Agenda Document Pack - Risk and Audit Scrutiny Committee - 25/06/2024
South Lanarkshire Council · 25 June 2024
Back to Risk and Audit Scrutiny Committee — 25 June 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
Council Offices, Almada Street Hamilton, ML3 0AA Monday, 17 June 2024 Dear Councillor Risk and Audit Scrutiny Committee The Members listed below are requested to attend a meeting of the Committee to be held as follows:- Date: Tuesday, 25 June 2024 Time: 14:00 Venue: Hybrid - Council Chamber, 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), Mathew Buchanan, Alistair Fulton, Ross Gowland, Celine Handibode, Cal Johnston-Dempsey, Susan Kerr, Richard Lockhart Substitutes Colin Dewar, Gavin Keatt, Monique McAdams, Helen Toner 1
Page 2
BUSINESS 1 Declaration of Interests 2 Minutes of Previous Meeting Minutes of the meeting of the Risk and Audit Scrutiny Committee held on 26 March 2024 submitted for approval as a correct record. (Copy attached) 5 - 10 Item(s) for Decision 3 Internal Audit Annual Assurance Report 2023/2024 Report dated 4 June 2024 by the Audit and Compliance Manager, Finance and Corporate Resources. (Copy attached) 11 - 26 4 Annual Governance Statement for 2023/2024 and Significant Governance Areas Quarter 4 Progress Report Report dated 7 June 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 27 - 60 Item(s) for Noting 5 Unaudited Annual Accounts 2023/2024 Report dated 7 June 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 61 - 214 6 Workforce Innovation - How Councils are Responding to Workforce Challenges. Best Value Thematic Work in South Lanarkshire Council 2023/2024 Report dated June 2024 by Audit Scotland, External Auditors to the Council. (Copy attached) 215 - 240 7 Internal Audit Activity as at 31 May 2024 Report dated 5 June 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 241 - 260 8 Audit Scotland – Financial Bulletin 2022/2023 Report dated 18 May 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 261 - 266 9 Financial Resources Scrutiny Forum Activity Report dated 24 April 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 267 - 270 10 Forward Programme for Future Meetings Report dated 28 May 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 271 - 274 Urgent Business 2
Page 3
11 Urgent Business Any other items of business which the Chair decides are urgent. Clerk Name: Elizabeth-Anne McGonigle Clerk Telephone: 07385403101 Clerk Email: elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 3
Page 4
4
Page 5
RISK AND AUDIT SCRUTINY COMMITTEE Minutes of meeting held via Confero and in Committee Room 1, Council Offices, Almada Street, Hamilton on 26 March 2024 Chair: Councillor Elaine McDougall Councillors Present: Councillor Mary Donnelly (Depute), Councillor Alistair Fulton, Councillor Ross Gowland, Councillor Cal Johnston-Dempsey, Councillor Gavin Keatt (substitute for Councillor Mathew Buchanan), Councillor Richard Lockhart Councillors' Apologies: Councillor Mathew Buchanan, Councillor Celine Handibode, Councillor Susan Kerr Councillor Also Present: Councillor Joe Fagan (for item 3) Attending: Chief Executive’s Service S Sengupta, Acting Depute Chief Executive (for item 3) Finance and Corporate Resources J Taylor, Executive Director, Y Douglas, Audit and Compliance Manager; E-A McGonigle, Administration Officer; I Strachan, Head of Administration and Legal Services; L Wyllie, Administration Assistant Also Attending: Audit Scotland A Barclay and J Boyd, External Auditors Chair’s Opening Remarks The Chair, on behalf of the Committee:- congratulated Jackie Taylor on her recent appointment as Executive Director (Finance and Corporate Resources) welcomed Iain Strachan, Head of Administration and Legal Services and Amanda Barclay, Senior Auditor, Audit Scotland to their first meeting of the Committee 1 Declaration of Interests No interests were declared. 2 Minutes of Previous Meeting The minutes of the meeting of the Risk and Audit Scrutiny Committee held on 30 January 2024 were submitted for approval as a correct record. The Committee decided: that the minutes be approved as a correct record. 2 5
Page 6
3 Good Governance Update A report dated 28 February 2024 by the Executive Director (Finance and Corporate Resources) was submitted providing an update on the Council’s governance arrangements. Each year, the Council undertook a comprehensive review of the governance arrangements required to support its financial and operational controls. The annual review of governance arrangements informed the Governance Statement which was included within the Council’s Annual Accounts. As part of this annual review, the Council’s Local Code of Corporate Governance was reviewed, updated and republished. Compliance with the Code was also reviewed on an annual basis and Appendix 1 to the report provided details of the Council’s compliance with the Code. Details of the amendments made to the Code, following the review, were provided and the revised Code was attached as Appendix 2 to the report. Progress on the significant governance areas, as highlighted within the Annual Governance Statement 2022/2023, was detailed in Appendix 3 to the report. Officers responded to members’ questions on various aspects of the report, and where information was not readily available, undertook to provide this information to the relevant members. The Committee decided: (1) that the findings from the annual compliance check against the Local Code of Corporate Governance be noted; (2) that the updated Local Code of Corporate Governance be approved; and (3) that progress against the significant governance areas identified within the Annual Governance Statement 2022/2023 be noted. [Reference: Minutes of 7 March 2023 (Paragraph 3)] 4 Internal Audit Plan 2024/2025 A report dated 8 March 2024 by the Executive Director (Finance and Corporate Resources) was submitted on the proposed Internal Audit Plan 2024/2025. Internal Audit formed part of the Council’s wider governance framework. Output from the function was the delivery of a planned programme of internal audit assignments. Each assignment was formally reported to the Committee and an audit opinion expressed which was based on the level of assurance that testing had provided. The definitions of the various levels of assurance that were expressed within an audit report were provided in Appendix 1 to the report. Those assurances informed an overall audit opinion of the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements that were reported to the Committee and captured in the Council's Governance Statement which formed part of the Annual Accounts. The function operated within the context of an Internal Audit Charter, as detailed in Appendix 2 to the report, and a set of internal audit standards known as the Public Sector Internal Audit Standards (PSIAS). The Council’s Internal Audit function’s compliance with PSIAS was externally assessed in 2022/2023 and the outcome of that review was reported to the Committee on 31 October 2023. A few areas of improvement had been identified and an update on progress of those would be presented to the Committee in June 2024. Two of the actions were, however, relevant to the audit planning process and an update was provided as follows:- 6
Page 7
the relationship between the Chief Internal Auditor and the Monitoring Officer was clarified, and a section on escalation had been added to the Internal Audit Charter in Appendix 2 to the report audit activities should be prioritised as part of the South Lanarkshire Annual Audit Plan. The audit activities were prioritised, as detailed in Appendix 3 to the report. Priority assignments were graded as ‘H’ for high New Internal Audit Standards would be effective from January 2025 with PSIAS currently being updated to reflect those new standards within a UK public sector context. It was anticipated that any subsequent changes to the UK PSIAS, and their implementation, would be subject to consultation and appropriate transitional arrangements. At this point in time, compliance with the Standards continued to be an annual self-assessment exercise, with a periodic independent external inspection, and an annual statement or report on the function’s level of compliance. PSIAS required a specific based approach to be taken when preparing audit plans and all planning requirements within the Standards had been applied in preparation of the 2024/2025 Internal Audit Plan. The risk assessment matrix used when evaluating each audit idea, was detailed in the matrix attached in Appendix 4 to the report. The 2024/2025 Audit Plan, attached as Appendix 3 to the report, would be delivered within the context of the Internal Audit Charter and in accordance with the PSIAS. Progress against the audit strategy would be monitored and reported to the Committee as part of regular monitoring reports presented at each meeting. Delivery of the strategy would be evidenced by the completion of the 2024/2025 Internal Audit Plan. A total of 1,287 audit days, inclusive of days which had been allocated to external clients, had been provided for in the Plan. Year on year comparisons of the number of days available were difficult due to in year variations linked to periods of planned leave, secondments and personnel changes. All known factors had been reflected in capacity planning. The underlying assumptions would be reviewed throughout the year and any significant changes to the Plan would be presented to the Committee. In 2024/2025, the content of the Internal Audit Plan recognised the need to commit time to Oracle Fusion, a cloud based human resources and financial management system which was being implemented by the Council and this was detailed in section 4.6 of the report. At the start of the financial year, there would be a requirement to input to the testing of costing and reconciliation solutions as well as providing guidance around changes in internal controls that related to new automated processes and workflows. Once completed, a programme of audit work would be developed that would span a 3-year period. The Plan would require further refinement as the Council moved towards the go live and post go live periods. In the medium term, the Council would also implement new social care and housing IT systems, and audit work across those core systems would form an element of the Audit Plan in the next 3 to 5 years. A detailed 3-year Plan would be presented at a future meeting of the Committee in relation to the proposed audit areas across all Oracle Fusion functions for 2024/2025, and indicatively through to 2026/2027. The commitments for Oracle Fusion had to be balanced with the delivery of routine corporate activities and a programme of audits that delivered the function’s core objectives, as set out in the Internal Audit Charter. Overarching all of this, were the fundamental changes that required to be made as to how internal audits were being delivered. There was a growing need to develop skill sets within the Council’s own internal audit function and this was detailed at section 4.8 of the report. Time had been included in the 2024/2025 Plan to prepare a strategy, develop skills within the team and to establish how outputs from major, new Council systems could be used to refine the data analytical approach of Internal Audit in the future. 7
Page 8
The Audit and Compliance Manager responded to a member’s question in relation to how the 345 days set aside for Oracle Fusion would be used. The Chair and Depute, on behalf of the Committee members, thanked officers for the work that had been undertaken to prepare the 2024/2025 Internal Audit Plan. The Committee decided: (1) that the proposed Internal Audit Plan for 2024/2025, as detailed in Appendix 3 to the report, be approved; and (2) that it be noted that a detailed 3-year Plan would be presented after the first quarter of 2024/2025 in relation to the proposed audit areas across all Oracle Fusion functions for 2024/2025, and indicatively through to 2026/2027. [Reference: Minutes of 7 March 2023 (Paragraph 4)] 5 Audit Scotland: Annual Audit Plan 2023/2024 The Committee considered the South Lanarkshire Council Annual Audit Plan for 2023/2024 submitted by Audit Scotland, the Council’s External Auditor. The Plan set out the audit work necessary to allow Audit Scotland to provide an independent auditor’s report and meet the wider scope requirements of public sector audit which included assessing arrangements for:- financial management financial sustainability vision, leadership and governance use of resources to improve outcomes The planned work on the wider scope responsibilities was risk based and, proportionate and in addition to local risks, challenges which were impacting the whole public sector would be considered. In 2023/2024, a significant risk was identified around financial sustainability and this was detailed in Exhibit 4 of the report. The Plan was structured around the following areas:- annual accounts wider scope and best value reporting arrangements, timetable and audit fee other matters Details were given on key aspects of those areas. As part of the annual work on Best Value, thematic reviews were conducted as directed by the Accounts Commission. In 2023/2024, the thematic review across the sector would be on workforce innovation and would consider how councils were responding to the current workforce challenges through building capacity, increasing productivity, and innovation. The Committee decided: that the report be noted. [Reference: Minutes of 23 May 2023 (Paragraph 5)] 8
Page 9
6 Internal Audit Activity as at 8 March 2024 A report dated 8 March 2024 by the Executive Director (Finance and Corporate Resources) was submitted on work completed by Internal Audit during the period 13 January to 8 March 2024. Findings from internal audit assignments were reported to this Committee throughout the year and the last progress report was considered by this Committee on 30 January 2024. Key performance indicators, which reflected quality, on time and within budget as at 29 February 2024, were summarised in Appendix 1 to the report. As at 29 February 2024, 33% of the 2023/2024 Audit Plan was completed to draft report stage, with a further 22 assignments in progress. In the reporting period, all elements of the Audit Plan had been progressed with a continued focus on the National Fraud Initiative (NFI), investigative activities and external client audit plans. Alongside this, there had been a significant time commitment to the implementation of Oracle Fusion, a cloud based human resources and financial management system within the Council. Internal Audit would continue to provide resources to assist with the implementation of Oracle Fusion through to 31 March 2024. Updates would continue to be provided to the Committee in the Internal Audit Activity report. Assignments completed in the period 13 January to 8 March 2024, together with a summary of overall assurances, were detailed in Appendix 2 to the report. An update was also provided on progress against the Audit Strategy which was a requirement of the Public Sector Internal Audit Standards (PSIAS). Delivery of the 2023/2024 Strategy had been evidenced by the completion of the Internal Audit Plan in-year and monitored during the year by performance indicators which were regularly reported to the Committee. The Audit and Compliance Manager responded to a member’s question in relation to delivery of the remaining assignments in the 2023/2024 Audit Plan. The Committee decided: that progress be noted. [Reference: Minutes of 30 January 2024 (Paragraph 3)] 7 Forward Programme for Future Meetings A report dated 28 February 2024 by the Executive Director (Finance and Corporate Resources) was submitted on the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 6 May 2025. As part of future arrangements, members were invited to suggest topics for inclusion in the Committee’s forward programme. The Committee decided: that the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 6 May 2025 be noted. [Reference: Minutes of 30 January 2024 (Paragraph 6)] 8 Urgent Business There were no items of urgent business. 9
Page 10
Chair’s Closing Remarks The Chair referred to a training needs analysis assessment that had recently been emailed to all elected members. The Chair said that relevant training could be helpful for members of this Committee and suggested that members respond accordingly. 10
Page 11
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Audit and Compliance Manager (Finance and Corporate Resources) Subject: Internal Audit Annual Assurance Report 2023/2024 1. Purpose of Report 1.1 The purpose of the report is to:- report on the progress and performance of Internal Audit and to provide an independent audit opinion on the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements for the year ended 31 March 2024 2. Recommendation(s) 2.1 The Committee is asked to approve the following recommendation(s):- (1) that Internal Audit’s performance be noted; (2) that the overall findings from internal audit work be noted, and that it be approved that these will inform the Council’s 2023/2024 governance statement; and (3) that the level of assurance be noted. 3. Background 3.1 The internal audit service is delivered in South Lanarkshire Council (SLC) within the context of the Public Sector Internal Audit Standards (PSIAS) (revised 1 April 2017), compliance with which is mandatory under Section 95 of the Local Government (Scotland Act) 1973. This sets out a series of standards to ensure a professional, independent and objective internal audit service is delivered that supports good governance within an organisation. 3.2 PSIAS requires that a Quality Assurance and Improvement Programme (QAIP) is developed to provide assurance that internal activity is conducted in accordance with an Internal Audit Charter, that it operates in an efficient and effective manner and that it is perceived to be adding value and improving operations. The internal audit function’s compliance with PSIAS is assessed through periodic internal assessments as well as by way of an external inspection, once in each 5-year period. The requirement for the next formal, external inspection was intimated to the Risk and Audit Scrutiny Committee (RASC) in September 2022 in line with the time period that had elapsed since the last review in 2017/2018. 3.3 The review began in 2022/2023 and was reported in 2023/2024. Findings were presented to the Committee in October 2023. The overall assessment was that South Lanarkshire Council’s Internal Audit function, ‘fully conformed ’ with seven standards 3 11
Page 12
and ‘generally conformed ’ in the remaining seven areas. This was a positive outcome with no significant areas of improvement identified. 3.4 An updated copy of the action plan to address areas of non-compliance is attached at Appendix 1 reflecting progress in implementing recommendations. 3.5 In conjunction with this, a review was undertaken of the Audit and Compliance Manager role in SLC using the Chartered Institute of Public Finance and Accountancy (CIPFA) Statement “The Role of the Head of Internal Audit”. This Statement sets out 5 principles that define the core activities and behaviours that belong to the role of the Chief Internal Auditor in public service organisations and the arrangements needed to support them. The review confirmed core responsibilities were delivered in the year consistent with PSIAS. 3.6 The primary objective of Internal Audit is to evaluate and improve the effectiveness of governance, risk management and control processes. The purpose of this report is to provide an independent audit opinion on the overall adequacy and effectiveness of SLC’s framework of governance, risk management and control arrangements based on audit work undertaken in 2023/2024. 3.7 The internal audit approach in 2023/2024 has sought to:- provide real-time advice and support in the development of new systems ensure that core internal audit work remains risk-based and relevant regularly report activity to the Council’s audit committee 3.8 Significant time in the year has, again, been committed to the implementation of Oracle Fusion, a cloud based human resources and financial management system. Where internal audit staff have been diverted into operational roles, declaration of interest processes will address any future impairment to independence and objectivity. 3.9 In 2023/2024, Internal Audit has sought to enhance and protect organisational value by providing risk-based and objective assurance, advice and insight. Throughout the year, Internal Audit has reported to the Committee. Reports to the Committee have detailed the findings from each finalised assignment in conjunction with information in relation to Internal Audit activity’s purpose, authority, responsibility and performance relative to the 2023/2024 Audit Plan. 4. Link to Council’s Objectives and Top Risks 4.1 As a function, Internal Audit seeks to link to the Council’s Connect Value of ‘accountable, effective, efficient and transparent’. 4.2 In addition to Connect, assignments within the Audit Plan each year are linked to the Council’s top risks and to wider strategic risks. Although the Plan could not cover all of the organisation’s top risks, assignments are prioritised to ensure a correct focus and that these are directed towards areas where an independent review would add greatest value. 5. Internal Audit Workload and Performance 2023/2024 Workload 5.1 The 2023/2024 Audit Plan was presented to the Committee on 7 March 2023 and set out a programme of audits to be delivered in that financial year. The actual number of audit days delivered in 2023/2024 was 1,127 days which was 92% of the target planned days in the year. Additional resources were seconded in year to assist with the closure of the 2014 to 2020 EU ESF Programme which impacted on the original 12
Page 13
planned number of audit days. This amendment was managed to ensure it did not impede the ability to express an audit opinion. 94% of the Audit Plan was delivered by 30 April 2024. The two outstanding audit assignments at this date related to special investigations where work remains ongoing. Total No. Jobs Planned assignments 36 Reports completed to draft 34 Internal Audit workload analysis for 2023/2024 5.2 Each of the audits undertaken in the year were conducted in conformance with PSIAS. The standards require the Council’s internal audit function to demonstrate engagement with clients to ensure the Audit Plan is agreed at the outset of the year and continues to address known and emerging risks as the year progresses. The scope of the 2023/2024 Audit Plan was amended to reflect the significant resources committed to the implementation of Oracle Fusion. Through this, the internal audit function delivered a service that aligned to the strategies, objectives, and risks of the organisation. 5.3 Throughout the year, Internal Audit continued to sit on a variety of internal working groups. This participation provides assurance that the implementation of internal controls has been considered in the development of new processes or revisions to existing practices and that these embed the key internal controls of segregation of duties, authorisation, reconciliation and monitoring. 2023/2024 Performance 5.4 A summary of key Internal Audit performance statistics is included at Appendix 2 These detail performance in areas that are relevant to the delivery of an effective and efficient internal audit service. Performance indicators were reported to the RASC during the year. Three from 5 indicators exceeded targets with the other 2 indicators falling marginally behind target (delivery of planned audit days and completion of plan to draft report stage). 5.5 The Committee is asked to note Internal Audit’s workload and performance in the year to 31 March 2024 and that both remain sufficient to support the audit opinion expressed within this report. 6. Basis of Audit Opinion 6.1 The opinion expressed within this report (see 7.4) has been based, primarily, on the output from the 2023/2024 Internal Audit Plan as well as reports that have been issued by the Council’s external auditors, regulators and inspectors during the year. Area of Assurance – Governance 6.2 The first area of assurance is in relation to the Council’s governance arrangements and the findings that support the overall assessment of these are detailed in paragraphs 6.3 to 6.9. 6.3 Routine governance tasks have been delivered throughout the year, as required, including a cross-Resource review of the 2022/2023 Director Statements of Assurance. Assurance around effective governance comes also from the annual exercise that assesses the effectiveness of the governance arrangements within South Lanarkshire Council. An assurance mapping process is undertaken in conjunction with the Good Governance Group to inform the Council’s Annual Governance Statement. 13
Page 14
6.4 Within individual Director’s Statement of Assurance, Resources have indicated a commitment to deliver against the recommendations of external auditors and other external review agencies, and report progress to Committees and Boards. Good governance is demonstrated by the timeous implementation of actions and recommendations made by both internal and external audit and external inspectors. 6.5 PSAIS places a responsibility for monitoring progress with the delivery of internal audit actions on the Chief Internal Auditor to ensure that recommendations are effectively implemented. Relatively few audit actions fell due in 2023/2024 reflecting the legacy impact of COVID-19 on routine internal audit plans from 2020/2021 through to 2022/2023. Although relatively few in number in 2023/2024, Council-wide, 100% of all audit actions were delivered on time. This suggests that actions are being fully and timeously implemented. 6.6 Audit actions also arise from external auditors and inspectors. One such area is internal audit activity undertaken by Glasgow City Council who act as internal auditors for the Glasgow City Region – City Deal. More robust arrangements have been established to follow up specific City Deal actions and progress with implementation is reported to the RASC as part of regular update reports. None of the actions in year were significant but implementation is nonetheless important to demonstrate good governance. 6.7 The Council’s External Auditors undertook the 2022/2023 financial audit during 2023/2024 and provided an unqualified opinion in relation to the Council’s financial statements. There has been no formal interim audit output for 2023/2024. Internal Audit have liaised with External Audit periodically throughout the year and have collated financial year-end data extracts. 6.8 Audit Scotland also publish wider Public Sector reports throughout the year. Where appropriate, the key messages and their application to the Council are reported to Committees as appropriate (see 6.46 to 6.48). 6.9 The final area of governance assurance relates to raising fraud awareness which remains under review with options being considered around the use of periodic bulletins, ‘tool box talks’ and Executive Director briefings to convey key messages to target groups of employees. A recommended approach will be set out later in 2024/2025 when fraud statistics and National Fraud Initiative (NFI) outcomes are reported. Area of Assurance – Risk Management 6.10 The second area of assurance is around the Council’s risk management arrangements. The findings that support the overall assessment of these are detailed in paragraphs 6.11 to 6.24. 6.11 Work has continued in 2023/2024 to categorise controls that mitigate the Council’s top risks using the Institute of Internal Auditors ‘three lines of defence’ methodology. This framework recognises that different parts and levels of the organisation play complementary roles in risk management. Controls that form the first line of defence sit at a Service level with the second line of defence being those that ‘oversee’ (e.g. Committees). The final level is that of independent assurance provided by internal and external audit or external inspectors. Good risk management will evidence controls across all ‘lines’. A revised analysis of controls has been completed and shared with Resource Risk Sponsors to assist in the annual review of top risks. 14
Page 15
6.12 Cyber Security remains a significant risk with an attack possible, despite the controls in place resulting in, potentially, significant reputational, operational and financial impact. Experience of other Public Sector attacks has highlighted heightened vulnerabilities around employees and legacy systems. Employee training is available but may benefit from a re-testing of employee awareness. A replacement plan for legacy systems has been developed and is being progressed with interim controls in place to mitigate as this programme is progressed. 6.13 Enquiries have provided assurances that key controls and arrangements are in place in relation to preventing and preparing for, detecting, and managing a cyber-attack. Controls across the three key areas of vulnerability; technical; employee and supplier have advised to be in place and reviewed following high profile public sector cyber attacks. It is recognised, however, that, disruption in terms of the time that would elapse over a period of restoration, testing and establishing of a live production environment is, potentially, an area which cannot be fully mitigated. 6.14 The Scottish Government’s “Scottish Public Sector Resilience Framework” includes guidance (December 2023) that all Scottish Public Sector organisations are encouraged to follow on how to ensure cyber resilience throughout the supply chain. IT and Procurement will review this guidance to assess the Council’s checks on the cyber preparedness of suppliers and the incorporation of such throughout the procurement and contract lifecycle. 6.15 A management protocol for use in the event of a cyber-attack is now in place and the IT and Resilience Teams are content that this works in terms of managing an incident both from a technical perspective and the wider management actions required. Testing of such has been completed but it may be prudent to consider re-testing at more frequent intervals, given the evolving nature of the risk. 6.16 Continuity plans, within the organisation are currently being updated and mechanisms to support recovery from an attack are being explored. Periodic updates on progressing mitigating controls are presented to senior management. Some progress has been made in 2023/2024 and it is recommended that an assessment of progress and actions, that remain outstanding, is undertaken to conclude work in this area. The 2024/2025 Internal Audit Plan includes further time to review progress. 6.17 The 2022/2023 Annual Report set out a position statement around sustainability, one of the Council’s top risks. At that point it was noted that there were clear aspirations and commitment, but that the residual risk’s score reflected the challenges even despite the level of mitigations that had been put in place. The risk was expanded in 2023/2024 to reflect the fact that the objectives may not be met in the timescales (medium or longer term) or in such a way to support a fair and just transition. The objective of audit work in 2023/2024 was to continue with the ‘watching brief’ objective of monitoring developments and actions being taken by the Council to manage and mitigate this strategic risk, specifically in relation to the ‘reducing emissions’ theme. 6.18 It continues to be clear that achieving the aim of no longer generating carbon emissions from the Council’s non-domestic buildings by 2038 will be extremely challenging for a number of reasons including costs, timescales and capacity. It is essential that future use of these buildings is understood so that plans can be made. Approaches to progress are being considered to respond to a motion passed by the Council in December 2022. Actions agreed related to producing an energy demand reduction plan; adopting the highest possible standards of energy efficiency for all South Lanarkshire Council funded building projects, and in the forthcoming Residential Design Guide, and a kick starting of the local green economy. 15
