monthly basis. 4.25. This new multi-agency SOC sub-group, chaired by the Police, covering the 4 associated themes has recently been approved by the multi-agency Strategic SOC Group. SLC engagement with the sub-group is via the Council’s Resilience Adviser, and there is an intention to prepare a SOC presentation for the Council Heads of Service and other key Council stakeholders to identify areas of activity already 79
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underway within the Council or which could be adopted to align Council practices with the SOC Delivery Plan. Scottish Local Authority Investigators Group (SLAIG) 4.26. Internal Audit is a member of SLAIG, which is a sub-group of the Scottish Local Authorities Chief Internal Audit Group. This provides a forum to share and discuss counter fraud practices and developments, including raising awareness of updates to legislation, new and current topics of interest, and developments in counter fraud activities. SLAIG met 4 times in 2025/2026 with topics/speakers from various organisations, including case studies from other authorities who have identified significant fraud activity. Learning points are considered and disseminated as appropriate. National Anti-Fraud Network (NAFN) Report 2025 4.27. The NAFN (National Anti-Fraud Network) assists public sector organisations in tackling and preventing fraud, crime, and error to protect the public purse through the sharing of intelligence. Their Annual Report for 2025 provides a comprehensive, evidence-based overview of fraud risks, trends, and counter-fraud capacity across UK local authorities. It is the first national dataset of its kind since 2020 and is designed to establish a new baseline for understanding how councils detect and respond to fraud. 4.28. A central finding of the report is that there has been a significant growth in fraud activity. Fraud case volumes have nearly doubled over the past 5 years, indicating a sharp rise in demand on counter-fraud services. Despite this increase, the average value of fraud cases has declined, signalling a shift toward more frequent but lower-value frauds. Overall, local authorities are estimated to have detected around £265 million in fraud in 2024/2025, demonstrating both the scale of the issue and the effectiveness of existing detection efforts. 4.29. Tenancy fraud, procurement fraud, and council tax fraud are identified as the being in the ‘highest-value’ category. The report notes that council tax also features in the ‘high volume, low value’ category along with blue badge misuse and employment fraud. Procurement, insider fraud and client monies are seen to be low volume but high-risk frauds. The report also points to emerging threats, including AI-enabled fraud, identity fraud, and insider risk, reflecting the increasing sophistication of fraudsters and the challenges these pose to public sector organisations. 4.30. A major theme of the report is the strain on resources and local authorities’ capacity to respond. Many councils do not have dedicated counter-fraud teams, with around 40% relying on staff who combine fraud work with other responsibilities. The report reflected on wider challenges around skills shortages, limited funding, and competing priorities, which may affect the ability of councils to respond effectively to rising fraud risks. The report emphasises that strengthening workforce capability is critical to maintaining resilience. 4.31. Anti-fraud activity is led by Internal Audit within the Council rather than by a counter- fraud team. Time to investigate can utilise a considerable number of resources and is, mainly, reactive to reports of concerns. There is an ongoing commitment to make better use of data and to develop pro-active monitoring arrangements. This progress is formally monitored as part of the suite of performance indicators regularly reported by Internal Audit to the Committee. 80
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4.32. Providing a helpful benchmark, areas identified within the report as being of higher risk, are being reviewed separately in 2026/2027 to assess the risk and the effectiveness of mitigating controls within the Council. 5. Employee Implications 5.1. SLC has a zero tolerance approach to fraud. Manager and employee roles and responsibilities are set out in Counil’s Counter Fraud, Bribery and Corruption Policy. 6. Financial Implications 6.1. The investigation of fraud, participation in the NFI exercise and the collection and reporting of fraud statistics is carried out within existing resources. 7. Climate Change, Sustainability and Environmental Implications 7.1 There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 8. Risk and Other Implications 8.1. Fraud risk is recognised as one of the top risks facing the Council. This risk is significant as it can adversely affect the delivery of Council objectives and erode valuable resources. It is therefore important that the risk of fraud is soundly managed. 8.2. The new ‘Failure to Prevent Fraud’ offence in the UK, introduced by the ECCTA, makes large organisations criminally liable for failing to prevent fraud committed by an ‘associated person’, for example by an employee, agent or subsidiary if the fraud benefits the organisation. Steps continue to be taken to mitigate associated risks as far as practical. 8.3. There are no sustainability issues in terms of the information contained in this report. 9 Integrated Impact Assessment and Consultation Requirements 9.1. This report does not introduce a new policy, function or strategy or recommend a change to existing policy, function or strategy and, therefore, no integrated impact assessment is required. 9.2. Consultation was not necessary for this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 28 July 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk Audit Scrutiny Committee - 25 June 2025 (2024 National Fraud Initiative Exercise) Risk Audit Scrutiny Committee - 30 September 2025 (Fraud Statistics 2024/2025) Risk Audit Scrutiny Committee - 9 December 2025 (Annual Report, Fraud Statistics Six Monthly Update 2025/2026) 81
