Agenda Document Pack - Risk and Audit Scrutiny Committee - 29/09/2026
South Lanarkshire Council · 29 September 2026
Back to Risk and Audit Scrutiny Committee — 29 September 2026 and its agenda
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Council Offices, Almada Street Hamilton, ML3 0AA Monday, 21 September 2026 Dear Councillor Risk and Audit Scrutiny Committee The Members listed below are requested to attend a special meeting of the above Committee to be held as follows:- Date: Tuesday, 29 September 2026 Time: 14:00 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, Monique Equi, Alistair Fulton, Ross Gowland, Graeme Horne, Richard Lockhart, Fiona McDermott Substitutes Archie Buchanan, Bert Thomson, Helen Toner 1
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BUSINESS 1 Declaration of Interests Monitoring Item(s) 2a External Auditors' Report 2025/2026 Letter and report dated 29 September 2026 by Audit Scotland, External Auditors to the Council. (Copy attached) 3 - 64 2b External Auditors' Report 2025/2026. South Lanarkshire Council Charitable Trusts Letter and report dated 29 September 2026 by Audit Scotland, External Auditors to the Council. (Copy attached) 65 - 86 Item(s) for Decision 3 Audited Annual Accounts 2025/2026 Report dated 11 September 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 87 - 90 Item(s) for Noting 4 Audit Scotland Report - Delivering for the Future – Transformation - How Councils Are Redesigning and Delivering More Efficient Services Report dated 9 September 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 91 - 98 5 Year End Insured Claims Report – 2025/2026 Report dated 1 September 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 99 - 110 6 Year End Risk Management Report (2025/2026) and Review of Council's Top Risks (2026/2027) Report dated 1 September 2026 by the Executive Director (Finance and Corporate Resources). (Copy attached) 111 - 122 Urgent Business 7 Urgent Business Any other items of business which the Chair decides are urgent. For further information, please contact:- Clerk Name: Ishara Opatha Clerk Telephone: 07385370069 Clerk Email: ishara.opatha@southlanarkshire.gov.uk 2
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4th Floor, South Suite, The Athenaeum Building, 8 Nelson Mandela Place, Glasgow, G2 1BT Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot Risk and Audit Scrutiny Committee 29 September 2026 South Lanarkshire Council Audit of the 2025/26 annual accounts Independent Auditor’s Report 1. My audit work on the 2025/26 annual accounts is now substantially complete. Subject to the satisfactory conclusion of the outstanding matters referred to later in this letter receipt of a revised set of annual accounts for final review, I anticipate being able to issue unmodified audit opinions in the Independent Auditor's Report on 29 September 2026. The proposed Independent Auditor’s Report is attached at Appendix A. Annual Audit Report 2. Under International Standards on Auditing in the UK (ISA (UK)), I am required to report specific matters identified from the audit of the annual accounts to those charged with governance of South Lanarkshire Council in sufficient time to enable appropriate action. For South Lanarkshire Council, those charged with governance is the Risk and Audit Scrutiny Committee. I present for the committee's consideration my draft Annual Audit Report on the 2025/26 audit. The section headed "Significant findings and key audit matters" sets out the issues identified in respect of the annual accounts, including those that I am required to report to you. 3. The Annual Audit Report also sets out conclusions on the wider scope areas that frame public audit as set out in the Code of Audit Practice. 4. The Annual Audit Report will be issued in final form after the audit of the annual accounts has been completed. Uncorrected misstatements 5. I also report to those charged with governance all uncorrected misstatements in the annual accounts which I have identified during the course of my audit, other than those of a trivial nature, and request that these misstatements be corrected. 6. There are no uncorrected misstatements to report. 2a 3
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Other ISA (UK) matters 7. In presenting this letter and the Annual Audit Report to the Risk and Audit Scrutiny Committee, I seek confirmation from those charged with governance on the following matters: • if they are aware of any instances of actual, suspected, or alleged fraud, • if they are aware of any subsequent events that have occurred since the date of the financial statements, • if they are content that the methods, assumptions, and data used in making accounting estimates in the annual accounts are appropriate, • if all related party relationships and transactions they are aware of are reflected in the annual accounts, and • if they are aware of any non-compliance with laws and regulations. 8. I am required to report to those charged with governance any issues that I have identified from my audit in relation to other ISA (UK) matters. I have not identified any such issues. Representations from the Section 95 Officer 9. As part of the completion of the audit, I am seeking written representations from the Executive Director (Finance and Corporate Resources), who is the Section 95 Officer, on aspects of the annual accounts, including the judgements and estimates made. 10. A draft letter of representations is attached at Appendix B. This should be signed and returned to me by the Section 95 Officer with the signed annual accounts prior to the Independent Auditor’s Report being signed. Outstanding matters 11. There are some areas where I still require additional information to conclude on audit work, and these are identified below: • A response for a query regarding a rental income transaction remains outstanding. • Supporting evidence for one expenditure sample remains outstanding. 4
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Appendix A: Proposed Independent Auditor’s Report Opinion on financial statements I certify that I have audited the financial statements in the annual accounts of South Lanarkshire Council and its group for the year ended 31 March 2026 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the group and council-only Comprehensive Income and Expenditure Statements, the group and council-only Balance Sheets, the group and council-only Movement in Reserves Statements, the group and council-only Cash Flow Statements, the Housing Revenue Account Income and Expenditure Statement, the National Non-Domestic Rates Income and Expenditure Statement, the Council Tax Income and Expenditure Statement and notes to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 (the 2025/26 Code). In my opinion the accompanying financial statements: • give a true and fair view of the state of affairs of the council and its group as at 31 March 2026 and of the income and expenditure of the council and its group for the year then ended; • have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2025/26 Code; and • have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003. Basis for opinion I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I was appointed by the Accounts Commission on 2 December 2022. My period of appointment is five years, covering 2022/23 to 2026/27. I am independent of the council and its group in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the council. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 5
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Conclusions relating to going concern basis of accounting I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the ability of the council and its group to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. These conclusions are not intended to, nor do they, provide assurance on the current or future financial sustainability of the council and its group. However, I report on the council’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. Risks of material misstatement I report in my Annual Audit Report the most significant assessed risks of material misstatement that I identified and my judgements thereon. Responsibilities of the Executive Director (Finance and Corporate Resources) and Risk and Audit Scrutiny Committee for the financial statements As explained more fully in the Statement of Responsibilities, the Executive Director (Finance and Corporate Resources) is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Executive Director (Finance and Corporate Resources) determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Executive Director (Finance and Corporate Resources) is responsible for assessing the ability of the council and its group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there is an intention to discontinue the operations of the council and its group. The Risk and Audit Scrutiny Committee is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will 6
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always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using my understanding of the local government sector to identify that the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003 are significant in the context of the council and its group; • inquiring of the Executive Director (Finance and Corporate Resources) as to other laws or regulations that may be expected to have a fundamental effect on the operations of the council and its group; • inquiring of the Executive Director (Finance and Corporate Resources) concerning the policies and procedures of the council and its group regarding compliance with the applicable legal and regulatory framework; • discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and • considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the council’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report. 7
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Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report I have audited the parts of the Remuneration Report described as audited. In my opinion, the audited parts of the Remuneration Report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Executive Director (Finance and Corporate Resources) is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities and the unaudited parts of the Remuneration Report. My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Management Commentary and Annual Governance Statement to the extent explicitly stated in the following opinions prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Management Commentary and Annual Governance Statement In my opinion, based on the work undertaken in the course of the audit: • the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and • the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). 8
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Matters on which I am required to report by exception I am required by the Accounts Commission to report to you if, in my opinion: • adequate accounting records have not been kept; or • the financial statements and the audited parts of the Remuneration Report are not in agreement with the accounting records; or • I have not received all the information and explanations I require for my audit. I have nothing to report in respect of these matters. Conclusions on wider scope responsibilities In addition to my responsibilities for the annual accounts, my conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in my Annual Audit Report. Use of my report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. John Boyd FCPFA Audit Scotland 4th Floor, South Suite The Athenaeum Building 8 Nelson Mandela Place Glasgow G2 1BT 9
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Appendix B: Letter of Representations (ISA (UK) 580) [the Section 95 Officer should reproduce this on the audited body’s letterhead] 29 September 2026 John Boyd, Audit Director Audit Scotland 4th Floor, South Suite The Athenaeum Building 8 Nelson Mandela Place Glasgow G2 1BT South Lanarkshire Council Annual accounts 2025/26 Dear John, This representation letter is provided in connection with your audit of the annual accounts of South Lanarkshire Council and its group, hereafter referred to as [South Lanarkshire Council, for the year ended 31 March 2026 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view and have been properly prepared, and for expressing other opinions on the Remuneration Report, Management Commentary, and Annual Governance Statement. I confirm to the best of my knowledge and belief, and having made such enquiries as I considered necessary, the following representations given to you in connection with your audit of South Lanarkshire Council’s annual accounts for the year ended 31 March 2026. General I have fulfilled my responsibilities for the preparation of the 2025/26 annual accounts as set out in your 2025/26 Annual Audit Plan. All the accounting records, documentation, and other matters which I am aware are relevant to the preparation of the annual accounts have been made available to you for the purposes of your audit. All transactions undertaken by South Lanarkshire Council have been recorded in the accounting records and are properly reflected in the financial statements. I confirm that the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. As you have reported, there are no uncorrected misstatements. Financial Reporting Framework The annual accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 10
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(2025/26 Code), and the requirements of the Local Government (Scotland) Act 1973, the Local Government in Scotland Act 2003, and the Local Authority Accounts (Scotland) Regulations 2014. In accordance with the Local Authority Accounts (Scotland) Regulations 2014, I have ensured that the financial statements give a true and fair view of the financial position of South Lanarkshire Council at 31 March 2026 and the transactions for 2025/26. Accounting Policies and Estimates All material accounting policies applied are as shown in the note included in the financial statements. The accounting policies are determined by the 2025/26 Code, where applicable. Where the 2025/26 Code does not specifically apply, I have used judgement in developing and applying an accounting policy that results in information that is relevant and reliable. All accounting policies applied are appropriate to South Lanarkshire Council’s circumstances and have been consistently applied. The methodology, significant assumptions, and data used in making accounting estimates are reasonable, and have been properly reflected and disclosed in the financial statements in accordance with the 2025/26 Code. Judgements made in making estimates have been based on the latest available and reliable information. Estimates have been revised where there are changes in the circumstances on which the original estimate was based or as a result of new information or experience. Going Concern Basis of Accounting I have assessed South Lanarkshire Council’s ability to continue to use the going concern basis of accounting and have concluded that it is appropriate. I am not aware of any material uncertainties that may cast significant doubt on South Lanarkshire Council’s ability to continue to adopt the going concern basis of accounting. Assets All assets at 31 March 2026 of which I am aware have been reported in the financial statements. All assets as at 31 March 2026 have been valued and / or indexed in line with the accounting polices around asset valuations. I carried out an assessment at 31 March 2026 as to whether there is any indication that an asset may be impaired and have recognised any impairment losses identified in the financial statements. I have provided you with all information of which I am aware regarding any valuation exercises carried out after 31 March 2026. There are no plans or intentions that are likely to affect the carrying value or classification of the assets recognised in the financial statements. 11
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Owned assets are free from any lien, encumbrance, or charge, except as disclosed in the financial statements. Liabilities All liabilities at 31 March 2026 of which I am aware have been reported in the financial statements. Provisions have been recognised in the financial statements for all liabilities of uncertain timing or amount at 31 March 2026 of which I am aware where the conditions specified in IAS 37, as adapted by the 2025/26 Code, have been met. The amount recognised as a provision is the best estimate of the expenditure likely to be required to settle the obligation at 31 March 2026. Where the effect of the time value of money is material, the amount of the provision has been discounted to the present value of the expected payments. Provisions recognised in previous years have been reviewed and adjusted, where appropriate, to reflect the best estimate at 31 March 2026, or to reflect material changes in the assumptions underlying the calculations of the provisions. The accrual recognised in the financial statements for annual leave untaken by 31 March 2026 has been estimated on a reasonable basis. There are no plans or intentions that are likely to affect the carrying value or classification of the liabilities recognised in the financial statements. Contingent Liabilities There are no significant contingent liabilities, other than those disclosed in Note 29 to the financial statements, arising either under formal agreement or through formal undertakings requiring disclosure in the financial statements. All known contingent liabilities have been fully and properly disclosed in accordance with IAS 37, as adopted by the 2025/26 Code. Litigation and Claims All known actual or possible legal claims have been disclosed to you and have been accounted for and disclosed in the financial statements in accordance with the 2025/26 Code. Fraud I understand my responsibilities for the design, implementation, and maintenance of internal control to prevent fraud and I believe I have appropriately fulfilled those responsibilities. I have provided you with all information in relation to: • my assessment of the risk that the financial statements may be materially misstated as a result of fraud, 12
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• any allegations of fraud or suspected fraud affecting the financial statements, and • fraud or suspected fraud that I am aware of involving management, employees who have a significant role in internal control, or others that could have a material effect on the financial statements. Laws and Regulations I have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements. Related Party Transactions All material transactions with related parties have been appropriately accounted for and disclosed in the financial statements in accordance with IAS 24, as adopted by the 2025/26 Code. I have made available to you the identity of all of South Lanarkshire Council’s related parties and all the related party transactions of which I am aware. Remuneration Report The Remuneration Report has been prepared in accordance with the Local Authority Accounts (Scotland) Regulations 2014, and all required information of which I am aware has been provided to you. Management Commentary I confirm that the Management Commentary has been prepared in accordance with statutory guidance, and the information is consistent with the financial statements. Corporate Governance I confirm South Lanarkshire Council has undertaken a review of the system of internal control during 2025/26 to establish the extent to which it complies with proper practices set out in Delivering Good Governance in Local Government: Framework 2016. I have disclosed to you all deficiencies in internal control identified from this review or of which I am otherwise aware. I confirm that the Annual Governance Statement has been prepared in accordance with the Delivering Good Governance in Local Government: Framework 2016 and the information is consistent with the financial statements. There have been no changes in the corporate governance arrangements, or issues identified, since 31 March 2026 which require to be reflected in the Annual Governance Statement or annual accounts. Group Accounts I have identified all the other entities in which South Lanarkshire Council has an interest and have classified and accounted for them in accordance 13
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with the 2025/26 Code. Any significant issues, including those related to fraud and any qualified audit opinions, in relation to the financial statements of group entities, have been provided to you. Any significant issues identified by you as group auditor have been communicated to management of group components, where relevant to those components. Events Subsequent to the Date of the Balance Sheet All events subsequent to 31 March 2026 for which IAS 10, as adopted by the 2025/26 Code, requires adjustment or disclosure have been adjusted or disclosed. Other representations – Prior year restatement I confirm that all restatements to correct or update the 2024/25 comparative figures in the 2025/26 financial statements have been accurately processed. Details of the restatement can be found on the Balance sheet. Yours sincerely Section 95 Officer 14
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South Lanarkshire Council 2025/26 Annual Audit Report – Draft Prepared for South Lanarkshire Council and the Controller of Audit September 2026 2a 15
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South Lanarkshire Council: 2025/26 Annual Audit Report – Draft | 2 Contents Summary of audit opinions and conclusions 3 Introduction 4 Audit scope, responsibilities, and fee 5 Audit of the annual accounts 7 Wider scope audit 20 Best Value audit 37 Appendix 1 41 Appendix 2 49 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. 16
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Summary of audit opinions and conclusions | 3 Summary of audit opinions and conclusions Audit of the annual accounts 1 All audit opinions stated that the annual accounts were free from material misstatement. 2 All audit adjustments required to correct the financial statements were processed by South Lanarkshire Council. Wider scope audit 3 South Lanarkshire Council has effective and appropriate arrangements in place for Financial Management; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. 4 South Lanarkshire Council faces a challenging but deliverable short-term financial position, with a projected budget gap of £26.500 million over the next two years. The more significant risk lies in the longer term, with forecast cumulative budget gap of £180.4 million to 2036/37. The council should enhance its existing financial plans by setting out clearer financial scenarios and options to show how it will address these pressures and support sustainable decision making. Best Value audit 5 South Lanarkshire Council has effective and appropriate arrangements in place for securing Best Value. 6 The council has effective and appropriate arrangements in place for preparing and publishing statutory performance information. These arrangements have continued to develop in recent years. There is an opportunity to strengthen public reporting by making clearer how Strategic Key Performance Measures align with the council’s wider performance management framework, and how relevant Local Government Benchmarking Framework (LGBF) indicators are used to support assessment of progress against priorities and outcomes. 17
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Introduction | 4 Introduction Purpose of the Annual Audit Report 1. The purpose of this Annual Audit Report is to report the significant matters identified from the 2025/26 audit of South Lanarkshire Council’s annual accounts and the wider scope areas specified in the Code of Audit Practice (2021). 2. The Annual Audit Report is addressed to South Lanarkshire Council, hereafter referred to as ‘the council’ and the Controller of Audit, and will be published on Audit Scotland’s website in due course. Appointed auditor and independence 3. John Boyd, of Audit Scotland, has been appointed as external auditor of the council for the period from 2022/23 until 2026/27. As reported in the Annual Audit Plan, John Boyd as engagement lead and the audit team are independent of the council in accordance with relevant ethical requirements, including the Financial Reporting Council’s Ethical Standard. There have been no developments since the issue of the Annual Audit Plan that impact on the continued independence of the engagement lead or the rest of the audit team from the council, including no provision of non-audit services. Acknowledgements 4. We would like to thank the council and its staff, particularly those involved in preparation of the annual accounts, for their cooperation and assistance during the audit. We look forward to working together constructively over the remainder of the five-year audit appointment. 18
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Audit scope, responsibilities, and fee | 5 Audit scope, responsibilities, and fee Scope of the audit 5. The audit is performed in accordance with the Code of Audit Practice, including supplementary guidance, International Standards on Auditing (ISA) (UK), and relevant legislation. These set out the requirements for the scope of the audit which includes: • An audit of the financial statements and an opinion on whether they give a true and fair view and are free from material misstatement. • An opinion on statutory other information published with the financial statements in the annual accounts, namely the Management Commentary and Annual Governance Statement. • An opinion on the audited part of the Remuneration Report. • Conclusions on the council’s arrangements in relation to the wider scope areas: Financial Management; Financial Sustainability; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. • Reporting on the council’s arrangements for securing Best Value. • Providing assurance on the Housing Benefit Subsidy Claim, Non- Domestic Rates Return, Whole of Government Accounts return, and summary financial statements. • A review of the council’s arrangements for preparing and publishing statutory performance information. • Provision of this Annual Audit Report. Responsibilities and reporting 6. The Code of Audit Practice sets out the respective responsibilities of the council and the auditor. A summary of the key responsibilities is outlined below. Auditor’s responsibilities 7. The responsibilities of auditors in the public sector are established in the Local Government (Scotland) Act 1973. These include providing an 19