Page 16
6.19 The Council is noted as being committed to reducing emissions from its buildings “as much as possible” with the development of the draft Local Heat and Energy Efficiency Strategy being a key area to compliment and facilitate progress of the aims and objectives of the Sustainable Development and Climate Change Strategy whilst also focusing on legislative compliance relating to fuel poverty, heat networks, standards for social housing and national planning frameworks. 6.20 In turn, this will support the Council in devising a detailed “route map” for decarbonising heat in buildings that will require to be underpinned by a comprehensive financial strategy, a supply chain and a skilled workforce to deliver this agenda. 6.21 Positive steps are already evident around no new social housing or non-domestic buildings being heated with direct emission heating systems and building warrants (from 2024) requiring zero emissions heating and cooling systems. In addition, no new petrol and diesel cars will be procured by the Council and recycling opportunities (to support the residual waste targets) will continue to be maximised whilst encouraging further change. 6.22 The Council’s strategy and action plan recognise that underlying all of the corporate decisions there needs to be consistent consideration of the actual implications for the residents and communities in South Lanarkshire, in particular, the impact of decisions in areas of existing challenge, such as fuel and food poverty or other areas of inequality. It is noted that there are many actions that are planned to be taken in the next year and across the remainder of the 5-year action plan. This includes some notable “next steps” for 2024/2025 and time has been committed in the Audit Plan to continue with an overview in this area. 6.23 Outwith these main areas of review, other routine tasks continued, such as a review of Resource Fraud Risk Registers with Internal Audit satisfied that there was evidence of in-year evaluation and update by all Resources. 6.24 The main changes made to the registers were to reflect the potential heightened impact of theft; an update of the risk and controls linked to information security fraud; recognition of the new and evolving areas of risk around existing processes as well as in areas at risk of scam or fake activity and the increased fraud risk linked to new and significant financial and operational systems. Routine, periodic, as well as year-end visits to stores will help to inform a review of anti-fraud controls in one of the identified areas. Area of Assurance – Internal Control 6.25 Robust internal controls are important, irrespective of the activity or process. Their effective implementation supports delivery of vital Council services to people and businesses in South Lanarkshire. The main areas of assurance around the Council’s internal control arrangements are detailed in paragraphs 6.26 to 6.52. 6.26 Around 24% of internal audit resources in 2023/2024 have been utilised to support the implementation of Oracle Fusion, a cloud based human resources and financial management system. 6.27 In 2023/2024 Internal Audit have focused on developing business processes, providing input to design solutions, mapping out tests, assisting with reconciliations and responding to issues in the early go live period. In the year, over half of this time was to provide assistance in implementing the Cash Management module which has introduced significant new processes. 6.28 Effective project management also requires roles and responsibilities to be defined within an overall program governance structure to allow effective and timely decision- making. Ownership and accountability for all key components of the project is needed 16
Page 17
to identify and resolve critical risks across all functional areas. Internal Audit is represented on the Steering Group and the Project Review Board and has attended these meetings alongside all key stakeholders and partners. 6.29 There has been regular meetings of both the Board and Steering Group, with agendas, presentations and actions being minuted. These meetings are attended by the Business Partner with a detailed progress update being presented at each meeting by all functional leads. Detailed plans and revisions have been developed to respond to known challenges and risks and the project has required close management of the significant volume of tasks and the associated timeline through to staged go live dates. 6.30 Internal Audit has sought to ensure that processes incorporate key internal controls and that off-system or manual workarounds are minimised. The higher degree of automation will bring benefits but key internal controls must be embedded. Internal Audit are now focussing on reporting, to obtain assurance that, these meet business need (from an Internal Audit perspective) and to consider how these can be used in wider data analysis. 6.31 Challenges around resourcing a project of this magnitude exist within Internal Audit and have similarly been reflected in Council Services leading on implementation. The project has had a successful go live in relation to Finance and P2P functions and is now progressing implementation of the remaining functions, including the core HR module. Plans are being developed to deliver a rolling programme of audits of the new system functions over future years. 6.32 Other internal control work included follow up to preparatory work undertaken in 2022/2023 to review the Equity Strategy and Additional Support Needs (ASN) transport. Responses to a questionnaire in 2022/2023, sent to a sample of schools, suggested that there was comprehensive guidance and regular reporting and engagement with schools over the allocation and spend of Pupil Equity Funding (PEF) monies. Schools indicated that a documented audit trail of spend was being maintained. 6.33 Work in 2023/2024 established that key to effective governance was a plan of action on how money will be spent to benefit pupils, a tracking of progress to demonstrate that monies are being spent in line with the plan and the gathering of evidence that outcomes are being delivered. The audit assignment in 2023/2024 focussed on reviewing the governance arrangements in a sample of schools to obtain assurances that these were robust and supported the correct administration of PEF funds, in terms of planning, coding, monitoring, reporting and tracking. 6.34 Key findings were that local guidance had been developed that complimented the national guidance. There are some minor recommendations to strengthen this guidance including demonstrating the link between planning, spending and achieving. 6.35 Sample schools were found to be preparing school improvement plans that outline objectives for addressing attainment gaps and, separately, ‘profile of spend’ reports that detail plans around annual PEF fund spend. These plans were found to indirectly correlated. A more overt connection would make it easier to link spend to outcomes. 6.36 The audit established that there is, generally, documentary evidence to support spend but that accounting could be improved to ensure consistency of coding of spend that, 17
Page 18
in turn, would facilitate better reporting. Areas for improved audit trail were identified and further work to analyse data is planned for 2024/2025. 6.37 Sample schools were found to be monitoring spend internally, liaising with Education Resources and reporting to and involving stakeholders in PEF spend decisions. Reports were found to be submitted timeously to the Scottish Government and there was evidence of good collaboration between students, parents, and teachers regarding the Participatory Budget element of the PEF allocation. 6.38 In a similar manner, research of ASN transport arrangements was undertaken in 2022/2023. The was to assess progress with previous audit actions and collate background data to inform audit testing in 2023/2024. This overview indicated that systems were in place to source, administer and manage the delivery of ASN transport and that there had been progress in addressing previously identified areas of action. 6.39 Using 2022/2023 data, testing confirmed that all ASN contractors were listed on the Council’s contract register and that charges levied correlated with contracted rates. 6.40 PVG requirements were found to be embedded within the process with a date driven database monitoring the expiry of certifications and reminders being routinely sent to ensure compliance. 6.41 There are some recommendations around the retention of key documentation which will be discussed and agreed with Education Resources. 6.42 Advice and guidance has been provided in the year, including responses to fraud and Freedom of Information enquiries. 6.43 Routine control work also continued through Continuous Control Monitoring analysis that was used to inform ‘intelligent’ audit sampling and to provide detailed data to External Audit for the purposes of the Council’s financial year-end audit. 6.44 Investigative work was a more significant element of the 2023/2024 Audit Plan marking a return to patterns similar to pre-pandemic years. The nature of these concerns were wide ranging and each of these were investigated in line with established fraud procedures and reflecting the Council’s zero tolerance approach to fraud. Two of these assignments remain open as at 31 March 2024. A detailed report on fraud statistics and activity will be presented separately to the Committee. 6.45 Aside from this, time allocated to anti-fraud work was fully utilised across adhoc and unplanned areas including NDR refunds, Paypal fraud, contractual and employee related issues and to review grant awards. 6.46 External auditors are required to report significant frauds, or suspected frauds, to Audit Scotland, where they were caused or facilitated by weaknesses in public bodies’ internal controls. Frauds and irregularities are considered significant where the value of the loss is over £5,000 or where it is of significance owing to the nature of the activity. 6.47 An annual Audit Scotland report shares this information to help prevent a re- occurrence of similar circumstances. The level of fraud and irregularity reported by external auditors was, Scotland-wide, over £139,000, which is a very small proportion of the 2022/2203 Scottish budget of £56.5 billion. This does not include fraud identified by internal auditors. 18
Page 19
6.48 Such reports are routinely reviewed to identify lessons learned. The 2022/2023 report was issued in July 2023 and no significant issues were identified that related to or impacted SLC. 6.49 Separately, Internal Audit was involved in a review surrounding a data breach to identify areas for improvement. The Council took immediate steps when the breaches were identified to prevent recurrence of the same issue and reported the data breach to the Information Commissioner who subsequently advised that no further action will be taken. 6.50 Research around information sharing will help to inform areas of improvement that will now be led by the Information Governance Board. 6.51 Internal Audit has also monitored fraud alerts through internal and external sources and disseminated information as appropriate. In 2023/2024 these have continued to relate to adhoc issues and have been shared with Council Resources as appropriate. 6.52 In 2022/2023, data was uploaded for the current NFI exercise with matches returned in 2023/2024 for investigation. A report on returned matches and a proposed approach to investigating was presented to RASC in June 2023. Outcomes are broadly comparable to previous exercises and findings will be reported separately to RASC. 7. Summary of overall assurance and audit opinion 7.1 Adequate arrangements exist within SLC to escalate any concerns the Audit and Compliance Manager may have in relation to the level of risk accepted by management or SLC. 7.2 Internal control remains, primarily, a management responsibility to ensure that the Council conducts its business in a manner that has due regard to the principles of good governance. The presence of an internal audit function does not negate the importance of effective internal controls. Internal Audit cannot be expected to give total assurance that control weaknesses or irregularities do not exist. The audit opinion is based upon the audit work undertaken during the year and knowledge of the Council’s wider governance, risk management and control arrangements. 7.3 Many significant controls are imbedded within systems and these have been tested throughout the year by a programme of internal and external audit testing. Key controls such as adherence to proper processes and procedures, application of management checks and robust monitoring are generally vested in people and, therefore, remain an area of higher inherent risk. These processes continue to be subject to change and all reasonable steps have been taken to gather sufficient evidence to express an audit opinion for this year. 7.4 In 2023/2024, the Internal Audit opinion is that, overall, reasonable assurance can be placed on the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements for the year ending 31 March 2024. 7.. The Committee is asked to note the above findings and approve their inclusion in the Council’s Annual Governance Statement. A signed Annual Internal Statement of Assurance is included at Appendix 3 based on the view of the Council’s own internal audit function. 19
Page 20
8. Employee implications 8.1. The Internal Audit service in 2023/2024 was delivered initially by a team of ten. This reduced during the year to eight as a result of one retiral and one resignation. All of the team are fully or partly qualified through either the Chartered Institute of Internal Auditors or one of the Consultative Committee of Accountancy Bodies. 8.2. Informal feedback received in relation to audit assignments is used to highlight areas for training and development. These are progressed on an individual basis as part of the performance development review process. Best practice information is shared and learning points discussed throughout the year. 9. Financial implications 9.1. Audit and Compliance Services, during 2023/2024, fully utilised its allocated budget. 10. Future years 10.1 The 2023/2024 Internal Audit Plan sought to return to a more routine programme of work. This proved challenging in practice, with the implementation of Oracle Fusion requiring significant resource commitment. 10.2 The momentum of evolving processes will continue with a number of other, significant new systems, meaning that the organisation is in a period of transformational change. Investing time to fully develop data analytical tools will prove increasingly important and is being actively considered given the improved functionality of new systems. This will require the upskilling of the wider Internal Audit team, attending cross Local Authority working groups to share knowledge and experience and committing time to train. It is a key focus for 2024/2025 to ensure that the work of the team remains relevant and delivers value-added output. 10.3 New Internal Audit Standards will be effective from January 2025 with PSIAS currently being updated to reflect these new standards within a UK public sector context. It is anticipated that any subsequent changes to the UK’s PSIAS, and their implementation, will be subject to consultation and appropriate transitional arrangements. At this point in time, compliance with the Standards continues to be an annual self-assessment exercise (with a periodic independent external inspection) and an annual statement or report on the function’s level of compliance. Further work to prepare for the implementation of the new Standards is planned in 2024/2025. 10.4 Alongside the revised standards, will be the ongoing commitment to compare existing arrangements to wider best practice and report outcomes as appropriate. 10.5 Membership of the Chief Internal Auditor’s Group (SLACIAG) provides access to a valuable network of internal auditors across Scottish Local Authorities. Sub-groups are a key benefit of this Group and help in understanding common risks and approaches across areas such as data analytics, resourcing, sustainability/climate change and financial sustainability. SLC’s internal audit function has engaged with these Groups across 2023/2024 and will continue to do so in 2024/2025. 11. Climate Change, Sustainability and Environmental Implications 11.1 There are no implications for climate change, sustainability or the environment in terms of the information contained within this report. 12. Other implications 12.1 Each audit assignment seeks to identify efficiencies and report as part of the audit opinion where appropriate. In practice this often translates suggesting a more efficient 20
Page 21
way in which to deliver services. Opportunities to identify ‘cash’ savings are becoming less frequent in an environment of growing financial constraints. From Resources perspective, much of the ‘value added’ element of an internal audit service is linked to the function’s ability to provide advice and guidance. In addition, there has been a growing focus on the content of action plans to ensure that these effect required improvements. This is particularly important in areas where issues are more significant. 12.2 Responding to Services’ requests for assistance and participation in internal working groups is accommodated within the Plan and through contingency time. This aligns to the PSIAS requirement to deliver an effective internal audit service. 13. Equality impact assessments and consultation arrangements 13.1 There is no requirement to carry out an impact assessment in terms of the information contained within this report. 13.2 Resource Heads of Service are consulted in advance of every planned audit assignment and following completion of fieldwork. Resources and elected members are also consulted during preparation of the annual audit plan. Yvonne Douglas Audit and Compliance Manager 4 June 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk and Audit Scrutiny Committee, 2023/2024 Internal Audit Plan - 7 March 2023 Risk and Audit Scrutiny Committee 2022 National Fraud Initiative Exercise - 27 June 2023 Risk and Audit Scrutiny Committee Fraud Statistics Annual Report 2022/2023 - 22 August 2023 Risk and Audit Scrutiny Committee Fraud Statistics Six Monthly Update 2023/2024 - 30 January 2024 List of Background Papers 2023/2024 progress reports to the Risk and Audit Scrutiny Committee Figtree statistical and assurance and time recording extracts Public Sector Internal Audit Standards (revised) Fraud statistics and NFI updates Audit Scotland Fraud and Irregularity Annual Report 2022/2023 (July 2023) Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Audit and Compliance Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 21
Page 22
PSIAS – ACTION PLAN Appendix 1 No. Para Recommendation Management Response Responsible Officer / Agreed Completion Date 1 6.1.3 That the relationship between the Chief Internal Auditor and the Monitoring Officer is clarified in the next update to the Internal Audit Charter. Agreed. Will update and present with the 2024/2025 IA Plan. Complete. 2 6.2.3 That the Chief Internal Auditor (Audit and Compliance Manager) reports in their own name to the Risk and Audit Scrutiny Committee. Annual Report will continue to be in the name of the Chief Internal Auditor. In compliance with South Lanarkshire Council protocol other reports will be in the name of the Executive Director. This is not considered to impair independence. Not applicable. 3 6.2.6 Consideration should be given to the annual appraisal of the Audit and Compliance Manager being countersigned by another council officer ideally the Chief Executive. Agreed. PDR is currently signed by direct line manager (and the one best placed to appraise performance). To demonstrate strict compliance, PDR will be countersigned. Complete. 4 6.3.6 Job Profiles/Descriptions should be refreshed for all Internal Audit staff to provide a clear expectation of what each role requirements are. Agreed. Complete. 22
Page 23
5 6.4.3 Consideration should be given to developing a formal questionnaire or feedback mechanism from clients to obtain quantifiable client feedback. Agreed. Annual process will be devised. Complete. 6 6.4.6 Consideration should be given to providing the Risk and Audit Scrutiny Committee with summary details of the areas of non- conformance identified in the annual QAIP self-assessment. Agreed. Areas of non- compliance are not significant but to demonstrate strict compliance, these areas will now be detailed within the annual report. Complete. 7 7.1.3 Audit Activities should be prioritised as part of the South Lanarkshire Annual Audit Plan. Agreed. Audit activities are prioritised in practice but this is not visible within the Plan. Will revise format of the 24/25 IA Plan to evidence. Complete. 8 7.1.6 The Audit and Compliance Manager should complete the assurance mapping exercise and report the findings to the Risk and Audit Scrutiny Committee. Agreed. Programmed to complete and report in 23/24. Complete. 9 7.3.2 Client approval of audit briefs and the factual accuracy of reports by email should be stored on the audit file and not in SLC email accounts. Agreed, although not routinely stored in email accounts. Reminder to be issued. Complete. 23
Page 24
Internal Audit section performance during 2023/2024 Appendix 2 Performance Indicator Target 2023/2024 2022/2023 2021/2022 Delivery of planned audit days 100% 92% 102% 104% Completion of plan to draft report stage 100% 94% 94% 92% Completed assignments delivered within budget 80% 100% 79% 87% Draft reports issued within 42 days of fieldwork completed 80% 97% 100% 100% Productive time 80% 81% 80% 82% 24
Page 25
Appendix 3 To the members of South Lanarkshire Council, the Chief Executive and Executive Directors As Audit and Compliance Manager of South Lanarkshire Council, I am pleased to present my annual statement and report on the adequacy and effectiveness of the governance, risk management and internal control systems of the Council for the year ended 31 March 2024. Respective responsibilities of management and internal auditors in relation to governance, risk management and internal control It is the responsibility of the Council’s senior management to establish appropriate and sound systems of governance, risk management and internal control and to monitor the continuing effectiveness of these systems. It is the responsibility of the Audit and Compliance Manager to provide an independent opinion on the adequacy and effectiveness of the governance, risk management and internal control systems of the Council. The Audit and Compliance Manager cannot be expected to give total assurance that control weaknesses or irregularities do not exist but can form an opinion based on work undertaken during the year and knowledge of control systems. The Council’s framework of governance, risk management and internal controls South Lanarkshire Council has a responsibility to ensure its business is conducted in accordance with legislation and proper standards and adheres to and works within a framework of internal values and external principles and standards. The governance framework comprises the systems and processes, culture and values by which the Council is directed and controlled and how it accounts to communities. It enables the Council to monitor the achievement of its strategic objectives and to consider whether those objectives have led to the delivery of appropriate services and value for money. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and, therefore, only provides reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks that would prevent the achievement of South Lanarkshire Council’s policies, aims and objectives, to evaluate the likelihood and potential impact of those risks being realised, and to manage them efficiently, effectively and economically. The work of Internal Audit Internal Audit is an independent and objective assurance function established by the Council to review its governance, risk management and internal control arrangements. It objectively examines, evaluates and reports on the adequacy of these arrangements as a contribution to general governance arrangements and more specifically the proper, economic, efficient and effective use of resources. The Internal Audit Service operated in accordance with the Public Sector Internal Audit Standards (PSAIS) (revised 2017) throughout 2023/2024. An external assessment of the extent of compliance as part of the Quality Assurance and Improvement Programme was reported in November 2023. The assessment did not identify any significant areas of non- compliance and the section was assessed as continuing to generally conform with the requirements set out in PSIAS. 25
Page 26
The section undertakes an annual programme of work approved by the Risk and Audit Scrutiny Committee. All plans are based on a formal risk evaluation process, which reflects agreed and emerging risks and changes within the Council and is subject to periodic review throughout the year. All internal audit reports identifying risks, areas for improvement and/or non-compliance with expected controls are brought to the attention of management and include appropriate recommendations and agreed action plans. It is management’s responsibility to ensure that proper consideration is given to internal audit reports and that appropriate action is taken to implement audit recommendations. Internal Audit ensure that management has understood agreed actions or assumed the risk of not taking action. A programme of informal and formal follow-up audit assignments provides assurance around the complete and timeous implementation of audit recommendations. Significant matters arising from internal audit work are reported to the Executive Director Finance and Corporate Resources and the Council’s Risk and Audit Scrutiny Committee. Basis of opinion My evaluation of the control environment relates only to South Lanarkshire Council and is informed by a number of sources including internal audit work undertaken during 2023/2024. Limitation of scope No individual audit assignments were specifically limited in scope at the outset but scopes have been amended to reflect the output from the initial risk and control analysis undertaken at the start of each assignment and the resources available. Opinion It is my opinion, based on the above, that overall, reasonable assurance can be placed on the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements for the year ending 31 March 2024. Signature:- Yvonne Douglas BA CA 17 May 2024 26
Page 27
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Annual Governance Statement for 2023/2024 and Significant Governance Areas Quarter 4 Progress Report 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] provide the proposed Annual Governance Statement for 2023/2024, for inclusion in the Council’s 2023/2024 Annual Accounts, following consideration and approval by the Risk and Audit Scrutiny Committee [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendations:- [ (1) that the Annual Governance Statement attached at Appendix 2, due to be included in the Council’s 2023/2024 Annual Report and Statement of Accounts, be approved; and (2) that progress against the significant governance areas identified within the Annual Governance Statement 2022/2023 attached at Appendix 3 be noted. [1recs] 3. Background 3.1. Each year the Council undertakes a comprehensive review of the governance arrangements that are required to support the Council’s financial and operational controls. The annual review of governance arrangements informs the Governance Statement which is included within the Council’s Annual Accounts. 3.2. Good Governance is underpinned by the principles contained in the Delivering Good Governance in Local Government framework and guidance for Scottish Local Authorities which were published in December 2016. The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) established the framework. The Council’s governance assurance framework is detailed at Appendix 1. 3.3. To achieve good governance, the Council should be able to demonstrate that its governance structures comply with the principles contained in the CIPFA/SOLACE framework (referred to as ‘the framework’ from here on) and should, therefore, develop and maintain a Local Code of Governance and governance arrangements reflecting these principles. The Council’s Local Code of Corporate Governance is reviewed and re-published annually. Compliance with the Local Code is reviewed as part of the Annual Review of Governance arrangements and informs the Annual Governance Statement. The Committee considered and approved the updated Local Code at its meeting on 26 March 2024. 4 27