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List of Background Papers None Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Internal Audit Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 82
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Appendix 1 Summary of enquiries received in 2025/2026 Category Number Comments Whistleblowing (letter or email) 11 Related to suspected fraud. Missing IT Equipment 9 Decrease in the number of lost/stolen devices during 2025/2026 reported to Internal Audit. 9 were lost/gone missing (1 subsequently found). Resource Fraud and Conduct 7 5 from 7 enquiries led to a more detailed investigation. 2 did not require further work. Other Local Authorities 5 All 5 were passed to and investigated by other Services. Scottish Local Authority Investigator’s Group 3 Suspected fraud enquiries via SLAIG from other Local Authorities. National Anti-Fraud Network Alerts 41 Disseminated to Services for information and action. Formal feedback required to check for relevance and to implement any recommended actions. NHS 2 2 fraud enquiries were received from NHS and passed onto the relevant Service to investigate. TOTAL 78 83
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Appendix 2 Preventing Fraud – Self Assessment Checklist “Managing Fraud Risk in a Changing Environment – A Good Practice Guide” Consider each statement and determine whether it should be assessed as: Red: The area needs significant strengthening and improvement to reduce fraud risk. Amber: The area needs some strengthening and improvement to reduce fraud risk. Green: The area is strong, and fraud risk has been reduced to an acceptable level R A G Organisational Culture SLC Approach Our organisation has a zero-tolerance approach to fraud and corruption that is communicated to all staff in a policy. All staff are aware of their role in relation to fraud prevention. SLC has a zero tolerance to fraud, bribery and corruption. A counter fraud bribery and corruption policy is in place which clearly states expected employee roles and behaviour. There is clear commitment from senior management and the Board that fraud will not be tolerated. Clear commitment from senior management and Members to a zero-tolerance approach. We have communicated our zero tolerance of fraud to all staff, contractors and other third parties with whom we do business. They know what to do if they become aware of possible fraud. The Council’s Counter Fraud, Bribery and Corruption Policy is available to all employees. Fraud awareness programme has been developed and will be rolled out fully in 2026/2027. A designated senior manager has responsibility for counter fraud work, sufficient resources for this work and direct access to the Audit Committee. The Internal Audit Manager has responsibility for counter fraud work and has direct access to the Risk and Audit Scrutiny Committee. There is a code of conduct which sets out clearly for employees’ which behaviour is acceptable or unacceptable. All staff are required to sign up to this annually. The code highlights that unethical behaviour will lead to disciplinary proceedings. A Code of Conduct is in place for all employees. The Code outlines what is acceptable conduct. Employees do not sign up to the Code annually, however, they should complete a “Conflict of Interest” declaration when required. Any employee who does not comply with the Code is considered for disciplinary process. Annual reminder of Conflict of Interest policy has been developed and an online form rolled out in 2026/2027. There are arrangements in place for reporting and addressing conflicts of interest, including a register of interests. Staff are made aware of the need to declare The Council has a Conflict of Interest Policy. Annual reminder of Conflict of Interest policy developed. A new online form has been rolled out in 2026/2027. 84