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Audit scope, responsibilities, and fee | 6 independent opinion on the financial statements and other information reported within the annual accounts, and concluding on the council’s arrangements in place for the wider scope areas and Best Value. 8. The matters reported in the Annual Audit Report are only those that have been identified by the audit team during normal audit work and may not be all that exist. Communicating these does not absolve the council from its responsibilities outlined below. 9. The Annual Audit Report includes an agreed action plan at Appendix 1 setting out specific recommendations to address matters identified and includes details of the responsible officer and dates for implementation. The council’s responsibilities 10. The council has primary responsibility for ensuring proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety, and regularity that enables it to successfully deliver its objectives. The features of proper financial stewardship include: • Establishing arrangements to ensure the proper conduct of its affairs. • Preparation of annual accounts, comprising financial statements for the council and its group that gives a true and fair view and other specified information. • Establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. • Implementing arrangements to ensure its financial position is soundly based. • Making arrangements to secure Best Value. • Establishing an internal audit function. Audit Fee 11. The audit fee for the 2025/26 audit was reported in the Annual Audit Plan and was set at £660,930. There have been no developments that impact on planned audit work required, therefore the audit fee reported in the Annual Audit Plan remains unchanged. National performance audit reporting 12. The Auditor General for Scotland and the Accounts Commission regularly publish performance audit reports. These cover a range of matters, many of which may be of interest to the council and Risk and Audit Scrutiny Committee. Details of national and performance audit reports published over the last year can be seen in Appendix 2. 20
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Audit of the annual accounts | 7 Audit of the annual accounts Main judgements All audit opinions stated that the annual accounts were free from material misstatement. All audit adjustments required to correct the financial statements were processed by the council. Audit opinions on the annual accounts 13. The council’s annual accounts were approved by Risk and Audit Scrutiny Committee on 29 September 2026 and certified by the appointed auditor on 29 September 2026. In addition to the council the group accounts consolidate the financial results of the council and its subsidiaries and its investments in associates and interests in joint ventures. These include: Strathclyde Partnership for Transport, Strathclyde Concessionary Travel Scheme Joint Committee, Lanarkshire Valuation Joint Board, South Lanarkshire Integration Joint Board, South Lanarkshire Leisure and Culture Limited, Routes to Work South, Clyde Valley Learning and Development Joint Committee and the Common Good Fund. 14. The Independent Auditor’s Report is included in the council’s annual accounts, and this reports that, in the appointed auditor’s opinion, these were free from material misstatement. Audit timetable 15. The unaudited annual accounts were received on 25 June 2026 in accordance with the agreed audit timetable. 16. In response to the recommendation in our 2024/25 Annual Audit Report regarding year-end closedown procedures and the provision of working papers, improvements were noted in the volume of working papers provided to the audit team at the start of the audit process. However, we found material errors and omissions from the unaudited accounts (see Exhibit 2 below). Management should ensure that they have arrangements in place to support the accurate completion of the accounts and support audit delivery (Appendix 1, point B/f 1). 21
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Audit of the annual accounts | 8 Materiality 17. The concept of materiality is applied by auditors in planning and performing an audit, and in evaluating the effect of any uncorrected misstatements on the financial statements or other information reported in the annual accounts. 18. Broadly, the concept of materiality is to determine whether misstatements identified during the audit could reasonably be expected to influence the decisions of users of the annual accounts. Auditors set a monetary threshold when determining materiality, although some issues may be considered material by their nature. Therefore, materiality is ultimately a matter of the auditor’s professional judgement. 19. Materiality levels for the audit of the council and its group were determined at the risk assessment phase of the audit and were reported in the Annual Audit Plan, which also reported the judgements made in determining materiality levels. These were reassessed on receipt of the unaudited annual accounts. Exhibit 1 2025/26 Materiality levels for the council and its group Materiality The council Group Materiality – set at 2% of gross expenditure. £27.861 million £28.409 million Performance materiality – set at 75% of materiality. As outlined in the Annual Audit Plan, this acts as a trigger point. If the aggregate of misstatements identified during the audit exceeds performance materiality, this could indicate further audit procedures are required. £20.895 million £21.307 million Reporting threshold – set at 5% of materiality. £1.393 million £1.420 million Source: Audit Scotland Significant findings and key audit matters 20. ISA (UK) 260 requires auditors to communicate significant findings from the audit to those charged with governance, which for the council is Risk and Audit Scrutiny Committee. 21. The Code of Audit Practice also requires public sector auditors to communicate key audit matters. These are the matters that, in the auditor’s professional judgement, are of most significance to the audit of 22
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Audit of the annual accounts | 9 the financial statements and require most attention when performing the audit. 22. In determining key audit matters, auditors consider: • Areas of higher or significant risk of material misstatement. • Areas where significant judgement is required, including accounting estimates that are subject to a high degree of estimation uncertainty. • Significant events or transactions that occurred during the year. 23. The significant findings and key audit matters to report are outlined in Exhibit 2. Exhibit 2 Significant findings and key audit matters Significant findings and key audit matters Outcome Indexation The 2025/26 Code requires assets that have not been formally revalued during the year to be subject to annual indexation, where appropriate, to ensure carrying values remain materially consistent with current value. Indexation adjustments were not included in the Annual Report and Accounts submitted for audit. Indexation was applied to the revised financial statements. This resulted in an increase to the value of Property, Plant and Equipment of £41.842 million. Council dwellings Errors in the working paper for calculating the valuation of council dwellings resulted in the gross book value of council dwellings being understated in 2024/25 by £83.255 million and by £134.909 million in 2025/26. The council processed the adjustment for 2025/26 and restated 2024/25 figures in the revised financial statements. 23
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Audit of the annual accounts | 10 Significant findings and key audit matters Outcome Group accounts The group accounts figures included in the Annual Report and Accounts submitted for audit required amendments as outlined in Exhibit 5. Delays in the provision of revised figures and working papers impacted the timely completion of the audit. The council updated group accounts figures in the revised financial statements. Source: Audit Scotland Qualitative aspects of accounting practices 24. ISA (UK) 260 also requires auditors to communicate their view about qualitative aspects of the council’s accounting practices, including accounting policies, accounting estimates, and disclosures in the financial statements. Accounting policies 25. The appropriateness of accounting policies adopted by the council was assessed as part of the audit. These were considered to be appropriate to the circumstances of the council, and there were no significant departures from the accounting policies set out in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). Accounting estimates 26. Accounting estimates are used in number of areas in the council’s financial statements, including the valuation of land and buildings assets and the valuation of the pension balance. Audit work considered the process management of the council has in place around making accounting estimates, including the assumptions and data used in making the estimates, and the use of any management experts. Audit work concluded: • There were no issues with the selection or application of methods, assumptions, and data used to make the accounting estimates, and these were considered to be reasonable. • There was no evidence of management bias in making the accounting estimates. 27. Details of the audit work performed and the outcome of the work on accounting estimates that gave rise to significant risks of material misstatement are outlined in Exhibit 5. 24
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Audit of the annual accounts | 11 Disclosures in the financial statements 28. The adequacy of disclosures in the financial statements was assessed as part of the audit. The quality of disclosures was adequate, with additional levels of detail provided for disclosures around areas of greater sensitivity, such as financial instruments and valuation of the pension liability. Group audit 29. The council is part of a group and prepares group financial statements. The group is made up of nine components, including the council which is the parent of the group. As outlined in the Annual Audit Plan, audit work was required on a number of the group’s components for the purposes of the group audit, and this work was performed by a combination of the audit team and the components’ audit teams. Group audit instructions were issued to component auditors, where required, to outline the expectations and requirements in performing the audit work for the purposes of the group audit. The audit work performed on the group’s components is summarised in Exhibit 3. Exhibit 3 Summary of audit work on the group’s components Group component Auditor and audit work required Summary of audit work performed South Lanarkshire Council Audit Scotland Fully scope audit of the council’s annual accounts. The outcome of audit work performed is reported within the Annual Audit Report, with details of significant findings and key audit matters reported in Exhibit 2. Common Good Fund Audit Scotland Analytical procedures at the group level. Consolidated on a line-by-line basis. Audit team confirmed correct accounting treatment, no significant issues were identified. Routes to Work South AAB Audit & Accountancy Limited Analytical procedures at the group level. Consolidated on a line-by-line basis. Audit team confirmed correct accounting treatment, no significant issues were identified. 25
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Audit of the annual accounts | 12 Group component Auditor and audit work required Summary of audit work performed South Lanarkshire Leisure and Culture Limited Henderson Loggie Analytical procedures at the group level. Consolidated on a line-by-line basis. Audit team confirmed correct accounting treatment, no significant issues were identified. Clyde Valley Learning and Development Joint Committee Audit Scotland Analytical procedures at the group level. Accounted for on an equity basis. Audit team confirmed treatment and no significant issues were identified. Lanarkshire Valuation Joint Board Audit Scotland Analytical procedures at the group level. Accounted for on an equity basis. Audit team confirmed treatment and no significant issues were identified. Strathclyde Concessionary Travel Scheme Joint Committee Audit Scotland Analytical procedures at the group level. Accounted for on an equity basis. Audit team confirmed treatment and no significant issues were identified. Strathclyde Partnership for Transport Audit Scotland Risk assessment questionnaire and analytical procedures at the group level. Accounted for on an equity basis. Audit team confirmed treatment and no significant issues were identified South Lanarkshire Integration Joint Board Audit Scotland Analytical procedures at the group level. Accounted for on an equity basis. Audit team confirmed treatment and no significant issues were identified. Source: Audit Scotland Significant matters discussed with management 30. All significant matters identified during the audit and discussed with the council’s management have been reported in the Annual Audit Report. Audit adjustments 31. Audit adjustments were required to the financial statements to correct misstatements that were identified from the audit. Details of all audit adjustments greater than the reporting threshold of £1.393 million are outlined in Exhibit 4. 26
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Audit of the annual accounts | 13 Exhibit 4 Audit adjustments Details Financial statements lines impacted Comprehensive Income and Expenditure Statement (CIES) Balance Sheet Audit adjustments to financial statements Dr Cr Dr Cr £000 £000 £000 £000 1. Indexation PPE 41,842 Revaluation reserve 38,022 Surplus/deficit on provision of services 3,820 2. Council Dwellings PPE – Council Dwellings 134,909 Revaluation reserve 135,043 Capital Adjustment Account 134 Depreciation 3,768 Housing Revenue Account 3,768 3. Reclassification between short and long term borrowing Short term borrowing 51,056 Long term borrowing 51,056 4. Reclassification of developer contributions 27
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Audit of the annual accounts | 14 Details Financial statements lines impacted Comprehensive Income and Expenditure Statement (CIES) Balance Sheet Short-term creditors 23,742 Long-term creditors 23,742 5. Adjustment to prior year period not removed from ledger Short term creditors 2,146 Short term debtors 2,146 6. Group accounts Income – Community and Enterprise 4,034 Expenditure – Community and Enterprise 4,034 Total adjustments 7,802 7,854 253,829 253,777 Net impact on financial statements 52 52 Audit adjustments in disclosures 1. An error in a PPP working paper resulted in future Payments for Services disclosed in Note 26 being overstated by £55.030 million. 2. An error in an expenditure working paper required an adjustment which increases education depreciation by £67.850 million and a decrease in other services expenditure of £67.580million. 3. The Non-Domestic Rates Rateable Value at 31 March 2026 was incorrectly based on the revaluation of properties which took effect from 1 April 2026. This was adjusted resulting in a decrease to the Rateable Value of £96.532 million. 4. Several changes were required to the Group Cash Flow Statement that resulted in cumulative adjustments of £2.161 million. Source: Audit Scotland 28
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Audit of the annual accounts | 15 32. Management of the council processed audit adjustments for all misstatements identified greater than the reporting threshold. As a result, there are no uncorrected misstatement to report. Whole of Government Accounts (WGA) return 33. The council is part of the WGA boundary and therefore prepares a return that is used by HM Treasury to prepare the WGA. The National Audit Office (NAO) is the auditor for the WGA and issues instructions outlining audit procedures auditors must follow when auditing a WGA return. The threshold for requiring audit procedures to be performed on the WGA return was set at £2 billion. The council was below this threshold and therefore only limited audit procedures were required, and submission of an assurance statement to the NAO. Significant risks of material misstatement identified in the Annual Audit Plan 34. Audit work has been performed in response to the significant risks of material misstatement identified in the Annual Audit Plan. The outcome of audit work performed is summarised in Exhibit 5. In addition to the significant risks of material misstatement identified in the Annual Audit Plan, a further significant risk of material misstatement was subsequently identified, and this is also included in Exhibit 6. 29
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Audit of the annual accounts | 16 Exhibit 5 Significant risks of material misstatement to the financial statements Risk of material misstatement Planned audit response Outcome of audit work Fraud caused by management override of controls Management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. The audit team will: • Evaluate the design and implementation of controls over journal entry processing. • Make inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries. • Test journals entries, focusing on those that are assessed as higher risk of fraud. • Evaluate significant transactions outside the normal course of business. • Assess the adequacy of controls in place for identifying and disclosing related party relationships and transactions in the financial statements. • Assess changes to the methods and underlying assumptions used to prepare accounting estimates and assess these for evidence of management bias. Audit work performed found: • The design and implementation of controls over journal processing were appropriate. • No inappropriate or unusual activity relating to the processing of journal entries was identified from discussions with individuals involved in financial reporting. • No significant issues were identified from testing of journal entries. • No significant issues were identified from transactions outside the normal course of business. • The controls in place for identifying related party relationships and transactions were adequate. There were no indications of fraud in related party transactions. • Additional disclosures were requested on transactions with other Scottish public sector bodies. • No significant issues were identified with changes to methods and underlying assumptions used to prepare accounting estimates and there was no evidence of management bias. Conclusion: no evidence of material fraud or error caused by management override of controls. 30
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Audit of the annual accounts | 17 Valuation of property, plant and equipment The council held £4,113 million of property, plant, and equipment (PPE) as at 31 March 2025, of which £3,697million was land and building assets, including £1,668 million of council dwellings. The council is required to value land and building assets at existing use value where an active market exists for these assets (with a social housing adjustment factor for council dwellings). Where there is no active market, these assets are valued on a depreciated cost replacement (DRC) basis. There is a significant degree of subjectivity in these valuations which are based on specialist assumptions, and changes in the assumptions can result in material changes to valuations. For 2025/26, CIPFA/LASAAC has updated the Code of Practice to reflect HM Treasury’s reforms to public sector asset valuations. Under the revised approach, local authorities will now move to quinquennial (five- yearly) valuations, usually through a rolling programme of valuations, with annual indexation applied in the intervening years to ensure asset values remain materially accurate. There is an increased risk of material misstatement due to greater reliance on management judgement and estimation, particularly in selecting appropriate indices and For assets subject to valuation in year, the audit team will: • Evaluate the design and implementation of controls over the valuation process. • Review the information provided to the valuer and assess this for completeness and accuracy. • Evaluate the competence, capabilities, and objectivity of the valuer. • Obtain an understanding of management’s involvement in the valuation process to assess if appropriate oversight has occurred. • Review the appropriateness of the key data and assumptions used in the 2025/26 valuation process, and challenge these where required. For assets where indexation is applied in year, the audit team will: • Review the indices applied by management to assets not subject to valuation in 2025/26 and assess if these are reasonable and have been correctly applied. • Review the information provided to the valuer and assess this for completeness and accuracy. • Evaluate the competence, capabilities, and objectivity of the valuer. • Review the appropriateness of the key data and assumptions used in the 2025/26 indexation process, and challenge these where required. Audit work performed found: • The design and implementation of controls over the valuation process were appropriate. • The information provided to the valuer was accurate and complete. • The valuer had sufficient competence, capability, and objectivity to perform their work. • Management is involved in the valuation process and have an appropriate level of oversight. • The data and assumptions used in the 2025/26 valuation process were appropriate. • Indexation was not applied in the financial statements provided for audit. The indices applied by management to assets not subject to valuation in 2025/26 in the revised financial statements were reasonable and had been correctly applied. Conclusion: the valuation of PPE is not materially misstated per the revised financial statements. 31
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Audit of the annual accounts | 18 Risk of material misstatement Planned audit response Outcome of audit work determining when additional valuations are necessary in between formal valuations. Estimation of the pension balance The council recognised a pension balance of £97.992 million at 31 March 2025. The council is a member of the Local Government Pension Scheme (LGPS), which is a defined benefit pension scheme. LGPS is subject to formal valuation every three years, and this sets out each member’s share of the scheme’s overall pension balance and contributions for the next three years. The last formal valuation was carried out at 31 March 2023. An estimation of the council’s share of the overall pension balance is required in each intervening year between formal valuations, and these are carried out by Hymans Robertson. There is a significant degree of subjectivity in the estimation of the funded and unfunded pension balances as the estimation is based on specialist assumptions, and changes in the assumptions can result in material changes to the estimation. The audit team will: • Evaluate the design and implementation of controls over the pension balance estimation process. • Review the information provided to the actuary and assess this for completeness and accuracy. • Evaluate the competence, capabilities, and objectivity of the actuary. • Obtain an understanding of the management’s involvement in the estimation process to assess if appropriate oversight has occurred. • Review the appropriateness of the key data and assumptions used by management for the estimation of the pension balance, and challenge these where required. • Audit Scotland uses PwC as an auditor’s expert to inform the planned audit procedures outlined above. Therefore, the audit team will also review the information provided by PwC and reflect this in the planned audit procedures where required. Audit work performed found: • The design and implementation of controls over the pension liability estimation process were appropriate. • The information provided to the actuary was accurate and complete. • The actuary had sufficient competence, capability, and objectivity to perform their work. • Management is involved in the estimation process and have an appropriate level of oversight. • The data and assumptions used in the estimation process were appropriate. • The information provided by PwC was reviewed and this reflected in the planned audit procedures, where required. Conclusion: the estimation of the pension balance is not materially misstated. Source: Audit Scotland Prior year recommendations 35. The council has made reasonable progress in implementing the agreed prior year audit recommendations. For actions not yet 32
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Audit of the annual accounts | 19 implemented, revised responses and timescales have been agreed with the council and are outlined in Appendix 1. Statutory override for infrastructure assets 36. The statutory override relating to valuation of infrastructure assets is due to end on 31 March 2027. Due to practical difficulties in applying component accounting for the recognition and derecognition of replaced components of infrastructure assets, most local authorities have been unable to comply with the requirement to assess the net book value of a replaced component of an infrastructure asset and have taken a network approach to the measurement of such assets, treating the amount of the replaced component as having no value. 37. The temporary statutory override was introduced in August 2022, to allow time for the CIPFA LASAAC Local Authority Accounting Code Board to conclude the development of a permanent solution, with work ongoing in this area. 33