Page 28
3.4. The Council’s cross-service Good Governance Group undertakes an annual review of the Council’s governance arrangements through a programme of peer reviews and evaluations to share learning, best practice and ensure consistency in approach (where relevant) across Resources. At the end of the review period, an evaluation of the governance process is completed, and arrangements revised (where relevant) in preparation for the next review. 3.5. Based on good practice highlighted by CIPFA in relation to the publication of Annual Governance Statements, a Good Governance page which provides links to relevant reports and documents is available on the Council’s website. 3.6. The purpose of this report is to provide the Committee with the Annual Governance Statement which is due to be included within the Council’s 2023/2024 Annual Report and Statement of Accounts and an update on progress against the actions highlighted as significant governance areas in the 2022/2023 Annual Governance Statement. 4. Annual Governance Statement 2023/2024 4.1. The Annual Governance Statement for 2023/2024 is attached at Appendix 2. Information on the COVID-19 pandemic governance arrangements remain within Section 5 of the statement for this year but will be removed for next year. As before, this section details the impact the pandemic had on the Council’s governance arrangements and gives examples of the alternative ways of working which have now been embedded and become ‘business as usual’, having originally been introduced to assist service delivery as Council services recovered from the pandemic. This also reflects advice previously given by CIPFA which is set out at 4.2 below. 4.2. The CIPFA guidance which was provided via a webinar that took place in February 2021 set out the impacts on governance arrangements which were to be considered when drafting the 2020/2021 statement. This is kept under review each year, and where relevant other factors are taken into account in the drafting of the Annual Governance Statement 4.3. The internal assurance opinions which are also set out in Section 6 of the Governance Statement are as follows:- It is the opinion of the Council’s Audit and Compliance Manager that, overall, reasonable assurance can be placed on the adequacy and effectiveness of the Council’s framework of governance, risk management and control arrangements for the year ending 31 March 2024. It is the opinion of the Council’s Risk Management Service that a good level of assurance can be placed on the Council’s strategic risk control environment and a good level of assurance can be placed on the Council’s operational risk control environment. 4.4. Section 7 of the Annual Governance Statement highlights “Significant Governance Areas” which were identified through the Horizon Scanning process and the Director’s Statements of Assurance and the key actions that are being taken to address these during 2024/2025. The Committee is asked to consider the areas detailed in the summary below. Comments have been added to show where this is new or has been carried forward from the previous statement:- 28
Page 29
Significant Governance Areas identified in 2023/2024 Comments Cyber resilience Compliance with legislative and regulatory policy Carried forward from 2022/2023 Digital Modernisation Deliver the implementation of new digital solutions that will support the wider transformation of the Council, including the more efficient and effective delivery of internal and external services. New Financial Challenges Reduction in Council funding, resulting in difficulties maintaining front line services and taking forward new initiatives. Carried forward from 2022/2023 Homelessness The Council has seen unprecedented need and demand for statutory homelessness services including the need for temporary accommodation. Presentations levels during 2023/2024 are the highest in the Council since records began, placing significant pressure on the service and the general services fund. New Integration Joint Board – Health and Social Care The need for the Council to deliver the objectives set out in the Integrated Joint Board (IJB) Strategic Commissioning Plan 2022-25 Carried forward from 2022/2023 Sustainable Development and Climate Change Deliver the Sustainable Development and Climate Change Strategy Carried forward from 2022/2023 Economic Recovery and Renewal Deliver the Economic, ‘Response, Recovery and Renewal’ Strategy Carried forward from 2022/2023 South Lanarkshire Leisure and Culture (SLLC) Work in partnership with SLLC to develop relationship, in particular around commissioning, use of assets and financial sustainability. New Recruitment and Retention Challenges Carried forward from 2022/2023 29
Page 30
4.5. The Committee is asked to note that the content of the Annual Governance Statement is subject to scrutiny by the External Auditor and, therefore, may change after approval by the Corporate Management Team and the Risk and Audit Scrutiny Committee. However, the final Governance Statement will be re-submitted for approval with the final Annual Accounts. 5. Significant Governance Areas 5.1. Progress on the significant governance areas highlighted within the Annual Governance Statement 2022/2023 is attached at Appendix 3. 6. Next Steps 6.1. The Governance Team will review and update the Council’s Local Code of Corporate Governance with the changes highlighted from the annual review of governance arrangements and report this to the CMT and the Risk and Audit Scrutiny Committee. 6.3. The Good Governance Group will evaluate the governance review process and refine this in preparation for the 2023/2024 annual review of governance arrangements. 7. Employee Implications 7.1. Officers will continue to attend the Good Governance Group and will commit time to review and monitor governance and assurance arrangements. 7.2. Officers will be assigned to lead on areas identified as improvement areas. 8. Financial Implications 8.1. There are no financial implications directly associated with this report. 9. Climate Change, Sustainability and Environmental Implications 9.1 There are no significant implications for climate change or sustainability in terms of the information contained in this report. 10. Other Implications 10.1. The Annual Governance Statement will be subject to review by Audit Scotland as part of their consideration of the Council’s Annual Report. 10.2. There are no significant issues in terms of risk associated with this report. 11. Equality Impact Assessment and Consultation Arrangements 11.1. All Resources, through senior officers, participate in the progress, monitoring and review of governance arrangements and the preparation of the Annual Governance Statement. 11.2. 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. Jackie Taylor Executive Director (Finance and Corporate Resources) 7 June 2024 30
Page 31
Link(s) to Council Values/Priorities/Outcomes Values Focused on people and their needs Working with and respecting others Accountable, effective, efficient and transparent Ambitious, self-aware and improving Fair, open and sustainable Excellent employer Priorities We will work to put people first and reduce inequality We will work towards a sustainable future in sustainable places We will work to recover, progress and improve Outcomes Our children and young people thrive Good quality, suitable and sustainable places to live Thriving business, fair jobs and vibrant town centres Caring, connected, sustainable communities People live the healthiest lives possible Inspiring learners, transforming learning, strengthening partnerships Previous References Risk and Audit Scrutiny Committee - Annual Governance Statement 2022/2023 and Quarter 4 Progress Report –27 June 2023 Risk and Audit Scrutiny Committee – Good Governance Update – 26 March 2024 List of Background Papers None Contacts for Further Information If you would like further information, please contact:- Iain Strachan, Head of Administration and Legal Services Ext: 4516 (Tel: 01698 454516) Email:- iain.strachan@southlanarkshire.gov.uk 31
Page 32
32
Page 33
Annual Accounts 2024 (1) Good Governance Resource Self-Assessment Draft Statement Final Governance Statement Risk and Audit Scrutiny Committee (RASC) Corporate Management Team (CMT) (11) Group Assurances (8) External Reviews/ Regulation and Inspection Reports (7) Risk Register Monitoring/Reporting (6) Sample checks on Director’s Self-Assessment (4) Complaints/ Comments/ SPSO feedback (3) Executive Directors’ Statement of Assurance (2) Internal Audit Reports/Annual Assurance Report (17) ALEO Good Governance Self-Assessment and Statement of Assurance (16) Information Governance Self- Assessment and Statement of Assurance (15) Community Planning Partnership – Community Plan Progress Report (14) Connect, Resource and Service Plan Progress Reports (other performance reports) (13) Benchmarking Results (12) Performance, Review and Scrutiny Forum Reporting (18) Equality Duty Reporting Reporting Schedule: RASC – 25 June 2024 (19) Self-Assessment Activity (10) Governance Improvement Plan (9) External Audit Reports (20) Annual Report and Public Performance Reports Good Governance Group Minutes (5) Assessment of compliance with the Local Code of Corporate Governance Appendix 1 4 33
Page 34
34
Page 35
Appendix 2 South Lanarkshire Council Annual Governance Statement 2023/2024 1. Scope of responsibility The residents of South Lanarkshire expect the Council to conduct its business in a lawful and transparent way. In particular, the Council has a duty to safeguard public money and account for it; and to continuously review and improve how its functions are discharged, focussing on the priorities of economy, efficiency, and effectiveness. The Council is responsible for putting in place proper arrangements for the governance of its activities, facilitating the effective exercise of its functions including clear arrangements for the management of risk. A Local Code of Corporate Governance (referred to as the “Code” from here on) has been approved and adopted. The Code is reviewed and updated annually and is consistent with the seven core principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) framework entitled ‘Delivering Good Governance in Local Government’. This statement explains how the Council has complied with the Code during 2023/2024 and meets legislative requirements to include the Annual Governance Statement within the Annual Accounts. It also sets out the significant changes to the Council’s governance arrangements as a result of the global health pandemic (referred to as the “Pandemic” from here on). 2. The purpose of the council The Council Plan 2022-27 sets out the Council’s vision, values and objectives and what difference this will make to the residents and communities of South Lanarkshire. The Council Plan which was informed by the views of South Lanarkshire residents and information from many other sources including local community plans, face to face discussions, online feedback, feedback from Community Groups, Community events and surveys was approved by Council in June 2022. The Council is also a statutory Community Planning Partner and the Community Plan 2022-32 provides a common vision for the South Lanarkshire Community Planning Partnership and sets out how the partners aim to achieve that vision. The Council has set the framework for strong corporate governance by having a clear vision and values which are outlined below: - Our vision is to improve the lives and prospects of everyone in South Lanarkshire. Our priorities are: • People – we will work to put people first and reduce inequality. • Progress - we will work to recover, progress and improve. • Planet – we will work towards a sustainable future in sustainable places. Our outcomes will be: • Communities and environment - Caring, connected, sustainable communities. 4 35
Page 36
• Education and learning - Inspiring learners, transforming learning, strengthening partnerships. • Health and wellbeing - People live the healthiest lives possible. • Children and young people - Our children and young people thrive. • Housing and land - Good quality, suitable and sustainable places to live. • Our economy - Thriving business, fair jobs and vibrant town centres. Our values are: • Focused on people and their needs • Working with and respecting others • Accountable, effective, efficient and transparent • Ambitious, self-aware and improving • Fair, open and sustainable • Excellent employer 3. The purpose of the Council’s governance framework The governance framework comprises of the culture, values, systems, and processes by which the council is directed and controlled. It describes the way the Council is accountable to communities. It enables the Council to monitor the achievement of its strategic objectives and consider whether these objectives have led to the delivery of appropriate and cost-effective services. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It is based on an ongoing process designed to identify and prioritise the risks to the achievement of the council’s aims and objectives by evaluating the likelihood and potential impact of those risks being realised. This enables the Council to manage risk efficiently, effectively, and economically. The governance framework has been in place at South Lanarkshire Council for the year ended 31 March 2024 and up to the date of approval of the Annual Report and Accounts. 4. How the Council monitors and evaluates the effectiveness of its governance arrangements? The Council annually reviews the effectiveness of its governance arrangements. The key sources of assurance that inform this review and underpin the statements made within this document are shown in the diagram below. 36
Page 37
2023/24 Annual Governance Statement Assurance Framework Annual Accounts 2024 (1) Good Governance Resource Self-Assessment Draft Statement Final Governance Statement Risk and Audit Scrutiny Committee (RASC) Corporate Management Team (CMT) (11) Group Assurances (8) External Reviews/ Regulation and Inspection Reports (7) Risk Register Monitoring/Reporting (6) Sample checks on Director’s Self-Assessment (4) Complaints/ Comments/ SPSO feedback (3) Executive Directors’ Statement of Assurance (2) Internal Audit Reports/Annual Assurance Report (17) ALEO Good Governance Self-Assessment and Statement of Assurance (16) Information Governance Self-Assessment and Statement of Assurance (15) Community Planning Partnership – Community Plan Progress Report (14) Connect, Resource and Service Plan Progress Reports (other performance reports) (13) Benchmarking Results (12) Performance, Review and Scrutiny Forum Reporting (18) Equality Duty Reporting Reporting Schedule: (19) Self-Assessment Activity (10) Governance Improvement Plan (9) External Audit Reports (20) Annual Report and Public Performance Reports Good Governance Group Minutes (5) Assessment of compliance with the Local Code of Corporate Governance 37
Page 38
5. Key elements of the Council’s governance assurance framework The council aims to achieve good standards of governance by adhering to the seven national principles below, which form the basis of the Council’s Code. These principles are used each year to evaluate governance arrangements and identify areas for improvement. The following table demonstrates how the council has complied with these principles and provides assurance as to how they are met. Significant elements of the systems and processes that comprise the council’s governance arrangements and important changes/ developments are described. Links to the key Council documents referred to below can be found in Section 2 of the Code. The impact of the Pandemic has been included and additional commentary can 38
Page 39
be found at the end of this section. Commentary on the council’s level of compliance with the CIPFA Financial Management Code can also be found at the end of this section. Principle A: Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law Links to Council’s values: • Accountable, effective, efficient, and transparent; Working with and respecting others How we do this: • The Council’s values and objectives provide clear direction to councillors and employees and are embedded in all policies and processes. • Standards of conduct and integrity were promoted through the national Code of Conduct for Councillors and by the Standards and Procedures Advisory Forum. This is supplemented by role profiles which have a core accountability to maintain the highest standards of conduct. • The employee Code of Conduct outlines standards of conduct and integrity. All breaches including reported cases of suspected unethical behaviour and non-compliance with the law/policy were investigated through the employee disciplinary process and the recommended actions taken. • Professional Codes of Conduct ensured that ethical standards were maintained, and all breaches were investigated by the governing body. • To support integrity in decision making, the Council has a number of Committee procedural documents including decision making protocols known as the Scheme of Delegation, terms of reference documents, standing orders on procedures and contracts and financial regulations. • To ensure openness and transparency agendas and Committee reports are published to the council website at least five working days ahead of the scheduled meeting dates and any minutes of decisions taken by the Chief Executive during any period when committee meetings are suspended are publicised on the Council website. Committee meetings are live streamed to the Council’s YouTube channel. • To ensure openness and transparency in decision making processes, all declarations of interest made by councillors at meetings were recorded and made available online. • There are a range of policies such as the Counter Fraud, Bribery and Corruption Policy Statement and Strategy, Fraud Response Plan, Whistleblowing for Third Parties and Confidential Reporting procedures. These continue to be updated to reflect best practice and support a culture of ethical behaviour amongst employees and councillors. • Health and Safety compliance during 2023/2024 was assessed as being within the top rating band of “good”. • Legal Services maintained an overview of legislation and regulations and worked with services to ensure compliance. Principle B: Ensuring openness and comprehensive stakeholder engagement Links to Council’s values: Accountable, effective, efficient, and transparent; Fair, open, and sustainable; Focused on people and their needs; Working with and respecting others How we do this: • To ensure transparency and openness in decision making processes, all agendas, reports, and decisions were published on the Council’s website and printed copies were available for public inspection for all Committee and Forum meetings (except the Standards and Procedures Advisory Forum). From April 2021 all Committee meetings were live streamed 39
Page 40
to the Council’s YouTube channel http://bit.ly/SL_Committees. From August 2021 all Forum meetings have been live streamed. • The Committee Management Information System allows members of the public to register and be notified when Committee and forum papers are published. The system also facilitates the creation of online petitions to increase the potential reach of signatories. • The work of the Council and key information from our partners is communicated regularly using a range of communication channels. The South Lanarkshire View pages on the Council website provide a dedicated source of local information and news for communities. A variety of social media channels are used to communicate updates and share information. • A ‘Let’s Talk South Lanarkshire’ campaign has been established and was used to engage local people in an initial discussion about their experiences of the pandemic and continues to be used for ongoing dialogue with communities on both the Council and community planning priorities. • The Council’s Community Engagement Team continue their work to increase stakeholder engagement and involvement in decision making processes through the continued development of new Community Planning Partnership Neighbourhood Plans which are aimed at improving outcomes and reducing inequalities. • The Community Planning Partnership published its first Community Participation and Engagement Strategy 2020 to 2025 which is also available online in BSL and the Council has produced an online course for employees to complement this. • A partnership Participation and Engagement Group has been established to ensure that there is a consistent and co-ordinated approach to engaging with communities. • The Council carried out circa 50 surveys and engagement activities with residents, employees, and partners, and through the council’s Citizens Panel to inform policy and service delivery. Further information on our surveys is published on the Council’s website. • To ensure inclusivity and help shape service delivery, the Council co-ordinates regular engagement with targeted groups of people such as young people, older people, people with disabilities, unpaid carers, black and ethnic minorities, etc. Groups considered items such as the budget consultation, rent setting and performance reporting. • The Participation Requests and Community Asset Transfer processes support communities to engage with the Council to improve local outcomes. • The Council’s performance Spotlights summarise what the Council has achieved and the Public Performance Reports provide a comprehensive overview of service performance. These, along with the council’s Benchmarking report demonstrate the Council’s commitment to continuous improvement and achieving Best Value; summarise the progress that the council has made in meeting its priorities and how it is performing locally and nationally. • The Council’s Digital Strategy 2022 to 2027 sets out the overall approach to digital for the Council. A key objective within the strategy is to assist those people who are unable to get online to access services digitally. The Council also leads on the Digital Inclusion Sub Group, which reports into the Community Planning Partnership. • A comprehensive range of information on how the Council operates is available on the website. The Freedom of Information Publication Scheme ensures that key information about how the council works is accessible to the public. Principle C: Defining outcomes in terms of sustainable, economic, social, and environmental benefits Links to Council’s values: Accountable, effective, efficient, and transparent; Fair, open, and sustainable; Focused on people and their needs How we do this: 40
Page 41
• The Council has a Capital Strategy that has a long-term ambition on future capital investment (up to 2027/2028) and a capital programme agreed for 2024/25. This document is underpinned by a suite of Asset Management Plans which are aligned with the council’s objectives and focus on creating an efficient, fit-for-purpose and sustainable core estate that delivers best value in terms of investment, running costs and environmental impact. • The Council Plan 2022 to 2027 and Community Plan 2022 to 2032 have clearly defined economic, social, and environmental outcomes to be delivered during the period. • A Community Wealth Building Strategy setting out the Council’s ambitions in relation to spending, workforce, land and property, finance and building the generative economy was approved in March 2021. A Community Wealth Building Commission was established to oversee the implementation of the Strategy, with the Commission receiving an annual report on progress. A Community Wealth Building Progress Group has been set up to ensure that timescales within the action plan are met. • The CWB Strategy is supported by an action plan which is reviewed annually, with progress reported to the Commission at Q2 and Q4 via the council’s Improve system. • Annual Resource Plans which deliver the objectives of the Council Plan were reviewed and updated. These plans outline the outcomes and actions to be achieved within the year and reference linkages with other key strategic plans of the Council and partnership plans. • The Sustainable Development and Climate Change Strategy 2022-27 was approved by the Council in June 2022 and which sets out the Council’s strategic vision ,themes and priorities in terms of the Council, environment and communities for sustainable development and climate change during the period was developed using the principles of the United Nation’s Sustainable Development Goals and to reduce the council’s contribution to global warming. • The Council’s Climate Change and Sustainability Committee oversees the delivery of the Sustainable Development and Climate Change Strategy 2022-2027,the Council’s transition to carbon neutrality and climate resilience. • The Council’s Procurement Strategy 2023-28 which is complemented by an annual action plan, sets out how value for money, national and local priorities will be delivered. It also demonstrates how the Council will deliver the wider social, economic, and environmental aims of procurement as required by the sustainable procurement duty. • Sustainability principles are embedded in procurement processes and in recognition of the importance of our suppliers in achieving the Council’s aim to become more sustainable. • Strategic Environmental Assessments (SEAs) were completed for all relevant Council led policies, plans and strategies developed during 2023/2024. • The South Lanarkshire Local Development Plan 2 was adopted by the Council on 9 April 2021. The spatial strategy of the plan is to encourage sustainable economic growth and regeneration, a move towards a low carbon economy, protect the natural and historic environment and mitigate against the impacts of climate change. • A summary of the findings resulting from Equality Impact Assessments of the Council’s key decisions on service users, communities and businesses have been published on the Council’s website. • Strategic decisions of the Council have been subject to a Fairer Scotland Impact Assessment which considers how inequalities of outcome can be reduced. Principle D: Determining the interventions necessary to optimise the achievement of the intended outcomes Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Focused on people and their needs; Working with and respecting others How we do this: • . • There has been a programme of transformational reviews undertaken over recent years to identify savings and help manage balancing the Councils budget. This programme is 41
Page 42
overseen by the Senior Management Team. Frameworks are in place for holding discussions with key stakeholders. Savings achievements are monitored monthly and reported to the Senior Management Team quarterly. • The Financial Strategy which is aligned with the Council’s objectives was updated during the year to reflect the latest internal and external influences. This plan sets out the assumptions in terms of commitments, grant funding and efficiency requirement and demonstrates sound financial management and the ability to address projected funding gaps. • The annual budget setting consultations took place with members of the public, groups and the Council’s partners in order to inform the budget process. The annual budget is open to scrutiny and amendment by councillors until the approval of the final budget. • The Council’s Performance Management Framework has ensured that progress against intended outcomes has been regularly reported to Management Teams; Committees; and the Performance and Review Scrutiny Forum. Decisions and actions to address performance issues have been taken and monitored to ensure that they have been effective. • The Council has complied with its statutory and regulatory reporting requirements during the year. • The Public Bodies (Joint Working) (Scotland) Act 2014 sets out those Adult Care Services that are delegated to the Integration Joint Board (IJB) as set out in the South Lanarkshire Health & Social Care Integration Scheme. These services continue to be operationally delivered by the Council in line with the strategic direction set out in the Strategic Commissioning Plan and IJB Directions. • The Council considers the specification and achievement of community benefits, which focus on the health, economic, social, and environmental wellbeing of the South Lanarkshire area, when awarding contracts. • To improve efficiency and effectiveness, the Council is the lead authority for a range of collaborative projects and services delivered through the Clyde Valley Learning and Development Group. We also work closely with, and share services with partners including SLLC, IJB and Seemis. Principle E: Developing the entity’s capacity, including the capability of its leadership and the individuals within it Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Excellent employer; Focused on people and their needs; Working with and respecting others How we do this: • A Leadership Challenge Programme which is linked to succession planning was rolled out during 2023-24, and this is continuing. • Learning and Development programmes were revised and employees at all levels can now access optional accredited management qualifications. • Training requirements were identified and online learning and development opportunities including webinars and e-briefings were developed and offered to all councillors. • Feedback from 2022 survey on working from home/hybrid working is used to inform agile working arrangements. • A range of policies and activities are in place to support the Health and Wellbeing of employees including physical and mental health and these have been regularly communicated. Online wellbeing events were held in response to the new ways of working. • The Council recognises that skilled and motivated employees are a key asset. All employees have an annual performance appraisal which links to the Council values and a Personal Development Plan. The council offers a range of training interventions to support employee development. 42
Page 43