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potential conflicts of interest. Our organisation maintains a register of gifts and hospitality. Staff are aware of the need to register any gifts and hospitality received. Register maintained and guidance included within Conflict of Interest policy. All staff attend regular fraud and ethics awareness training. The effectiveness of the training is confirmed through testing. New staff receive fraud and ethics awareness training at induction. Being developed as part of the fraud awareness programme and as part of the induction process for new employees. A new Learn on Line course is also under development. Our organisation undertakes pre-employment screening by risk assessing posts and undertaking checks to minimise the risk of employing dishonest and unethical staff. SLC undertakes the relevant and necessary screening checks. Leavers and retirees are subject to an exit interview which is designed to identify any vulnerability to fraud. The Audit Committee is notified of any relevant concerns. All employees who leave or retire should complete an exit interview as part of the leaving process. Outcomes reported to the Finance and Corporate Resources Committee. Our organisation has a counter fraud strategy in place, which applies to all aspects of the business, is communicated across the organisation and is overseen by those charged with governance. Yes, SLC has a counter fraud strategy in place which applies Council-wide. Fraud Risk Assessment Our organisation considers fraud risk as part of the overall risk management process. Yes, management of fraud risk administered by Internal Audit on behalf of the Council. Fraud risks are incorporated into processes, procedures and controls. Our organisation has carried out a rigorous fraud risk assessment in the last two years (more recently if a new or merged organisation). Fraud risk registers are in place for all Resources of the Council along with Council-wide risks and controls. Each register must be reviewed by the Resource and updated annually (at a minimum) for any new emerging fraud risks or controls implemented. Our assessment of fraud risk is based on known fraud risks, benchmarking with similar organisations and internal brainstorming with frontline staff. Based on known fraud risks and known emerging risks. Council-wide review process involves a bench-marking exercise. Our fraud risk assessment has been reviewed and agreed by the Audit Committee and/ or Board. Risk Management Strategy to the Risk and Audit Scrutiny Committee. Counter fraud staff and/or internal audit have a role in fraud-proofing new policies, strategies and initiatives across our organisation to minimise fraud risks. As part of a rolling programme of testing. 85
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Our fraud risk assessment is reviewed at regular intervals, and particularly when our organisation changes, to ensure that any new fraud risks are identified and addressed. Annual exercise. Audit Committee Our Audit Committee takes a proactive role with respect to fraud prevention. Receive six monthly and annual fraud statistic reports along with reports on the National Fraud Initiative Exercise. Output from investigations reported within routine activity reports and annual report. Our Audit Committee is totally independent of management and includes members with financial expertise. Risk and Audit Scrutiny Committee operate as an independent scrutiny committee. Members receive periodic training to assist in this role. Our Audit Committee meets at least quarterly and devotes sufficient time to providing assurance on our counter fraud strategy Audit Committee meets quarterly and devotes sufficient time to consider anti-fraud arrangements. Internal Control Environment Our internal controls have been designed to address identified fraud risks and help prevent fraud occurring. The controls are proportionate to the identified fraud risks. Yes, controls address fraud risks. Controls are designed to be proportionate to assessed fraud risk. Our internal control environment includes a range of complementary controls (directive, preventive, detective and corrective). Yes, evidenced within Fraud Risk Registers. All staff, contractors and other stakeholders are made aware that there are controls in place to prevent and detect fraud, as a deterrent. Anti-fraud clauses within contracts. Our fraud risk controls have been reviewed by internal audit and the Audit Committee. Yes, Internal Audit review fraud risk registers, which contain the fraud risk controls for each Resource, to ensure they are relevant. Internal Audit has a direct role in reviewing any new or amended policies and programmes to ensure that fraud risk is minimised at the outset. As part of a rolling programme of testing. Internal Audit tests controls to mitigate fraud risks as part of its annual programme of work. Yes, all audit work is tested against fraud risks. Data Mining and Data Matching We regularly use data analysis to detect potentially fraudulent activity Yes, Internal Audit uses data analysis on a regular basis to detect fraud and have devised programmes to enable Resources to monitor fraud. 86
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Our IT and information systems include controls (such as reconciliations, physical counts and analyses) designed to detect potentially fraudulent activity Yes, regular reviews are carried out and exceptions reports are built into systems to enable monitoring. Our data analysis controls include review of journal entries, unusual transactions and period-end transactions, where fraud may be concealed by management override. Processes in place and audited by External Audit as part of the financial year-end audit. We share data and participate in data matching exercises (e.g. the National Fraud Initiative) to help in the prevention and detection of fraud. Yes, SLC takes part every two years in the National Fraud Initiative Exercise. We act promptly on any issues of concern identified through data mining and data matching. Yes, any concerns are investigated