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Wider scope audit | 20 Wider scope audit Conclusion The council has effective and appropriate arrangements in place for Financial Management; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. South Lanarkshire Council faces a challenging but deliverable short- term financial position, with a projected budget gap of £26.500 million over the next two years. The more significant risk lies in the longer term, with forecast cumulative budget gaps to 2036/37. The council should set out clearer financial scenarios and options to show how it will address these pressures and support sustainable decision making. Audit approach to wider scope Wider scope 38. As reported in the Annual Audit Plan, the wider scope audit areas are: • Financial Management. • Financial Sustainability. • Vision, Leadership and Governance. • Use of Resources to Improve Outcomes. 39. Audit work is performed on these four areas and a conclusion on the effectiveness and appropriateness of arrangements the council has in place for each of these is reported in this chapter. Significant wider scope risks 40. Audit work has been performed in response to the significant wider scope risks identified in the Annual Audit Plan. The outcome of audit work performed is summarised in Exhibit 6. 34
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Wider scope audit | 21 Exhibit 6 Significant wider scope risks Significant risk Planned audit response Outcome of audit work Financial sustainability South Lanarkshire Council continues to operate in an increasingly complex and challenging environment, aiming to provide the best possible service within the resources available. Although a surplus position of £3.579 million before final transfers to reserves is projected for 2025/26, the council has identified a savings requirement of £29.2 million over the next three years to 2028/29. A long-term programme of transformational reviews is ongoing to contribute towards addressing the financial pressures. However, there is a risk that the council plans do not deliver the required savings to address the projected shortfall. The audit team will: • Review the council’s annual budget setting arrangements. • Review and assess budget monitoring arrangements. • Review the council’s medium to longer term financial planning including how the council aligns savings plans and transformation activity with strategic priorities. • On-going review of the council’s financial position and delivery of planned savings. Audit work performed found: • The council’s annual budget setting and monitoring arrangements were appropriate • The assumptions made in the council’s medium and long-term financial plans are reasonable. • The financial plans estimate a budget gap of £26.500 million over the next 2 years. The council has demonstrated financial resilience and sound financial management in recent years and is confident in addressing the budget gaps through increasing revenue through council tax or through delivery of savings plans. • The longer term financial strategy is more challenging with more uncertainty around projections and dependency to ensure effective and sustainable budgetary decision making to ensure future finances remain sustainable. Conclusion: South Lanarkshire Council faces a challenging but deliverable short- term financial position, with a projected budget gap of £26.500 million over the next two years. The more significant risk lies in the longer term, with forecast cumulative budget gap of £180.4 million to 2036/37. The council should enhance its existing financial plans by setting out clearer financial scenarios and options to show how it will address these pressures and support sustainable decision making. Source: Audit Scotland 35
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Wider scope audit | 22 Conclusions on wider scope audit Financial Management 41. The audit work performed on the council’s arrangements for securing sound financial management found them to be effective and appropriate, although some opportunities for improvement were identified. This judgement is evidenced by the council: • having a system of internal control in place that is operating effectively. Some areas for improvements in financial controls were identified as outlined in Exhibit 4. • having clear and up-to-date policies and procedures, for example, financial regulations and scheme of delegation, in place that ensure effective financial management. • having clear and up-to-date policies in place for preventing and detecting fraud and other irregularities, and participation in fraud prevention and detection activities such as the National Fraud Initiative (NFI). • having suitably qualified and experienced staff leading the finance function. However, the unaudited accounts contained material errors and omissions, highlighting the need to strengthen the arrangements in place to support the accurate preparation of the accounts and the efficient delivery of the audit, as outlined in paragraph 16. • having effective arrangements in place for the scrutiny of arrangements that support sound financial management, and effective scrutiny and challenge provided by Executive Committee. The council recorded a surplus on the provision of services of £27.115 million this has been earmarked to meet future committed expenditure and cost pressures 42. The council approved it’s 2025/26 revenue budget on 26 February 2025. The budget was set at £1,019.145 million. This included a council tax increase of 6% generating approximately £9.480 million of additional income and recurring savings of £6.485 million. 43. The budget was revised to a final budget of £1,025.172 million, to reflect higher than initially budgeted pay awards which were funded through additional Scottish Government funding other budget movements recognised during the financial year. 44. The council reported an underspend of £27.115 million. This was principally achieved as a result of underspends in the corporate items budget and underspend on loan charges together with smaller underspends totalling £10.712 million across all service areas. The council 36
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Wider scope audit | 23 agreed to transfer these underspends to reserves, effectively accelerating the current reserves strategy. The council has effective financial management arrangements in place. There is an opportunity to enhance budget papers to provide greater transparency around the profile and timing of budgeted expenditure 45. There is effective budget monitoring through the year including regular reporting to the Executive Committee and Service Committees. 46. Our review found that budget monitoring reports provided a reasonable overview of the financial position at service level and included forecasts of the expected year-end outturn. The reports contained narrative explanations for significant variances against budget, which helped to explain key movements and supported monitoring of the council's financial performance throughout the year. 47. The council actual outturn performance has been significantly more favourable than budget assumptions in recent years, despite operating in a challenging financial environment - See Exhibit 8. Exhibit 8 Year 2021/22 2022/23 2023/24 2024/25 2025/26 Outturn - £’000 Over/(underspend) (66,074) (45.700) (26.436) (30.090) (27.115) Source: South Lanarkshire Council Annual Report and Accounts 2021/22 to 2025/26 48. The council’s budget includes areas of expenditure including budgeted strategic investments where the actual expenditure is expected to be incurred in future years. This results in overall underspends each year to allow the surplus reserve position to be earmarked for use in future years. While there is a clear understanding of this process at the council, the formal reprofiling of areas of expenditure does not take place until during the financial year. There is an opportunity to enhance the transparency within financial planning papers and budget papers to clearly outline the planned profile of expenditure, including the strategic initiatives. 37
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Wider scope audit | 24 Recommendation 1 The council should review the transparency of budget papers to ensure that members and the wider public have a clear understanding of the profile of planned areas of expenditure to support greater scrutiny of financial delivery. The council should also seek to develop it’s medium to longer term financial plans to incorporate scenarios and options on addressing budget gaps. Reserve balances increased during 2025/26 despite the council's reserves strategy forecasting a reduction in reserves 49. One of the key measures of the financial health of a body is the level of reserves held. The council’s reserves strategy is subject to annual review with the last review in September 2025. 50. The council's total usable reserves increased from £147.568 million at 31 March 2025 to £176.726 million at 31 March 2026. This was largely driven by an increase in general fund reserves of £34.710 million to £153.709 million. Of this, £140.666 has been earmarked for specific purposes, with the remaining £13.043 million uncommitted, representing approximately 1.2 percent of budgeted expenditure and is consistent with previous years. These funds are held as a contingency reserve to provide financial resilience and support the council in managing unforeseen events, emergencies and in-year financial pressures. 51. The closing general fund position as at 31 March 2026 represented a significantly higher balance than the position projected in the reserves strategy of £122.957 million. The favourable outturn position arose from a range of factors including service and corporate budget underspends, lower than anticipated loan charges, and one-off investment funding which was approved in-year but subsequently earmarked for delivery in future years. While the higher reserve position provides additional capacity to support future financial pressures and strategic priorities, it also highlights the extent to which planned reserve usage did not materialise during the year and reinforces the importance of regularly reviewing assumptions underpinning the council's budget and medium-term financial planning to improve forecast accuracy and support the effective deployment of available resources. The General fund balance at 31 March 2026 includes £106.992 million of funds earmarked for Future Budget Strategies. This has increased significantly from £69.097 million two years ago. While we recognised these funds are earmarked for specific budgeted activities in future years, given the increasing size of the reserve, the council should consider if implementation of the budget commitments remains realistic given the increasing value. 38
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Wider scope audit | 25 52. Exhibit 9 provides an analysis of useable reserves over the last five years and shows the significant increase in reserves over the last three years. Exhibit 9 Analysis of useable reserves Source: South Lanarkshire Council Annual Report and Accounts 2021/22 to 2025/26 53. The Local Authority Accounting Panel (LAAP) provides guidance 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 account of their strategic, operational and financial risks. The guidance also makes clear that reserves should be held for specific and identifiable purposes and should not be accumulated without a clear rationale or intended use. 54. The current reserves strategy proposes to keep unearmarked general reserves at a consistent value of £13.043 million. With projected uncertainty around future funding and cost pressures the council should ensure that this reserve, whose purpose is to meet unforeseen costs, remains appropriate to retain at the current level in future years. Capital Programme delivery in 2025/26 55. The council's capital expenditure is delivered through two capital programmes: the General Services Capital Programme and the Housing Capital Programme. 56. The council approved a 2025/26 General Services Capital Programme budget of £60.216 million. The programme expenditure included £17.979m relating to re-profiled capital spend from 2024/25. This was subsequently increased to £67.712 million through a series of budget adjustments 152.186 176.941 132.510 147.568 176.728 0 20 40 60 80 100 120 140 160 180 200 £’million £’million £’million £’million £’million 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 General fund Housing revenue account Repair and renewal fund Capital fund Insurance fund 39
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Wider scope audit | 26 during the year. Capital expenditure of £57.570 million against the programme was incurred during 2025/26, resulting in a total underspend in 2025/26 of £10.142 million. 57. The 2025/26 Housing capital programme budget was set a £87.740 million. The council reported spend against the programme of £85.782 million in 2025/26, representing 98 percent of the approved budget. There is scope for improvement to the operation of certain internal controls and year- end processes. 58. We review the design, implementation and operating effectiveness of systems of internal control (including those relating to IT) relevant to our audit approach. We concluded that the systems of control were designed appropriately, however, we noted some areas where there is scope for improvement to the control environment: • Payroll system reconciliation - While there is a regular check to ensure that outputs from the payroll system are correctly recorded in the ledger, there is no year-end reconciliation is performed between staff costs in the payroll system, general ledger and financial statements. This reconciliations ensures that the financial statements reflect a complete and accurate reflection of all payroll transactions, including payroll system generated transactions, manual adjustments and invoices. Audit performed a reconciliation at year end to give assurance over the figures in the financial statements. It is recommended the council perform a year-end reconciliation between payroll records, the general ledger, and the financial statements, with any differences identified, investigated, and resolved. • NDR system reconciliation - In December 2025/26 the reconciliation between the total rateable value as per NEC Orbis and the Assessor's roll was not completed in a timely manner. Audit have confirmed that Management have undertaken subsequent reconciliations in the remainder of the financial year to ensure that the NDR system has been appropriately reconciled. The council implemented a new housing system in 2025/26 59. In 2017/18, the council appointed Aareon to deliver a new Housing and Property Management system. Due to ongoing delivery concerns, the contract was terminated in March 2023. 60. Recognising the risks associated with contract termination, the council subsequently assessed Capita's cloud-based Housing One solution. The assessment confirmed that the system met the council's requirements and could be implemented within the required timescales. 40
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Wider scope audit | 27 61. The council determined that a direct award through the Scottish procurement framework represented the most appropriate procurement route. Following contract negotiations, a contract was awarded to Capita (subsequently acquired by MRI). The estimated contract value is £2.87 million, covering implementation and support costs over seven years, with an option to extend for a further three years. 62. The Housing Services and Property Services modules were originally scheduled to go live in January 2026. Following User Acceptance Testing (UAT), data migration and cutover testing, implementation of the Property Services module was deferred. 63. The Housing Services module went live in January 2026. Post- implementation issues relating to direct debits and cash payments were identified and have largely been resolved, with one Priority 1 issue remaining under testing. 64. At the time of the audit, the Property Services module remained in testing, with the Project Review Board overseeing progress. We understand that the system is now live. 65. Our high-level review of the Housing Services implementation, focusing on General IT Controls, found that: • data migration from legacy systems was well planned and executed, and UAT was sufficiently comprehensive to support go- live, subject to the issues noted above • cutover activities were appropriately planned, managed and delivered • helpdesk support tickets are being managed as part of business-as- usual operations, with outstanding issues expected to be addressed through MRI system upgrades during 2026/27. The number of open tickets will be monitored as part of the 2026/27 audit programme. • patch management and system upgrades are being undertaken regularly; and • business continuity arrangements were developed, although a number of manual contingency templates covering areas such as customer interactions, temporary accommodation, vulnerable residents and emergency repairs are scheduled for completion during 2026/27. 66. As part of pre-contract due diligence, the council obtained details of the application's hosting arrangements. However, it does not currently obtain annual independent assurance reports, or equivalent evidence, to confirm that the supplier's control environment remains effective in areas such as physical and network security, change and configuration 41
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Wider scope audit | 28 management, operational controls, disaster recovery, and data backup arrangements. 67. The council intends to undertake a post-implementation and benefits realisation review in 2027/28. This review is important to assess the impact of implementation delays and costs, user feedback, the effectiveness of training and support, the extent to which expected benefits have been realised, and whether sufficient resources are in place to support future system development and benefits realisation. Recommendation 2 The council should: - ensure that it has sufficient assurance to confirm that key third-party assurance controls continue to operate effectively - conduct both a post-implementation review and a benefits realisation review of the new Housing Management platform to assess the extent to which the project has achieved its objectives and delivered the expected benefits. Financial Sustainability 68. The audit work performed on the arrangements the council has in place for securing financial sustainability found that these were effective and appropriate. This judgement is evidenced by the council: • making appropriate arrangement to develop medium and longer- term financial plans. • having effective arrangements in place for identifying risks to financial sustainability over the medium and longer-term, and understanding medium and longer-term demand pressures that could impact on available resources. • having savings plans in place to manage forecast budget deficits, and a reserves strategy in place to manage the use of reserves if the required level of savings cannot be met. 69. Key financial information considered in forming the judgement on the council’s arrangements for securing financial sustainability is outlined in Exhibit 9. Exhibit 9 Key financial information Budget setting 2023/24 (£m) 2024/25 (£m) 2025/26 (£m) 2026/27 (£m) 42
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Wider scope audit | 29 Budget gap/(surplus) 8.818 20.570 5.264 (1.518) Planned to be met via: • Savings and flexibilities 1.950 13.190 6.485 4.503 • Use of reserves 6.565 2.176 11.970 18.304 • Additional council tax / funding 8.050 7.869 9.480 11.168 • Recurring investments - 0.480 3.921 3.534 • One-off investments 7.747 2.185 18.750 33.300 Actual Savings delivered 1.950 12.667 6.221 - Reserves Use of / (contribution to) reserves 43.252 (13.879) (29,158) - Total usable reserves carried forward 133.689 147.568 176.726 - General Fund: - • Earmarked 96.730 105.956 140.666 - • Uncommitted 13.043 13.043 13.043 - Source: The council’s 2025/26 annual accounts and Executive Committee papers 70. The councils 2026/27 budget of £1,086.714 million was approved on 25 February 2026. The approved budget delivers a surplus of £1.518 million and includes a 6.5% increase in Council Tax, together with the delivery of £4.503 million of savings to support financial sustainability. The approved budget includes £3.534 million of recurring investment and £33.300 million of one-off investments, including £12.000 million of investments in environment and infrastructure. The council has established arrangements to monitor financial resilience and respond to significant medium and long-term financial challenges. 71. In June 2026, the council’s reported it’s medium-term Budget Strategy covering the years 2027/2028 and 2028/2029 to the Executive Committee. This highlighted an estimated budget gap of £26.500 million over the two years. 72. The strategy recognises that the Programme of Transformational Reviews, an ongoing change initiative launched to address budget gaps and drive service redesign, is a key part of the council's strategy for 43
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Wider scope audit | 30 addressing its medium-term budget gap. The strategy also notes that, while transformational reviews will contribute towards narrowing the budget gap, additional measures, including future council tax decisions and further savings proposals, are likely to be required to achieve a balanced budget. 73. In addition to the medium-term outlook, the council set out a long-term financial strategy, which projects cumulative budget pressures of around £180.400 million over the period to 2036/37. However, the variability in the assumptions used, including level of funding, pressures on budgets and external factors, is recognised as extremely difficult to predict. 74. Annually, the council reports on council’s Financial Resilience and Sustainability demonstrating its understanding of the medium-term financial outlook. 75. The latest report, presented to the August 2026 Risk and Audit Scrutiny Committee, provided a summary of the 2027/28 to 2028/29 Budget Strategy, demonstrating the council’s understanding of the medium-term financial outlook. The report also highlighted a number of emerging risks that could affect the council’s future financial position and demonstrated consideration of options to address the funding gap, including transformational reviews and potential council tax increases. 76. The council could enhance its financial plans to include more detailed consideration of the different options to address forecast budget gaps to support more effective strategic financial planning and informed decision making. This could include modelling of the potentially revenue-generating activities including scenario council tax increases as well as the cost benefits through transformation programmes. 77. The report also included the council’s Financial Resilience Framework, providing a comprehensive assessment of the council’s financial strength and capacity to respond to future challenges. This included a review of the balance sheet, reserves, liquidity, debt and investment positions, together with an assessment of the council’s exposure to risk, including significant income streams, key expenditure commitments and wider organisational risks. 78. Despite favourable outturn positions and recent underspends, the council's medium to long term financial outlook remains challenging, with forecast budget gaps and ongoing uncertainty around funding, inflation and future cost pressures. The council demonstrates awareness of these pressures and keeps its financial position under regular review with reports to members identifying emerging risks and potential mitigating actions, helping to maintain and appropriate level of financial resilience. 79. The council has one of the lowest levels of council tax in Scotland. Consequently, it retains a degree of flexibility to raise additional income through council tax increases, should elected members choose to do so. 44
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Wider scope audit | 31 This provides a potential mechanism for helping to close funding gaps and strengthen the council's financial position in response to increasing budgetary pressures. Increasing capital investment is planned 80. The council's planned capital investment programme continues to grow, with a General Services Capital Programme budget of £105.247 million approved for 2026/27 . The council’s wider "Growing South Lanarkshire" programme identifies approximately £555 million of capital investment to 2030, reflecting the council's investment ambitions. 81. While these investments support the council's strategic priorities, they will require careful monitoring to ensure they remain affordable. The increasing reliance on borrowing to finance the capital programme is expected to result in a substantial rise in the council's borrowing requirement, with gross borrowing projected to increase from £1,033 million in 2025/26 to £1,383 million by 2028/29. The Capital Financing Requirement is also forecast to increase from £1,305 million billion to £1,497 million over the same period. 82. We understand that a proportion of the forecast borrowing supports investment that will be partly funded by external contributions and grant funding, with the associated costs incorporated into the council's medium- term financial plans. 83. This growth in borrowing is expected to increase financing costs charged to the revenue budget. The ratio of General Fund financing costs to the net revenue stream is forecast to rise from 4.86% in 2025/26 to 6.69% by 2028/29. The new Programme for Government in September 2026 focuses on improving outcomes and addressing national challenges with wide ranging proposed reform 84. The Scottish Government’s Programme for Government 2026-31 focuses on eradicating child poverty, growing the economy, tackling the climate emergency, and delivering a strong NHS and public services. Within health and social care, it prioritises reducing waiting times, improving access to care, and shifting more services from hospitals into community settings to support prevention and independent living. 85. The Programme proposes modernisation and significant reform including replacing the current 14 territorial health boards with two strategic health boards. For local authorities, the Programme signals potential reform of health and social care governance and delivery arrangements and reducing duplication and increasing efficiency in the delivery of public services. While the direction of travel is towards greater integration, prevention and community-based care, the full implications for local authorities remain uncertain. Greater clarity is expected in the coming months as the Scottish Government undertakes planned 45