• The Council has a comprehensive and coordinated approach to workforce planning which also supports succession planning. Each Resource reviews their workforce plan and related action plan to better understand workforce capacity issues, further challenges, and opportunities to ensure that resources are in the right place, at the right time and people have the right skills. The Council-wide Workforce plan has been revised to consider the workforce requirements as a result of the pandemic response. • Senior Managers have overseen the annual scrutiny of the Council’s assets through the review of a suite of Asset Management Plans. Service Asset Management Plans have been developed in line with CIPFA guidance and these feed into the Corporate Asset Management Plan which outlines priorities and provides an overview of how the Council has performed in this area. • The Council’s Scheme of Delegation, Financial Regulations, Standing Orders on Contracts and Terms of Reference ensured that Committees, officers, and statutory officers were clear on the decisions that could be made within their area of authority. This is supplemented by councillor’s role profiles which outline the key purpose, specific and core accountabilities for each role. • The Council continues to work with a range of public sector, business, and academic partners to improve outcomes for those living and working in South Lanarkshire. Strategic Partnerships include the Community Planning Partnership and the Glasgow City Region City Deal. • Local Government Benchmarking Framework (LGBF) results continue to be reported to the Performance Review and Scrutiny Forum, containing all LGBF indicators. As other reporting arrangements mature, the scale of this report may be reduced and the strategic suite of indicators aligned to Council Plan outcomes are featured in an appendix to the Council Plan Q4 report, giving an opportunity to assess the Council’s performance over time and comparative performance in the context of the Council Plan priorities. • Further LGBF indicators will feature in the Council’s public performance reporting, both in the Annual Performance Spotlights and in the PPR pages on the website. These are topic- based and place the LGBF information in a richer context than is possible in the annual LGBF report. The results are analysed and an action plan developed which will be monitored by the Senior Management Team. • To complement this work, an LGBF dashboard has been developed to provide easy access to the LGBF indicators and the narrative that sits alongside them. The dashboard shows time trends for each of the strategic indicators aligned with the council plan outcomes and provides charts comparing SLC performance with both the Scottish and the family group average. • The Council takes a risk-based approach to self-assessment which is used to review and redesign services with a focus on fundamental change. Progress and the impact of improvement activity was reported to the Senior Management Team and the Performance and Review Scrutiny Forum. • The Council has a robust complaints process which is underpinned by national complaints handling standards. Complaints performance was regularly reported to Senior Management and Committee and learning from complaints which is integral to this process is also published on the Council’s website. Complaint handling procedures have been updated in line with national changes and communicated to all employees. Principle F: Managing risks and performance through robust internal control and strong public financial management Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving How we do this: 43
Page 44
• The Council, in partnership with Trade Unions, ensured that safe systems of work were in place through a robust risk assessment process, changes to working methods and supply of personal protective equipment. • The Council has put in place comprehensive arrangements for identifying, evaluating, and controlling significant risks which threaten the council’s ability to meet its objectives to deliver services to the public. There is also a robust process in place for compliance monitoring of the Council’s Risk Management Strategy, Resource Risk Registers and Control Plans. • The annual end of year compliance statement evidenced that all Resources were compliant with Risk Management Strategic requirements. • The Council’s risk scoring matrix was revised as an outcome of the 2021/2022 annual review of risks. • The Council’s Internal Audit Service which complies with Public Sector Internal Audit Standards completed an annual programme of risk-based audits with an objective of providing an opinion on the adequacy and effectiveness of the Council’s risk management, governance, and internal control arrangements. Where improvements were required, action plans were developed and monitored and where necessary follow-up audit work completed. • In response to changes in working practices and the introduction of new systems, Internal Audit has advised on key internal controls that should be maintained. • The Information Governance Board is reasonably satisfied that Resources have followed the Information Governance operational arrangements to promote effective arrangements for the safe collection, storage, use and sharing of data, including processes to safeguard personal data, but this will be the subject of further work in 2024/25. • Information security incidents have continued to be monitored and considered for notification to the Information Commissioner’s Office. Throughout the period, the Council’s Data Protection Officer provided advice and assistance to Resources in relation to meeting their obligations under UK General Data Protection Regulations (GDPR). • The system of internal financial control is based upon the Financial Regulations which set out the rules to ensure robust internal control over the council’s finances. Control is maintained through regular management information, management supervision and a structure of delegation and accountability. • External Audit of the Council’s accounts is robust and a “clean audit certificate” was issued for 2022/2023. • Through a well-established Performance Management Framework, the Council has clearly defined processes in place for the identification, monitoring, and reporting of its objectives to ensure continued effectiveness and the achievement of Best Value. Progress is monitored and reported regularly to both managers and councillors. This includes areas of under-performance and the related improvement actions. • Trustees of the South Lanarkshire Charitable and Educational Trusts received independent legal training setting out their duties and responsibilities in ensuring that the trusts operate in a manner designed to benefit communities. • The Executive Director of Finance and Corporate Resources is a member of the Council’s Senior Management Team and as such, is integral in all major decisions taken by the Council, and in material matters which are submitted to councillors for decision. This involvement fulfils the expectation of CIPFA in terms of the role of the Chief Financial Officer. • The Council previously completed a self-assessment using the principles of the CIPFA Financial Management Code. Our existing financial management controls and measures continue to provide comfort on the Council’s financial management and resilience. This includes the preparation of a medium term strategy presented to members regularly as part of the annual budget process, providing members with the information required to assist budget planning. Principle G: Fair, Open and Sustainable; Implementing good practices in transparency, reporting, and audit to deliver effective accountability 44
Page 45
Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Working with and respecting others How we do this: • The Good Governance Group has completed the annual review of governance arrangements at resource level and in line with the CIPFA/SOLACE Delivering Good Governance Framework. Governance improvement actions have also been identified and are included in Resource/Service Action Plans. Progress against actions including those highlighted as significant governance areas for action will be reported to the Senior Management Team and Committee. • In the 2022/2023 annual audit report, the external auditor reported that the Council had in place appropriate arrangements to support good governance and accountability and they were of the view that governance arrangements remained effective in 2022/23. • All Directors completed their annual Statement of Assurance and relevant assurances have been provided. • The Council prepares and publishes an Annual Governance Statement which is aligned with national guidance and reflects on the adequacy and effectiveness of the Council’s governance arrangements. This is independently considered by External Audit and published with the Annual Accounts and separately on a dedicated governance web page. • The annual review of governance arrangements for the Council’s at Arm’s Length External Organisations (ALEOs) and key external service providers has not highlighted any compliance issues. • The annual review of the Local Code of Corporate Governance was completed, and the revised Code was approved by Committee in March 2024 and re-published on the Council’s website. • all agendas, reports and decisions continue to be published (except those exempt under the Local Government (Scotland) Act 1973) on the Council’s website. All Committee and Forum meetings are livestreamed to the Council’s YouTube page http://bit.ly/SL_Committees. • The Risk and Audit Scrutiny Committee considered the adequacy and effectiveness of the Council’s governance arrangements and internal control environment and approved the Annual Governance Statement and Accounts. • Internal audit activity has continued to be reported to the Senior Management Team and to the Risk and Audit Scrutiny Committee. • Outcomes from external audit and inspection activity was reported to the appropriate Committee and action plans were developed for implementation where required. COVID-19 Pandemic Governance Arrangements The 2019/2020 Governance Statement set out the initial impacts of the Pandemic on the council’s governance arrangements. Since then, the Council, its partners and local community organisations have continued to strengthen the partnership approach adopted in response to the Pandemic, and the Council continues to manage any remaining impacts of the Pandemic through robust resilience arrangements and controls. As the Council moved through the different phases of response and recovery, changes to governance arrangements were made to comply with national guidance and legislation. In some cases new ways of working which were implemented to continue to maintain the delivery of essential business of the Council during the Pandemic have become embedded and now represent a ‘business as usual’ approach. Priority services were maintained throughout the Pandemic and many new services/processes established. Schools, nurseries, and the like adapted in accordance with national decisions and guidance. 45
Page 46
The Council and the Community Planning Partnership reviewed their priorities which were informed by ongoing dialogue with local communities, organisations, and businesses. Recovery was previously a significant area of work for the council and its partners and was highlighted as such in Section 7 of the 2021-2022 Annual Governance Statement. Given the above, and the passage of time since the Pandemic was at its height, it is anticipated that this is the last year this update will be provided in the Annual Governance Statement. This will, however, be kept under review by the Council. CIPFA Financial Management Code The Financial Management Code (FM Code) provides guidance for good and sustainable financial management in local authorities. By complying with the principles and standards within the code authorities will be able to demonstrate their financial sustainability. The following information sets out the Council’s level of compliance with the FM Code. The Council has reviewed the principles of the FM Code as part of its internal governance process. The Council previously completed a self-assessment using the principles of the CIPFA Financial Management Code identifying areas to be progressed. Since then, budget consultation approach and a standard options appraisal process continue to be embedded across the Council, while our existing financial management controls and measures continue to provide comfort on the Council’s financial management and resilience. 6. Review of Effectiveness The review of governance arrangements for 2023/2024 has also considered the following assurance outcomes: - 46
Page 47
Group Assurances In respect of the Joint Boards, Charities and Companies that fall within the Council’s group boundary, the review of their internal financial control systems is informed by: - • Annual Governance Statements included in the respective financial statements of the Joint Boards. • Assurances from company directors and/or other senior company officials; and • The work of the relevant body’s respective external auditors (and where relevant internal auditors) and other interim reports. The Executive Director of Finance and Corporate Resources, the Council’s Chief Financial Officer, has considered the effectiveness of the group’s internal financial control system for the year ended 31 March 2024. It is the Executive Director of Finance and Corporate Resources’ opinion that reasonable assurance can be placed on its effectiveness. Internal Assurance It is the opinion of the Council’s Risk Management Service that a reasonable level of assurance can be placed on the Council’s strategic risk control environment and a reasonable level of assurance can be placed on the council’s operational risk control environment. It is the opinion of the Council’s Audit and Compliance Manager that, overall, reasonable assurance can be placed on the adequacy and effectiveness of the council’s framework of governance, risk management and control arrangements for the year ending 31 March 2024. 7. Significant Governance Areas The 2022/2023 Annual Governance Statement identified 10 significant governance areas that the Council were working to address. Progress updates can be found on the Council’s website; see the Significant Governance Areas Update Q4 2022/2023. Six of these areas remain as significant areas of action for the Council moving forward into 2024/2025 and will continue to be monitored as such. Through the 2023/2024 annual governance review, the following areas, which include an outline of the actions being taken to address them, have been identified as significant areas of work for the Council during 2024/2025:- No. Areas identified in 2023/2024 Actions Lead Officer 1 Cyber Resilience Compliance with legislative and regulatory policy A programme of actions to maintain cyber security and resilience in 2024/2025 will include: • Refresh/retiral of legacy systems, network equipment and end user devices (mobile phones, PCs) • Programme of security patching of all systems • Compliance with PSN and Cyber Essentials schemes • Incident response • Officer training and awareness (e.g., phishing) Executive Director of Finance and Corporate Resources 47
Page 48
No. Areas identified in 2023/2024 Actions Lead Officer • Data security reviews as part of new system installation and security monitoring 2 Digital Modernisation Deliver the implementation of new digital solutions that will support the wider transformation of the Council, including the more efficient and effective delivery of services, to internal and external service users. This will include the implementation of Oracle Fusion (Finance & Corporate Resources), Liquidlogic (Social Work) and HOME (Housing & Technical Resources). Executive Director of Finance and Corporate Resources 3 Financial Challenges Exceptional increase in costs, reduction in council funding, resulting in difficulties maintaining front line services The Council faces a challenging situation in the medium to long-term because of reduced funding in real terms, rising costs and an increase in demand. The Council has developed a long-term strategy which identifies budget pressures, future risks and uncertainties, and projects budget gaps to 2027/2028. The Budget Strategy for 2025/2026 will be updated and presented to councillors in 2024. Chief Executive Director of Finance and Corporate Resources 4 Integration Joint Board – Health and Social Care The need for the Council to deliver the objectives set out in the Integrated Joint Board (IJB) Strategic Commissioning Plan 2022-25 The current strategic direction set out and approved by the IJB is detailed within the Strategic Commissioning Plan. The council and NHS Board are required to deploy their resources in line with this strategic direction. The IJB issues Directions that set out the key actions to be delivered by the Council. This includes directions in respect of the actions required in order for the IJB to deliver the balanced budget agreed at its meeting in March 2024. The IJB monitors progress in respect of these Directions. Director, Health and Social Care, South Lanarkshire Health, and Social Care Partnership 5 Homelessness The Council has seen unprecedented need and demand for statutory homelessness services including the need for temporary accommodation. Presentations levels during 2023/24 are the highest in the Council since records Director of Housing & Technical Resources 48
Page 49
No. Areas identified in 2023/2024 Actions Lead Officer began, placing significant pressure on the service and the general services fund. A range of mitigations were approved at H&TR Committee on 7 February 2023 and these are now in place with managing and monitoring actions in place. Temporary accommodation solutions continue to be explored to minimise breaches of the unsuitable accommodation order and costs incurred through the use of B&B. Other implications such as the Prisoner Early Release, increased asylum levels, continued removal of local connection and potentially new duties of ‘Ask & Act’ within the new Housing Bill could have consequences for the service. 6 Sustainable Development and Climate Change A new Strategy for 2022-2027 was developed and presented to Council in June 2022 for approval together with the Council Plan and Community Plan. An Action Plan was developed for the first year of the Strategy, and this . continues to be implemented and reviewed annually with progress updates being reported to the Climate Change and Sustainability Committee on a 6 monthly basis. Following a period of public consultation, the council will introduce its first Local Heat & Energy Efficiency Strategy (LHEES) in June 2024. Subject to the availability of finance and taking account of the need to address inequalities and just transition, the introduction of the LHEES will be a key component of a long-term strategy to reduce of carbon emissions, and reduce fuel poverty by 2045. Director of Community and Enterprise Resources 7 Economic Strategy The new draft Economic Strategy 2022- 2027 has been developed and approved by Council on 15th June 2022 as part of a suite of documents accompanying the draft Council Plan and Community Plan. The vision within the Strategy is “to make Director of Community and Enterprise Resources 49
Page 50
No. Areas identified in 2023/2024 Actions Lead Officer South Lanarkshire a flourishing, green, dynamic and equitable place for communities, visitors, businesses and investors”. The Strategy is framed around the 3 themes of sustainable, inclusive, economic development- People, Place and Business. Progress on the delivery of the Action Plan will be measured 6-monthly with the results being reported annually to the relevant committees. The Council will continue to lead on local economic recovery for South Lanarkshire businesses through promotion of local economic support networks and contribution to the pan-Lanarkshire Economic Forum. The Council will also take forward its plans for the regeneration of Hamilton and East Kilbride, and the delivery of projects through its participation in the Glasgow City Region Deal. 8 South Lanarkshire Leisure and Culture Work in partnership with SLLC to develop relationship, in particular around commissioning, use of assets and financial sustainability. Director of Community and Enterprise Resources 9 Recruitment and Retention Challenges The labour market has tightened and employees have more mobility through agile working which is not necessarily tied to a geographical location. In addition some older workers have reassessed priorities and taken up an option for partial or full retiral earlier than they would have done previously. As a result there are a number of skills in short supply nationally and this is putting pressure on local government services. Examples of this include HGV drivers, procurement and Social Care. The impact on Senior Manager recruitment and retention is also clear Chief Executive and all Directors 50
Page 51
No. Areas identified in 2023/2024 Actions Lead Officer and turnover at this level is closely monitored. South Lanarkshire Council has experienced these issues and is taking the following actions:- • Workforce Plans were refreshed to reflect the changed environment by 30 June 2022. The updated plans were reported to the relevant Resource Committees in September and October 2022 and are being delivered. • A grow your own approach is being used in key areas (recruited graduates in Procurement) and this will continue • Further increasing social media recruitment and use of job fairs • Employability routes will continue to be defined for skills shortage areas (e.g. Social care) • Enhanced employee support arrangements are in place and well developed 8. Summary The annual review of governance arrangements across the Council and overall compliance with the Council’s Code demonstrate sufficient evidence that the Code’s principles of Delivering Good Governance in Local Government operated effectively, and that the Council complies with its Code. During 2024/2025, steps will be taken to address the significant governance areas highlighted in this statement to further strengthen the council’s governance arrangements and evidence our commitment to continuous improvement. Joe Fagan Leader of the Council Signature: Date: Paul Manning Chief Executive 51
Page 52
Signature: Date: 52
Page 53
Appendix 3 Annual Governance Statement 2023/2024 – Significant Governance Areas Quarter 4 update – September/October 2023 to March 2024 Areas identified in 2023/2024 Actions Quarter 4 Progress 1. Cyber Resilience Compliance with legislative and regulatory policy A programme of actions to maintain cyber security and resilience in 2023/2024 will include: • Refresh/retiral of legacy systems, network equipment and end user devices (mobile phones, PCs) • Programme of security patching of all systems • Compliance with PSN and Cyber Essentials schemes • Incident response • Officer training and awareness (e.g., phishing) • Data security reviews as part of new system installation Security monitoring • Refresh programme is ongoing, retiral of legacy systems is monitored and reported on by the IT Security team on a fortnightly basis. • Monthly and Quartey patching are scheduled tasks across the estate. • SLC aligned to PSN and Cyber Essentials Plus standards. • Incident response is reviewed by the IT management team working with the Resilience team. • Ongoing awareness driven by regular campaigns such as Cyber Scotland week and posts to the Intranet. • Security reviews are embedded into the onboarding of new systems. 4 53
Page 54
Areas identified in 2023/2024 Actions Quarter 4 Progress 2. Financial Challenges Exceptional increase in costs, reduction in council funding, resulting in difficulties maintaining front line services. The Council faces a challenging situation in the medium to long-term because of reduced funding in real terms, rising costs and an increase in demand. In addition, there are exceptional increases in costs being experienced resulting in significant budget gaps that will require to be managed. The Council has developed a long-term strategy which identifies budget pressures, future risks and uncertainties, and projects budget gaps to 2028/2029. The Budget Strategy for 2024/2025 was updated and presented to the Executive Committee in June 2023 and a Budget Sounding Board and latterly a Budget Working Group with cross party membership was formed to allow advance preparations for the Council Budget Setting in 2024/2025. Regular updates were provided to Members throughout 2023 and early 2024 and the Budget was set in February 2024. Work has commenced on the 2025/2026 to 2027/2028 Budget Strategy with a report to be presented to the Executive Committee in June 2024. Support for tenants in financial hardship has been identified via Tenancy Sustainment Fund to assist them to pay their rent. The rent setting survey for 2024/2025 took place early in the year, with tenants being given opportunity to attend local focus groups. The output of the consultation fed into the rent setting and budget which was set in February 2024. 54
Page 55
Areas identified in 2023/2024 Actions Quarter 4 Progress 3. Integration Joint Board – Health and Social Care The need for the Council to deliver the objectives set out in the Integration Joint Board (IJB) Strategic Commissioning Plan 2022 to 2025 The current strategic direction set out and approved by the IJB is detailed within the Strategic Commissioning Plan. The council and NHS Board are required to deploy their resources in line with this strategic direction. The IJB issues Directions that set out the key actions to be delivered by the council during the year 2022/2023 and these Directions were agreed by the IJB at it special budget meeting in March 2022. The Council will provide progress updates against Directions for which it is the lead organisation. The IJB adopted the Sustainability and Value Options Appraisal programme in September 2023 to support its delivery of a balanced budget for 2024-2025, in line with its statutory duties. Proposed savings options across health and social care services were presented to the IJB for approval on 26 March 2024. An update was provided on the Integration Scheme Review at the IJB meeting on 26 March 2024. It included proposed changes to the Directions and notification that Scottish Ministers had approved the revised integration scheme approved by South Lanarkshire Council and NHS Lanarkshire. The Annual Performance Report (APR) was published for 2022/2023 providing an overall assessment of performance in relation to the statutory/governance requirements related to performance and progress on the priorities outlined in the Strategic Commissioning Plan 2022 to 2025 (SCP). The APR for 2023-2024 is in progress. A Progress Report on the Internal Audit Plan 2023-2024 was presented to the IJB at a meeting on 20 February 2024. A workplan was agreed to deliver the 2023/2024 Internal Audit Plan by 31 March 2024. The Internal Audit Plan 2024/2025 was submitted at the IJB meeting on 20 February 2024. 55
Page 56
Areas identified in 2023/2024 Actions Quarter 4 Progress 4. Review of Community Planning Provide support to the review of Community Planning arrangements During 2019, the Community Planning Partnership Board undertook a self- assessment of the current Community Planning arrangements. Improvement actions were later supplemented by the recommendations from the Council’s Best Value Assurance Review and a group was set up to take these forwards. The review focuses on several key areas including structures, governance, and accountability arrangements. The council will provide resources to support the implementation of the agreed actions. The proposal was approved by the Community Planning Partnership Board at their meeting in September 2020. This highlighted a two- phase approach to implementation, with interim actions to be delivered during the 2021/2022 year leading to final improvements, particularly around structures, during 2022/2023 in order to ensure that the partnership is fit for purpose to deliver the outcomes within the new Community Plan, which will be created using a co-production model during 2021/2022. Interim structures are in place and the new Community Plan was presented to the CPP Board for approval on 22 June 2022 together with a progress update on structure changes. Further progress updates were made to the CPP Board on 14 September 2022 detailing the changes required to governance structures in order to deliver the plan. Work continues with the partners to progress changes. Following a full review of Community Planning structures and plans, on 22 March 2023 the Community Planning Partnership Board approved a new Thematic Board structure. On 6 September 2023, the Board approved its revised Governance Framework. The final part of the review is to develop a proposal for partnership working at a locality level. Work continues with the Outcomes Leads Group to deliver on this. 56
Page 57