immediately. Whistleblowing Arrangements Our organisation has an internal whistleblowing policy and procedures in place which are known to all staff. Staff are regularly reminded of the policy and procedures. Yes, SLC has a Whistleblowing policy which can be accessed both internally and externally for members of the public. Policy being reviewed in 2026/2027. Our whistleblowing arrangements are endorsed by senior management and the Board and include an assurance that all concerns raised will be welcomed and treated seriously. Yes, SLC’s Whistleblowing policy has been approved by senior management and by Committee. The policy states that all whistleblowing communications will be investigated. The policy and procedures make clear how, and with whom, staff should raise concerns about possible fraud. A range of internal and external reporting options is given. Yes, clearly stated in policy. The policy and procedures make clear how we will handle any concerns raised. Yes, states the process. Our whistleblowing policy provides reassurance that employees will not be victimised or suffer detriment for raising concerns. We monitor to ensure this commitment is borne out in practice. Whistle-blowing policy commits to protection of anonymity. Our whistleblowing policy provides assurance about confidentiality. Confidentiality is respected as far as possible in practice. Yes, all whistleblowing communications are treated confidentially. Our whistleblowing policy allows for anonymous disclosures, which will be treated seriously, but points out the disadvantages of anonymous disclosures. Yes, the policy states that a communication can be anonymous. There is a clear process by which contractors, third parties and members of the public can raise concerns about possible fraud in our organisation, for example a fraud SLC has a generic fraud email address which can be accessed by members of the public as well as employees. Suspected fraud can also be reported via the customer 87
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hotline. Details are easily accessible on our website. relationship management system or by telephone. We review our whistleblowing arrangements periodically to ensure their continued effectiveness. We seek views from employees as to their level of trust and confidence in the arrangements. Policy periodically reviewed (planned for 2026/2027). Feedback will be sought as part of the fraud awareness programme. We maintain confidential case files on all concerns raised and analyse the caseload for indications of systemic control weaknesses. All whistleblowing concerns sent to Internal Audit are confidentially retained. We report on whistleblowing caseload to the Audit Committee. Included within fraud statistic reports and routine activity reports to the Risk and Audit Scrutiny Committee. Fraud Response Plan Our organisation has a comprehensive fraud response plan in place. The plan is approved by the Audit Committee and Board. The fraud response process is incorporated into the Counter Fraud, Bribery and Corruption Strategy which has been approved by the Risk and Audit Scrutiny Committee. The fraud response plan makes clear that all allegations of fraud will be investigated and appropriate action taken. Yes, all allegations of fraud are taken seriously and investigated. Action will be taken where fraud is identified. All allegations of fraud, including anonymous allegations, are assessed in line with the fraud response plan. Yes, all allegations will be investigated in line with the response plan. Fraud Investigations The fraud response plan clearly documents the procedures for fraud investigations. Policy being reviewed in 2026/2027. All fraud investigations are carried out in accordance with the fraud response plan. All completed within established protocols and procedures. There are arrangements in place for securing fraud investigation expertise from outside the organisation, if required. Not routinely required but would be secured if expertise required. Sanctions and Redress In responding to proven fraud, we consider the full range of possible sanctions – disciplinary, regulatory, civil and criminal. Where appropriate we consider parallel sanctions. Independent decision by Personnel Services. Decision to report to the Police determined following established protocol. The fraud response plan makes clear that we will seek to recover any losses incurred due to fraud. The Council policy is to seek to recover any losses incurred due to fraud. Fraud Reporting and Case Review All frauds are brought to the attention of the Board and Audit Committee. All are reported within activity, fraud and annual assurance reports. We review and strengthen systems and controls in light of Yes, additional controls will be implemented where relevant 88
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proven frauds. following the identification of a fraud. We report annually to the Board and Audit Committee on fraud caseload. Yes, a report is provided to the senior management and the Risk and Audit Scrutiny Committee on a six-monthly basis. We report all frauds to external third parties as required. Reported to Police as required. We publicise proven frauds, and action taken in response to the frauds, both internally and externally as appropriate, as a deterrent. To be addressed more fully as part of the fraud awareness programme. 89