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Wider scope audit | 32 consultation and engagement on the future of social care and local governance. Vision, Leadership and Governance 86. The audit work performed on the arrangements the council has in place around its Vision, Leadership and Governance found that these were effective and appropriate. This judgement is evidenced by the council: • having a Corporate Plan in place, supported by Operational Plans, that clearly set out its vision, strategy, and priorities and reflect the pace and depth of improvement required to realise these in a sustainable manner. • involving service users, delivery partners, and other stakeholders in the development of its vision, strategy, and priorities to ensure these align to their needs. • having clear financial and performance reporting in place, both internally and externally, that is linked to its Operational Plans, and effective scrutiny and challenge of performance provided by the Risk and Audit Scrutiny Committee • having effective governance arrangements in place in general, as reflected in the Annual Governance Statement included in the annual report and accounts. The council has a clear vision linked to its outcomes 87. The Council’s Plan Connect 2022 -2027 is the strategic document that sets out the council’s vision, values and objectives and what difference this will make to the residents and communities of South Lanarkshire. 88. The council’s vision is ‘to improve the lives and prospects of everyone in South Lanarkshire’. It sets out the key actions to be delivered over five years, around a long-term vision with three key priorities and supported by six detailed outcomes. 89. The council undertook a mid-term review of the Plan in 2024/25 to ensure the council’s priorities reflected current challenges. The review considered stakeholder feedback and the impact of changing internal and external pressures. 90. The review concluded that the council’s vision, values and outcomes remain appropriate and relevant. The council continues to face financial pressures, increasing service demand, and wider economic uncertainty and three key themes were introduced to reflect this. The revised Council Plan was approved by the Executive Committee in April 2025. 46
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Wider scope audit | 33 91. We have concluded that the vision, priorities and outcomes are clearly articulated. Risk and Audit Scrutiny Committee 92. The council’s governance arrangements have been set out in the Annual Governance Statement in the annual accounts. We have reviewed these arrangements and concluded that they are appropriate. This is informed by our regular attendance at the Risk, Audit and Scrutiny Committee and review of Council, Executive Committee and other committee papers as appropriate. 93. The Risk and Audit Scrutiny Committee’s role is to support the council in establishing, maintaining, and improving effective governance, risk management, and internal control arrangements. 94. Members need to ensure that all key decisions are subject to an appropriate level of challenge and scrutiny at public meetings. This includes sufficient discussion and scrutiny of performance and financial reports. 95. A self-assessment exercise has been carried out in accordance with recommended practice for audit committees from the Chartered Institute of Public Finance (CIPFA). The results of the assessment will be reported to the Committee. 96. Members have continued to review their personal training and development needs through completion of an annual training needs assessment exercise. Equalities and fairness 97. We noted in our Annual Audit Plan 2025/26 that auditors are required to carry out a review of the ‘fairness and equality’ characteristic at least once during the audit appointment. This work is ongoing and will be reported as part of the 2026/27 audit. The council works with key partners at a strategic and local level 98. South Lanarkshire Council has a range of key strategic partners including public bodies, voluntary sector and local communities to improve public services and address inequalities. Key partners include NHS Lanarkshire, Police Scotland, Scottish Fire and Rescue, South Lanarkshire College, Skills Development Scotland and the Federation of small businesses. 99. In early 2026 South Lanarkshire Council agreed the South Lanarkshire Third Sector Partnership Agreement which formally integrates local voluntary groups, charities, and social enterprises into council strategic planning. The Agreement was co-produced with the local third sector and works alongside a Third Sector Grants policy that establishes clear ad 47
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Wider scope audit | 34 transparent processes for payments from the council to the sector. We will continue to monitor the progress of agreement and benefits delivered. 100. The council has a community engagement process to allow local residents, local agencies, community groups and organisations to work collaboratively to develop local neighbourhood plans. The neighbourhoods are identified as some of our most deprived communities in South Lanarkshire and the aim of this process is to reduce inequalities and improve outcomes for residents within these neighbourhoods. 101. The council’s community engagement team work with nine communities to progress neighbourhood planning with a further in development. 102. The council uses participatory budgeting aligned with local neighbourhood plans which allows local residents to vote directly on how public funds are deployed to tackle micro-local priorities, such as child poverty and neighbourhood. While relatively low value the benefits can have meaningful impact on local residents including running soccer schools, investment in defibrillators and community access to IT equipment and development of a community café. Use of Resources to Improve Outcomes 103. The audit work performed on the arrangements the council has in place around its Use of Resources to Improve Outcomes found that these were effective and appropriate. This judgement is evidenced by the council: • being able to demonstrate a clear link between the use of resources and delivery of its priorities. • having arrangements in place to benchmark its performance to identify areas of improvement. • being able to demonstrate improvements in performance against benchmarks and relative to other comparable organisations. 104. The council demonstrates a clear link between the use of resources and delivery of its priorities. The council reviews its performance using a number of measures that are aligned to the priorities and outcomes set out in the Council Plan. A total of 266 measures were identified within Resource Plans for 2025/26. Of those 64 are nominated as key strategic measures for reporting progress against the Connect Outcomes detailed in the Council Plan. These measures are a combination of statistical indicators as well as delivery of agreed projects. The council’s combines LGBF indicators alongside its own measures. 105. Progress against Resource Plans is reviewed internally on a quarterly basis and reported to individual Resource Committees twice a year. Similarly, progress reports on the Council Plan are taken to the 48
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Wider scope audit | 35 Performance and Review Scrutiny Forum bi-annually. The latest Quarter 4 Progress Report 2025/26 was considered in August 2026. The progress reports include a summary of performance against measures for each of the Council Plan objectives, along with details of the main achievements for that objective. The council has worked with the Improvement Service to continue to develop and enhance its self-assessment and performance arrangements. 106. The Council Plan quarter four progress report for 2025/26 reports that of the council’s 64 strategic performance measures, nine projects had been completed; 46 projects, the timescale or target had been met; six projects where there was minor slippage in timescale or target, two projects where there has been major slippage against timescale or target and one where the information was not yet available and would be reported at a later date. Despite the ongoing service pressures, the council has achieved or is on track to achieve most of its performance measures as set out in its Connect Plan. The council has arrangements in place to benchmark its performance and identify areas for improvement 107. The council reports its Local Government Benchmarking Framework (LGBF) results annually to the Performance and Review Scrutiny Forum. The most recent report, covering 2024/25 performance, was presented in May 2026. The report provides an assessment of all LGBF indicators over the past three years, supported by commentary and improvement actions. Performance relative to the family group is reported for those indicators where the council performed below the Scottish average (34 in the 2024/25 results). 108. There is an interactive public performance dashboard on the council’s website. This shows performance over time for a strategic subset of 36 of LGBF indicators, aligned to the Council Plan outcomes. This ensures the council maintain focus on its key priorities when considering the LGBF indicators. The dashboard shows council performance in comparison to the Scottish average and family group performance. For strategic LGBF indicators showing a year-on-year decline in performance, supporting explanatory narrative is provided separately on the website. 109. From a review of the performance information reported by the council, the information was found to be sufficiently detailed to enable an assessment of the council’s overall progress against its strategic priorities. Where areas of underperformance are identified, contributing factors and remedial actions that are being implemented are generally explained. Public performance arrangements are in place but there is an opportunity to continue to refine this information 110. The council provides a wealth of information on its performance on its website. This includes: Performance against the 64 key strategic measures; the LGBF indicators (interactive link); the performance against 49
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Wider scope audit | 36 the Strategic subset of 36 LGBF indicators and also detail on those strategic indicators where performance had declined or below target. However, the quality and depth of information reported on the council’s website varied on areas of required improvement. For some areas of underperformance against strategic performance measures, explanations for underperformance and clear actions to address this were provided, others lacked sufficient detail on defined actions or expected timeframes for achieving improvements. There is an opportunity for greater consistency in public facing performance reports. 111. It is important that public performance reporting provides a clear and accessible explanation of the council’s performance. While the council’s reporting has evolved in recent years, there is an opportunity to make the relationship between Strategic Key Performance Measures, the council’s wider performance management framework, and relevant LGBF indicators clearer. While we recognise that the council has a well-established performance management process, there is an opportunity to enhance the transparency around this for the public. This would help users understand how LGBF indicators are selected and used alongside council measures to assess progress against strategic priorities and outcomes. Recommendation 3 The council should review its public performance reporting, particularly on the council’s website, to ensure performance reporting is clearly aligned to Strategic Key Performance Measures and there is links to the wider performance management framework and Council Plan outcomes. This should include setting out how relevant LGBF indicators are selected, used and reported alongside council measures, and ensuring actions and expected timeframes for improvement are clearly presented for areas of underperformance. Self-evaluation arrangements 112. A national programme of work, led by the Improvement Service and supported by SOLACE, is developing a National Self-Evaluation Framework for local government. The framework is intended to provide a more consistent approach to assessing performance, leadership, governance and impact across Scotland's councils, while supporting the demonstration of continuous improvement and Best Value. The framework will establish a common basis for self-evaluation and is expected to influence the future development of local self-evaluation arrangements. 113. The council demonstrates a commitment to self-evaluation as a key mechanism for driving continuous improvement. A horizon scanning and self-assessment exercise is undertaken each year to target improvement activity through a proportionate and risk-based approach. The council has also worked with the Improvement Service to continue to enhance its self- assessment and performance arrangements. 50
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Best Value audit | 37 Best Value audit Conclusion The council has effective and appropriate arrangements in place for securing Best Value. The council has effective and appropriate arrangements in place for preparing and publishing statutory performance. Audit approach to Best Value 114. Under the Code of Audit Practice, the audit of Best Value in councils is fully integrated within the annual audit. As part of the annual audit, auditors are required to take a risk-based approach to assessing and reporting on whether the council has made proper arrangements for securing Best Value in accordance with statutory guidance, including follow up of findings previously reported in relation to Best Value. 115. The Accounts Commission also reports nationally on thematic aspects of councils’ approaches to, and performance in, meeting their Best Value duties. As part of the annual audit, thematic reviews, as directed by the Accounts Commission, are conducted on the council. The thematic review for 2025/26 is on the subject of asset management and involved considering how councils are managing their assets to ensure high quality services while also responding to challenges around financial sustainability and climate change. Conclusions and judgements on the thematic review will be reported in a separate Management Report. Conclusions on Best Value The council’s arrangements and performance in meeting Best Value and community planning duties 116. The audit work performed on the arrangements the council has in place for securing Best Value and its community planning arrangements found these were effective and appropriate. This judgement is evidenced by: • the council having well established and effective governance arrangements in place, with Best Value being a key aspect of the governance arrangements. 51
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Best Value audit | 38 • the arrangements the council has in place around the four wider scope audit areas, which are effective and appropriate, contribute to it being able to secure Best Value. • progress the council is making to embed sustainability into corporate and operational plans and enhance reporting arrangements around sustainability. Themes prescribed by the Accounts Commission 117. As previously outlined, the Accounts Commission reports nationally on thematic aspects of council’s approaches to, and performance in, meeting their Best Value duties, with the thematic review for 2025/26 on the subject of asset management. Our Best Value thematic work is ongoing and the conclusions and judgements on the council’s approach to asset management will be included in a separate Management Report which will be available on the Audit Scotland website. Statutory performance information (SPI) and service performance 118. The Accounts Commission has issued a Statutory Performance Information Direction which requires the council to publish information that will: • enable comparisons of performance between councils and over time • show how well it is improving local outcomes with community planning partners in their area. 119. Auditors have a statutory duty to satisfy themselves that the council has made proper arrangements for preparing and publishing SPI in accordance with the Direction and report a conclusion in the Annual Audit Report. 120. The arrangements the council has in place for preparing and publishing SPI were assessed by considering: • whether information reported allowed comparison of performance between councils and over time • the indicators it uses for reporting and whether it maximises use of the Local Government Benchmarking Framework (LGBF) indicators (and explaining the rationale when the LGBF is not used) • whether information reported was balanced, timely, and accessible • whether information reported covered the four key areas set out in the Schedule to the Direction. 52
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Best Value audit | 39 121. Audit work on the arrangements the council has in place for preparing and publishing SPI concluded the arrangements in place were effective and appropriate. 122. The Accounts Commission also requires auditors to report a summary of the LGBF indicators the council has reported, which can be seen in Exhibit . Exhibit 11 Summary of LGBF indicators the council has reported Cost indicators % Performance indicators % Satisfaction indicators % All indicators % Movement in last year Improved 80 52 9 53 Stayed the same - 23 18 18 Declined 20 25 73 29 Movement since base year Improved 65 73 9 65 Stayed the same - 4 9 4 Declined 35 23 82 31 Indicators in the top two quartiles Most recent year 60 62 27 58 Base year 65 49 36 50 Source: LGBF at 3 September 2026 123. There has been mixed performance across the Council’s LBGF indicators. Cost indicators have shown a significant improvement in year, and performance indicators and performance against LGBF indicators as a whole have also shown positive movement. Satisfaction indicators have significantly declined in year and continue to present a challenge, with almost all reported satisfaction indicators declining since the base year. 124. The proportion of the council’s indicators in the top two quartiles has increased since the base year, suggesting that the council has improved in 53
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Best Value audit | 40 its position relative to other councils. However, despite an improvement in cost indicators since the base year the number of cost indicators in the top two quartiles has decreased. This means that whilst the council’s performance has improved, overall, the council is performing worse in these indicators relative to other councils. 125. At a service level, Children's Services, Corporate Services and Environmental Services have shown the strongest improvement since the base year. Housing Services is also an area of strength, with 80% of indicators now in the top two quartiles. In contrast, Adult Social Work Services and Economic Development have declined relative to other councils, with Adult Social Work Services showing the most significant deterioration. 126. The council has identified 36 key strategic LGBF which it prioritises as part of the Council Plan. Progress against these and any actions to address these are reported through the council’s website. The council provide a wealth of performance information and there is an opportunity to provide greater clarity to the public around the alignment between the wider LGBF indicators published and the core areas of focus from the council under the strategic LGBF indicators and the councils Key Strategic Measures. Progress against previous Best Value findings and recommendations 127. Best Value findings and recommendations have been made in previous years’ Annual Audit Reports, Management Reports on themes prescribed by the Accounts Commission, and in Best Value reports published by the Accounts Commission, which are based on Controller of Audit reports. 128. Details of previous recommendations and progress the council is making against these can be seen in Appendix 1 with three of the four recommendations made being implemented to date, and progress being made with one further recommendation. Overall, the pace and depth of improvements resulting from the recommendations is positive, with many improvements occurring quickly after the recommendations were implemented. 54
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Appendix 1 | 41 Appendix 1 Action plan 2025/26 2025/26 recommendations Matter giving rise to recommendation Recommendation Agreed action, officer and timing 1. Budget papers and financial monitoring The council demonstrates sound financial management. However, there is an opportunity to enhance budget papers to be clearer on the profiling of planned expenditure at the outset of the budget and application of reserves during the year. The council includes high level scenario plans on potential options to address forecast budget gaps. However, these are not incorporated into medium and longer term financial planning forecasts. Risk - There is a risk that financial plans and budgets aren’t consistently understood and interpreted and that the council’s financial planning does not explore options or scenarios to take a strategic approach to address medium to longer term budget gaps. The council should review the transparency of budget papers to ensure that members and the wider public have a clear understanding of the profile of planned areas of expenditure to support greater scrutiny of financial delivery. The council should also seek to develop it’s medium to longer term financial plans to incorporate scenarios and options on addressing budget gaps. Accepted The Council updates members early in the new year on the planned profile of spend for that year, and any impact on the spend for future years. However, officers will include reference to the profile of spend in the Budget setting paper as appropriate. Head of Finance (Strategy) Summer 2027 The Council does include scenarios in its medium-term Budget papers, however, officers will extend this into longer term scenario planning as far as possible, given the uncertainty of future year projections. Head of Finance (Strategy) November 2026 55
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Appendix 1 | 42 Matter giving rise to recommendation Recommendation Agreed action, officer and timing 2. New housing system During 2025/26 the council implemented a new Housing system. At the time of our audit, the new system has yet to go-live due to issues identified during user acceptance testing. Risk - The council should ensure that all service issues are resolved prior to implementation and that there is appropriate assurance arrangements in place to confirm that key third-party controls continue to operate effectively post implementation. The council should: • ensure that it has sufficient assurance to confirm that key third- party assurance controls continue to operate effectively • conduct both a post- implementation review and a benefits realisation review of the new Housing Management platform to assess the extent to which the project has achieved its objectives and delivered the expected benefits. Partially Accepted The Property System is now live. The Council does gain assurance on our contracts, with issues or concerns around these areas raised through the contract performance process at any time. This is managed on a risk or issues basis. We would not expect to be asking for this on an annual basis across all our contracts as assurance requirements are applied proportionately according to the criticality and risk profile of the service. Post-implementation review will be undertaken within 18 months of full go-live. Head of IT Services / Head of Housing Services. March 2028 56
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Appendix 1 | 43 Matter giving rise to recommendation Recommendation Agreed action, officer and timing 3. Performance monitoring The council provides a significant amount of performance information to the public on the council’s website. However, there is an opportunity to provide clearer links between reported performance information, Strategic Key Performance Measures, and the wider performance management framework, including Council Plan outcomes. Risk - There is a risk that the level of information provided on council’s performance does not enable effective scrutiny. The council should review its public performance reporting to ensure Strategic Key Performance Measures are clearly linked to the wider performance management framework and Council Plan outcomes. This should include setting out how relevant LGBF indicators are selected, used and reported alongside council measures, and ensuring actions and expected timeframes for improvement are clearly presented for areas of underperformance. Accepted The council will review public performance reporting on the council’s website to strengthen and clarify the alignment between performance reporting and Strategic Key Performance Measures. The review will include how relevant LGBF indicators are selected, used and reported alongside council measures, clarifying the actions and expected timeframes for improvement associated with areas of underperformance. Head of Communications & Strategy March 2027 57