Areas identified in 2023/2024 Actions Quarter 4 Progress 5. Community Wealth Building Deliver the Community Wealth Building Strategy The Community Wealth Building Strategy which was approved in March 2021 will bring fundamental changes to how the Council delivers its services and works with its partners and communities. In August 2021 the Community Wealth Building Commission approved an action plan containing a range of actions to progress the aspirations of the Strategy over a 3-to-5-year timeframe. A risk register has been developed and approved. Risk monitoring arrangements are in place. An annual report highlighting progress over the first year of the Strategy was presented to the Commission on 28 June 2022 for approval. The work building on the CWB Strategy continued throughout 2023-24. The Q4 update on the 2022/2023 Action Plan was approved by the Commission on 6 June 2023. The Action Plan was then given a refresh, following an annual review led by FCR with input from other Resources, which was approved on 5 September 2023. The 72 actions will be progressed throughout the year and will be reported on at Q2 and Q4. In addition, the Commission agreed on 7 February 2022 that CWB annual reports should be produced to bring the work to a wider, public audience. The most recent of these was approved on 5 September 2023. Risk monitoring remains in place and the CWB risk register is presented annually. A review of the Community Wealth Building Risk Register is underway. The outcome of the review will be reported to the CWB Commission later this year. 6. Sustainable Development and Climate Change The Council acknowledges the serious and immediate threat of climate change and is committed to accelerating the pace of action in response to the climate emergency and in Scotland’s transition to a net-zero and climate resilient society and economy. A review of the council’s Sustainable Development and Climate Change Strategy (2017-2022) has commenced and is scheduled to conclude during 2022; and a new Strategy for 2022- 2027 was developed and presented to Council in June 2022 for approval together with the Council Plan and Community Plan. An Action Plan is being developed covering the 5-year period of the Strategy. The Action Plan will be reviewed annually with progress updates being reported to the Climate Change and Sustainability Committee on a 6 monthly basis. The Council’s Sustainable Development and Climate Change (SDCC) Strategy 2022 to 2027 and its accompanying 5-year action plan was developed in 2022. Delivery of the SDCC action plan provides the main focus for SLC’s sustainable development activity. The first year of this action plan was implemented with progress against the actions monitored using IMPROVe and reported to the Climate Change and Sustainability Committee at quarter two (28 February 2024) and quarter four (due for presentation 14 August 2024). The action plan for the second year of the strategy has now been developed and will be presented to the Climate Change and Sustainability Committee on 14 August 2024. As above, progress updates on implementation of 57
Page 58
Areas identified in 2023/2024 Actions Quarter 4 Progress Sustainable Development and Climate Change Cont’d this new plan will be reported to the Climate Change and Sustainability Committee on a 6 monthly basis. Development of full Local Heat and Energy Efficiency Strategies (LHEES) continues. A consultation was undertaken between February – April and a report on progress was presented at the Sustainable Development and Climate Change committee in February 2024. The draft LHEES strategy will be reported to the Corporate Management Team in May. Following this, the Strategy will be reported to the Executive Committee for approval on 26 June 2024. The Council is also committed to raising awareness and empowering young people to become active participants in work around climate change and sustainability. The recent Pupil Climate Conference (COS2 - Conference of Schools) highlights the ongoing commitment to this. The Council now needs to continue to establish sustainability throughout more than just the life and ethos of our schools, but as part of a refreshed curriculum offer, in which learners regularly learn about sustainable issues and share depth of learning with the wider school community. 7. Economic Strategy The new draft Economic Strategy 2022-2027 has been developed and approved by Council on 15 June 2022 as part of a suite of documents accompanying the draft Council Plan and Community Plan. The vision within the Strategy is “to make South Lanarkshire a flourishing, green, dynamic and equitable place for communities, visitors, businesses and investors”. The Strategy is framed around the 3 themes of sustainable, inclusive, economic The annual update on the Economic Strategy was presented to the Community and Enterprise Resources Committee on 23 April 2024. The committee noted the progress in the last year since the strategy was approved by Committee and the updates to the action plan. The initial year of the strategy was used as an opportunity to reassess and reset the benchmark as the economy recovers and the impacts of COVID-19 are addressed. Further update reports will be taken to committee to keep 58
Page 59
Areas identified in 2023/2024 Actions Quarter 4 Progress Economic Strategy Cont’d. development- People, Place and Business. Further online consultation on the Strategy took place during July and August. Progress on the delivery of the Action Plan will be measured 6-monthly with the results being reported annually to the relevant committees. The council will continue to lead on local economic recovery for South Lanarkshire businesses through promotion of local economic support networks and contribution to the pan-Lanarkshire Economic Forum. members informed of progress against the strategy and action plan. 8. Recruitment and Retention Challenges COVID-19 and Brexit have had a substantial impact on recruitment and retention as the labour market has tightened and employees have more mobility through agile working which is not necessarily tied to a geographical location. In addition, some older workers have reassessed priorities and taken up an option for partial or full retiral earlier than they would have done previously. As a result there are a number of skills in short supply nationally and this is putting pressure on local government services. Examples of this include HGV drivers, procurement and Social Care. The impact on Senior Manager recruitment and retention is also clear and turnover at this level is closely monitored South Lanarkshire Council has experienced these issues and is taking the following actions:- • Workforce Plans were refreshed to reflect the changed environment by 30 Recruitment and staff retention has been challenging for Social Work Resources in recent years and workforce availability remains in the top five risks on the Social Work Risk Register. Workforce supply availability is also a notable risk for partners and commissioned services, and this creates an inherent risk for the Resource. The Locality Based Social Work Services’ Modernisation Programme identified the need to update the model of service delivery across localities to meet growing demand on statutory duties relating to assessment and care management, mental health and public protection. Proposed changes to the staffing establishment were approved by Social Work Resources Committee on 28 June 2023 and demonstrated a commitment to the recruitment and retention of the workforce by enhancing career pathways and succession planning for existing staff. Workforce is included in the Education Resources risk register for 2023/2024. The Education Resources workforce plan for 2022 to 2025 was endorsed by the Education Resources Committee on 6 September 2023. 59
Page 60
Areas identified in 2023/2024 Actions Quarter 4 Progress 8. Recruitment and Retention Challenges Cont’d. June 2022. The updated plans were reported to the relevant Resource Committees in September and October 2022. • A grow your own approach is being used in key areas (recruited graduates in Procurement) • Increasing social media recruitment and use of job fairs • Employability routes are being defined for skills shortage areas (e.g. Social care) • Enhanced employee support arrangements are in place but also being reviewed for development In the annual census Education Resources complied with and met the target for teacher numbers in September 2023. However, recruitment in other areas may slow due to the unprecedented financial pressures facing the Council. Community and Enterprise Resources have deployed revised recruitment practices to address challenges, examples include: • rebranding adverts within facilities including information on how to maximise income for those on benefits; • Roadshow to attract candidates for mechanics and drivers; and • Targeted recruitment for planning officers, including trainees and graduate appointments. Within Housing and Technical Resources the Council has redesigned job roles, used targeted recruitment (surveyors). The Modern Apprentice programme within Housing continues to attract high numbers of candidates and is very successful in ‘growing our own’ talent. Within Finance and Corporate there has been changes to criteria for some posts across finance to attract a wider pool of candidates. The Resource continues to utilise employability routes and supports recruitment fairs. 60
Page 61
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Unaudited Annual Accounts 2023/2024 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] advise members of the requirement to consider the unaudited Annual Accounts of the Council and related Charitable Trusts [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that it be noted that the unaudited Annual Accounts of the Council and related Charitable Trust are presented to Members of this Committee for their consideration, and that they will be submitted to Audit Scotland by the deadline of 30 June 2024. 3. Background 3.1. The Local Authority Accounts (Scotland) Regulations 2014 require the unaudited Accounts to be submitted to the External Auditor no later than 30 June. The Regulations also require elected members to consider the unaudited accounts at a meeting to be held no later than 31 August. 3.2. The Council’s Terms of Reference deems that the Risk and Audit Scrutiny Committee will formally consider the unaudited Accounts prior to submitting them to the External Auditor and making them available for public inspection. 3.3. This report provides the Council’s unaudited Accounts for Members’ consideration, (Section 4), as well as the related Charitable Accounts (Section 5). 4. Unaudited Accounts – South Lanarkshire Council 4.1. The Council’s unaudited Accounts for 2023/2024 are a statutory document which detail key information on the Council’s expenditure and income for the financial year ended 31 March each year. The Annual Accounts show a number of statements including a Comprehensive Income and Expenditure Statement, Balance Sheet, Movement in Reserves, Cash Flow and supplementary notes. They will also include the Annual Statement of Governance which is presented separately to this Committee. 4.2. The Council’s unaudited Accounts 2024 are included as Appendix 1 to this report for consideration. It is noted that the Accounts also contain the Council’s Group Account position. 4.3. These unaudited Accounts will be available for public inspection between 1 July 2024 and 22 July 2024, as prescribed by the Local Authority Accounts (Scotland) 5 61
Page 62
Regulations 2014. They will be available on the Council’s website and can also be provided to any member of the public upon request. Arrangements will be made to provide any information requested as part of this public consultation. The unaudited Accounts will be on the Council’s website from 1 July 2024 until the date the audited Accounts are published. 4.4. Following the audit of the Accounts across the summer months, the audited Annual Accounts will be brought back to this Committee. The scheduled date for the Committee to approve the audited Accounts is 24 September 2024. 4.5. A copy of the unaudited Accounts will be circulated to all elected members for information following submission of the Accounts to the External Auditor by 30 June 2024. 4.6. Restatement of Monitoring Figures Reported: The CIPFA Code of Accounting Practice (the Code) introduced an Expenditure and Funding Analysis which must be prepared as part of the main Accounts. The purpose of the statement is to reconcile the monitoring position which will be reported to the Council’s Executive Committee, to the figures reported in the Comprehensive Income and Expenditure Statement, which are presented on an accounting basis. 4.7. A monitoring report on the year-end position of the Council’s Revenue Budget will be presented to the Executive Committee on 26 June 2024. The Executive Committee position shows an additional year-end Revenue Budget surplus of £0.128 million. The report proposes that the Committee approve that this surplus is transferred to reserves to assist in future Budget Strategies, including pay award requirements. This report also seeks approval to transfer funds to reserves to meet future budget pressures and commitments. The information contained in the unaudited Accounts takes into account the year-end position reported in the Executive Committee report, with the requested Transfers to Reserves being subject to the approval of the Executive Committee. If these proposed Transfers are not approved, the Accounts will be amended. 4.8. The position shown in Appendix 2 to this report reflects all of the Transfers to Reserves subject to approval at Executive Committee (26 June 2024), resulting in an overall breakeven position for the year. 4.9. Appendix 2 provides a reconciliation of this final breakeven position, as will be reported to the Council’s Executive Committee (26 June 2024), to the figures included in the Council’s Accounts 2024 (in the Expenditure and Funding Analysis Statement and the Comprehensive Income and Expenditure Account) and include the application of accounting entries in line with the CIPFA Code of Practice. 5. Unaudited Accounts – Charitable Trusts 5.1. In addition to the unaudited Accounts for the Council, this Committee is also required to consider the accounts of the South Lanarkshire Council Charitable Trust. These accounts are attached in Appendix 3 for consideration and will be e-mailed to all elected members following submission to External Audit before 30 June 2024. They will also be available on the Council’s website on 1 July 2024 for public inspection. 5.2. These audited Accounts will also be brought back for approval and signature in Autumn 2024 along with the External Audit Members’ report. 6. Employee Implications 6.1. There are no direct employee implications from this report. 62
Page 63
7. Financial Implications 7.1. The financial implications are detailed in section 4.7 and the relevant appendices. 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. 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. 9.2. There are no implications for sustainability in terms of the information contained in this report. 10. Equality Impact Assessment and Consultation Arrangements 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 also no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 7 June 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References None List of Background Papers South Lanarkshire Council Annual Accounts 2023/2024 Charitable Trusts’ Annual Accounts 2023/2024 Financial Ledger 2023/2024 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 63
Page 64
64
Page 65
1 5 65
Page 66
2 Contents Contents Introduction by Chief Executive and Council Leader 3 Management Commentary 5 Annual Governance Statement 22 Statement of Responsibilities 34 Remuneration Report 35 Comprehensive Income and Expenditure Statement 55 Balance Sheet 56 Movement in Reserves Statement 57 Cash Flow Statement 59 Notes to the Financial Statements Note 1 - Accounting Standards Issued but Not Yet Adopted 61 Note 2 - Assumptions Made About the Future and Other Major Sources of Uncertainty 62 Note 3 - Material items and Expenditure and Income 63 Note 4 - Expenditure and Funding Analysis Note 5 - Reconciliation of Adjustments Between Funding and Accounting Basis Shown in the Expenditure Funding Analysis (EFA) to Those Shown in the Movement in Reserves Statement (MIRS) 64 66 Note 6 - Expenditure and Income Analysed by Nature 67 Note 7 - Revenue From Contracts with Service Recipients 68 Note 8 - Adjustments Permitted Under Accounting Standards and Between Accounting Basis and Funding Basis Under Regulations 68 Note 9 - Other Operating Expenditure 72 Note 10 - Financing and Investment Income and Expenditure 72 Note 11 - Taxation and Non Specific Grant Income and Expenditure 72 Note 12 - Movement in Usable Reserves 73 Note 13 - Balance Sheet – Unusable Reserves 75 Note 14 - Members Allowances 78 Note 15 - External Audit Costs 78 Note 16 - Related Parties 78 Note 17 - Leases 80 Note 18 - Grant Income 82 Note 19 - Events After the Balance Sheet Date 82 Note 20 - Property, Plant and Equipment 83 Note 21 - Other Assets - Intangible, Heritage and Assets Held For Sale 88 Note 22 - Capital Expenditure and Capital Financing 89 Note 23 - Short Term Debtors 90 Note 24 - Debtors For Local Taxation 90 Note 25 - Short Term Creditors 90 Note 26 - Provisions 90 Note 27 - Receipts in Advance 91 Note 28 - Public Private Partnerships and Similar Contracts 91 Note 29 - Pension Schemes Accounted for As Defined Contribution Schemes 93 Note 30 - Defined Benefit Pension Scheme 93 Note 31 - Contingent Assets and Liabilities 99 Note 32 - Financial Instruments 100 Note 33 - Disclosure of Nature and Extent of Risks Arising From Financial Instruments 103 Note 34 - Common Good 107 Note 35 - Trust Funds 108 Note 36 - Accounting Policies 109 Note 37 - Critical Judgments in Applying Accounting Policies 116 Supplementary Statements Statement 1 - Housing Revenue Account Income and Expenditure Statement 117 Statement 2 - National Non-Domestic Rates Income and Expenditure Statement 119 Statement 3 - Council Tax Income and Expenditure Statement 120 Group Accounts 121 Notes to Group Accounts 127 Audit Arrangements 134 Glossary of Terms 135 66
Page 67
3 Joint Introduction by Chief Executive and Council Leader Welcome to South Lanarkshire Council’s annual accounts for the financial year 2023/2024. Thanks for taking the time to read them. These accounts are published annually to show how the council manages and spends the public money with which we are entrusted. This demonstrates our commitment not only to the relentless pursuit of best value, but also to public transparency. Both commitments are increasingly important given the extremely difficult financial environment within which all local authorities continue to operate. In fact, at the start of the financial year 2023/2024 we faced a budget gap of £32.5 million. By 22 February 2023, when our full Council met our legal obligation to agree a balanced budget, that gap had been reduced due to financial movements and actions taken by the council. However, a number of savings had to be agreed to bridge that final gap of £8.8 million. This followed many years of similar budget shortfalls which had already been dealt with through efficiencies and other means, totalling some £155m over a decade. Looking ahead, without a significant improvement in the way councils are funded, our current projections are that by the end of 2027/2028 we will have had to deal with a further, cumulative funding gap of more than £97m. However unwelcome, our council has never shirked from these challenges, or those that have been presented by the Covid pandemic and its legacy issues, or the ongoing impact on our cost base of inflation levels that remained historically very high throughout much of the financial year that is covered by these accounts. We provided high-quality services to our residents throughout this challenging period; we continue to do so now, and we commit fully to providing the best possible outcomes for service users, as agreed in our Council Plan, Connect 2022-2027. When our 2023-24 budget and associated spending plans were agreed our revenue budget for the year was £895.7m. As in previous years, Education received the biggest part of our budget, and our investment in our excellent estate of nurseries, primary and secondary schools continues to pay dividends in terms of academic success and positive destinations for our young people. Social Work continues to be our next biggest area of spend, with the remainder of our budget providing for services being delivered through Community and Enterprise, Housing and Technical, and Finance and Corporate Resources. Our teams work collaboratively, and with partners and our communities to deliver the services our residents rely upon, day in, day out. In addition to approving the revenue budget, the full Council in February 2023 also approved a £91m general capital programme and a £64m housing capital programme. In recognition of the need for modernisation of some local facilities, our revenue budget also included a £1.182m initial contribution towards a £13m leisure and culture transformation fund. Despite the financial challenges being faced, elected members also agreed to a number of one-off investments in the area, including the creation of a Frontline First Fund to tackle fly-tipping and graffiti and undertake other work over a three-year period. We continue to target resources at those most in need, and funding was also made available to extend the provision of grants for school clothing to three- and four-year-olds in early years establishments. Although council tax had to rise in 2023-24 to help fund these investments and our services generally, South Lanarkshire remained the local authority with the lowest council taxes in mainland Scotland. This is still the case today, following the national freeze that took place when 2024-25 council budgets were set. It is worth noting that when our own 2024-25 budget was agreed, on 21 February 2024, South Lanarkshire Council was able to continue its record of delivering investment in the local area, notably through two significant funds designed to keep open facilities that would otherwise have to close following budget decisions that had to be taken by South Lanarkshire Leisure and Culture (SLLC). The Community Fightback Fund is aimed primarily at local halls that local community groups may wish to take over, while the Future Libraries Fund seeks to provide services in new ways and sometimes in new locations. The council’s 2024-25 budget also identified additional investments into the Central Energy Efficiency Fund and through a Net Zero Innovation Fund. It is because of the council’s prudent approach to financial management and planning that we have been able to make these types on investments while continuing to deliver quality services, despite financial challenges. 67
Page 68
4 The other significant factor in our success is the role played by our magnificent workforce. Most of our staff are residents too, and together we take pride in the central role we all play in delivering on our core vision to “improve the lives and prospects of everyone in South Lanarkshire”. Our thanks also go to our colleagues in SLLC and the other partners with whom we work. Finally, we could do none of this without the support of our communities. Together, we have been through some difficult times in recent years. Difficult times and hard choices remain ahead of us, too. So, we are deeply grateful when our residents recognise the challenges we are facing together, and when they support our efforts to make South Lanarkshire the best possible place to live, visit and do business. 68
Page 69
5 Management Commentary Background The Management Commentary will provide the reader with key messages in relation to the council’s year-end financial position for 2023/2024, as well as details on its performance for the year. As well as providing a summary of 2023/2024, the commentary also looks forward and provides detail on the council’s future strategy and the challenges, risks and uncertainties it faces over the coming years, while working hard to maintain service delivery and meet the needs of the people of South Lanarkshire. Before this, the commentary will provide a brief introduction to the council area and its functions, as well as its key ambitions and achievements. Introduction to South Lanarkshire Council The Area The South Lanarkshire area is both urban and rural and covers 686 square miles from the Cathkin Braes to the Pentlands and down through the Southern Uplands. The council faces the dual challenge of catering for the busy towns in the north west (East Kilbride, Hamilton, Cambuslang and Rutherglen), while meeting the needs of residents in Lanark and the rural Clydesdale area. The Council Structure The council provides a range of essential public services across the area through its five Resources, facilitated by the commitment, dedication and ability of our 16,065 employees. The council’s five Resources, their functions and number of employees is detailed below: Council Resource Functions Employees Community and Enterprise Resources Facilities, Waste and Grounds, Leisure and Culture Services, Planning and Regulatory Services, Enterprise and Sustainable Development, Roads Transportation and Fleet 3,332 Education Resources Early Years, Schools, Quality and Improvement 7,525 Finance and Corporate Resources Finance, Information Technology, Personnel, Administration, Legal and Licensing, Communications and Strategy 879 Housing and Technical Resources Housing and Property Services 1,440 Social Work Resources Adults and Older People, Children and Families, Criminal Justice 2,889 The Council’s 5 Resources serve around 320,000 people. This population is expected to both grow and age with projections suggesting that this population will rise c325,000 in 2028, an increase of 2% since 2018. This compares with a projected increase of 1.8% for Scotland as a whole. The projected 2028 figures show the largest decrease of 4.1% in the 0-15 age group and the largest increase of 25% in the 75+ age group. A further 0.8% increase is projected for the years 2028 to 2038. Source: National Records of Scotland The Council’s overall population growth is around a tenth faster than is projected in Scotland as a whole and its share of Scotland’s population rises from 5.87% in 2018 to 5.88% in 2038. South Lanarkshire is expected to have the 5th highest 69
Page 70
6 population out of the 32 council areas in Scotland in 2028. These changes in population in terms of both number and age profile, influence how the council and its partners shape future service design and delivery and feed into the Council Plan. City Region City Deal The council is part of the Glasgow City Region City Deal partnership. The council’s capital programme, referred to later in this commentary, includes significant infrastructure projects which will bring economic benefit to the council area. These projects include the completion of two significant roads projects (Cathkin Relief Road and the dualling of Greenhills Road in East Kilbride). It also includes numerous Community Growth Area (CGA) projects across the 4 CGAs: Hamilton, East Kilbride, Larkhall and Newton including some large-scale build projects such as a new Primary School and Nursery provision in Jackton. The Council Plan The Council Plan, Connect was approved by the Council on 15 June 2022. The Council Plan and Community Plan were built using engagement to place residents’ views and aspirations front and centre, with more than 3,300 responses received, representing the largest consultation exercise ever carried out by the council. Connect is the key strategic document that shapes the work of the council. It sets out the key actions to be delivered over the five years from 2022 to 2027, and identifies a long-term vision supported by core values and priorities that influence how the council works. These in turn stretch out into all annual Resource Plans through what is known as the “golden thread”, and on further to Service Plans, and through personal development plans, on to the individual members of staff who are responsible for service delivery. In line with the Best Value Audit Report recommendations and to further align the work of the council and the partnership, the Plan sets out a common vision which is to improve the lives and prospects of everyone in South Lanarkshire. It also sets out a common set of outcomes, developed through the extensive and multi-layered engagement and consultation process noted above. Three cross-cutting themes emerged from the community responses and feedback, and these became the priorities for the new Plan. These were: People (in particular, the impact of poverty and inequalities), Progress (in particular, recovery from the pandemic) and Planet (in particular, sustainable development). Further analysis of what our residents and communities had told us they want, resulted in six outcomes being identified for the Council Plan and the Community Plan: Communities and Environment Caring, connected, sustainable communities Education and Learning Inspiring learners, transforming learning, strengthening partnerships Health and Wellbeing People live the healthiest lives possible Children and Young People Our children and young people thrive Housing and Land Good quality, suitable and sustainable places to live Our Economy Thriving business, fair jobs and vibrant town centres Council Performance The council rates its performance using a number of measures. These are aligned to the priorities and outcomes set out in the Council Plan. A total of 272 measures were identified within Resource Plans for 2023/2024. Of those 68 (25%) are linked to the achievement of the Connect Outcomes detailed in the Council Plan. The measures are detailed within the individual Resource Plans and bi-annual progress reports, and can be found on the Performance pages of the council’s website. The Connect 2022-27 Quarter 2 Progress Report 2023/2024 was reported to the Performance and Review Scrutiny Forum on 5 December 2023. The performance figures for quarter 2 of 2023-24 are shown below / overleaf. Status of performance measures Definition Number of performance measures Blue Project complete 3 Green The timescale or target has been met as per expectations 44 Amber There has been minor slippage against timescale or minor shortfall against target 8 Red There has been major slippage against timescale or major shortfall against target 1 Report later / contextual The information is not yet available or included for information only. 12 70
Page 71