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Appendix 3 FIGHTING FRAUD AND CORRUPTION LOCAL STRATEGY (FFCL STRATEGY) Fighting Fraud and Corruption Locally Strategy SLC Anti-Fraud, Bribery and Corruption Policy/Strategy Pillars of activity: Contents: Govern Having robust arrangements and executive support to ensure antifraud, bribery and corruption measures are embedded throughout the organisation Managers and Employee Roles and Responsibilities Acknowledge Accessing and understanding fraud risks. Committing the right support and tackling fraud and corruption. Demonstrating that it has a robust anti-fraud response. Communicating the risks to those charged with Governance . Fraud Awareness, Fraud Risk Management Prevent Making the best use of information and technology. Enhancing fraud controls and processes. Developing a more effective anti-fraud culture. Communicating its’ activity and successes. Fraud Detection and Reporting Process Pursue Prioritising fraud recovery and use of civil sanctions. Developing capability and capacity to punish offenders. Collaborating across geographical and sectoral boundaries. Learning lessons and closing the gaps. Fraud Response Process / Investigative Reporting / Recovery and Sanctions Protect Recognising the harm that fraud can cause in the community. Protecting itself and its’ residents from fraud. Monitor and Review 90
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FFCL Action SLC response Culture Creating a culture where fraud and corruption are unacceptable and that is measurable. SLC has a zero tolerance to fraud. Fraud statistics are reported to Committee. Capability Assessing the full range of fraud risks and ensuring that the range of counter fraud measures deployed is appropriate. SLC has fraud risk registers in place across the whole organisation with control measures recorded. Competence Having the right skills and standards commensurate with the full range of counter fraud and corruption activity. Internal Audit undertake investigations within remit. Capacity Deploying the right level of resources to deal with the level of fraud risk that is monitored by those charged with governance. Internal Audit undertake all fraud investigative work. Communication Raising awareness internally and externally, deterring fraudsters, sharing information, celebrating successes. Communicated via the fraud awareness programme. Collaboration Working together across internal and external boundaries: with colleagues, with other local authorities, and with other agencies; sharing resources, skills and learning, good practice and innovation, and information. Commitment to work with Police and other Local Authorities. Part 1 - Fighting Fraud and Corruption Locally Strategy What should senior stakeholders do The chief executive SLC Response 1. Ensure that your authority is measuring itself against the checklist for FFCL 2. Is there a trained counter fraud resource in your organisation or do you have access to one? 3. Is the audit committee receiving regular reports on the work of those leading on fraud and is the external auditor aware of this? Yes. Internal Audit undertake all counter fraud work. Fraud is reported to the Risk and Audit Scrutiny Committee and to External Audit. 91
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The section 151 officer SLC Response 1. Is there a portfolio holder who has fraud within their remit? 2. Is the head of internal audit or counter fraud assessing resources and capability? 3. Do they have sufficient internal unfettered access? 4. Do they produce a report on activity, success and future plans and are they measured on this? The Internal Audit Manager would be the portfolio holder and has fraud within remit. Yes. Yes. Yes. The monitoring officer SLC Response 1. Are members, audit committees and portfolio leads aware of counter fraud activity and is training available to them? 2. Is the fraud team independent of process and does it produce reports to relevant committees that are scrutinised by members? Yes. Yes and presents reports to the Risk and Audit Scrutiny Committee that are scrutinised. The audit committee SLC Response 1. Should receive a report at least once a year on the counter fraud activity which includes proactive and reactive work 2. Should receive a report from the fraud leads on how resource is being allocated, whether it covers all areas of fraud risk and where those fraud risks are measured 3. Should be aware that the relevant portfolio holder is up to date and understands the activity being undertaken to counter fraud 4. Should support proactive counter fraud activity 5. Should challenge activity, be aware of what counter fraud activity can comprise and link with the various national reviews of public audit and accountability Yes, report provided twice yearly. Annual Fraud report contains this detail. Yes, set out in Annual Audit Plan and updated against Plan quarterly. Yes, the Risk and Audit Scrutiny Committee supports counter fraud activity. Receives regular updates on anti-fraud work, NFI and Audit Scotland reports. The portfolio lead SLC Response Receives a regular report that includes information, progress and barriers on: • The assessment against the FFCL checklist Fraud risk assessment and horizon scanning. Annual Fraud Report contains this detail. 92