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Appendix 1 | 44 Follow-up of prior year recommendations, including any previous Best Value report findings and recommendations Matter giving rise to recommendation Recommendation, agreed action, officer and timing Update B/f 1. Close down procedures There were delays in the provision of a number of underlying working papers to the audit team to support the financial statements. Risk: There is a risk that the delivery of the financial audit is inefficient and the resultant delays impact on the agreed sign off by the statutory deadline. Staff should be reminded of the year end timetable and the importance that working papers for external audit are provided to the Finance Strategy Team in line with the year-end timetable deadlines to ensure all working papers are available with the unaudited accounts. Work in progress Staff are aware of the importance of the year end closedown process and of meeting timescales for working papers. In advance of the audit process, all staff were reminded of the importance of full and adequate working papers, and the deadlines required by external audit. This reminder will be issued on an annual basis, and discussions will be held timeously with external audit to ensure both parties resource requirements are aligned through the audit process. Head of Finance (Strategy) March 2027 B/f 2. Whole of Government Accounts (WGA) The council has had issues setting up users for portal access to allow completion of the WGA; despite ongoing dialogue the council did not receive a response. Risk: There is a risk the council does not comply with HM Treasury requirements in respect of the submission of WGA information. The council should continue to engage with HM Treasury to ensure that both prior year and the 2024/25 return is submitted in line with WGA guidance. Work in progress Due to timing, unable to submit WGA for 2024/2025. Working to timetable for submission of 2025/2026 return in October 2026. Head of Finance (Strategy) October 2026. 58
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Appendix 1 | 45 Matter giving rise to recommendation Recommendation, agreed action, officer and timing Update B/f 3. Oracle Fusion The council successfully implemented a new financial system at the start of the 2024/25, Oracle’s cloud- based Human Resources (HR) and Finance solution. Our review identified that clear supporting documentation was not always available due to the council’s retention policy. We also noted that, as yet, no post implementation or benefits realisation review has been undertaken. Clear supporting documentation for future projects should be kept to back-up the decision making process. The council should undertake both a post-implementation and benefits realisation review of the new Oracle platform to reflect on the overall success of the project in meeting its stated objectives and expected benefits. This should include assessing which aspects of the project went well and what could have gone better, and to identify lessons and insights that can be applied more widely to improve the planning, management and delivery of future projects. Work in progress A Critical Friend Review has been undertaken, reflecting on this and other systems implementation and has been reported to Corporate Management Team in Q1 2026/2027. Recommendations from that review are being developed into an action plan to deliver improvements to implementations and benefits tracking. As part of post implementation and benefit realisations work, analysis tools are currently being used to evaluate process efficiency. Head of IT March 2027 B/f 4. Risk and Audit Scrutiny Committee The Risk and Audit Scrutiny Committee’s role is to support the council in establishing, maintaining, and improving effective governance, risk management, and internal control arrangements. Currently no self-assessment review is undertaken on the committee’s performance. Risk: There is a risk members do not reflect on the effectiveness of the committee to identify areas for improvement. Members should, with the assistance of officers, continue to review their personal training and development needs and agree a plan to ensure that they have the skills required to effectively fulfil their scrutiny and challenge roles. To ensure the Risk and Audit Scrutiny Committee is effective in its role an annual review and assessment should be undertaken with the results captured within an annual report. Work in progress A self-assessment questionnaire, based on the CIPFA self-assessment template for audit committees, was issued in August 2026. Results will be reported back to members. A handbook for members is in development. This will be supplemented by training sessions. Refresher and update sessions will also be offered. A library of relevant resources is to be created. Internal Audit Manager 31 March 2027 2024/25 recommendations from the BV thematic report 59
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Appendix 1 | 46 Matter giving rise to recommendation Recommendation, agreed action, officer and timing Update 1. Transformation ambition The council has significant budget savings to make over the next three years and beyond and is aware that it must explore further options for transformation to help bridge its funding gap and improve outcomes for the people of South Lanarkshire. There is a risk that the council may not be able to deliver sustainable services if the required savings are not achieved. The council should ensure its plans for transformation are sufficiently ambitious to ensure that it can continue to deliver sustainable services, prioritising transformational activities that will deliver the most impact and contribute to reducing the budget gap. Agreed action The council continues to progress a long term schedule of transformational reviews which run in parallel with the Budget process, in order to maximise the impact on the Budget Gap. Executive Director of Finance and Corporate Resources / Corporate Management Team. September 2025 Work in progress The Council has recently presented a summary of its Transformational programme, its success and the savings it has realised to date to assist in managing the Council’s Budget Gap. A recent report on the future pipeline of Transformational Reviews has also been reported to Members. This paper acknowledged the ongoing role of these reviews in assisting the Council to manage its Budget Gap but also highlighted their role in ensuring the Council is transforming services to ensure we continue to deliver services in an efficient and effective way. Executive Director of Finance and Corporate Resources / Corporate Management Team. 60
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Appendix 1 | 47 Matter giving rise to recommendation Recommendation, agreed action, officer and timing Update 2. Resourcing transformation The council has advised that delivering transformation is part of the jobs of managers, heads of service and directors and the council has periodically hired external support to help capacity. It has an officer in place to support project teams with the administrative tasks of the transformation programme. There is a risk that the council’s Transformational Change Programme will lose momentum if it does not have the sufficient dedicated resource to drive the activity required. The council should assess whether its arrangements for resourcing transformation activities are sufficient to drive the scale and pace of change required in future. Agreed action The role of senior officers in the council includes managing change and the work around transformation forms part of that role. The arrangements for resourcing transformation across the council will continue to be monitored, and as is currently the case, additional resources will be deployed as and when required. Executive Director of Finance and Corporate Resources / Corporate Management Team. Ongoing as required Implemented The Council’s governance arrangements for Transformational remains at the highest level: Transformation programmes are led by senior officers, but external resources are employed when necessary. Updates continue to be presented to the Performance and Review Scrutiny Forum. Further dedicated resource has been identified to support transformation on an ongoing basis. Executive Director of Finance and Corporate Resources / Corporate Management Team. 3. Demonstrating the impact of community engagement on transformational activities The council has shared examples of how it has engaged or consulted with communities in relation to its transformational reviews and budget process. It is unclear what specific changes have been made as a result of this engagement as this has not been clearly demonstrated. There is a risk that the council is not viewed to have considered community views when prioritising which transformational projects to be taken forward. The council should ensure it demonstrates how engagement with communities, including vulnerable groups, has informed planned changes to services. Agreed action The council will consider adding a final stage to the Budget Consultation process for the 2026/2027 exercise, to ensure outcomes are fed back to communities. This will include feedback on the impact of consultation on Transformational Reviews. Head of Finance (Strategy) March 2026 Implemented Following the Budget Setting process, communications were issued via social media ‘You said, we listened’. This explained to constituents how their feedback helped shape the Council’s budget for the coming year, where certain savings proposals not taken forward. This feedback to constituents will be a regular part of the budget process moving forward. Head of Finance (Strategy) / Head of Communications & Strategy 61
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Appendix 1 | 48 Matter giving rise to recommendation Recommendation, agreed action, officer and timing Update 4. Measuring the impact of transformational activities The council currently focuses on establishing the financial benefits of its transformational activities but does not routinely separately track or report on the impact on service quality or outcomes for service users in relation to these transformational activities. There is a risk that, when prioritising which transformational activities to take forward, the council does not have adequate information on impact to make a fully-informed decision. The council should prioritise establishing a framework that identifies and monitors the estimated and realised impact to date of its transformation work, including on service delivery and on outcomes for service users. It should report to CMT and elected members on both the financial and non- financial impact of the full range of its transformational activities. Agreed action The council will develop a framework to capture estimated and actual impacts from transformation activities. An annual report will be produced which will provide a summary of the outcomes from the Transformational Review Programme. Executive Director of Finance and Corporate Resources / Corporate Management Team June 2026 Implemented An outcome summary report was presented to the Executive Committee in June 2026 which provided a summary of the outcomes of the previous transformation activities including benefits realised and financial savings achieved. This report also included a benefits realisation approach which has been developed which at the start of any new transformation programme, will set out the expectations from the programme of work. This framework will highlight cashable savings, productivity improvements and qualitative service improvements. It will also define how success is measured and reported. Executive Director of Finance and Corporate Resources / Corporate Management Team 62
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Appendix 2 | 49 Appendix 2 Supporting national and performance audit reports Report name Date published Local government budgets 2025/26 22 May 2025 NHS in Scotland: Spotlight on governance 28 May 2025 Delivering for the future: Responding to the workforce challenge 7 August 2025 Flooding in communities: Moving towards flood resilience 28 August 2025 Adult Disability Payment 18 September 2025 Scotland’s colleges 2025 2 October 2025 Improving care experience: Delivering The Promise 8 October 2025 Local government performance: Spotlight on culture and leisure services 23 October 2025 Financial sustainability and taxes 13 November 2025 NHS in Scotland 2025: Finance and performance 4 December 2025 Delayed discharges: A symptom of the challenges facing health and social care 8 January 2026 Community health and social care: Performance 2025 8 January 2026 Administration of Scottish income tax 2024/25 16 January 2026 Local Government in Scotland: Financial bulletin 2024/25 29 January 2026 The Scottish Budget 2026/24: Supplement to the Financial bulletin 2024/25 12 February 2026 Integration Joint Boards: Finance bulletin 2024/25 26 February 2026 Annual Assurance and Risks Report: A review of 2024/25 local government audits in Scotland 12 March 2026 Transforming the approach to climate change: Lessons from public audit 19 March 2026 63
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South Lanarkshire Council 2025/26 Annual Audit Report – Draft – Draft Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot AS.5.0 64
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4th Floor, South Suite, The Athenaeum Building, 8 Nelson Mandela Place, Glasgow, G2 1BT Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot Risk and Audit Scrutiny Committee 29 September 2026 South Lanarkshire Council Charitable Trusts (SC025089) Audit of the 2025/26 annual accounts Independent Auditor’s Report 1. My audit work on the 2025/26 annual accounts is now substantially complete. Subject to receipt of a revised set of annual accounts for final review, I anticipate being able to issue unmodified audit opinions in the Independent Auditor's Report on 29 September 2026. The proposed Independent Auditor’s Report is attached at Appendix A. Annual Audit Report 2. Under International Standards on Auditing in the UK (ISA (UK)), I am required to report specific matters identified from the audit of the annual accounts to those charged with governance of South Lanarkshire Council Charitable Trusts in sufficient time to enable appropriate action. For South Lanarkshire Council Charitable Trusts, those charged with governance is South Lanarkshire Council Risk and Audit Scrutiny Committee. I present for the committee's consideration my draft Annual Audit Report on the 2025/26 audit. The section headed "Significant findings and key audit matters" sets out the issues identified in respect of the annual accounts, including those that I am required to report to you. 3. The Annual Audit Report also sets out conclusions on the wider scope areas that frame public audit as set out in the Code of Audit Practice. 4. The Annual Audit Report will be issued in final form after the audit of the annual accounts has been completed. Uncorrected misstatements 5. I also report to those charged with governance all uncorrected misstatements in the annual accounts which I have identified during the course of my audit, other than those of a trivial nature, and request that these misstatements be corrected. 6. There are no uncorrected misstatements to report. 2b 65
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Other ISA (UK) matters 7. In presenting this letter and the Annual Audit Report to the Risk and Audit Scrutiny Committee, I seek confirmation from those charged with governance on the following matters: • if they are aware of any instances of actual, suspected, or alleged fraud, • if they are aware of any subsequent events that have occurred since the date of the financial statements, • if they are content that the methods, assumptions, and data used in making accounting estimates in the annual accounts are appropriate, • if all related party relationships and transactions they are aware of are reflected in the annual accounts, and • if they are aware of any non-compliance with laws and regulations. 8. I am required to report to those charged with governance any issues that I have identified from my audit in relation to other ISA (UK) matters. I have not identified any such issues. Representations from the Section 95 Officer 9. As part of the completion of the audit, I am seeking written representations from the Executive Director (Finance and Corporate Resources), who is the Section 95 Officer, on aspects of the annual accounts, including the judgements and estimates made. 10. A draft letter of representations is attached at Appendix B. This should be signed and returned to me by the Section 95 Officer with the signed annual accounts prior to the Independent Auditor’s Report being signed. 66
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Appendix A: Proposed Independent Auditor’s Report Independent auditor’s report to the trustees of South Lanarkshire Council Charitable Trusts and the Accounts Commission Reporting on the audit of the financial statements Opinion on financial statements I certify that I have audited the financial statements in the statement of accounts of South Lanarkshire Council Charitable Trusts for the year ended 31 March 2026 under Part VII of the Local Government (Scotland) Act 1973 and section 44(1)(c) of the Charities and Trustee Investment (Scotland) Act 2005. The financial statements comprise the Statement of Receipts and Payment, the Statement of Balances, and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and a receipts and payments basis. In my opinion the accompanying financial statements: • properly present the receipts and payments of the charity for the year ended 31 March 2026 and their statement of balances at that date; and • have been prepared in accordance with the requirements of the Charities and Trustee Investment (Scotland) Act 2005, and regulations 9(1),(2) and (3) of The Charities Accounts (Scotland) Regulations 2006. Basis for opinion I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I am independent of the charity in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Responsibilities of the trustees for the financial statements The trustees are responsible for the preparation and proper presentation of financial statements in accordance with the financial reporting framework, and for such internal control as the trustees determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibilities for the audit of the financial statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 67
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Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using my understanding of the local government sector and charity sector to identify that the Local Government (Scotland) Act 1973, Charities and Trustee Investment (Scotland) Act 2005 and The Charities Accounts (Scotland) Regulations 2006 are significant in the context of the charity; • inquiring of the Trustees as to other laws or regulations that may be expected to have a fundamental effect on the operations of the charity; • inquiring of the Trustees concerning the charity’s policies and procedures regarding compliance with the applicable legal and regulatory framework; • discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and • considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the charity’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report. Reporting on other requirements Other information The trustees are responsible for the other information in the statement of accounts. The other information comprises the Trustees’ Annual Report. My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Trustees’ Annual Report to the extent explicitly stated in the following opinion prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Trustees’ Annual Report 68
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In my opinion, based on the work undertaken in the course of the audit, the information given in the Trustees' Annual Report for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with The Charity Accounts (Scotland) Regulations 2006. Matters on which I am required to report by exception I am required by The Charity Accounts (Scotland) Regulations 2006 to report to you if, in my opinion: • proper accounting records have not been kept; or • the financial statements are not in agreement with the accounting records; or • I have not received all the information and explanations I require for my audit. I have nothing to report in respect of these matters. Use of my report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. Kerry Tonner CA Audit Scotland 4th Floor, South Suite The Athenaeum Building 8 Nelson Mandela Place Glasgow G2 1BT Kerry Tonner is eligible to act as an auditor in terms of Part VII of the Local Government (Scotland) Act 1973. 69
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Appendix B: Letter of Representations (ISA (UK) 580) Kerry Tonner, Senior Audit Manager Audit Scotland 4th Floor, South Suite The Athenaeum Building 8 Nelson Mandela Place Glasgow G2 1BT South Lanarkshire Council Charitable Trusts (SC025089) Annual accounts 2025/26 Dear Kerry, This representation letter is provided in connection with your audit of the annual accounts of South Lanarkshire Council Charitable Trusts (SC025089), hereafter referred to as the Charitable Trusts, for the year ended 31 March 2026 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view and have been properly prepared, and for expressing other opinions on the Remuneration Report, Management Commentary, and Annual Governance Statement. I confirm to the best of my knowledge and belief, and having made appropriate enquiries of the Trustees of the registered charities where South Lanarkshire Council is the sole Trustee, the following representations given to you in connection with your audit of the Charitable Trusts’ annual accounts for the year ended 31 March 2026. General South Lanarkshire Council, as administering authority, and I have fulfilled our responsibilities for the preparation of the 2025/26 annual accounts as set out in your 2025/26 Annual Audit Plan. All the accounting records, documentation, and other matters which I am aware are relevant to the preparation of the annual accounts have been made available to you for the purposes of your audit. All transactions undertaken by the Charitable Trusts have been recorded in the accounting records and are properly reflected in the financial statements. I confirm that the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. As you have reported, there are no uncorrected misstatements. Financial Reporting Framework The financial statements comply with the requirements of the Charities and Trustee Investment (Scotland) Act 2005, and the regulations 9(1), (2) 70
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and (3) of the Charities Accounts (Scotland) Regulations 2006. Disclosure has been made in the financial statements of all matters necessary for them to properly present the receipts and payments and statement of balances of the Charitable Trusts for the year ended 31 March 2026. Accounting Policies The annual accounts have been prepared on a receipts and payments basis in accordance with applicable regulations and the founding documents of the Charitable Trusts. Fraud I understand my responsibilities for the design, implementation, and maintenance of internal control to prevent fraud and I believe I have appropriately fulfilled those responsibilities. I have provided you with all information in relation to: • my assessment of the risk that the financial statements may be materially misstated as a result of fraud, • any allegations of fraud or suspected fraud affecting the financial statements, and • fraud or suspected fraud that I am aware of involving management, employees who have a significant role in internal control, or others that could have a material effect on the financial statements. Laws and Regulations I have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements. Related Party Transactions All material transactions with related parties have been appropriately accounted for and disclosed in the financial statements in accordance with Part 2 of Schedule 3 of the Charities Accounts (Scotland) Regulations 2006. 71
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Corporate Governance The business of the Charitable Trusts is recorded in the systems of South Lanarkshire Council. As Section 95 officer for South Lanarkshire Council, I confirm that there are no issues or deficiencies in internal control that require to be disclosed within the annual accounts of the Charitable Trusts. Events Subsequent to the Date of the Balance Sheet All events subsequent to 31 March 2026 for which IAS 10, as adopted by the 2025/26 Code, requires adjustment or disclosure have been adjusted or disclosed. Yours sincerely Section 95 Officer 72
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South Lanarkshire Council Charitable Trusts (SC025089) 2025/26 Annual Audit Report – Draft Prepared for South Lanarkshire Council Charitable Trusts (SC025089) and the Controller of Audit September 2026 2b 73
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South Lanarkshire Council Charitable Trusts (SC025089): 2025/26 Annual Audit Report – Draft | 2 Contents Summary of audit opinions and conclusions 3 Introduction 4 Audit scope, responsibilities, and fee 5 Audit of the annual accounts 7 Wider scope and Best Value audit 11 Appendix 1 13 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. 74
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Summary of audit opinions and conclusions | 3 Summary of audit opinions and conclusions Audit of the annual accounts 1 All audit opinions stated that the annual accounts were free from material misstatement. 2 There were no significant findings or key audit matters to report. All audit adjustments required to correct the financial statements were processed by South Lanarkshire Council Charitable Trusts. Wider scope and Best Value audit 3 South Lanarkshire Council Charitable Trusts have effective and appropriate arrangements in place for Financial Sustainability. 4 South Lanarkshire Council Charitable Trusts have effective and appropriate arrangements in place for securing Best Value. 75
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Introduction | 4 Introduction Purpose of the Annual Audit Report 1. The purpose of this Annual Audit Report is to report the significant matters identified from the 2025/26 audit of South Lanarkshire Council Charitable Trusts’ annual accounts and the wider scope areas specified in the Code of Audit Practice (2021). 2. The Annual Audit Report is addressed to South Lanarkshire Council Charitable Trust, hereafter referred to as ‘the Charitable Trusts’ and the Controller of Audit, and will be published on Audit Scotland’s website in due course. Appointed auditor and independence 3. Kerry Tonner, of Audit Scotland, has been appointed as external auditor of the Charitable Trusts for the period from 2025/26 until 2026/27. As reported in the Annual Audit Plan, Kerry Tonner as engagement lead and the audit team are independent of the Charitable Trusts in accordance with relevant ethical requirements, including the Financial Reporting Council’s Ethical Standard. There have been no developments since the issue of the Annual Audit Plan that impact on the continued independence of the engagement lead or the rest of the audit team from the Charitable Trusts, including no provision of non-audit services. Acknowledgements 4. We would like to thank the Charitable Trusts and their staff, particularly those involved in preparation of the annual accounts, for their cooperation and assistance during the audit. We look forward to working together constructively over the remainder of the five-year audit appointment. 76