7 Status of council performance measures There is one ‘red’ status measure: Percentage of reports submitted to the Children’s Reporter within agreed timescales. Due to staff vacancies of just over 30% within local teams, some reports have been submitted beyond the deadline. Service managers are working closely with operational teams to prioritise workloads and ensure that children and their families are not adversely affected by any delays. A more flexible approach to recruitment is being taken with social worker students on placement with South Lanarkshire guaranteed a job interview and practice educator support with the interview process. This has resulted in an increase in the recruitment of newly qualified workers in the first year. Despite the return of services through the council’s Recovery Plan there is a Covid legacy in terms of a residual impact on some services and a significant build-up of demand, which means there remains an inevitable impact on performance in some areas. The council continues to remain an active participant in the Local Government Benchmarking Framework (LGBF). As well as allowing the council to self-assess its performance across years, the main benefit of the LGBF is the ability to compare performance with peers against an agreed suite of performance indicators, which will assist in achieving best practice and efficiencies. The latest results available (2022/2023, as at 30 April 2024) show that across the 102 indicators in that year’s suite, the council’s performance improved against 52 (51%) indicators, remained the same against 4 (4%) indicators, and declined for 31 (30%) indicators. There are 15 (15%) indicators for which there are no results or trend information available for 2022/2023. Council performance against 102 indicators (latest available information – 2022/2023) KEY: Number (%) of indicators 2020-21 2021-22 2022-23 South Lanarkshire performance ↑ improving performance in SLC 36 (38%) 39 (39%) 52 (51%) ↓ declining performance in SLC 36 (38%) 53 (54%) 31 (30%) ↔ No change in performance in SLC 2 (2%) 3 (3%) 4 (4%) --- Results/trends not available 21 (22%) 4 (4%) 15 (15%) Comparison with Scottish average ✓ SLC results better than Scottish average 37 (39%) 50 (51%) 47 (46%) X SLC results worse than Scottish average 37 (39%) 43 (43%) 38 (37%) ↔ SLC results same as Scottish average 0 (0%) 2 (2%) 2 (2%) -- Results not available 21 (22%) 4 (4%) 15 (15%) 2020-21 Results at May 2022 refresh, 2021-22 Results at May 2023 refresh, 2022-23 Results at 30 April 2024 In terms of South Lanarkshire’s figures relative to the Scottish results, our performance was better than the Scottish average for 47 indicators (46%) and worse for 38 indicators (37%). 71
Page 72
8 Key Achievements Communities and Environment • Full Fibre Connection has exceeded in urban areas is at 34.5% of properties. • During 2023, 1.5% of household waste was sent to landfill, which is significantly better than the target of 10%. • The Office for Zero Emissions Vehicles (OZEC) Project installed 13 dual on-street electric chargers in various residen- tial streets. • A new allotment site at Chatelherault Country Park is now fully operational and all plots are now let. • A number of cycling and walking projects were progressed including Active Travel Studies completed for towns such as Blackwood, Kirkmuirhill, Abington, Crawford, Carnwath, Forth and Biggar. • 111 Community Wishes were received from a range of community groups across South Lanarkshire and 41 Wishes were answered. Education & Learning • 2023 saw the highest percentage of S4 candidates achieving SCQF Level 4 Literacy in 5 years and the highest number in Numeracy since 2020. • 13 establishments were inspected and received positive outcomes with a grade of good or above. • 96.8% of young people who have left school and moved into a positive destination. • 389 young people achieved Duke of Edinburgh Award accreditation Health and Wellbeing • 20 of the 104 (19.2%) new council homes completed in 2023-24 were accessible for wheelchairs. • All schools and educational settings are now providing free and easy to collect period products as and when required. • Over 7,500 children and their families are benefitting from the council’s investment in early learning and childcare. 72
Page 73
9 Housing and Land • 269 additional new houses were provided in 2023-24 including 104 new build properties. • 99% of reactive repairs were completed right first time. • Temporary accommodation was provided to all homelessness households where it was required. Our Economy • 646 jobs were created or sustained, and increased sales derived exclusively from additional sales through Business Support Grants amounted to £14.496m. Delivering the Plan and Achieving Best Value • Primary, Additional Support Needs and Early Years Refresh - 141 establishments were upgraded with over 4,000 de- vices delivered. 73
Page 74
10 Financial Performance General Fund Position at end 2023/2024 The council’s General Fund budget for 2023/2024 was approved by the Council on 22 February 2023. This is the operational budget of the Council. At the end of 2023/2024, the Council’s budget was showing an underspend position of £26.351 million. After making a number of agreed Transfers to Reserves totalling £26.351 million, the final position was a breakeven position. The full position for the council’s Resources is detailed in the Revenue Budget Outturn 2023/2024 reported to the Executive Committee on 26 June 2024. This position takes account of the achievement of £4.985 million of the £5.115 million of approved savings for the year, with the remainder being pursued into 2024/2025. The split of the spend across the individual Resources is shown below. This reflects the council’s spend based on its operational structure (including transfers to reserves), with the biggest Resource being Education Resources. The budget is monitored internally on the basis of the five Resources. Council spend across its five Resources (£m) is noted in the diagram and table overleaf. Council Resource Spend (After Transfers to Reserves) £m Community and Enterprise Resources 138.189 Education Resources 440.417 Finance and Corporate Resources 46.472 Housing and Technical Resources 17.946 Social Work Resources 237.210 This spend against budget is shown in the South Lanarkshire Performance Section of the table below, which shows the Resources’ final outturn position before any transfers were made to reserves for specific funding or commitments. The main variances are explained as: • Community and Enterprise Resources: an underspend of £0.667 million offset by monies carried forward into 2024/2025 for committed spend, as a result of further underspends in employee cost, less than anticipated costs of waste and subcontractors and materials in Roads. • Education Resources: an overspend of £0.286 million was due to the additional costs of mainstream transport, teacher cover costs and the cost of external placement for children with additional support needs. This is after taking account of monies for Pupil Equity Fund and multi-year investments being carried into 2024/2025. • Finance and Corporate Resources: an overspend of £0.165 million reflected higher costs in relation to Empty Property Relief. 74
Page 75
11 • Housing and Technical Resources: a minor overspend of £0.003 million after carrying forward Scottish Government monies for Resettlement, received later in the year. • Social Work Resources: a break-even position mainly reflecting the costs of residential placement pressures in Children and Families, offset by underspends in Performance and Support Services. • Loan Charges: an underspend of £0.949 million after carrying forward funding to assist in the Medium-Term Budget Strategy, reflecting and reflects cash balances available to invest being higher than anticipated in the last months of the year. • Council Tax/Council Tax Reduction Scheme (over-recovery £3.229 million) mainly the impact of additional houses added in-year, higher than anticipated levels of income from previous years arrears collection and additional income from empty properties. These were offset by a minor overspend in Council Tax Reduction Scheme reflecting demand. The Comprehensive Income and Expenditure Statement of the Accounts (page 55) sets out the council’s year-end posi- tion on expenditure and income, in accordance with accounting requirements. This is different to the way that the council reports its financial monitoring internally as we are required to make a number of accounting adjustments. The Expenditure and Funding Analysis (EFA) on page 64 provides a link between the council's internal financial monitoring reports, and the figures in the Comprehensive Income and Expenditure Statement. Table 1 shows the reader of the Accounts how to go from the internal Monitoring Report, through to the first column of the EFA (page 64). SLC Annual Budget (Col 1) SLC Actual Outturn (Col 2) SLC Outturn Variance (Col 3) Building the EFA Actual Outturn (Col 2 Data) Building the EFA Move / Remove items not included in Cost of Services Building the EFA Net Expenditure Chargeable to the General Fund and HRA Services £m £m £m £m £m £m Community and Enterprise 138.189 137.522 0.667 137.522 0.002 137.524 Education 440.131 439.938 0.193 439.938 0.002 439.940 Finance and Corporate 47.842 48.007 (0.165) 48.007 (0.003) 48.004 HRA - - - - (0.360) (0.360) Housing and Technical 17.943 16.436 1.507 16.436 (0.004) 16.432 Social Work 237.210 237.210 - 237.210 (0.006) 237.204 Joint Boards 2.053 2.052 0.001 2.052 - 2.052 Corporate Items (7.661) (14.199) 6.538 (14.199) 0.006 (14.193) Net Cost of Services 875.707 866.966 8.741 866.966 (0.363) 866.603 Other Income and Expenditure (875.707) (893.317) 17.610 (893.317) 71.888 (821.429) (Surplus) / Deficit on Provision of Services - (26.351) 26.351 (26.351) 71.525 45.174 The council’s final reported outturn position for the year is a breakeven position (surplus of £26.351 million if you exclude the transfers to reserves at the end of the year – see col 2 above). However, as previously noted, this is not how the surplus is displayed in the various statements in the accounts due to accounting requirements to both exclude and include certain items for both the EFA and CIES, with the final entries being included as part of the Movement in Reserves Statement. The final column in the table shows a deficit of £45.174 million which corresponds to the figures in the first column on the Expenditure and Funding Analysis on page 64. To this, accounting regulations require us to add in other entries for items including pensions, holiday pay, capital financed from revenue and loans fund principal payments (column 2 on EFA page 64) to arrive at a deficit on the provision of services of £22.354 million. To this, we need to take into account accounting requirements to reverse some entries to the balance sheet and also transfers from reserves which were required to fund projects during the year and transfers to reserves at the end of the year which are required to fund commitments in future years. After taking into account all of these items, the final outturn position for the council was a breakeven position, as reported to the Executive Committee. The Movement in Reserves Statement on page 57 reconciles the financial position shown in the Comprehensive Income and Expenditure Statement (page 55) to the movement on the council’s Reserves (pages 57 to 58). 75
Page 76
12 During the year, the council drew money down from reserves, to meet current commitments or for agreed use in the 2023/2024 budget strategy, including Pupil Equity Fund for schools, Information Technology and funding for multi-year projects. In addition, the council made contributions to reserves for a variety of projects including multi year investment plans, Pupil Equity funding and to meet future commitments. Money was also set aside for future budget strategies. The balance on the council’s total General Fund Reserve is £109.687 million and includes commitments for future projects as well as elements earmarked for use in future budget strategies. The General Fund Reserve is one of the statutory reserves that the council is permitted to hold and is included in the total usable reserves on the Balance Sheet totalling £133.603 million. A summary of the councils’ total usable reserves is shown in the table below, with full details of all the council’s usable reserves, including transfers to / from each of these reserves in 2023/2024 are detailed in Note 12. £000 £000 Total Usable Reserves 133,603 Less: General Fund (committed inc. budget strategies) 96,644 Repairs and Renewals (inc. Winter Maintenance) 5,346 Capital Funds (inc. Capital Receipts Reserve) 5,153 Insurance Fund 1,178 Housing Revenue Account 13,221 Total Committed Usable Reserves 121,542 Uncommitted General Fund 13,043 Note 12 shows that the council’s General Fund reserve comprises an earmarked element (£96.644 million) and an unearmarked balance of £13.043 million. The council’s Reserves policy identifies that there is no prescribed minimum level of reserves which should be held by a council. The level of Uncommitted General Fund of £13.043 million currently reflects a suitable cushion to contribute towards any unanticipated pressures that the council may face. Housing Revenue Account As well as running a General Fund account to deliver services, the council also manages a stock of housing. The annual expenditure on the council houses (£116.218 million in 2023/2024) and the total income received (£116.578m in 2023/24), are held as a ring-fenced Housing Revenue Account (HRA). Any surplus funds are held in a Reserve on the council’s balance sheet and can be used in future years. The details are shown on pages 117-118. At the end of financial year 2023/2024, there was an underspend of £0.360 million on the Housing Revenue Account. This was transferred to the Housing Revenue Account Reserve. This transfer means an increase of £0.360 million in the Housing Revenue Reserve, taking its total to £13.221 million at the end of 2023/2024. These monies will be carried forward to future years to fund the increased volume and cost of repairs, the development costs related to the new housing management I.T. system and the continuation of the housing investment programme, as well as maintaining a reasonable level of reserves. The council has a medium to long term financial business plan for the HRA. This ensures the affordability of the council’s approved Strategic Housing Investment Programme (SHIP), a key part of the Local Housing Strategy (LHS) process. The strategic outcomes identified in the LHS, guide investment priorities outlined within the SHIP, including the increase in supply of affordable housing in areas of housing pressure, as well as coping with the needs of an ageing population. The Balance Sheet Taking the year’s activity into account, the council’s balance sheet (page 56) shows the position as at 31 March 2024 and brings together the council’s year end balances including the assets owned, the monies owed to and by the council and the reserves available to the council for use in future years. The position at the end of March 2024 as well as the previous year for information, is shown below. 76
Page 77
13 The main change year on year is the increase in Net Current Liabilities. This reflects the Council’s spend on its property assets, an increase in the value of its council housing stock and a new Pension Asset following actuarial review of the Fund. The long-term liabilities decreased mainly due to a reduction in the pension liability which was offset by an increase in long term borrowing reflecting the implementation of the accounting treatment of Service Concession arrangements (PPP and similar contracts). The Pension Liability is indicative of a broad position, however the reader should be aware that the council is meeting its pension costs on an annual basis. Assets of the Strathclyde Pension Fund are ordinarily included in the Balance Sheet at their fair value (current bid prices as required under IAS19), principally the bid price for quoted securities, estimated fair value for unquoted securities and market price for property. However, while the accounting requirements of IAS19 have been applied in the current year, the significant nature of the Asset has been reviewed, and in line with IFRIC14, the asset has been de-recognised to equate to the level of the asset ceiling, provided by the Fund’s actuary, a nil value. The Pension Liability is also recognised on the Balance sheet. Taking the two together, the Net Pension Liability reflects the net present value of future service costs less the net present value of future obligations over the future working lifetime as at 31 March 2024. Further information is provided in Note 30 (pages 93-99). The council’s assets and liabilities are funded by an equivalent level of Reserves. These Reserves comprise Unusable Reserves of £2,189.1 million (maintained for accounting purposes only) and Usable Reserves of £133.6 million which as the name suggests, are those which the council can use to support service delivery through its Revenue and Capital budgets. The detail of these Reserves is noted in the Movement in Reserves Statement on page 57 with more detail provided in Note 12 (page 73) and the Accounting Policies (pages 109 to 115). It is expected that future revenue income, alongside the council’s budgeting and planning processes, will ensure management of future liabilities. It is therefore considered appropriate to adopt a going concern basis for the preparation of these financial statements. Capital Programme The council operates two distinct capital programmes: the General Services Capital Programme and the Housing Capital Programme. The spend across Resources and Housing is shown in the graphic (and the table) below. 77
Page 78
14 Council Resource Spend £m Community and Enterprise Resources 33.936 Education Resources 15.594 Finance and Corporate Resources 4.649 Housing and Technical Resources 7.717 Social Work Resources 2.348 Housing Capital Programme 62.240 The General Services Capital Programme spend was £64.244 million in 2023/2024, equating to approximately 83% of the original capital budget approved at the start of the financial year. The underspend reflects a variation from the expected timing of spend across a number of projects within multi-year programmes. The main projects contributing to the underspend include the Place Based Investment Programme, Rural Development Centre, Clyde Bridge, Philipshill Cemetery Extension, Wooddean Early Learning Centre, Free School Meals, IT Infrastructure Refresh, Prioritised Urgent Investment and a number of Glasgow City Region City Deal projects including Greenhills Road, Cathkin Bypass (grant payments), Woodfoot Road / Wellhall Road, Hamilton, Calderside Acadmy and Holy Cross High School. Project budgets have been carried forward into 2024/25 to complete these projects where appropriate. Significant project spend during the year has been incurred on a number of projects including: • Jackton Primary School, • Roads Carriageway Investment Programme, • Clyde Bridge • Our Lady of Lourdes Primary School Upgrade, • First Steps Community Nursery Extension, • Wooddean Early Learning Centre, • Oracle Fusion Project and Schools ICT and • Community Alarms – Analogue to Digital. The new Jackton Primary School is shown in the image below. 78
Page 79
15 The General Services Programme has been funded from a combination of grants from various funding bodies including Scottish Government and partner organisations (£35.316 million), borrowing (£18.919 million), developers’ contributions (£8.354 million) and revenue contributions (£1.655 million). The Housing Capital Programme spent £62.240 million in 2023/2024, 92% of its revised budget target. This underspend is due to the timing of purchase of land at East Kilbride, CGA and Brackenhill Farm sites with these settling early in the new financial year. In addition, there were access issues with a significant number of central heating systems upgrades and windows and doors projects. The focus of Housing Capital Programme expenditure on council housing stock was on the provision of additional housing and improvement and environmental works. The Housing Programme is ring-fenced and funded by the Housing Revenue Account, Government Grant, Borrowing and house/land sales. Newly completed housing in Whitlawburn is shown in the image below. 79
Page 80
16 The Capital Budget Monitoring Final Outturn – 2023/2024 for both Programmes was reported to the Executive Committee on 26 June 2024. The council is able to regulate its own capital spending limits within a Prudential Framework recommended by CIPFA and endorsed by the Scottish Government. As such, the repayment of borrowing, which falls as a future commitment against the council’s Revenue Budget, must be affordable. The repayments form part of the approved revenue budget, and the spend and debt repayments remain within the Prudential Framework limits approved by the council. The ratio of financing costs to the council’s Net Revenue Stream for 2023/2024 (Government Grant plus Council Tax Income) is 4.47% Key Financial Ratios In order to monitor financial performance and to supplement the figures contained within the Annual Accounts, the council prepares a number of financial ratios as a result of best practice guidance contained within the Prudential Code for Capital Finance in Local Authorities. These relate to the borrowing the council undertakes. The following table provides information on these indicators: Financial Indicator and Commentary 2023/2024 Forecast £m 2023/2024 Outcome £m Debt/Long-term Borrowing Capital Financing Requirement (CFR) for the current year. External Debt Levels for the current year. (Excluding Accrued Interest) Gross Borrowing (External Debt Levels excluding PPP Finance Lease Liability) 1,404 1,215 1,036 1,382 1,215 1,036 Ratio of Financing Costs to Net Revenue Stream (as a %) which indicates how much of the council’s net revenue budget is used for servicing debt: • General Services • Housing Revenue Account 4.96% 17.16% 4.47% 13.98% The Capital Financing Requirement (CFR) shows how much the council needs to borrow in order to fund its capital expenditure. The actual CFR for the year is £22 million less than forecast due to a reduction in borrowing required to fund the 2023/2024 capital programmes. This reflects the timing of spend across both capital programmes (General Services and HRA). The ratio of financing costs to net revenue stream for General Services shows what percentage of our income from Council Tax and Government Grant is used to pay for the costs of borrowing. For the Housing Revenue Account, the ratio shows how house rents have been used to pay for the cost of borrowing. For General Services the ratio is less than forecast. This is due to lower borrowing costs and the Net Revenue Stream being higher than forecast. For the Housing Revenue Account, the ratio is also lower than forecast due to actual borrowing costs being lower than forecast and a slight increase in income. 80
Page 81
17 Financial Planning The current economic situation, the residual demands in the wake of the Coronavirus Pandemic and pessimistic forecasts of government grant mean that the council continues to operate in a climate of financial pressure. Increasing cost burdens due to pay awards and above average contract inflation over recent years have continued to reduce the spending power of council budgets. Financial Planning is a key tool in managing these pressures. While the Council has Long Term Revenue and Capital Budget Strategies, a Revenue Budget Strategy is prepared in advance of the new financial year along with an annual report on the Prudential Indicators, the Treasury Management Strategy and the Annual Investment Strategy. This suite of reports lays out the position for the council across the coming years and identifies the key areas of financial risk and pressure. A new Capital programme is also approved each year, based on the aspirations of the Capital Strategy, but also taking account of any new areas of investment to be considered since the Strategy was drafted. Financial Outlook including Risks and Uncertainties Outlook The council approved its 2024/2025 revenue budget of £958 million on 21 February 2024. Moving forward, the outlook for Scottish Public Finances is not positive. The Scottish Fiscal Commission (SFC) estimates that the overall Scottish Budget will have an average budget gap of over 10 percent each year over the next 50 years. They believe that these financial pressures will build as the population ages and as the cost of delivering services increases. A recent report prepared by Audit Scotland and released by the Accounts Commission (Local government budgets 2024/25 | Audit Scotland) reaffirms that Scottish councils are facing a significant gap between the money needed to deliver local services and the money they have available. Together, all 32 councils have a gap of £585 million for 2024/2025. This is estimated to increase to £780 million by 2026/2027. The scale of the financial challenge is greater than ever. Given the magnitude of the Budget Gap, there requires to be a fundamental re-think of what public services in Scotland can do moving forward. That includes what the Council can deliver by way of services to the public. This will require us to reconsider the things we do as a Council, how we do them and where we deliver them from. On 26 June 2024, a Revenue Budget Strategy covering the period 2025/2026 to 2027/2028 was presented to the Executive Committee, giving a medium term view on the financial position of the Council over the next 3 years and resulting in a Budget Gap of over £77 million. Given the magnitude of the Budget Gap across the coming 3 years, there is an acknowledgement across the council that fundamental change is required. Difficult decisions will need to be made to balance the Council’s budget. We will need to significantly change what we deliver over the next 3 years with the focus being on statutory services. There will likely be areas where we will need do consider whether we can continue to deliver services and if so, what those services will actually look like. In order to deliver a balanced budget, it is acknowledged that we need to have a programme of change. This will build on the work undertaken over many years, where service reviews have taken place and which have fed into the savings options that Members have considered. A Transformational Change programme will drive continuous improvement as well as efficiencies, and will feed into the Budget Strategy. Alongside a number of Cross-Cutting Reviews, Resources are considering their own Service areas. Risks and Uncertainties There are a number of other risks and uncertainties faced by the council. In looking at these areas, it is important to note the council’s governance arrangements. These are detailed in the Annual Governance Statement which sets out the proper arrangements for the governance of the council’s activities, facilitating the effective exercise of its functions and including clear arrangements for the management of risk. The Annual Governance Statement can be found on page 22. The council maintains a Risk Register which is updated on a regular basis by senior management and is presented to elected members. The latest reported version of the Risk Register was the Review of the council's Top Risks/Year End Risk Management Report reported to committee in October 2023. The risk register is one of the key sources of assurance that inform the council’s annual review of its governance arrangements. The council’s Top Risks (Very High level) are provided below. 1. Reduction in external funding and fees/income received by the Council, as well as the increased demand for services and the increased cost of services including impact of price increases and inflation results in increasing budget gaps. 81
Page 82
18 2. The Council is unable to support households most impacted by the cost-of-living crisis resulting in increasing levels of poverty, debt, and damage to health. 3. Failure to comply with or meet the expected standards, scrutiny levels, or improvement as identified by regulatory bodies 4. Implications of the Scottish Fire and Rescue Service Unwanted Fire Alarm Signals Policy within the council's non-domestic estate 5. The council fails meet statutory and legislative duties in respect of public protection. 6. The council does not fully deliver the strategic outcomes required of the Integrated Joint Board (IJB) as outlined in their Strategic Commissioning Plan. 7. The provision of council services is disrupted because of industrial action. 8. Inability of the Council to effectively balance the provision of accommodation and support to households who arrive in South Lanarkshire as part of refugee resettlement and the asylum seeker dispersal programmes, including those for unaccompanied children, whilst also meeting demands from other high need groups including homeless household. 9. The Council fails to deliver the objectives of the Community Wealth Building Strategy. 10. Inability to meet sustainable development and climate change objectives and timescales in such a way to support a fair and just transition. These key risks as well as the remainder of the council’s high-level risks are shown in the list and graphic below: • Reduction in external funding and fees/income received by the Council, as well as the increased demand for ser- vices and increased cost of services including impact of price increases and inflation, results in increasing budget gaps. • The council is unable to support households most impacted by the cost-of-living crisis resulting in increasing levels of poverty, debt, and damage to health • Failure to comply with or meet the expected standards, scrutiny levels, or improvement as identified by regulatory bodies • Implications of the Scottish Fire and Rescue Service Unwanted Fire Alarm Signals Policy within the council's non- domestic estate • The council fails meet statutory and legislative duties in respect of public protection • The council does not fully deliver the strategic outcomes required of the IJB as outlined in their Strategic Commis- sioning Plan • The provision of council services is disrupted because of industrial action • Inability of the Council to effectively balance the provision of accommodation and support to households who arrive in South Lanarkshire as part of refugee resettlement and the asylum seeker dispersal programmes, including those for unaccompanied children, whilst also meeting demands from other high need groups including homeless household • The council fails to deliver the objectives of the Community Wealth Building Strategy • Inability to meet sustainable development and climate change objectives and timescales in such a way to support a fair and just transition • Failure to fulfil emergency response commitments befitting the council’s status as a Category One (emergency) responder • Third and private sector market capacity. The market has a level of fragility which means that there may be reduced choice to meet demand for services. Providers are potentially unable to sustain their business models, which could result in a deterioration in service standards and provider closures, with the council requiring to source alternative service pro- vision. • The council does not have the appropriate emergency / business continuity plans; contingency arrangements or partnerships in place to respond to/or recover from a pandemic/endemic event. • Procurement activity is affected by supply chain issues; a lack of resources; non-compliance or legal challenge • Fraud, theft, organised crime and cyber attacks • Information governance not subject to adequate control • Historic childhood abuse • The council is materially affected by the implications arising from the National Care Service Bill • IT development and functionality does not support service delivery to secure efficiencies • Lack of capacity and skills to meet increased service demands • Inability to maintain infrastructure, assets and properties in a safe and well-maintained condition due to budget con- straints and failure to achieve objectives of asset and property reviews. • Increasing levels of adverse weather • The Council fails to deliver the outcomes of the Economic Strategy 82