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Part 2 - Fighting Fraud and Corruption Locally Strategy FFCL Checklist SLC Response The local authority has made a proper assessment of its fraud and corruption risks, has an action plan to deal with them and regularly reports to its senior Board and its members. Yes, fraud and corruption have been assessed and included in the Council’s top risks. Internal Audit links its Plan to the top risks and includes fraud checks in all work undertaken. A report is provided to senior management and to the Risk and Audit Scrutiny Committee twice a year on fraud work and outcomes. The local authority has undertaken a fraud risk assessment against the risks and has also undertaken horizon scanning of future potential fraud and corruption risks. This assessment includes the understanding of the harm that fraud may do in the community. Resources each have their own fraud risk registers in addition to the corporate fraud risk register. These are updated as a minimum, annually, but also as and when new risks emerge. Formal review as part of audit planning process. There is an annual report to the audit committee, or equivalent detailed assessment, to compare against FFCL 2020 and this checklist. Annual Report includes checklist in 2025/2026 and going forward. The relevant portfolio holder has been briefed on the fraud risks and mitigation. Yes. The audit committee supports counter fraud work and challenges the level of activity to ensure it is appropriate in terms of fraud risk and resources. Yes, the Risk and Audit Scrutiny Committee supports and challenges the work of Internal Audit. There is a counter fraud and corruption strategy applying to all aspects of the local authority’s business which has been communicated throughout the local authority and acknowledged by those charged with governance. The Council has an Anti-Fraud, Bribery and Corruption Policy. It has been approved by senior management and the Risk and Audit Scrutiny Committee. An updated version will be communicated to all employees in 2026/2027. The local authority has arrangements in place that are designed to promote and ensure probity and propriety in the conduct of its business. SLC promotes the prevention and detection of fraud. Each employee is obliged to follow the Code of Conduct which promotes expected standards of behaviour of employees and responsibilities in identifying and reporting fraud and corruption. The risks of fraud and corruption are specifically considered in the local authority’s overall risk management process. Yes. 93
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Counter fraud staff are consulted to fraudproof new policies, strategies and initiatives across departments and this is reported upon to committee. Part of reviews from 2026/2027 going forward. Successful cases of proven fraud/corruption are routinely publicised to raise awareness. Fraud Awareness Programme to address this requirement. The local authority has put in place arrangements to prevent and detect fraud and corruption and a mechanism for ensuring that this is effective and is reported to committee. Yes, fraud risk registers evidence controls put in place to prevent and detect fraud and corruption. Internal Audit review the registers annually and, in 2026/2027, will sample check registers to confirm compliance. The local authority has put in place arrangements for monitoring compliance with standards of conduct across the local authority covering: – codes of conduct including behaviour for counter fraud, anti-bribery and corruption – register of interests – register of gifts and hospitality Yes, SLC has these policies in place. Compliance is monitored by Resources. Annual reminder now forms part of the Council's Fraud Awareness Programme. The local authority undertakes recruitment vetting of staff prior to employment by risk assessing posts and undertaking the checks recommended Fighting Fraud and Corruption Locally - A strategy for the 2020s 28 in FFCL 2020 to prevent potentially dishonest employees from being appointed. Yes, depending on the nature of the role, there are different levels of checking/vetting. All employees are vetted via evidence provided and referees. Others will have disclosure/Police checks. Members and staff are aware of the need to make appropriate disclosures of gifts, hospitality and business. This is checked by auditors and reported to committee. Yes, this is stated within the Council's Code of Conduct for employees. Forms part of the Fraud Awareness Programme. Reported to Risk and Audit Scrutiny Committee from 2025/2026 onwards. There is a programme of work to ensure a strong counter fraud culture across all departments and delivery agents led by counter fraud experts. Internal Audit carry out all investigatory work relating to fraud, with the assistance of Personnel Services when interviewing employees. There is an independent and up-to-date whistleblowing policy which is monitored for take-up and can show that suspicions have been acted upon without internal pressure. Yes, SLC has a whistleblowing policy. 94