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Audit scope, responsibilities, and fee | 5 Audit scope, responsibilities, and fee Scope of the audit 5. The audit is performed in accordance with the Code of Audit Practice, including supplementary guidance, International Standards on Auditing (ISA) (UK), and relevant legislation. These set out the requirements for the scope of the audit which includes: • An audit of the financial statements and an opinion on whether they give a true and fair view and are free from material misstatement. • An opinion on statutory other information published with the financial statements in the annual accounts, namely the Trustees’ Report. • Conclusions on the financial sustainability of the Charitable Trusts. • Reporting on the Charitable Trusts’ arrangements for securing Best Value. • Provision of this Annual Audit Report. Responsibilities and reporting 6. The Code of Audit Practice sets out the respective responsibilities of the body and the auditor. A summary of the key responsibilities is outlined below. Auditor’s responsibilities 7. The responsibilities of auditors in the public sector are established in the Local Government (Scotland) Act 1973. These include providing an independent opinion on the financial statements and other information reported within the annual accounts, and concluding on the Charitable Trusts’ arrangements in place for the wider scope areas and Best Value. 8. The matters reported in the Annual Audit Report are only those that have been identified by the audit team during normal audit work and may not be all that exist. Communicating these does not absolve the Charitable Trusts from its responsibilities outlined below. 77
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Audit scope, responsibilities, and fee | 6 The Charitable Trusts’ responsibilities 9. The Charitable Trusts have primary responsibility for ensuring proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety, and regularity that enables it to successfully deliver its objectives. The features of proper financial stewardship include: • Establishing arrangements to ensure the proper conduct of its affairs. • Preparation of annual accounts, comprising financial statements for the Charitable Trusts that gives a true and fair view and other specified information. • Establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. • Implementing arrangements to ensure its financial position is soundly based. • Making arrangements to secure Best Value. • Establishing an internal audit function. Audit Fee 10. The audit fee for the 2025/26 audit was reported in the Annual Audit Plan and was set at £2,500. There have been no developments that impact on planned audit work required, therefore the audit fee reported in the Annual Audit Plan remains unchanged. National performance audit reporting 11. The Auditor General for Scotland and the Accounts Commission regularly publish performance audit reports. These cover a range of matters, many of which may be of interest to the Charitable Trusts and the South Lanarkshire Council Risk and Audit Scrutiny Committee. Details of national and performance audit reports published over the last year can be seen in Appendix 1. 78
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Audit of the annual accounts | 7 Audit of the annual accounts Main judgements All audit opinions stated that the annual accounts were free from material misstatement. There were no significant findings or key audit matters to report. All audit adjustments required to correct the financial statements were processed by the Charitable Trusts. Audit opinions on the annual accounts 12. The Charitable Trusts’ annual accounts were approved by the South Lanarkshire Council Risk and Audit Scrutiny Committee on 29 September 2026 and certified by the appointed auditor on 29 September 2026. The Independent Auditor’s Report is included in the Charitable Trusts’ annual accounts, and this reports that, in the appointed auditor’s opinion, these were free from material misstatement. Audit timetable 13. The unaudited annual accounts and all working papers were received on 25 June 2026 in accordance with the agreed audit timetable. Materiality 14. The concept of materiality is applied by auditors in planning and performing an audit, and in evaluating the effect of any uncorrected misstatements on the financial statements or other information reported in the annual accounts. 15. Broadly, the concept of materiality is to determine whether misstatements identified during the audit could reasonably be expected to influence the decisions of users of the annual accounts. Auditors set a monetary threshold when determining materiality, although some issues may be considered material by their nature. Therefore, materiality is ultimately a matter of the auditor’s professional judgement. 16. Materiality levels for the audit of the Charitable Trusts were determined at the risk assessment phase of the audit and were reported in the Annual Audit Plan, which also reported the judgements made in determining materiality levels. These were reassessed on receipt of the unaudited 79
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Audit of the annual accounts | 8 annual accounts. Materiality levels were updated and these can be seen in Exhibit 1. Exhibit 1 2025/26 Materiality levels for the Charitable Trusts Materiality The Charitable Trusts Materiality – set at 2% of net assets £26,403 Performance materiality – set at 75% of materiality. As outlined in the Annual Audit Plan, this acts as a trigger point. If the aggregate of misstatements identified during the audit exceeds performance materiality, this could indicate further audit procedures are required. £19,802 Reporting threshold – set at 5% of materiality. £1,320 Source: Audit Scotland Significant findings and key audit matters 17. ISA (UK) 260 requires auditors to communicate significant findings from the audit to those charged with governance, which for the Charitable Trusts is the South Lanarkshire Council Risk and Audit Scrutiny Committee. 18. The Code of Audit Practice also requires public sector auditors to communicate key audit matters. These are the matters that, in the auditor’s professional judgement, are of most significance to the audit of the financial statements and require most attention when performing the audit. 19. In determining key audit matters, auditors consider: • Areas of higher or significant risk of material misstatement. • Areas where significant judgement is required, including accounting estimates that are subject to a high degree of estimation uncertainty. • Significant events or transactions that occurred during the year. 20. There are no significant findings or key audit matters to report. 80
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Audit of the annual accounts | 9 Qualitative aspects of accounting practices 21. ISA (UK) 260 also requires auditors to communicate their view about qualitative aspects of the Charitable Trusts’ accounting practices, including accounting policies, accounting estimates, and disclosures in the financial statements. Accounting policies 22. The appropriateness of accounting policies adopted by the Charitable Trusts was assessed as part of the audit. These were considered to be appropriate to the circumstances of the Charitable Trusts, and there were no significant departures from the accounting policies set out in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). Disclosures in the financial statements 23. The adequacy of disclosures in the financial statements was assessed as part of the audit. The quality of disclosures was adequate. Audit adjustments 24. No audit adjustments were required to the financial statements greater than the reporting threshold. Significant risks of material misstatement identified in the Annual Audit Plan 25. Audit work has been performed in response to the significant risks of material misstatement identified in the Annual Audit Plan. The outcome of audit work performed is summarised in Exhibit 2. 81
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Audit of the annual accounts | 10 Exhibit 2 Significant risks of material misstatement to the financial statements Risk of material misstatement Planned audit response Outcome of audit work Fraud caused by management override of controls Management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. The audit team will: • Evaluate the design and implementation of controls over journal entry processing. • Make inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries. • Test journals entries, focusing on those that are assessed as higher risk. • Evaluate significant transactions outside the normal course of business. • Assess the adequacy of controls in place for identifying and disclosing related party relationships and transactions in the financial statements. Audit work performed found: • The design and implementation of controls over journal processing did not provide assurance over trust journal entries. As a result, we amended our audit approach to increase our substantive testing of journals. • No inappropriate or unusual activity relating to the processing of journal entries was identified from discussions with individuals involved in financial reporting. • No significant issues were identified from testing of journal entries. • No significant issues were identified from transactions outside the normal course of business. • The controls in place for identifying and disclosing related party relationships and transactions were adequate. Conclusion: no evidence of fraud caused by management override of controls. Source: Audit Scotland 82
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Wider scope and Best Value audit | 11 Wider scope and Best Value audit Conclusion The Charitable Trusts have effective and appropriate arrangements in place for Financial Sustainability. The Charitable Trusts have effective and appropriate arrangements in place for securing Best Value. Audit approach to wider scope and Best Value Wider scope 26. The Annual Audit Plan reported the Charitable Trusts were considered to be a less complex body for the wider scope audit. Therefore, the wider scope audit does not cover all four wider scope areas and is instead limited to concluding on the financial sustainability of the Charitable Trusts. Best Value 27. The duty on auditors to consider the arrangements in place to secure Best Value applies to the Charitable Trusts as it falls within section 106 of the Local Government (Scotland) Act 1973. 28. Consideration of the arrangements the Charitable Trusts have in place to secure Best Value has been carried out alongside the wider scope audit. Conclusions on Financial Sustainability 29. The audit work performed on the arrangements the Charitable Trusts have in place for securing financial sustainability found that these were effective and appropriate. 30. South Lanarkshire Council is in the process of transferring the remaining Charitable Trusts fund, the Loudon Bequest, to The South Lanarkshire Charitable Trust (SC049819) subject to approval from OSCR, the Scottish Charity Regulator. No grants will be awarded from the Charitable Trusts until the transfer has been completed, after which the fund will continue to be utilised in line with its intended purpose. 83
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Wider scope and Best Value audit | 12 Conclusions on Best Value 31. The audit work performed on the arrangements the Charitable Trusts have in place for securing Best Value found these were effective and appropriate. This judgement is evidenced by: • the Charitable Trusts having well established and effective governance arrangements in place. • the arrangements the Charitable Trusts has in place to secure financial sustainability which help ensure the effective use of resources. 84
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Appendix 1 | 13 Appendix 1 Supporting national and performance audit reports Report name Date published Local government budgets 2025/26 22 May 2025 NHS in Scotland: Spotlight on governance 28 May 2025 Delivering for the future: Responding to the workforce challenge 7 August 2025 Flooding in communities: Moving towards flood resilience 28 August 2025 Adult Disability Payment 18 September 2025 Scotland’s colleges 2025 2 October 2025 Improving care experience: Delivering The Promise 8 October 2025 Local government performance: Spotlight on culture and leisure services 23 October 2025 Financial sustainability and taxes 13 November 2025 NHS in Scotland 2025: Finance and performance 4 December 2025 Delayed discharges: A symptom of the challenges facing health and social care 8 January 2026 Community health and social care: Performance 2025 8 January 2026 Administration of Scottish income tax 2024/25 16 January 2026 Local Government in Scotland: Financial bulletin 2024/25 29 January 2026 The Scottish Budget 2026/24: Supplement to the Financial bulletin 2024/25 12 February 2026 Integration Joint Boards: Finance bulletin 2024/25 26 February 2026 Annual Assurance and Risks Report: A review of 2024/25 local government audits in Scotland 12 March 2026 85
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South Lanarkshire Council Charitable Trusts (SC025089) 2025/26 Annual Audit Report – Draft – Draft Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot AS.5.0 86
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 29 September 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Audited Annual Accounts 2025/2026 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] advise members of the requirement to approve the Annual Accounts 2025/2026 for signature by both Council and related Charitable Trusts [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that it be noted that the South Lanarkshire Council Accounts 2025/2026 and the Charitable Accounts have received a clean audit certificate; (2) that the audited South Lanarkshire Council Accounts 2025/2026 and the Charitable Trusts’ Accounts be approved for signature; (3) that it be noted that the External Auditor’s Report will be referred to South Lanarkshire Council for information; and (4) that it be noted that the Audited Accounts 2025/2026 will be available on the Council’s website (paragraph 3.6). [1recs] 3. Background 3.1. Following the publication of The Local Authority Accounts (Scotland) Regulations 2014, the members of the Committee are required to meet to consider approval of the Audited Accounts for signature. 3.2. The submission date for local government is generally set to be consistent with the date specified in accounts regulations by which a body is required to approve its audited annual accounts. For 2025/2026, the submission date is 30 September 2026. 3.3. The members are also required to have regard to any report made or advice provided on the Annual Accounts by the External Auditor. 3.4. The External Auditor’s Report was included as an earlier report to this meeting and will be referred to a meeting of South Lanarkshire Council for information. 3.5. Copies of the (unsigned) Audited Accounts 2025/2026, for both the Council and Related Charities, have been emailed to members of this Committee under separate cover. Copies of the Council’s Audited Accounts, the Charitable Trusts’ Audited Accounts and the External Auditor’s Report will be issued to all Elected Members for their information. 3 87
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3.6. Once signed, the Audited Accounts will be available to the general public on the Council’s website and we can arrange to send a copy out to anyone who requests them. 4. Audited Accounts – South Lanarkshire Council 4.1. As noted in paragraph 3.1, members of the Committee are required to approve the Audited Accounts for signature. A copy of the Audited Accounts for 2025/2026 are being emailed to Members of this Committee under separate cover. 4.2. As detailed in an earlier report to this Committee, at the time of writing, the Council’s External Auditors, Audit Scotland, are in the process of completing the audit which extends across the 2025/2026 Accounts and related matters. 4.3. The report notes that, at the time of writing, the External Auditor has provided a clear Audit Certificate with no qualifications on the Council’s Accounts. 4.4. The External Auditor’s Report also includes an agreed action plan at Appendix 1. Officers of the Council will work to ensure that these actions are implemented during 2026/2027. 5. Audited Accounts – Charitable Trusts 5.1. Members of the Committee are required to approve the Charitable Trust Audited Accounts for signature. A copy of the Audited Accounts for 2025/2026 have been emailed to Members of this Committee under separate cover. 5.2. The External Auditor also reports on the Charitable Trust managed by the Council: South Lanarkshire Council Charitable Trust. 5.3. The External Auditor’s report shows a clear audit certificate for the Trust. 6. Employee Implications 6.1. There are no direct employee implications from this report. 7. Financial Implications 7.1. There are no direct financial implications arising from this report. The Annual Accounts received a clear audit certificate. Any changes identified in the External Auditor’s report have been made and the impact on the Council’s outturn reflected in the Audited Accounts. 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. 9. Risk and Other Implications 9.1. The main risk associated with the Council and Charitable Annual Accounts is a qualified audit report. The risk has been assessed as low due to the detailed preparation in relation to the year end process, technical training undertaken by key finance staff and the roll out of this to Resource finance staff as appropriate. Finance and Resources work together to achieve key deadlines and actions set from timetables. 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. 88
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10.2. There is also no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 11 September 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References None List of Background Papers South Lanarkshire Council Annual Accounts 2025/2026 and External Auditor’s Report. Charitable Trusts’ Annual Accounts 2025/2026 and External Auditor’s Report. Financial Ledger 2025/2026 and associated working papers. 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) E-mail: lorraine.o’hagan@southlanarkshire.gov.uk 89
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 29 September 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland Report - Delivering for the Future – Transformation - How Councils Are Redesigning and Delivering More Efficient Services 1. Purpose of Report 1.1. The purpose of the report is to:- provide the Committee with a summary of the Audit Scotland Report ‘Delivering for the future – transformation’ published in May 2026 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the key findings within the report be noted. 3. Background 3.1. In May 2026, Audit Scotland published the above report on behalf of the Accounts Commission. The audit of Best Value is now integrated into the annual financial audit. As part of this, auditors are asked to report on a specific thematic issue chosen each year by the Accounts Commission, recognising the risks and challenges councils face. 3.2. Local transformation was the theme audited alongside the 2024/2025 annual audit work. The findings are set out in a management report to each council. 3.3. This report highlights some of the common points identified by auditors in their management letters, with the aim of assisting councils as they review and develop their priorities further. It also sets out a summary of the Commission’s expectations of councils in this area, along with improvement areas frequently identified by auditors. 3.4. Finally, the report includes a supplement containing 35 case studies drawn from auditors’ management reports. These are illustrative examples of approaches that are contributing positively within the respective councils. 4. Key Messages 4.1. The report sets out the Accounts Commission’s view that transformation is essential and needs to be initiated as soon as possible, despite the inevitable risks and challenges it brings. The report notes: the need for sustainable change is urgent. Councils have made considerable savings, including those stemming from transformation, but these have been insufficient to close the gap between the funding needed and funding available. While only part of the solution, transformational approaches (in areas such as early intervention, prevention, partnership working or digital) can reduce costs while bringing meaningful improvements for those who use council services 4 91
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alongside transformation, difficult decisions will be needed, which could include stopping services, reducing services, or making new or additional charges. The Accounts Commission recognises that implementing transformation is challenging and that some initiatives may not succeed. However, delaying transformation could risk greater costs, tougher decisions and increased challenges in future years 4.2. The Accounts Commission identified the following key messages:- Scotland’s councils continue to face deepening financial challenges, with increasing demand, the cost of delivering services rising faster than available funding, mounting debt and falling reserves the need for sustainable change is urgent and delaying transformation could risk greater costs, tougher decisions and increased challenges in future years councils need to set out how transformation activity will support future financial sustainability. Integrating this information into council medium- and long-term financial plans is key to understanding whether the scale of transformation being delivered is sufficient to respond to the challenges facing local government in some councils, oversight of transformation activities is not always clear, and reporting to councillors is often not comprehensive enough to fully inform their leadership and scrutiny responsibilities the timely and effective delivery of transformation plans requires appropriate workforce capacity and skills, in leadership, management and frontline roles. While some councils manage this well, resourcing challenges have been a barrier to faster progress in others it is essential that councils work with their partners in the public, private and third sectors to deliver transformation. Barriers include funding, capacity and resource constraints, governance, and IT and data-sharing issues while there are examples of consultation with communities on transformation projects, it is often not clear how this engagement has been reflected in service redesign proposals. Councils are also often unable to clearly report the financial impact and wider benefits of their transformation activities not all councils are using Equality Impact Assessments in a consistent or effective manner to identify and monitor the effects of transformation activities on vulnerable and protected groups. 5. Expectations of councils 5.1. In respect of transformation plans, the Commission’s expectations are listed in the table overleaf, and the Council’s position on each of these is noted for Members’ information. Expectation South Lanarkshire Council (SLC) position Are sufficiently ambitious to respond to the financial challenges The current and ongoing programme of Transformational Reviews has delivered nearly £6 million in savings towards the 2025/2026 and 2026/2027 budget, with more anticipated in future years. 92
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Expectation South Lanarkshire Council (SLC) position 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. Together, these programmes demonstrate a sustained commitment to improvement and transformation across the organisation. Are clearly linked and reflect wider strategic plans and priorities The programme looks ahead over the next 3 years, and in doing this, the transformation programme looks to align with the ambition set out in the Council Plan. The report to Executive Committee on 24 June 2026, Transformational Review Programme – Summary of Outcomes Report 2025/2026 and Future Pipeline, 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. Audit Scotland noted, as an outcome of the 2024/2025 audit work, that the Council’s Transformational Change Programme is clearly linked to our updated Council Plan, financial plans and digital strategy. Clearly set out details to support effective implementation, monitoring and reporting The Council has effective governance arrangements in place to oversee its transformational reviews. Each review is led by a Head of Service and has an Executive Director as a sponsor. Comprehensive updates on transformational reviews and the budget process are provided on a regular basis to elected members through the Performance and Review Scrutiny Forum and Committee as appropriate. At the outset of all reviews, a Terms of Reference (ToR) is prepared which outlines the scope, intended outcomes and timeline of each review, to ensure effective implementation, monitoring and reporting. Clearly set out planned savings from transformation programmes and plans, linking these to financial plans including medium- and long- term financial plans The Council has a strong budget planning process. The approved Budget Strategy 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. This report also notes the Council’s longer-term outlook, considering the Budget Gap across the next 10 years, totalling £180 million. The Budget Gap will continue to be met from measures including efficiencies and savings from Transformational Reviews. 93