Page 83
19 • Failure to ensure the health, safety and wellbeing of employees and the protection of service users and members of the public in the delivery of council services • Failure to achieve the outcomes of the Community Plan • Failure to achieve the outcomes of the Council Plan Taken together, these risks and external influences represent a fast-changing environment, bringing opportunities as well as challenges, and driving the requirement for the council and its services to be open to new ways of working, to innovation and continuous improvement. 83
Page 84
20 Sustainable Development and Climate Change Sustainable development and climate change action is governed through the council's Climate Change and Sustainability Committee which has decision making powers to help to accelerate the pace and scale of action needed in response to the climate emergency and meet challenging climate change national targets. Our commitment to sustainable development begins with integrating climate considerations into our policies, plans, and decision-making processes. Sustainable development and Climate Change is embedded within the Council Plan, Community Plan as well as other relevant plans, policies and strategies. The council's Sustainable Development and Climate Change Strategy (SDCCS) 2022 - 2027 sets out our overall approach to sustainable development and the challenges and opportunities of climate change. The Climate Change (Scotland) Act 2009 has set a 2045 target for net-zero emission of all greenhouse gases. As a public sector body, we have a legislative requirement to contribute to this target and are required to set and report on our own carbon reduction targets. We are committed to measuring, monitoring, and reporting our greenhouse gas emissions, as well as the progress we make in achieving our carbon reduction targets. The most recent carbon footprint, for 2022-23 shows that reductions of 65.7% have been achieved since the baseline year of 2005-06. In addition to mitigating our own impact, we understand the importance of adaptation to climate change. Failure to meet sustainable development and climate change objectives was identified as one of the council’s top risks - these risks relate to economic, social and cultural influencers. Supplementary Information Common Good and Trust Funds The council operates Common Good and Trust Fund accounts which record the financial transactions in relation to funds the council administers. These do not represent charges or income to Council Tax payers. These are shown in pages 107- 108 of the Accounts. Our Group The council has adopted the recommendations of the Accounting Code of Practice in the United Kingdom 2022/2023 and has produced a full set of Group Accounts. These accounts incorporate any material balances from identified associates of the Council, and include a Group Movement in Reserves Statement, a Group Balance Sheet, a Group Expenditure Funding Analysis Statement, a Group Income and Expenditure Statement and a Group Cash Flow. By including the Group entities along with the council’s own Accounts, the effect on the Group Balance Sheet is an increase in both Reserves and Net Assets of £28.901 million. This represents the council’s share of the net assets in these entities. The Group Accounts, including details of associates are included in pages 121-133. There has been no 84
Page 85
21 change to the Group membership since 2022/2023. More Information Further information about South Lanarkshire Council can be obtained on the Council’s website www.southlanarkshire.gov.uk. Alternatively, contact Finance and Corporate Resources, Floor 4, Almada Street, Hamilton ML3 0AB Jackie Taylor Executive Director, Finance and Corporate Resources Paul Manning Chief Executive Councillor Joe Fagan Leader of the Council 85
Page 86
22 South Lanarkshire Council Annual Governance Statement 2023/2024 1. Scope of responsibility The residents of South Lanarkshire expect the Council to conduct its business in a lawful and transparent way. In particular, the Council has a duty to safeguard public money and account for it; and to continuously review and improve how its functions are discharged, focussing on the priorities of economy, efficiency, and effectiveness. The Council is responsible for putting in place proper arrangements for the governance of its activities, facilitating the effective exercise of its functions including clear arrangements for the management of risk. A Local Code of Corporate Governance (referred to as the “Code” from here on) has been approved and adopted. The Code is reviewed and updated annually and is consistent with the seven core principles of the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE) framework entitled ‘Delivering Good Governance in Local Government’. This statement explains how the Council has complied with the Code during 2023/2024 and meets legislative requirements to include the Annual Governance Statement within the Annual Accounts. It also sets out the significant changes to the Council’s governance arrangements as a result of the global health pandemic (referred to as the “Pandemic” from here on). 2. The purpose of the council The Council Plan 2022-27 sets out the Council’s vision, values and objectives and what difference this will make to the resi- dents and communities of South Lanarkshire. The Council Plan which was informed by the views of South Lanarkshire residents and information from many other sources including local community plans, face to face discussions, online feedback, feedback from Community Groups, Community events and surveys was approved by Council in June 2022. The Council is also a statutory Community Planning Partner and the Community Plan 2022-32 provides a common vision for the South Lanarkshire Community Planning Partnership and sets out how the partners aim to achieve that vision. The Council has set the framework for strong corporate governance by having a clear vision and values which are outlined below: - Our vision is to improve the lives and prospects of everyone in South Lanarkshire. Our priorities are: • People – we will work to put people first and reduce inequality. • Progress - we will work to recover, progress and improve. • Planet – we will work towards a sustainable future in sustainable places. Our outcomes will be: • Communities and environment - Caring, connected, sustainable communities. • Education and learning - Inspiring learners, transforming learning, strengthening partnerships. • Health and wellbeing - People live the healthiest lives possible. • Children and young people - Our children and young people thrive. • Housing and land - Good quality, suitable and sustainable places to live. • Our economy - Thriving business, fair jobs and vibrant town centres. Our values are: • Focused on people and their needs • Working with and respecting others • Accountable, effective, efficient and transparent • Ambitious, self-aware and improving • Fair, open and sustainable • Excellent employer 3. The purpose of the Council’s governance framework 86
Page 87
23 The governance framework comprises of the culture, values, systems, and processes by which the council is directed and controlled. It describes the way the Council is accountable to communities. It enables the Council to monitor the achievement of its strategic objectives and consider whether these objectives have led to the delivery of appropriate and cost-effective services. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It is based on an ongoing process designed to identify and prioritise the risks to the achievement of the council’s aims and objectives by evaluating the likelihood and potential impact of those risks being realised. This enables the Council to manage risk efficiently, effectively, and economically. The governance framework has been in place at South Lanarkshire Council for the year ended 31 March 2024 and up to the date of approval of the Annual Report and Accounts. 4. How the Council monitors and evaluates the effectiveness of its governance arrangements? The Council annually reviews the effectiveness of its governance arrangements. The key sources of assurance that inform this review and underpin the statements made within this document are shown in the diagram below. 87
Page 88
2 5. Key elements of the Council’s governance assurance framework The council aims to achieve good standards of governance by adhering to the seven national principles below, which form the basis of the Council’s Code. These principles are used each year to evaluate governance arrangements and identify areas for improve- ment. The following table demonstrates how the council has complied with these principles and provides assurance as to how they are met. Significant elements of the systems and processes that comprise the council’s governance arrangements and important changes/ developments are described. Links to the key Council documents referred to below can be found in Section 2 of the Code. The impact of the Pandemic has been included and additional commentary can be found at the end of this section. Commentary on the council’s level of compliance with the CIPFA Financial Management Code can also be found at the end of this section. Principle A: Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law Links to Council’s values: • Accountable, effective, efficient, and transparent; Working with and respecting others How we do this: • The Council’s values and objectives provide clear direction to councillors and employees and are embedded in all policies and processes. • Standards of conduct and integrity were promoted through the national Code of Conduct for Councillors and by the Stand- ards and Procedures Advisory Forum. This is supplemented by role profiles which have a core accountability to maintain the highest standards of conduct. • The employee Code of Conduct outlines standards of conduct and integrity. All breaches including reported cases of suspected unethical behaviour and non-compliance with the law/policy were investigated through the employee disciplinary process and the recommended actions taken. • Professional Codes of Conduct ensured that ethical standards were maintained, and all breaches were investigated by the governing body. • To support integrity in decision making, the Council has a number of Committee procedural documents including decision making protocols known as the Scheme of Delegation, terms of reference documents, standing orders on procedures and contracts and financial regulations. 88
Page 89
3 • To ensure openness and transparency agendas and Committee reports are published to the council website at least five working days ahead of the scheduled meeting dates and any minutes of decisions taken by the Chief Executive during any period when committee meetings are suspended are publicised on the Council website. Committee meetings are live streamed to the Council’s YouTube channel. • To ensure openness and transparency in decision making processes, all declarations of interest made by councillors at meetings were recorded and made available online. • There are a range of policies such as the Counter Fraud, Bribery and Corruption Policy Statement and Strategy, Fraud Response Plan, Whistleblowing for Third Parties and Confidential Reporting procedures. These continue to be updated to reflect best practice and support a culture of ethical behaviour amongst employees and councillors. • Health and Safety compliance during 2023/2024 was assessed as being within the top rating band of “good”. • Legal Services maintained an overview of legislation and regulations and worked with services to ensure compliance. Principle B: Ensuring openness and comprehensive stakeholder engagement Links to Council’s values: Accountable, effective, efficient, and transparent; Fair, open, and sustainable; Focused on people and their needs; Working with and respecting others How we do this: • To ensure transparency and openness in decision making processes, all agendas, reports, and decisions were published on the Council’s website and printed copies were available for public inspection for all Committee and Forum meetings (except the Standards and Procedures Advisory Forum). From April 2021 all Committee meetings were live streamed to the Council’s YouTube channel http://bit.ly/SL_Committees. From August 2021 all Forum meetings have been live streamed. • The Committee Management Information System allows members of the public to register and be notified when Committee and forum papers are published. The system also facilitates the creation of online petitions to increase the potential reach of signatories. • The work of the Council and key information from our partners is communicated regularly using a range of communication channels. The South Lanarkshire View pages on the Council website provide a dedicated source of local information and news for communities. A variety of social media channels are used to communicate updates and share information. • A ‘Let’s Talk South Lanarkshire’ campaign has been established and was used to engage local people in an initial discus- sion about their experiences of the pandemic and continues to be used for ongoing dialogue with communities on both the Council and community planning priorities. • The Council’s Community Engagement Team continue their work to increase stakeholder engagement and involvement in decision making processes through the continued development of new Community Planning Partnership Neighbourhood Plans which are aimed at improving outcomes and reducing inequalities. • The Community Planning Partnership published its first Community Participation and Engagement Strategy 2020 to 2025 which is also available online in BSL and the Council has produced an online course for employees to complement this. • A partnership Participation and Engagement Group has been established to ensure that there is a consistent and co- ordinated approach to engaging with communities. • The Council carried out circa 50 surveys and engagement activities with residents, employees, and partners, and through the council’s Citizens Panel to inform policy and service delivery. Further information on our surveys is published on the Council’s website. • To ensure inclusivity and help shape service delivery, the Council co-ordinates regular engagement with targeted groups of people such as young people, older people, people with disabilities, unpaid carers, black and ethnic minorities, etc. Groups considered items such as the budget consultation, rent setting and performance reporting. • The Participation Requests and Community Asset Transfer processes support communities to engage with the Council to improve local outcomes. • The Council’s performance Spotlights summarise what the Council has achieved and the Public Performance Reports provide a comprehensive overview of service performance. These, along with the council’s Benchmarking report demon- strate the Council’s commitment to continuous improvement and achieving Best Value; summarise the progress that the council has made in meeting its priorities and how it is performing locally and nationally. • The Council’s Digital Strategy 2022 to 2027 sets out the overall approach to digital for the Council. A key objective within the strategy is to assist those people who are unable to get online to access services digitally. The Council also leads on the Digital Inclusion Sub Group, which reports into the Community Planning Partnership. • A comprehensive range of information on how the Council operates is available on the website. The Freedom of Infor- mation Publication Scheme ensures that key information about how the council works is accessible to the public. Principle C: Defining outcomes in terms of sustainable, economic, social, and environmental benefits Links to Council’s values: Accountable, effective, efficient, and transparent; Fair, open, and sustainable; Focused on people and their needs How we do this: 89
Page 90
4 • The Council has a Capital Strategy that has a long-term ambition on future capital investment (up to 2027/2028) and a capital programme agreed for 2024/25. This document is underpinned by a suite of Asset Management Plans which are aligned with the council’s objectives and focus on creating an efficient, fit-for-purpose and sustainable core estate that delivers best value in terms of investment, running costs and environmental impact. • The Council Plan 2022 to 2027 and Community Plan 2022 to 2032 have clearly defined economic, social, and environ- mental outcomes to be delivered during the period. • A Community Wealth Building Strategy setting out the Council’s ambitions in relation to spending, workforce, land and property, finance and building the generative economy was approved in March 2021. A Community Wealth Building Com- mission was established to oversee the implementation of the Strategy, with the Commission receiving an annual report on progress. A Community Wealth Building Progress Group has been set up to ensure that timescales within the action plan are met. • The CWB Strategy is supported by an action plan which is reviewed annually, with progress reported to the Commission at Q2 and Q4 via the council’s Improve system. • Annual Resource Plans which deliver the objectives of the Council Plan were reviewed and updated. These plans outline the outcomes and actions to be achieved within the year and reference linkages with other key strategic plans of the Council and partnership plans. • The Sustainable Development and Climate Change Strategy 2022-27 was approved by the Council in June 2022 and which sets out the Council’s strategic vision ,themes and priorities in terms of the Council, environment and communities for sustainable development and climate change during the period was developed using the principles of the United Na- tion’s Sustainable Development Goals and to reduce the council’s contribution to global warming. • The Council’s Climate Change and Sustainability Committee oversees the delivery of the Sustainable Development and Climate Change Strategy 2022-2027,the Council’s transition to carbon neutrality and climate resilience. • The Council’s Procurement Strategy 2023-28 which is complemented by an annual action plan, sets out how value for money, national and local priorities will be delivered. It also demonstrates how the Council will deliver the wider social, economic, and environmental aims of procurement as required by the sustainable procurement duty. • Sustainability principles are embedded in procurement processes and in recognition of the importance of our suppliers in achieving the Council’s aim to become more sustainable. • Strategic Environmental Assessments (SEAs) were completed for all relevant Council led policies, plans and strategies developed during 2023/2024. • The South Lanarkshire Local Development Plan 2 was adopted by the Council on 9 April 2021. The spatial strategy of the plan is to encourage sustainable economic growth and regeneration, a move towards a low carbon economy, protect the natural and historic environment and mitigate against the impacts of climate change. • A summary of the findings resulting from Equality Impact Assessments of the Council’s key decisions on service users, communities and businesses have been published on the Council’s website. • Strategic decisions of the Council have been subject to a Fairer Scotland Impact Assessment which considers how ine- qualities of outcome can be reduced. Principle D: Determining the interventions necessary to optimise the achievement of the intended outcomes Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Focused on people and their needs; Working with and respecting others How we do this: • . • There has been a programme of transformational reviews undertaken over recent years to identify savings and help man- age balancing the Councils budget. This programme is overseen by the Senior Management Team. Frameworks are in place for holding discussions with key stakeholders. Savings achievements are monitored monthly and reported to the Senior Management Team quarterly. • The Financial Strategy which is aligned with the Council’s objectives was updated during the year to reflect the latest internal and external influences. This plan sets out the assumptions in terms of commitments, grant funding and efficiency requirement and demonstrates sound financial management and the ability to address projected funding gaps. • The annual budget setting consultations took place with members of the public, groups and the Council’s partners in order to inform the budget process. The annual budget is open to scrutiny and amendment by councillors until the approval of the final budget. • The Council’s Performance Management Framework has ensured that progress against intended outcomes has been regularly reported to Management Teams; Committees; and the Performance and Review Scrutiny Forum. Decisions and actions to address performance issues have been taken and monitored to ensure that they have been effective. • The Council has complied with its statutory and regulatory reporting requirements during the year. • The Public Bodies (Joint Working) (Scotland) Act 2014 sets out those Adult Care Services that are delegated to the Inte- gration Joint Board (IJB) as set out in the South Lanarkshire Health & Social Care Integration Scheme. These services continue to be operationally delivered by the Council in line with the strategic direction set out in the Strategic Commis- sioning Plan and IJB Directions. • The Council considers the specification and achievement of community benefits, which focus on the health, economic, social, and environmental wellbeing of the South Lanarkshire area, when awarding contracts. 90
Page 91
5 • To improve efficiency and effectiveness, the Council is the lead authority for a range of collaborative projects and services delivered through the Clyde Valley Learning and Development Group. We also work closely with, and share services with partners including SLLC, IJB and Seemis. Principle E: Developing the entity’s capacity, including the capability of its leadership and the individuals within it Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Excellent employer; Focused on people and their needs; Working with and respecting others How we do this: • A Leadership Challenge Programme which is linked to succession planning was rolled out during 2023-24, and this is continuing. • Learning and Development programmes were revised and employees at all levels can now access optional accredited management qualifications. • Training requirements were identified and online learning and development opportunities including webinars and e-brief- ings were developed and offered to all councillors. • Feedback from 2022 survey on working from home/hybrid working is used to inform agile working arrangements. • A range of policies and activities are in place to support the Health and Wellbeing of employees including physical and mental health and these have been regularly communicated. Online wellbeing events were held in response to the new ways of working. • The Council recognises that skilled and motivated employees are a key asset. All employees have an annual performance appraisal which links to the Council values and a Personal Development Plan. The council offers a range of training interventions to support employee development. • The Council has a comprehensive and coordinated approach to workforce planning which also supports succession plan- ning. Each Resource reviews their workforce plan and related action plan to better understand workforce capacity issues, further challenges, and opportunities to ensure that resources are in the right place, at the right time and people have the right skills. The Council-wide Workforce plan has been revised to consider the workforce requirements as a result of the pandemic response. • Senior Managers have overseen the annual scrutiny of the Council’s assets through the review of a suite of Asset Man- agement Plans. Service Asset Management Plans have been developed in line with CIPFA guidance and these feed into the Corporate Asset Management Plan which outlines priorities and provides an overview of how the Council has performed in this area. • The Council’s Scheme of Delegation, Financial Regulations, Standing Orders on Contracts and Terms of Reference en- sured that Committees, officers, and statutory officers were clear on the decisions that could be made within their area of authority. This is supplemented by councillor’s role profiles which outline the key purpose, specific and core accountabili- ties for each role. • The Council continues to work with a range of public sector, business, and academic partners to improve outcomes for those living and working in South Lanarkshire. Strategic Partnerships include the Community Planning Partnership and the Glasgow City Region City Deal. • Local Government Benchmarking Framework (LGBF) results continue to be reported to the Performance Review and Scrutiny Forum, containing all LGBF indicators. As other reporting arrangements mature, the scale of this report may be reduced and the strategic suite of indicators aligned to Council Plan outcomes are featured in an appendix to the Council Plan Q4 report, giving an opportunity to assess the Council’s performance over time and comparative performance in the context of the Council Plan priorities. • Further LGBF indicators will feature in the Council’s public performance reporting, both in the Annual Performance Spot- lights and in the PPR pages on the website. These are topic-based and place the LGBF information in a richer context than is possible in the annual LGBF report. The results are analysed and an action plan developed which will be monitored by the Senior Management Team. • To complement this work, an LGBF dashboard has been developed to provide easy access to the LGBF indicators and the narrative that sits alongside them. The dashboard shows time trends for each of the strategic indicators aligned with the council plan outcomes and provides charts comparing SLC performance with both the Scottish and the family group average. • The Council takes a risk-based approach to self-assessment which is used to review and redesign services with a focus on fundamental change. Progress and the impact of improvement activity was reported to the Senior Management Team and the Performance and Review Scrutiny Forum. • The Council has a robust complaints process which is underpinned by national complaints handling standards. Complaints performance was regularly reported to Senior Management and Committee and learning from complaints which is integral to this process is also published on the Council’s website. Complaint handling procedures have been updated in line with national changes and communicated to all employees. Principle F: Managing risks and performance through robust internal control and strong public financial management Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving How we do this: 91
Page 92