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Contractors and third parties sign up to the whistleblowing policy and there is evidence of this. There should be no discrimination against whistleblowers. Standard clauses within contracts. There is no discrimination against whistleblowers and SLC has a confidential reporting process in place. Fraud resources are assessed proportionately to the risk the local authority faces and are adequately resourced. Yes, pre-work is carried out on all reported frauds to verify accuracy and risk. There is an annual fraud plan which is agreed by committee and reflects resources mapped to risks and arrangements for reporting outcomes. This plan covers all areas of the local authority’s business and includes activities undertaken by contractors and third parties or voluntary sector activities. Fraud work is included within the Internal Audit Annual Plan and time is available to deal with fraud alerts. The work is mainly employee-based but can include work carried out by contractors, other third parties or voluntary services. Statistics are kept and reported by the fraud team which cover all areas of activity and outcomes. Yes, Internal Audit keep records of all frauds identified and outcomes. Fraud officers have unfettered access to premises and documents for the purposes of counter fraud investigation. Internal Auditors can access all areas of the Council and review all documentation. There is a programme to publicise fraud and corruption cases internally and externally which is positive and endorsed by the council’s communications team. Fraud Awareness Programme will address. All allegations of fraud and corruption are risk assessed. Yes. The fraud and corruption response plan covers all areas of counter fraud work: – prevention – detection – investigation – sanctions – redress. Yes. The fraud response plan is linked to the audit plan and is communicated to senior management and members. Time included within Audit Plan to implement fraud response plan. Asset recovery and civil recovery are considered in all cases. Recovery is considered in all cases. Any external fraud identified will be passed to the Police to investigate. There is a zero-tolerance approach to fraud and corruption that is defined and monitored, and which is always reported to committee. SLC has a zero-tolerance approach to fraud and corruption which is communicated to all employees and reported to the Risk and Audit Scrutiny Committee. There is a programme of proactive counter fraud work which covers risks identified in assessment. Yes, Internal Audit has a programme of pro-active counter fraud work based on the top risks and on emerging fraud risks. 95
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The counter fraud team works jointly with other enforcement agencies and encourages a corporate approach and co- location of enforcement activity. Internal Audit work with the Police when required. The local authority shares data across its own departments and between other enforcement agencies. Yes, in a GDPR compliant manner. Prevention measures and projects are undertaken using data analytics where possible. Yes, data analytics are used by Internal Audit as a preventative measure. The counter fraud team has registered with the Knowledge Hub so it has access to directories and other tools. All Internal Audit members have registered with the Knowledge Hub and can access information from the FFCL group. The counter fraud team has access to the FFCL regional network. Confirmed. There are professionally trained and accredited staff for counter fraud work. If auditors undertake counter fraud work they too must be trained in this area. Work is undertaken by Internal Audit with access to ongoing training in place. The counter fraud team has adequate knowledge in all areas of the local authority or is trained in these areas. All Internal Audit employees have a wide knowledge of Council Services. The counter fraud team has access (through partnership/ other local authorities/or funds to buy in) to specialist staff for: – surveillance – computer forensics – asset recovery – financial investigations. Available if required. Weaknesses revealed by instances of proven fraud and corruption are scrutinised carefully and fed back to departments to fraud-proof systems. Yes, reports are issued to Resources with actions recommended to improve controls. 96
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Appendix 4 Economic Crime and Corporate Transparency Act – Action Plan Area Required Action Response Responsible Development of detailed checklist based on Home Office guidance (November 2024). Review of Public Sector Fraud Authority, CIFAS, Fraud Advisory Panel, International Public Sector Fraud Forum. Use to provide an over- arching review of arrangements. Review process in progress. Final outcomes will be reported during 2026/2027. Internal Audit, 31 March 2027 Top Level Commitment Reflect this in the induction process for all new employees and require this to form part of the required ‘behaviours’ set out within annual performance appraisal forms Fraud prevention added to the induction process for all new employees. Performance Appraisal Form formats to be reviewed. Personnel Services, 31 March 2027 Top Level Commitment Roll out the fraud awareness programme previously approved Programme has been developed. To be implemented in 2026/2027. Internal Audit, 31 March 2027 Top Level Commitment Undertake an annual review of the Council’s fraud policy and ongoing levels of compliance Programmed in 2026/2027. Internal Audit, 30 September 2026 Top Level Commitment Review the format of six monthly and annual fraud reports to provide a more comprehensive update on anti-fraud activity This has now been progressed with the first report to RASC in August 2026. Continue to review in 2026/2027. Internal Audit, 31 March 2027 Risk Assessment Review of fraud risk assessments to ensure adequate. A partial review was undertaken for year ended 31 March 2026. This will be reviewed again by Internal Audit in 2026/2027. Internal Audit, 31 March 2027 Risk-based Prevention Procedures Capture data around how many of these checks have been undertaken over the course of a year and report within the annual fraud report To be reported for 2026/2027. Internal Audit, 30 September 2027 97