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Expectation South Lanarkshire Council (SLC) position A separate report to the Executive Committee (Transformation – Programme of Reviews and Benefit Realisation) details savings from the Council’s current and ongoing Transformational Reviews, and sets out the future pipeline of the Programme. 5.2. In respect of programme management and resourcing, the Commission’s expectations are detailed below, along with the Council’s position in these areas. Expectation SLC position They have clear oversight at a strategic level of all transformation activity The role of all senior officers in the Council includes managing change. The work around Transformation is part of that role. The Corporate Management team lead the Transformational Review programme and report regularly to Members through the Performance and Review Scrutiny Forum. Dedicating a separate workstream to the Transformational Programme with Corporate Management team (CMT) and Member oversight ensures each proposal is subject to rigorous scrutiny and supports cross-Resource thinking and solutions. There is effective engagement with councillors accompanied by comprehensive reporting on transformation initiatives The programme is reported on regularly to Elected Members through the Performance and Review Scrutiny Forum. These reports provide information on the programme including the cross-resource and resource-specific reviews and also details on the way forward when required. The most recent report to the Performance and Review Scrutiny Forum (PRSF) was on 11 August 2026. As reviews progress, updates inform Elected Members of the impacts of reviews, including financial benefits and service improvements. Where the outcome of a review proposes a financial saving for contribution to a future year Budget Strategy, further scrutiny is provided by Members on the Council’s Executive Committee and by the convened Budget Working Group. In response to Elected Member queries, officers may provide evidence of impacts on service delivery and on outcomes for service users or any other area of relevance/interest for each transformational review. They regularly review whether workforce capacity (in terms of time availability and skills) is sufficient to plan, manage and deliver current and medium- Workforce capacity and skills for transformation are reviewed through the Council’s transformation governance arrangements and the workforce planning cycle. Each transformational review is supported by a Terms of Reference which sets out the scope, intended outcomes and timeline, and requires Resources to 94
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Expectation SLC position term transformation plans and programmes consider whether the officer time, management capacity and specialist skills are sufficient to progress the review. This is kept under review as the transformation reviews move through planning, approval and delivery. Capacity issues, skills requirements or additional resource needs are considered by Resources and escalated through existing management and governance arrangements where required. The Council Workforce Plan complements this by identifying workforce risks, skills gaps and development actions relevant to transformation, including leadership, change management, digital skills and service redesign. This provides assurance that workforce capacity is not considered as a one-off exercise, but is reviewed regularly against current and medium-term transformation activity. They strategically plan and establish the necessary workforce capacity to support transformation initiatives, ensuring adequate management and staff availability to facilitate the development and execution of transformation activities The Council plans workforce capacity for transformation through the Workforce Strategy, Workforce Planning Framework and Resource workforce plans. These require Resources to assess future service demands, management capacity, staffing availability and the skills needed to support service redesign and transformation activity. This planning is aligned to the Council Plan and transformation priorities, ensuring Resources identify the workforce capacity required to develop and deliver transformation initiatives. Where gaps are identified, actions may include recruitment, succession planning, leadership development, skills development or changes to working arrangements. Resource workforce plans are monitored through existing governance arrangements, so management and staff availability can be considered alongside the development, approval and implementation of transformation proposals. Transformation plans (at strategic and project level) set out appropriate success measures so that there is clear data to support scrutiny and demonstrate progress and impact against objectives All reviews progressed through the Transformation Programme commence with a Terms of Reference which lays out the scope, intended outcomes and timeline of the review. Progress is measured against these outcomes and reported regularly to the PRSF. Following approval by the Executive Committee on 24 June 2026, Benefits Tracker Templates are now being used to record expected benefits (cashable, productivity and qualitative) at the outset of each programme and to monitor progress and realisation over time. A summary of outcomes from the Transformational Programme for the year 2025/2026 was presented to the Executive Committee on 24 June 2026. 95
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5.3. For partnership working, community engagement and impacts, the Commission’s expectations are noted below, along with the Council’s position. Expectation SLC position Opportunities to work in partnership or to share services continue to be sought The Council engages with Society of Local Authority Chief Executives (SOLACE) and the Improvement Service across a number of workstreams as part of the national SOLACE/Improvement Service Transformation Programme. Workstreams cover public sector reform, opportunities for collective transformation across the sector, and building the capacity to lead and deliver the transformation work. The Third Sector Partnership Agreement, which was co-produced with the local third sector, established a strategic partnership between South Lanarkshire Council and local third sector organisations to collaborate on delivering services and activities for local people and communities of South Lanarkshire. The partnership sets out better ways of working together, including a commitment by the Council to include the local third sector in strategic and service delivery discussions. They clearly document how community engagement, data, and equality impact assessments have influenced plans and implementation South Lanarkshire Council uses integrated impact assessments (IIAs) 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 equality impact assessments and other legal checks into one clear process. These additional measures include:- Socio-economic impact Human rights Children and Young People's Rights Consumer Duty Sustainability Armed Forces Duty This helps us:- understand who may be affected identify risks or unintended impacts reduce negative effects where possible meet our legal duties make better, balanced decisions For each duty, a robust set of data must be collected, with conclusions presented in an accessible format. A key part of the IIA process is consultation with the communities who may be affected by them. As IIAs are a part of each new policy development, this ensures 96
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Expectation SLC position that the public's voice is clearly heard in any new policy. These IIAs are published on South Lanarkshire Council's website, as well as being presented to relevant committees and forums. A complete set of IIAs can be located on South Lanarkshire Council's website at https://www.southlanarkshire.gov.uk/integrated- impact-assessments They have arrangements in place to effectively monitor and report the impacts of transformation activities The Council has introduced a benefits realisation approach which requires transformation programmes to identify expected benefits at the outset, including cashable savings, productivity improvements and qualitative service improvements for customers and service users. Benefits are then monitored against agreed measures, with progress and outcomes reported through a benefits tracker framework. Any other impacts are considered through regular reporting and by comprehensive Integrated Impact Assessments for all transformational activities. 6. Employee Implications 6.1. There are no direct employee implications. 7. Financial Implications 7.1. There are no direct financial implications. 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. 9. Risk and Other Implications 9.1. Considering the detail of the report and identifying actions as appropriate contribute towards effective risk management. 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 for consultation on the content of the report. Jackie Taylor Executive Director (Finance and Corporate Resources) 9 September 2026 97
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Link(s) to Council Values/Priorities/Outcomes Ambitious, self-aware and improving Previous References None List of Background Papers Audit Scotland Report ‘Delivering for the future – Transformation’ 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.ohagan@southlanarkshire.gov.uk 98
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 29 September 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Year End Insured Claims Report – 2025/2026 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose} highlight trends on an annual basis for insurance claims against the Council [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that the Insured Claims Report for the year ended 31 March 2026 be noted. [1recs] 3. Background 3.1. The Council has in place insurance policies for employer’s liability, public liability, motor, property and other miscellaneous risks. 3.2. The combined liability policy covers both public liability (PL) and employer’s liability (EL) claims. The PL section of the policy provides indemnity for the Council’s legal liability to pay claims for death, injury and disease to third parties, as well as third party property damage, where the Council is found to be responsible for such losses. The EL section of the policy covers employee injury, disease, and death, where the Council is deemed to be negligent. The self-insured excess for this policy is £0.500m. 3.3. Motor insurance provides comprehensive cover for all Council vehicles and injuries resulting from motor incidents. The self-insured excess for this policy is £0.150m. 3.4. The property insurance policy covers damage/loss to Council buildings and assets. For 2025/2026, the self-insured excess for this policy was £0.500m for all claims other than storm and flood, where a £1.000m excess applied. 3.5. The self-insured excess for the property policy was increased from £0.500m to £1.000m for all claim types at renewal on 1 April 2026 to minimise the extent of proposed premium increases due to a worsening claims experience as a result of recent storm and fire losses. It should be noted that the self-insured excess in respect of storm and flood did not change at renewal, this was already £1.000m 4. Five Year Overview 4.1. Claims which fall under the main policies are handled by the Council’s Risk Management section and external claims handlers, Gallagher Bassett for employer’s liability and public liability claims; and the Davies Group for motor claims. The number and cost of these claims form the basis of this report and include comparisons with previous years. 5 99
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4.2. Claims will continue to be intimated beyond the financial year end, with numbers increasing by approximately 10 per cent due to those incidents that have taken place, but claims have not yet been reported to the Council. 4.3. Up to date annual comparisons for the last 5 years are included at Appendix 1. The comparison shows that claim numbers have fluctuated over the period, with the highest number of claims being intimated in 2025/2026 (931). The average number of claims intimated each year is 873, therefore with 931 claims intimated for 2025/2026, last year’s claim numbers are above the average figure. There has been an upward trend in claim numbers over the last five years, with the exception of a slight dip in 2024/2025. 4.4. Claims costs have also fluctuated over the last 5 years. On average, over that period, the self-insured cost of claims per annum is £3.432m, with 2025/2026 costs notably above average at £4.656m. It should be noted however that last year’s figures are higher due to a total loss fire at Rigside Nursery, property damage as a result of Storm Bram and a significant Council house fire loss. Increased costs of materials, car parts and repair charges has impacted on claim values also. 4.5. In addition, to allow comparison of the position as at the year-end for the last 2 years, Appendix 2 compares the claim numbers and costs for incidents reported in 2024/2025 as at 31 March 2025 against incidents reported in 2025/2026, as at 31 March 2026. In effect, this compares the equivalent position and removes the impact of late claims notification for both years. 5. Total losses reported as at 31 March each year – 2024/2025 vs 2025/2026 5.1. Based on the comparisons in Appendix 2, the overall number of claims for all classes received to date for incidents occurring during 2025/2026 is 931. This is an increase of 85 claims (10 per cent) on the numbers reported last year for 2024/2025. The biggest increase in numbers was for combined liability claims, with 56 more claims. 5.2. The total self-insured estimated cost of claims for 2025/2026 is £4.656m. At the same time last year, estimated claims costs for 2024/2025 was £4.137m. This is an increase of £0.519m (13 per cent). The biggest increase in costs was for property claims, which went up by £0.387m. In the main, this was due to 3 large losses for storm and fire damage. 5.3. Based upon Appendix 2, sections 6 to 8 detail some of the key findings from the analysis of 2025/2026 claims. 6. Combined liability claims 6.1. The combined liability policy covers for both public liability (PL) and employer’s liability (EL) claims. The PL section of the policy provides indemnity for the Council’s legal liability to pay claims for death, injury and disease to third parties, as well as third party property damage, where the Council is found to be responsible for such losses. The EL section of the policy covers employee injury, disease, and death, where the Council is deemed to be negligent. The following sections detail the current position for 2025/2026 and make comparisons against the position reported for 2024/2025 as at 31 March 2025. 6.2. 471 claims have been received for 2025/2026, with an estimated value of £1.405m. 6.3. The number of claims received for 2024/2025 was 415 with the estimated settlement value of these claims being £1.308m. The 2025/2026 figures represent a 13 per cent increase in claims received and a 7 per cent increase in claims costs. 100
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6.4. A further breakdown of public liability claims numbers and costs specifically for Roads and for other services within Community and Enterprise Resources is contained within Appendix 3. 7. Motor Claims 7.1. The Council’s motor insurance policy provides comprehensive cover for all Council vehicles and injuries resulting from motor incidents. The following sections detail the current position for 2025/2026 and make comparisons against the position reported for 2024/2025 as at 31 March 2025. 7.2. 395 claims have been received for 2025/2026, with an estimated value of £0.914m. 7.3. At the same time last year, 370 motor claims had been received for incidents during 2024/2025, with an estimated settlement value of £0.880m. This equates to a 7 per cent increase in claim numbers and a 4 per cent increase in costs. 7.4. The rising cost of vehicle parts and repairs is impacting the cost of claims and delays in obtaining car parts is leading to an increase in third-party hire charges. 7.5. “At fault” incidents continue to be monitored. Table 1 compares the number and cost of “at fault” incidents for the last 5 years. Table 1 – Comparison of “at fault” Incidents Number of vehicles on fleet Number of incidents Cost of incidents Number of incidents per vehicle Average cost per incident 2021/2022 1,834 189 £432,672 1:10 £2,289 2022/2023 1,700 200 £471,263 1:9 £2,356 2023/2024 1,676 183 £315,447 1:9 £1,724 2024/2025 1,643 189 £527,662 1:9 £2,792 2025/2026 1,746 183 £619,286 1:10 £3,384 7.6. The number of “at fault” incidents per vehicle has improved from last year. With 1 “at fault” incident per 10 vehicles for 2025/2026, this is slightly better than the average for the 4 previous years (1:9). 7.7. Reports on motor insurance claims are provided to Resources on a quarterly basis, with Resources being prompted to implement support and actions to mitigate against future losses. Evidence of corrective action, where required has been provided. This includes completion of challenging driver behaviour training, assessments and targeted support that can be offered by our driving instructors/assessors, as well as fact-finding investigations where appropriate. 8. Property Claims 8.1. The property insurance policy covers damage/loss to Council buildings and assets. This section of the report details the current claim position for 2025/2026 and makes comparison against the status reported for 2024/2025 as at 31 March 2025. 8.2. 65 claims have been received for 2025/2026, with an estimated self-insured value of £2.337m. 8.3. The overall number of claims intimated for 2025/2026 has increased by 4 from the previous year, which equates to a 7 per cent increase. The value of estimated claims intimated during 2025/2026 at £2.337m is an increase of £0.387m from 2024/2025, a 20 per cent increase. 101
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8.4. The reason for the increase is due to 2 large fire losses. One total loss at Rigside Nursery and a significant house fire along with the estimated cost of damage to housing stock during Storm Bram in October 2025. Self-insured estimates for these 3 losses total £1.310m. 8.5. The main cause of property claims during 2025/2026 continues to be fires. The number of house fires resulting in insurance claims has decreased by 2, from 31 incidents in 2024/2025 to 29 in 2025/2026. Costs over this period have however, increased by £0.168m, from £0.744m in 2024/2025 to £0.912m in 2025/2026. 8.6. The main causes of fires within Council housing are wilful fire-raising. The Council continues to raise awareness of fire risks and preventative measures in conjunction with the Scottish Fire and Rescue Service. 9. Insurance hotspots/Lessons Learned 9.1. Following a health and safety training review by Gallagher Bassett, an action plan was prepared to help mitigate against accidents and claims. 9.2. As at 31 March 2026, the percentage of actions completed was 78.3 per cent. 9.3. Table 2 below shows the overall status for all actions due as at 31 March 2026. Table 2 – Completion of Gallagher Bassett Health and Safety Review actions Action status Number of actions Percentage of actions On hold 0 0 Complete 18 78.3% On target (target dates in the future) 3 13.0% Slippage 2 8.7% Total 23 100.0% 9.4. Slippage has occurred in actions relating to induction training. Progress towards completion has been made in both actions, and it is anticipated that these actions will be finalised by 30 September 2026. 9.5. The actions noted above as being “slippage” have been carried forward. These actions, along with those with target dates during 2026/2027, will be progressed accordingly. 9.6. An analysis of all claims was undertaken by the Risk Management team. This highlighted the main cause of claims and areas of concern within each Resource. Feedback from Resources on controls that are currently in place and further planned actions to mitigate against the main hotspot areas identified are noted in the table below: Table 3 – Insurance Hotspots Resource Hotspot Area Action taken/to be taken by Resource Community and Enterprise Resources Roads defects (PL) Use of AI inspection being discussed nationally - no changes will be made to SLC arrangements pending national decision. Current 102
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inspection arrangements meet the required standards. An increase in roads investment in the coming years should improve the condition of the road network, which in turn will hopefully help to reduce the number of claims. Education Resources Violent incidents (EL) New legislation was recently passed by the Scottish Government - The Restraint and Seclusion in Schools (Scotland) Act 2026 (also known as Callum’s Law) Education Resources will consider further once guidance on the new legislation has been provided by the Scottish Government Risk management arrangements have also been strengthened Housing and Technical Resources Dampness (PL) In preparation of this new legislation being introduced, Housing and Technical Resources is: reviewing current processes for managing damp and mould considering opportunities to further support tenants in preventing and monitoring damp or mould issues within their homes providing appropriate training for staff on the new requirement Social Work Resources Slip, trip and fall – winter weather (EL) Social Work and Health and Safety to revisit practice 10. Employee Implications 10.1. Time and effort will continue to be required by Risk Management, Legal and Resource personnel to deal with the significant number of claims intimated. Resource Personnel will also require dedicating time to implement measures aimed at mitigating against future insurance claims. 11. Financial Implications 11.1. Claims received to date for incidents which occurred during 2025/2026 have an estimated self-insured cost of £4.656m. It is reasonable to expect this value to increase due to incidents that have taken place, but claims have not yet been received. 11.2. During 2025/2026, a total of £4.973m was paid out by the Council on all claims, irrespective of their incident date. For claims which occurred between 1 April 2025 and 31 March 2026, £0.635m was paid out by the Council. These costs include claims payments and other associated costs. 11.3. For losses above uninsured excess limits, recoveries from insurers are currently estimated at £2.650m. 11.4. The total cost of loss for 2025/2026 was £8.091m. This covers self-insured claims costs (£4.973m), insurance premiums (£3.118m), and other costs for contracted 103
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insurance services. For 2024/2025, the total cost of loss was £6.947m (£4.137m for claims and £2.810m for premiums). 11.5. It is envisaged that self-insured claims costs will increase as a result of the property uninsured excess increasing. There is also potential for increased claims costs as a result of more frequent weather events. 11.6. The balance in the insurance fund will need to be closely monitored to ensure adequate funds are available to meet known liabilities. 12. Climate Change, Sustainability and Environmental Implications 12.1. There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 13. Risk and Other Implications 13.1. The cost of insurance claims and premiums is linked to the Council's top risk on budget gaps/pressures. 13.2. Over the last 5 years, the Council’s claims handlers have repudiated a total of 1,529 public liability claims, which reduces the potential level of claim settlements. This equates to a repudiation rate of 63 per cent. 13.3. Failure to adequately manage insurance hotspots is likely to lead to increased claims numbers, self-insurance costs and insurance premiums. This risk is mitigated through the insurance hotspots review and associated action plans and other risk management initiatives implemented by Resources. 14. Integrated Impact Assessment and Consultation Requirements 14.1. There is no requirement to carry out an impact assessment in terms of the proposals contained within this report. 14.2. 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) 1 September 2026 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Risk and Audit Scrutiny Committee – 30 September 2025 (Year End Insured Claims 2024/2025 Report) List of Background Papers Insured Claims Annual Report for the year ended 31 March 2026 104
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Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Craig Fergusson, Head of Finance (Transactions) Ext: 4951 (Tel: 01698 454951) E-mail: craig.fergusson@southlanarkshire.gov.uk 105
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Appendix 1 Full year claims numbers and values by Resource as at 31 March 2026 All claim types Number of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources 518 536 644 513 569 Education Resources 40 28 44 20 23 Finance and Corporate Resources 0 3 7 5 0 Housing and Technical Resources 303 319 258 283 235 Social Work Resources 104 109 120 108 104 Total 965 995 1,073 929 931 Reported at individual year end 822 879 886 846 Cost of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources £879,341 £645,131 £996,642 £1,426,205 £1,617,074 Education Resources £296,572 £399,385 £360,982 £187,970 £781,887 Finance and Corporate Resources £0 £82,665 £95,765 £140,843 £0 Housing and Technical Resources £827,884 £1,534,615 £1,956,071 £2,354,038 £2,065,151 Social Work Resources £379,489 £396,752 £298,433 £186,035 £192,042 Total £2,383,286 £3,058,548 £3,707,893 £4,295,091 £4,656,154 Reported at individual year end £2,241,620 £2,474,988 £3,548,238 £4,137,241 Combined Liability Number of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources 283 334 412 316 349 Education Resources 36 18 24 13 13 Finance and Corporate Resources 0 3 6 5 0 Housing and Technical Resources 176 188 131 150 106 Social Work Resources 10 11 32 7 3 Total 505 554 605 491 471 Cost of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources £380,103 £283,580 £527,641 £894,701 £1,087,357 Education Resources £294,925 £392,949 £281,729 £177,680 £88,799 Finance and Corporate Resources £0 £82,665 £95,765 £140,843 £0 Housing and Technical Resources £401,019 £610,691 £469,593 £274,872 £210,296 Social Work Resources £307,109 £303,264 £150,502 £56,919 £18,987 Total £1,383,156 £1,673,149 £1,525,230 £1,545,015 £1,405,439 Motor 106
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Number of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources 213 187 211 182 202 Education Resources 2 7 10 4 4 Finance and Corporate Resources 0 0 1 0 0 Housing and Technical Resources 94 114 94 95 89 Social Work Resources 84 91 79 93 100 Total 393 399 395 374 395 Cost of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources £479,440 £353,838 £449,247 £464,929 £505,005 Education Resources £1,297 £5,283 £5,533 £3,815 £6,083 Finance and Corporate Resources £0 £0 £0 £0 £0 Housing and Technical Resources £175,559 £244,452 £244,463 £271,839 £230,040 Social Work Resources £65,552 £92,912 £147,470 £128,816 £173,055 Total £721,848 £696,485 £846,713 £869,399 £914,183 Property Number of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources 22 15 21 15 18 Education Resources 2 3 10 3 6 Finance and Corporate Resources 0 0 0 0 0 Housing and Technical Resources 33 17 33 38 40 Social Work Resources 10 7 9 8 1 Total 67 42 73 64 65 Cost of claims 2021/22 2022/23 2023/24 2024/25 2025/26 Community and Enterprise Resources £19,798 £7,713 £19,754 £66,575 £24,712 Education Resources £350 £1,153 £73,720 £6,475 £687,006 Finance and Corporate Resources £0 £0 £0 £0 £0 Housing and Technical Resources £251,306 £679,472 £1,242,015 £1,807,327 £1,624,815 Social Work Resources £6,828 £576 £461 £300 £0 Total £278,282 £688,914 £1,335,950 £1,880,677 £2,336,533 107
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Appendix 2 Comparison of claims costs and numbers for claims occurring during the last 2 years as at their respective year ends All claim types Number of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources 478 569 91 19 Education Resources 17 23 6 35 Finance and Corporate Resources 2 0 -2 -100 Housing and Technical Resources 245 235 -10 -4 Social Work Resources 104 104 0 0 Total 846 931 85 10 Cost of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources £1,447,836 £1,617,074 -£169,238 -12 Education Resources £70,980 £781,888 £710,908 1002 Finance and Corporate Resources £30,000 £0 -£30,000 -100 Housing and Technical Resources £2,406,922 £2,065,151 -£341,771 -14 Social Work Resources £181,503 £192,042 £10,539 6 Total £4,137,241 £4,656,154 £518,913 13 Combined liability Number of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources 285 349 64 22 Education Resources 10 13 3 30 Finance and Corporate Resources 2 0 -2 -100 Housing and Technical Resources 113 106 -7 -6 Social Work Resources 5 3 -2 -40 Total 415 471 56 13 Cost of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources £848,757 £1,087,357 £238,601 28 Education Resources £60,740 £88,799 £28,059 46 Finance and Corporate Resources £30,000 £0 -£30,000 -100 Housing and Technical Resources £335,466 £210,296 -£125,170 -37 Social Work Resources £32,810 £18,987 -£13,823 -42 Total £1,307,773 £1,405,439 £97,667 7 108
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Motor Number of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources 180 202 22 12 Education Resources 4 4 0 0 Finance and Corporate Resources 0 0 0 0 Housing and Technical Resources 94 89 -5 -5 Social Work Resources 92 100 8 9 Total 370 395 25 7 Cost of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources £468,057 £505,005 £36,948 8 Education Resources £3,765 £6,083 £2,318 62 Finance and Corporate Resources £0 £0 £0 0 Housing and Technical Resources £259,737 £230,040 -£29,697 -11 Social Work Resources £148,393 £173,055 £24,662 17 Total £879,951 £914,183 £34,232 4 Property Number of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources 13 18 5 38 Education Resources 3 6 3 100 Finance and Corporate Resources 0 0 0 0 Housing and Technical Resources 38 40 2 5 Social Work Resources 7 1 -6 -86 Total 61 65 4 7 Cost of claims 2024/25 as at 31 March 2025 2025/26 as at 31 March 2026 Difference Difference Percentage Community and Enterprise Resources £131,022 £24,712 -£106,310 -81 Education Resources £6,475 £687,006 £680,531 0 Finance and Corporate Resources £0 £0 £0 0 Housing and Technical Resources £1,811,719 £1,624,815 -£186,904 -10 Social Work Resources £300 £0 -£300 -100 Total £1,949,517 £2,336,533 £387,016 20 109
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Appendix 3 Public Liability – Community and Enterprise Resources Roads and other claims as at 31 March 2026 Number of claims 21/22 22/23 23/24 24/25 25/26 Total Roads claims - injury 60 47 54 56 43 260 Community and Enterprise Resources other - injury 8 11 9 2 7 37 Roads claims – property damage 163 223 246 191 242 1,065 Community and Enterprise Resources other – property damage 46 42 40 50 52 230 Total 277 323 349 299 344 1,592 Cost of claims 21/22 22/23 23/24 24/25 25/26 Total Roads claims - injury £250,056 £155,940 £160,937 £481,270 £519,970 £1,568,173 Community and Enterprise Resources other - injury £28,369 £47,121 £4,440 £0.00 £98,950 £178,880 Roads claims – property damage £19,011 £15,122 £43,400 £22,118 £154,054 £253,705 Community and Enterprise Resources other – property damage £5,297 £15,621 £7,963 £40,854 £52,803 £122,538 Total £302,733 £233,804 £216,740 £544,242 £825,777 £2,123,297 *note number and cost of these public liability claims are also contained in Appendix 1. 110
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 29 September 2026 Report by: Executive Director (Finance and Corporate Resources) Subject: Year End Risk Management Report (2025/2026) and Review of Council's Top Risks (2026/2027) 1. Purpose of Report 1.1. The purpose of the report is to:- S provide the Risk and Audit Scrutiny Committee (RASC) with an update on progress with risk management activity undertaken during 2025/2026 provide an update on the Council’s top risk register following the review and consultation process 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that Resource compliance with the requirements of the Risk Management Strategy be noted; (2) that the progress being made in delivering actions to mitigate top Council risks be noted; and (3) that the updated Council top risks detailed in Appendix 2 be noted. 3. Background 3.1. Annual reviews of the Council’s top risks are undertaken, with the findings of the last review reported to the RASC on 30 September 2025. This year’s full review commenced in April 2026. The consultation involved views being sought from Heads of Service, Elected Members and Trade Unions on new areas of risk. 3.2. The results of the work undertaken were considered and used to inform proposals for a refined set of top risks. The feedback was used to review risk descriptions, as required. 3.3. The content of this report provides the Committee with the outcome of the review of these risks. 4. Resource compliance with the Risk Management Strategy 4.1. Risk Sponsors are required on an annual basis to assess Resource compliance with the Risk Management Strategy and provide supporting evidence. The information for 2025/2026 is summarised in the end of year compliance statement, which is attached in Appendix 1. 4.2. Appendix 1 shows that Resources continue to demonstrate full compliance with the Strategy, having scored 45 out of 45. 6 111
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4.3. It is important that the current level of compliance is maintained to demonstrate effective risk management, which contributes to robust service planning and improved decision making. 5. Progress made in delivering actions to control the Council’s Top Risks 5.1. As at 31 March 2026, the percentage of actions completed on the 2025/2026 risk control plan was 60 per cent against an overall target of 90 per cent. 5.2. Table 1 below shows the overall status as at 31 March 2026 for all actions relating to the Council’s top risk register. Table 1 – Completion of Top Risk Control Actions Action status Number of actions Percentage of actions On hold 2 40% Complete 3 60% On target 0 0% Slippage 0 0% Total 5 100.0% 5.3. The actions that are on hold relate to Community Planning. These actions have been carried forward to next year’s risk control plan. 5.4. Actions carried forward along with those identified during this year’s review have been included within the 2026/2027 top risk control plan. 6. Results of the Review of the Council’s Top Risks 6.1. To assist the review process, the following broad criteria were recommended as a guide to concluding what constitutes a top risk:- it threatens delivery of corporate objectives it impacts on other services or partnerships there are financial impacts or it impacts on other key priority strategies there are impacts of a social or demographic context 6.2. Risks from last year’s review were mostly deemed to be still valid. The main changes and developments with the top risks are summarised below:- New Risks Three new risks have been added to the top risk register this year. These are noted below:- failure to deliver investment plans on time, within budget and to specification For 2026/2027, the Council’s General Fund Capital Programme budget is £105m, and the Housing Revenue Account (HRA) Capital Programme budget is £90m. These form part of the overall estimated spend on priority projects for Growing South Lanarkshire, for the period 2022 to 2030, which totals £555m. This will include a number of individual projects and programmes. Current and forthcoming higher value investment areas include:- 2026 Leisure and Culture Transformation Fund £13m 2027 Additional Homes £203m 2027 Clyde Gateway £18.4m 112
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2027 Commercial Space £11m 2027 Three Rivers/Clydesdale Way £7.5m 2028 Larkhall Leisure Centre £27.7m 2028 Estates Investment £24m 2028 Roads Investment Programme £19.2m 2028 Secondary Schools Refurbishment £18.8m 2028 Hamilton Town Centre Masterplan £8.2m 2029 East Kilbride Town Centre Masterplan £50.3m 2029 Stewartfield Way, East Kilbride £30m Failure to deliver these projects present a variety of risks to the Council, notably financial, operational and reputational. While external factors may impact project delivery, effective project management and robust monitoring are considered essential in minimising the level of residual risk the Council is exposed to. transformational change programmes do not improve service delivery or fully realise benefits the Council has embarked upon a transformational change programme which includes a series of cross-cutting reviews, with a view to transforming services and meeting savings targets over the coming years. The level of change will require the Council to take on new levels of risk in managing and delivering service change; as such, a standalone risk has been added to the register. failure to prepare for the legislative obligation presented by the Terrorism (Protection of Premises) Act 2025 (Martyn’s Law) the Terrorism (Protection of Premises) Act 2025 (also known as Martyn’s Law) requires the Council to establish proportionate protective security procedures for qualifying premises and events. It is anticipated that this legislation will not be in force until April 2027 at the earliest it is likely that all schools and early years establishments will be considered as Standard Tier premises, not just those meeting the qualifying threshold number. No Council premises are assessed as falling within scope of the Enhanced Tier a significant number of South Lanarkshire Leisure and Culture (SLLC) premises will also fall within the Standard Tier category. The SLLC premises falling potentially falling within scope of the Enhanced Tier are Hamilton Town House; Rutherglen Town Hall; and the New East Kilbride Town Hall. Events organised by SLLC will be considered on an individual basis preparations for the new legislation taking effect have commenced. Due to the wide-ranging impacts on a number of Council services and level of preparatory work to be completed to ensure the Council complies with the new legislation, a new risk has been added to the risk register Risks Removed ‘The provision of Council services is disrupted because of industrial action’ has been removed from the top register at present in light of the pay deal agreements that are in place for 2026/2027. 113
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‘Historic Childhood Abuse’ has been removed from the top risk register, recognising the support mechanisms for survivors being in place, including the Redress Scheme, along with the financial impacts for the Council being managed. Changes to Residual Risk Scores There have been no changes to risk scores from last year. Changes to Risk Wordings/Triggers Some key risk wordings have been updated to reflect the current status of risks. Impacts on the global economy as a result of conflicts overseas has been noted as a trigger on the ‘Budget Gap’, ‘Procurement’ and ‘Cost of Living Crisis’ risks. The impact on homelessness as a result of the Prison Early Release Scheme has been noted as a trigger in the ‘Housing Emergency’ risk. 6.3. The Council’s top risk register is monitored on an ongoing basis, ensuring that risks are adequately managed. Updates are reported annually to this Committee. Risk scores and rankings may be amended if new information comes to light that allows the position to be reassessed. 6.4. Risks scored 20 to 25 are considered to be very high risks and risks scored 10 to 16 are considered to be high risks. The top risks identified for the Council, that is those that are residually scored as being very high and high, are attached at Appendix 2. 7. Horizon Scanning 7.1. Through wider analysis and discussion with the Council’s Risk Sponsors Group, areas that could pose potential threats and risks or are emerging issues and opportunities that could affect the Council are considered. The only area identified during this year’s review was Public Sector Reform. 7.2. The Scottish Government’s Programme for Government 2026 to 2031, as part of wider programme, presents public service reform as a central means of delivering improved outcomes, strengthening financial sustainability and directing a greater share of available resources towards frontline services. 7.3. At this stage, the Programme for Government establishes a direction of travel rather than a detailed operating model. As such, a watching brief will be maintained at present and consideration given to risk implications as and when more detailed proposals become available. 8. Benchmarking 8.1. An informal benchmarking exercise has been undertaken to review risks faced by a sample of other Scottish local authorities. This review established that the Council's top risk register is, in the main, reflective of the risks faced by these other authorities. 9. Scope and Appetite for Risk 9.1. The Council aims to be risk-embracing; that is, it will accept a tolerable level of risk in seeking service efficiencies and in agreeing control measures. 9.2. The level of risk facing the Council is measured both before (inherent risk) and after (residual risk) consideration of controls. The Council should never carry a very high residual risk exposure as this would indicate instability, but a low residual risk exposure should also be avoided as this indicates a lack of innovation. 114
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9.3. The Council’s universal risk tolerance levels are detailed in the Risk Management Strategy, with the ideal risk profile defined as:- no more than 20 per cent of risks at a very high level no more than 25 per cent of risks at a high level around 40 to 50 per cent of risks at a medium level no more than 25 per cent of risks at a low level 9.4. Table 2 below shows the top risks heat map, i.e. it details the total number of risks for each individual risk score. Table 3 below notes the overall risk profile for the top risks. Table 2 – Top risks heat map Likelihood 5 Almost certain 4 4 Likely 2 5 1 3 Possible 6 5 2 Unlikely 3 1 Rare 1 Negligible 2 Minor 3 Moderate 4 Major 5 Catastrophic Impact Table 3 – Top risks risk profile Risk category Risk rating Number of risks Percentage of risks 1 Very high 5 19% 2 High 12 46% 3 Medium 9 35% 4 Low 0 0% 26 100% 9.5. The only change to the risk profile from last year is the addition of one new high-level risk. 9.6. Whilst the profile detailed in Table 3 remains outwith the ideal universal risk exposure defined by the Risk Management Strategy, this profile is not unusual in the current climate as these are the highest-level risks currently being faced by the Council. Where possible, further mitigation is encouraged. 10. Employee Implications 10.1. There are no direct employee implications relative to this report. There are proposed risks which are classified under the heading of employee. Where this is the case the appropriate controls and actions have been included in the risk control cards and progress will be monitored. 11. Financial Implications 11.1. There are no direct financial implications associated with the Council’s top risks. There are a number of proposed risks which are classified under the heading of financial. 115
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Where this is the case, the appropriate controls and actions have been included in the risk control cards and progress will be monitored. 12. Climate Change, Sustainability and Environmental Implications 12.1. There are no direct implications associated with the Council’s top risks. 12.2. A specific risk has been included within the Council’s top risk to cover climate change and environmental implications. The risk is titled ‘Inability to take the necessary action due to funding constraints, to adapt to climate change, and work toward achieving net zero carbon emissions by 2045, thereby contributing to negative and irreversible environmental, social and economic impacts on the Council and its residents’. Control measures that currently mitigate against this risk have been identified, with a number of additional actions recorded to further strengthen these controls. 12.3. There are a number of further risks within the Council’s top risk register which are categorised under the risk classification ‘Environmental’ and/or are linked to the Connect Outcome ‘Communities and Environment’. Appropriate controls and actions have been identified within the individual risk control cards and progress will be monitored. 13. Risk and Other Implications 13.1. Failure to demonstrate that risk is actively considered and managed can not only lead to avoidable financial loss but could also adversely affect delivery of services and could affect the Council’s reputation. The work carried out to identify and review the Council’s top risks and to determine the risk controls and actions necessary enables the Council to manage the impact. 14. Integrated Impact Assessment and Consultation Requirements 14.1. This report does not introduce a new policy, function or strategy or recommend a fundamental change to an existing policy, function or strategy and, therefore, no impact assessment is required. 14.2. Consultation has taken place with Heads of Service, Risk Lead Officers, Elected Members, Trade Unions and Resource Risk Sponsors. Jackie Taylor Executive Director (Finance and Corporate Resources) 1 September 2026 Link(s) to Council Values/Priorities/Outcomes Values: Accountable, effective, efficient and transparent Previous References Risk and Audit Scrutiny Committee – 30 September 2025 (Year End Risk Management Report 2024/2025 Report and Review of Council’s Top Risks 2025/2026 Report) List of Background Papers Top Risk Control Cards 116
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Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Craig Fergusson, Head of Finance (Transactions) Ext: 4951 (Tel: 01698 454951) E-mail: craig.fergusson@southlanarkshire.gov.uk 117
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Appendix 1 – 2025/2026 Compliance with risk management strategic requirements Key Score 3= Up to date and in line with requirement Score 2= Work in progress Score 1= Needs addressed Requirement from Risk Management Strategy Community and Enterprise Resources Education Resources Finance and Corporate Resources Housing and Technical Resources Social W ork Resources Risk registers are updated on an annual basis, in line with the Council’s Risk Management Strategy 3 3 3 3 3 Where appropriate, Council top risks are adequately reflected in the Resource risk register 3 3 3 3 3 Delivery of Resource risk control actions and control actions for top risks lead by the Resource are progressed. 3 3 3 3 3 The risk register and risk control plan are approved annually by the Resource Management Team 3 3 3 3 3 The risk register is presented for noting; and assurance of delivery of actions is given to the Resource Committee on an annual basis. 3 3 3 3 3 Information held on Figtree reflects the latest Resource Risk Register and Risk Control Plan 3 3 3 3 3 The Council’s agreed risk profile and risk tolerance level is adopted. 3 3 3 3 3 Risk evaluations are undertaken prior to the commencement of major projects, partnerships and organisational changes 3 3 3 3 3 Formal risk sharing agreements for major partnerships and contracts are in place 3 3 3 3 3 Major decisions are transparent and clearly show the following key elements: • Full cost over life of proposal; • Funding source; • Savings or efficiencies; • Other benefits; • Associated risks and how they will be managed. 3 3 3 3 3 Elected members are kept informed of risks by using the “Other Implications” section of the Committee report template. This section should include: • The risks involved with the report’s recommendations; • The potential positive and negative consequences; • How these risks are currently being managed (existing controls) or how they will be managed going forward (additional actions); • Link to risks on the Council’s top risk register. 3 3 3 3 3 Assurance is gained from contractors and sub-contractors, in line with procurement processes, of their adoption of recommended risk management practices, particularly that adequate insurance cover, safe health and safety practices, and equalities, sustainable development, business continuity and scrutiny procedures are in place. 3 3 3 3 3 Regular Resource Risk Management Group meetings (or alternative where risk management is a standing agenda item). 3 3 3 3 3 Liaison with Service Planners to ensure that risks associated with Council and Resource plans are identified and assessed; and that appropriate plans are put in place to manage these risks. 3 3 3 3 3 Management of insurance hotspots and required mitigating actions 3 3 3 3 3 Total 45 45 45 45 45 Percentage compliance 100% 100% 100% 100% 100% 118
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Appendix 2: Council Top Risk Register 2026/2027 Risk Cate gory Key risk Inherent risk score Residual risk score Controls (Good, adequate, poor) 1 Very High (20-25) The Budget Gap that the Council faces across the medium term continues to be the biggest risk faced by the Council. The Budget Gap is the result of the cumulative real terms reductions in Government funding as well as the ongoing impact of increased demand, increased cost of services due to inflation and the global economy, and increased staff costs resulting from pay awards. The potential of reduced fees/grants/income being received by the Council would further add to budget pressures across Services 25 20 Adequate Housing Emergency - inability of the Council to effectively provide accommodation, support and meet statutory duties, to households who are homeless or who arrive in South Lanarkshire as part of refugee resettlement and the asylum seeker dispersal programmes (including those for unaccompanied children) 25 20 Good The Council’s operations are significantly adversely affected by fraud, theft, organised crime and cyber attacks 25 20 Adequate Inability to take the necessary action due to funding constraints, to adapt to climate change, and work toward achieving net zero carbon emissions by 2045, thereby contributing to negative and irreversible environmental, social and economic impacts on the Council and its residents 25 20 Good The Council, in conjunction with its partners, is unable to provide the required support to reduce the overall impact of the cost-of-living crisis on households in South Lanarkshire, resulting in increasing levels of poverty, debt, and poorer outcomes for people 25 20 Adequate 119
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Risk Cate gory Key risk Inherent risk score Residual risk score Controls (Good, adequate, poor) 2 High (10- 16) Failure to deliver investment plans on time, within budget and to specification 25 16 Adequate Due to the fragility and lack of capacity of the third and private sector market, providers are potentially unable to sustain their business models, which could result in a deterioration of their service standards and/or provider failure. This could result in the Council seeking alternative service provision in a reduced marketplace to allow us to meet the demand for services. 25 16 Good Information governance not subject to adequate control 20 16 Adequate The Council fails to comply with or meet the expected standards of scrutiny and deliver the improvement actions identified by regulatory bodies 25 16 Adequate Inability of the Council to manage the impacts that increasing frequency and intensity of adverse weather events such as floods, storms, cold and freezing conditions and extreme heat, water shortages and wildfires have on Council services, budgets and our communities 20 16 Good Inability to ensure public protection and safety 25 12 Good Failure to prepare for the legislative obligation presented by the Terrorism (Protection of Premises) Act 2025 (Martyn’s Law) 25 12 Adequate The Council does not have the appropriate resilience measures, emergency or business continuity plans in place to respond efficiently as a Category 1 Responder to a civil emergency 25 12 Adequate Procurement activity is affected by supply chain issues; a lack of resources; non-compliance or legal challenge 25 12 Good Lack of capacity and skills to meet increased service demands 20 12 Good Inability to maintain infrastructure, assets and properties in a well- 20 12 Good 120
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Risk Cate gory Key risk Inherent risk score Residual risk score Controls (Good, adequate, poor) maintained condition and difficulties achieving the objectives of asset and property reviews Transformational change programmes do not improve service delivery or fully realise benefits. 16 12 Adequate 121
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