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Risk-based Prevention Procedures Require all Resources to review Service specific procedures to ensure these incorporate fraud prevention measures and that there is evidence of periodic briefing of employees Memo to be issued to Head of Services advising of this requirement. Internal Audit, 31 July 2026 Due Diligence Review current vetting of employees, agents, contractors, and subsidiaries who act “for or on behalf of” the organisation. Current arrangements to be reviewed. Personnel Services, 31 December 2026 Communication Develop a formal programme of Learn fraud modules on Fusion Drafted and being developed by Internal Audit in 2026/2027. Internal Audit, 30 September 2026 Monitoring and Review Compare whistle-blowing arrangements against the requirements of Home Office guidance and wider best practice Review completed. Actions to be delivered and progress reported. Internal Audit, 30 September 2026 98
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 August 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Forward Programme for Future Meetings 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] advise members of the forward programme for the meetings of the Risk and Audit Scrutiny Committee to March 2027, and invite members to suggest topics for inclusion in the Committee’s forward programme [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that the report and the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to March 2027, attached as an Appendix to the report, be noted. [1recs] 3. Background 3.1. As part of a range of improvement measures introduced as a result of Audit Scotland’s report on the Audit of Best Value and Community Planning (2009), an Action Plan was prepared. One of the actions was to include, as a standard agenda item, a list of items proposed for consideration at subsequent meetings of this Committee to provide an opportunity for members to inform future agendas. The outline forward programme to March 2027 is attached, for members’ information, as an Appendix to the report. 4. Employee Implications 4.1. There are no employee implications. 5. Financial Implications 5.1. There are no financial implications. 6. Climate Change, Sustainability and Environmental Implications 6.1. There are no Climate Change, Sustainability or Environmental implications in terms of the information contained within this report. 7. Risk and Other Implications 7.1. There are no risk implications in terms of the information contained within this report. 10 99
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8. Integrated Impact Assessment and Consultation Requirements 8.1. The report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment is required. 8.2. There was no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 3 August 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Executive Committee 8 July 2009 List of Background Papers Audit Scotland Audit of Best Value and Community Planning Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Ishara Opatha, Administration Officer Tel: 07385370069 E-mail:- ishara.opatha@southlanarkshire.gov.uk 100
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APPENDIX – RASC OUTLINE FORWARD PROGRAMME Meeting Date Item Responsibility 29 September 2026 (Special) External Auditor’s Annual Report to South Lanarkshire Council 2025/2026 External Audit Audited Annual Accounts 2025/2026 Head of Finance (Strategy) Year-End Insured Risks Report 2025/2026 Head of Finance (Transactions) Year-End Risk Management Report 2025/2026 and Review of Council’s Top Risks 2026/2027 Head of Finance (Transactions) Audit Scotland Report: Delivering for the Future – Transformation Head of Finance (Strategy) 3 November 2026 Internal Audit Activity Report Internal Audit Manager Annual Update on the Use of Surveillance Powers - The Regulation of Investigatory Powers (Scotland) Act 2000 Head of Administration and Legal Services 2024 NFI Exercise (Audit Scotland) Internal Audit Manager 26 January 2027 Internal Audit Activity Report Internal Audit Manager Performance and Review Scrutiny Forum Annual Update Head of Communications and Strategy Good Governance Update Head of Administration and Legal Services 2026/2027 Six-Monthly Fraud Statistics Internal Audit Manager March 2027 (Date TBC) 2027/2028 Internal Audit Plan Internal Audit Manager Internal Audit Activity Report Internal Audit Manager Annual Audit Plan External Audit N.B:- Audit Scotland national studies and reviews will appear as a recurring item, but the frequency and subject matter will vary according to their programme. 101
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