6 • The Council, in partnership with Trade Unions, ensured that safe systems of work were in place through a robust risk assessment process, changes to working methods and supply of personal protective equipment. • The Council has put in place comprehensive arrangements for identifying, evaluating, and controlling significant risks which threaten the council’s ability to meet its objectives to deliver services to the public. There is also a robust process in place for compliance monitoring of the Council’s Risk Management Strategy, Resource Risk Registers and Control Plans. • The annual end of year compliance statement evidenced that all Resources were compliant with Risk Management Stra- tegic requirements. • The Council’s risk scoring matrix was revised as an outcome of the 2021/2022 annual review of risks. • The Council’s Internal Audit Service which complies with Public Sector Internal Audit Standards completed an annual programme of risk-based audits with an objective of providing an opinion on the adequacy and effectiveness of the Coun- cil’s risk management, governance, and internal control arrangements. Where improvements were required, action plans were developed and monitored and where necessary follow-up audit work completed. • In response to changes in working practices and the introduction of new systems, Internal Audit has advised on key internal controls that should be maintained. • The Information Governance Board is reasonably satisfied that Resources have followed the Information Governance operational arrangements to promote effective arrangements for the safe collection, storage, use and sharing of data, including processes to safeguard personal data, but this will be the subject of further work in 2024/25. • Information security incidents have continued to be monitored and considered for notification to the Information Commis- sioner’s Office. Throughout the period, the Council’s Data Protection Officer provided advice and assistance to Resources in relation to meeting their obligations under UK General Data Protection Regulations (GDPR). • The system of internal financial control is based upon the Financial Regulations which set out the rules to ensure robust internal control over the council’s finances. Control is maintained through regular management information, management supervision and a structure of delegation and accountability. • External Audit of the Council’s accounts is robust and a “clean audit certificate” was issued for 2022/2023. • Through a well-established Performance Management Framework, the Council has clearly defined processes in place for the identification, monitoring, and reporting of its objectives to ensure continued effectiveness and the achievement of Best Value. Progress is monitored and reported regularly to both managers and councillors. This includes areas of under- performance and the related improvement actions. • Trustees of the South Lanarkshire Charitable and Educational Trusts received independent legal training setting out their duties and responsibilities in ensuring that the trusts operate in a manner designed to benefit communities. • The Executive Director of Finance and Corporate Resources is a member of the Council’s Senior Management Team and as such, is integral in all major decisions taken by the Council, and in material matters which are submitted to councillors for decision. This involvement fulfils the expectation of CIPFA in terms of the role of the Chief Financial Officer. • The Council previously completed a self-assessment using the principles of the CIPFA Financial Management Code. Our existing financial management controls and measures continue to provide comfort on the Council’s financial manage- ment and resilience. This includes the preparation of a medium term strategy presented to members regularly as part of the annual budget process, providing members with the information required to assist budget planning. Principle G: Fair, Open and Sustainable; Implementing good practices in transparency, reporting, and audit to deliver effec- tive accountability Links to Council’s values: Accountable, effective, efficient, and transparent; Ambitious, self-aware, and improving; Working with and respecting others How we do this: • The Good Governance Group has completed the annual review of governance arrangements at resource level and in line with the CIPFA/SOLACE Delivering Good Governance Framework. Governance improvement actions have also been identified and are included in Resource/Service Action Plans. Progress against actions including those highlighted as significant governance areas for action will be reported to the Senior Management Team and Committee. • In the 2022/2023 annual audit report, the external auditor reported that the Council had in place appropriate arrangements to support good governance and accountability and they were of the view that governance arrangements remained effec- tive in 2022/23. • All Directors completed their annual Statement of Assurance and relevant assurances have been provided. • The Council prepares and publishes an Annual Governance Statement which is aligned with national guidance and reflects on the adequacy and effectiveness of the Council’s governance arrangements. This is independently considered by Ex- ternal Audit and published with the Annual Accounts and separately on a dedicated governance web page. • The annual review of governance arrangements for the Council’s at Arm’s Length External Organisations (ALEOs) and key external service providers has not highlighted any compliance issues. • The annual review of the Local Code of Corporate Governance was completed, and the revised Code was approved by Committee in March 2024 and re-published on the Council’s website. • all agendas, reports and decisions continue to be published (except those exempt under the Local Government (Scotland) Act 1973) on the Council’s website. All Committee and Forum meetings are livestreamed to the Council’s YouTube page http://bit.ly/SL_Committees. 92
Page 93
7 • The Risk and Audit Scrutiny Committee considered the adequacy and effectiveness of the Council’s governance arrange- ments and internal control environment and approved the Annual Governance Statement and Accounts. • Internal audit activity has continued to be reported to the Senior Management Team and to the Risk and Audit Scrutiny Committee. • Outcomes from external audit and inspection activity was reported to the appropriate Committee and action plans were developed for implementation where required. COVID-19 Pandemic Governance Arrangements The 2019/2020 Governance Statement set out the initial impacts of the Pandemic on the council’s governance arrangements. Since then, the Council, its partners and local community organisations have continued to strengthen the partnership approach adopted in response to the Pandemic, and the Council continues to manage any remaining impacts of the Pandemic through robust resilience arrangements and controls. As the Council moved through the different phases of response and recovery, changes to governance arrangements were made to comply with national guidance and legislation. In some cases new ways of working which were implemented to continue to maintain the delivery of essential business of the Council during the Pandemic have become embedded and now represent a ‘business as usual’ approach. Priority services were maintained throughout the Pandemic and many new services/processes established. Schools, nurse- ries, and the like adapted in accordance with national decisions and guidance. The Council and the Community Planning Partnership reviewed their priorities which were informed by ongoing dialogue with local communities, organisations, and businesses. Recovery was previously a significant area of work for the council and its partners and was highlighted as such in Section 7 of the 2021-2022 Annual Governance Statement. Given the above, and the passage of time since the Pandemic was at its height, it is antic- ipated that this is the last year this update will be provided in the Annual Governance Statement. This will, however, be kept under review by the Council. CIPFA Financial Management Code The Financial Management Code (FM Code) provides guidance for good and sustainable financial management in local authorities. By complying with the principles and standards within the code authorities will be able to demonstrate their financial sustainability. The following information sets out the Council’s level of compliance with the FM Code. The Council has reviewed the principles of the FM Code as part of its internal governance process. The Council previously com- pleted a self-assessment using the principles of the CIPFA Financial Management Code identifying areas to be progressed. Since then, budget consultation approach and a standard options appraisal process continue to be embedded across the Council, while our existing financial management controls and measures continue to provide comfort on the Council’s financial management and resili- ence. 6. Review of Effectiveness The review of governance arrangements for 2023/2024 has also considered the following assurance outcomes: - 93
Page 94
8 Group Assurances In respect of the Joint Boards, Charities and Companies that fall within the Council’s group boundary, the review of their internal financial control systems is informed by: - • Annual Governance Statements included in the respective financial statements of the Joint Boards. • Assurances from company directors and/or other senior company officials; and • The work of the relevant body’s respective external auditors (and where relevant internal auditors) and other interim reports. The Executive Director of Finance and Corporate Resources, the Council’s Chief Financial Officer, has considered the effectiveness of the group’s internal financial control system for the year ended 31 March 2024. It is the Executive Director of Finance and Corporate Resources’ opinion that reasonable assurance can be placed on its effectiveness. Internal Assurance It is the opinion of the Council’s Risk Management Service that a reasonable level of assurance can be placed on the Council’s strategic risk control environment and a reasonable level of assurance can be placed on the council’s operational risk control environment. It is the opinion of the Council’s Audit and Compliance Manager that, overall, reasonable assurance can be placed on the adequacy and effectiveness of the council’s framework of governance, risk management and control arrangements for the year ending 31 March 2024. 7. Significant Governance Areas The 2022/2023 Annual Governance Statement identified 10 significant governance areas that the Council were working to address. Progress updates can be found on the Council’s website; see the Significant Governance Areas Update Q4 2022/2023. Six of these areas remain as significant areas of action for the Council moving forward into 2024/2025 and will continue to be monitored as such. Through the 2023/2024 annual governance review, the following areas, which include an outline of the actions being taken to address them, have been identified as significant areas of work for the Council during 2024/2025:- No. Areas identified in 2023/2024 Actions Lead Officer 1 Cyber Resilience Compliance with legislative and regulatory policy A programme of actions to maintain cyber security and resilience in 2024/2025 will include: • Refresh/retiral of legacy systems, network equipment and end user devices (mobile phones, PCs) • Programme of security patching of all systems • Compliance with PSN and Cyber Essentials schemes • Incident response • Officer training and awareness (e.g., phishing) • Data security reviews as part of new system installation and security monitoring Executive Director of Finance and Corporate Re- sources 2 Digital Modernisation Deliver the implementation of new digital solutions that will support the wider transformation of the Council, in- cluding the more efficient and effective delivery of ser- vices, to internal and external service users. This will include the implementation of Oracle Fusion (Finance & Corporate Resources), Liquidlogic (Social Work) and HOME (Housing & Technical Resources). Executive Director of Finance and Corporate Re- sources 3 Financial Challenges Exceptional increase in costs, re- duction in council funding, result- ing in difficulties maintaining front line services The Council faces a challenging situation in the me- dium to long-term because of reduced funding in real terms, rising costs and an increase in demand. The Council has developed a long-term strategy which identifies budget pressures, future risks and uncertain- ties, and projects budget gaps to 2027/2028. The Budget Strategy for 2025/2026 will be updated and presented to councillors in 2024. Chief Executive Director of Fi- nance and Corpo- rate Resources 4 Integration Joint Board – Health and Social Care The current strategic direction set out and approved by the IJB is detailed within the Strategic Commissioning Director, Health and Social Care, 94
Page 95
9 No. Areas identified in 2023/2024 Actions Lead Officer The need for the Council to de- liver the objectives set out in the Integrated Joint Board (IJB) Stra- tegic Commissioning Plan 2022- 25 Plan. The council and NHS Board are required to de- ploy their resources in line with this strategic direction. The IJB issues Directions that set out the key actions to be delivered by the Council. This includes directions in respect of the actions required in order for the IJB to deliver the balanced budget agreed at its meeting in March 2024. The IJB monitors progress in respect of these Direc- tions. South Lanarkshire Health, and Social Care Partnership 5 Homelessness The Council has seen unprecedented need and de- mand for statutory homelessness services including the need for temporary accommodation. Presentations lev- els during 2023/24 are the highest in the Council since records began, placing significant pressure on the ser- vice and the general services fund. A range of mitigations were approved at H&TR Com- mittee on 7 February 2023 and these are now in place with managing and monitoring actions in place. Temporary accommodation solutions continue to be ex- plored to minimise breaches of the unsuitable accom- modation order and costs incurred through the use of B&B. Other implications such as the Prisoner Early Release, increased asylum levels, continued removal of local connection and potentially new duties of ‘Ask & Act’ within the new Housing Bill could have consequences for the service. Director of Hous- ing & Technical Resources 6 Sustainable Development and Climate Change A new Strategy for 2022-2027 was developed and pre- sented to Council in June 2022 for approval together with the Council Plan and Community Plan. An Action Plan was developed for the first year of the Strategy, and this . continues to be implemented and reviewed annually with progress updates being reported to the Climate Change and Sustainability Committee on a 6 monthly basis. Following a period of public consultation, the council will introduce its first Local Heat & Energy Efficiency Strategy (LHEES) in June 2024. Subject to the availa- bility of finance and taking account of the need to ad- dress inequalities and just transition, the introduction of the LHEES will be a key component of a long-term strategy to reduce of carbon emissions, and reduce fuel poverty by 2045. Director of Com- munity and Enter- prise Resources 7 Economic Strategy The new draft Economic Strategy 2022-2027 has been developed and approved by Council on 15th June 2022 as part of a suite of documents accompanying the draft Council Plan and Community Plan. The vision within the Strategy is “to make South Lanarkshire a flourish- ing, green, dynamic and equitable place for communi- ties, visitors, businesses and investors”. The Strategy is framed around the 3 themes of sustainable, inclu- sive, economic development- People, Place and Busi- ness. Progress on the delivery of the Action Plan will be measured 6-monthly with the results being reported an- nually to the relevant committees. Director of Com- munity and Enter- prise Resources 95
Page 96
10 No. Areas identified in 2023/2024 Actions Lead Officer The Council will continue to lead on local economic re- covery for South Lanarkshire businesses through pro- motion of local economic support networks and contri- bution to the pan-Lanarkshire Economic Forum. The Council will also take forward its plans for the re- generation of Hamilton and East Kilbride, and the deliv- ery of projects through its participation in the Glasgow City Region Deal. 8 South Lanarkshire Leisure and Culture Work in partnership with SLLC to develop relationship, in particular around commissioning, use of assets and financial sustainability. Director of Com- munity and Enter- prise Resources 9 Recruitment and Retention Challenges The labour market has tightened and employees have more mobility through agile working which is not neces- sarily tied to a geographical location. In addition some older workers have reassessed priorities and taken up an option for partial or full retiral earlier than they would have done previously. As a result there are a number of skills in short supply nationally and this is putting pressure on local govern- ment services. Examples of this include HGV drivers, procurement and Social Care. The impact on Senior Manager recruitment and retention is also clear and turnover at this level is closely monitored. South Lanarkshire Council has experienced these is- sues and is taking the following actions:- • Workforce Plans were refreshed to reflect the changed environment by 30 June 2022. The updated plans were reported to the relevant Resource Committees in September and Oc- tober 2022 and are being delivered. • A grow your own approach is being used in key areas (recruited graduates in Procure- ment) and this will continue • Further increasing social media recruitment and use of job fairs • Employability routes will continue to be de- fined for skills shortage areas (e.g. Social care) • Enhanced employee support arrangements are in place and well developed Chief Executive and all Directors 8. Summary The annual review of governance arrangements across the Council and overall compliance with the Council’s Code demonstrate suf- ficient evidence that the Code’s principles of Delivering Good Governance in Local Government operated effectively, and that the Council complies with its Code. During 2024/2025, steps will be taken to address the significant governance areas highlighted in this statement to further strengthen the council’s governance arrangements and evidence our commitment to continuous improvement. 96
Page 97
11 Joe Fagan Leader of the Council Signature: Date: Paul Manning Chief Executive Signature: Date: 97
Page 98
12 Statement of Responsibilities The council is required to: ▪ Make arrangements for the proper administration of its financial affairs and to secure that the proper officer has responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). South Lanarkshire Council has designated the Executive director of Finance and Corporate Resources as the officer with these responsibilities. ▪ Manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets. ▪ Ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003). ▪ Approve the Annual Accounts for signature. Councillor Joe Fagan Leader of the Council Executive Director of Finance and Corporate Resources’ responsibilities The Executive Director of Finance and Corporate Resources is responsible for the preparation of the council’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing the Annual Accounts, the Executive Director of Finance and Corporate Resources has: ▪ selected suitable accounting policies and then applied them consistently. ▪ made judgements and estimates that were reasonable and prudent. ▪ complied with legislation. ▪ complied with the local authority Accounting Code (in so far as it is compatible with legislation) The Executive Director of Finance and Corporate Resources has also: ▪ kept proper accounting records which were up-to-date. ▪ taken reasonable steps for the prevention and detection of fraud and other irregularities. Annual Accounts I certify that the financial statements give a true and fair view of the financial position of the council (and its group) at the reporting date and the transactions of the council (and its group) for the year ended 31 March 2024. Jackie Taylor Executive Director (Finance and Corporate Resources) South Lanarkshire Council 98
Page 99
13 Remuneration Report Remuneration Policy Senior Employees The salary of senior employees is set by reference to national arrangements. The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services sets the salaries for the Chief Officers of Scottish local authorities. COSLA Industrial Relations Circular 11-23b sets the amount of salary for Chief Officers and the Chief Executive of South Lanarkshire Council for 2023/2024. Senior Councillors The remuneration of councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI No. 2007/183) as amended most recently by the Local Governance (Scotland) Act 2004 (Remuneration) Amendment Regulations 2023 (SSI 2023/21). The Regulations provide for the grading of councillors for the purposes of remuneration arrangements, as either the Leader of the Council, the Civic Head (or Provost), Senior Councillors or Councillors. The Leader of the Council and the Civic head (or Provost) cannot be the same person for the purposes of payment of remuneration. A Senior Councillor is a Councillor who holds a significant position of responsibility in the Council’s political management structure. The salary that is to be paid to the Leader of the Council is set out in the Regulations. For 2023/2024 the salary for the Leader of the Council is £46,902. The Regulations permit the Council to remunerate one Civic Head or Provost. The regulations set out the maximum salary that may be paid to that Civic Head. The Council follows the regulations and pays a salary of £35,179 to the Provost. The Regulations also set out the remuneration that may be paid to Senior Councillors and the total number of Senior Councillors the Council may have. The maximum yearly amount that may be paid to a Senior Councillor is 75 per cent of the total yearly amount payable to the Leader of the Council. The total yearly amount payable by the Council for remuneration of all of its Senior Councillors shall not exceed £525,117 (excluding the Leader and Provost). The Council is able to exercise local flexibility in the determination of the precise number of Senior Councillors up to a maximum of 19 and their salary within these maximum limits. In 2023/2024, the Council had 19 Senior Councillors and the salary paid to these councillors totalled £515,595 which is less than the threshold. The Regulations also permit the Council to pay contributions or other payments as required to the Local Government Pension Scheme in respect of those Councillors who elect to become Councillor members of the pension scheme. In addition to the Senior Councillors of the Council the Regulations also set out the remuneration payable to Councillors with the responsibility of a Convenor or a Vice-Convenor of a Joint Board. The Regulations require the remuneration to be paid by the Council of which the Convenor or Vice-Convenor is a member. The Council is also required to pay any pension contributions arising from the Convenor or Vice-Convenor being a member of the Local Government Pension Scheme. The Council is reimbursed by the Joint Board for any additional remuneration paid to the member from being a Convenor or Vice-Convenor of a Joint Board. Audit Arrangements All information disclosed in the tables numbered 1 to 6 in this Remuneration Report will be audited by the Council’s auditors, Audit Scotland. The other sections of the Remuneration Report will be reviewed by Audit Scotland to ensure that they are consistent with the financial statements. Note 14 to the Accounts contains total payments made to all Councillors and will be audited as part of the audit of the Financial Statements and supplementary Notes to the Accounts. 99
Page 100
14 Table 1 – General Pay Band Disclosure for Senior Employees Annual Remuneration 2023/24 Number of Employees 2022/23 Number of Employees 50,000 - 54,999 1,521 365 55,000 - 59,999 371 254 60,000 - 64,999 216 152 65,000 - 69,999 204 99 70,000 - 74,999 163 23 75,000 - 79,999 87 20 80,000 - 84,999 50 4 85,000 - 89,999 7 3 90,000 - 94,999 6 4 95,000 - 99,999 7 6 100,000 - 104,999 6 13 105,000 - 109,999 3 1 110,000 - 114,999 16 2 115,000 – 119,999 2 - 120,000 – 124,999 - - 125,000 – 129,999 1 - 130,000 – 134,999 - - 135,000 – 139,999 1 - 140,000 - 144,999 1 1 145,000 - 149,999 1 2 150,000 - 154,999 3 - 155,000 - 159,999 - 1 160,000 – 164,999 - - 165,000 – 169,999 1 - 170,000 – 184,999 (Note 1) - - 185,000 – 189,999 - 1 Note 1: These are merged pay bands covering more than £5,000 due to the fact that no employees fell into these bands in either financial year. 100
Page 101
15 Disclosure of Exit Packages The number of exit packages with total cost per band and total cost of the compulsory and other redundancies are set out in the table below. Table 2 – Exit Packages Exit package cost band (including special payments) £ Number of Compulsory Redundancies 2023/24 Number of Compulsory Redundancies 2022/23 Number of Other Departures Agreed 2023/24 Number of Other Departures Agreed 2022/23 Total Number of Exit Packages by cost Band 2023/24 Total Number of Exit Packages by cost Band 2022/23 Cash Value £ 2023/24 Notional CAY Value £ 2023/24 Total Cost Of Exit Packages In Each Band £ 2023/24 Cash Value £ 2022/23 Notional CAY Value £ 2022/23 Total Cost Of Exit Packages In Each Band £ 2022/23 0 - 20,000 - - - - - - - - - - - - 20,001 - 40,000 - - - - - - - - - - - - 40,001 - 60,000 - - - - - - - - - - - - 60,001 - 80,000 - - - - - - - - - - - - 80,001 - 100,000 - - - - - - - - - - - - 100,001 - 150,000 - - - - - - - - - - - - >150,000 - - - - - - - - - - - - Total - - - - - - - - - - - - Provision - - - - - - - - - - - - Total incl Provisions - - - - - - - - - - - - There were no exit packages agreed by the Council in 2023/2024, therefore the total cost of exit packages shown for 2023/2024 totals is nil. The table does not include any provisions as there are no known exit packages that relate to employees who will leave the Council in the coming year (2024/2025). 101
Page 102
16 Disclosure of Remuneration The tables below provide details of the remuneration paid to the Council’s Senior Employees and Senior Councillors and to the Chief Executive or most senior manager of subsidiary bodies (South Lanarkshire Leisure and Culture Ltd and Routes to Work South). Comparative figures for 2022/2023 have been shown if they were in post at that time. We have also disclosed the remuneration of Councillors who hold Convenor and Vice-Convenor roles with Joint Boards. The Council pays the Councillor on behalf of the Joint Board for their role and recovers these charges from the Joint Board. The annual return of Councillors’ remuneration for 2023/2024 is available on the Council’s website (www.southlanarkshire.gov.uk). Table 3 – Senior Officers Post Salary / fees £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ C Sneddon Chief Executive (To 2 January 2024) 147,017 (Full Year Equivalent 193,577) - - - 147,017 (Full Year Equivalent 193,577) 187,395 P Manning Executive Director of Finance and Corporate Resources (To 2 January 2024) Chief Executive and Executive Director of Finance and Corporate Resources (From 3 January 2024 to 10 March 2024) Chief Executive (From 11 March 2024) 125,011 (Full Year Equivalent 165,587) 44,304 (Full year Equivalent 180,793) - - - - - - 125,011 (Full Year Equivalent 165,587) 44,304 (Full year Equivalent 180,793) 159,142 J Taylor Section 95 Officer (From 3 January 2024 to 10 March 2024) Executive Director of Finance and Corporate Resources (From 11 March 2024) 20,976 (Full Year Equivalent 114,056) 8,772 (Full Year Equivalent 152,631) - - - - - - 20,539 (Full Year Equivalent 114,056) 9,357 (Full Year Equivalent 152,631 n/a D Booth Executive Director of Community and Enterprise Resources 154,778 - - - 154,778 143,924 102
Page 103
17 Post Salary / fees £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ S Gibson Executive Director of Housing and Technical Resources (From 21 November 2022) 152,631 - - - 152,631 52,386 (Full Year Equivalent 143,924) T McDaid Executive Director of Education Resources (To 16 June 2023) 33,066 (Full Year Equivalent 156,911 - - - 33,066 (Full Year Equivalent 156,911 147,959 C McKenzie Executive Director of Education Resources (From 19 June 2023) 119,883 (Full Year Equivalent 152,631 - - - 119,883 (Full Year Equivalent 152,631 n/a S Sengupta Executive Director of Health and Social Care (Note 1) 156,911 - - - 156,911 145,948 L Purdie Chief Social Work Officer 118,363 - - - 118,363 111,118 D Lowe Executive Director of Housing and Technical Resources (To 30 September 2022) - - - - - 74,263 (Full year Equivalent 147,959) A Finnan Acting Executive Director of Housing and Technical Resources (From 3 October 2022 to 20 November 2022 - - - - - 19,300 (Full Year Equivalent 143,924) Total 1,081,712 - - - 1,081,712 1,041,435 The senior employees included in the table include any local authority employee: • Who has responsibility for management of the local authority to the extent that the person has power to direct or control the major activities of the authority (including activities involving the expenditure of money), during the year to which the Report relates, whether solely or collectively with other persons. • Who holds a post that is politically restricted by reason of section 2(1) (a), (b) or (c) of the Local Government and Housing Act 1989; or • Whose annual remuneration, including any remuneration from a local authority subsidiary body, is £150,000 or more. 103
Page 104
18 The total remuneration includes Returning Officer (RO) and Petition Officer (PO) fees. An RO is the person responsible for administering an election and a PO is the person responsible for administering a Recall Petition. These duties are separate from any duties undertaken as a local government employee. The total RO fee for a UK Parliament By-election is set by legislation for the election in question. The total PO fee for administering a recall petition is set by legislation. The total RO fee for a local government election is based upon rate agreed by COSLA and the arrangements set out in the COSLA Circular CO/145 of July 2008. The RO and PO can appoint one or more persons to discharge any or all of the functions of the post but cannot delegate personal responsibility for delivering the election. Cleland Sneddon was the RO and PO appointed by South Lanarkshire Council during the financial year 2023/2024 and carried out his duties as RO for the East Kilbride West By- election on 6 July 2023, PO for the Rutherglen and Hamilton West recall Petition from 6 June until 31 July 2023, and as RO for the Rutherglen and Hamilton West By-election on 5 October 2023. Note 1 While the Executive Director of Health and Social Care is contractually employed by the Council, a proportion of their total remuneration is funded by the South Lanarkshire Health and Social Care Partnership in respect of their role as Chief Officer of the Partnership. Table 4 - Senior Employees of the Council’s Subsidiary Bodies Name and Post Salary/fees Taxable Expenses £ Compensation for Loss of office £ Any other Remuneration £ 2023/24 Total £ 2022/23 Total £ K Morrison General Manager of South Lanarkshire Leisure and Culture Ltd 111,118 - - - 111,118 100,844 S Barr Chief Executive of Routes to Work South 82,396 - - - 82,396 77,705 Total 193,514 - - - 193,514 178,549 Table 5 - Remuneration of Senior Councillors and Convenors and Vice-Convenors of Joint Boards The table below shows the full year remuneration for all senior councillors in 2023/2024. This includes senior councillors who started or ended their role during the year. Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ A Allison Opposition Leader – Conservative (From 1 April 2022 to 5 May 2022) Opposition Leader – Second Opposition (From 18 May 2022 to 31 March 2024) - 26,602 - - - - - - - 26,602 2,484 (Full Year Equivalent 25,903) 22,568 (Full Year Equivalent 25,903) 104
Page 105
19 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ R Brown Community and Enterprise Resources Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) A Buchanan East Kilbride Area Committee Chair (From 1 April 2022 to 5 May 2022) East Kilbride Area Committee Chair (From 18 May 2022 to 31 March 2024) - 24,001 - - - - - - - 24,001 2,241 (Full Year Equivalent 23,370) 20,361 (Full Year Equivalent 23,370) A Carmichael Licensing Committee Chair (From 18 May 2022 to 31 March 2024) 24,001 - - - 24,001 20,361 (Full Year Equivalent 23,370) M Chalmers Depute Leader of the Council (From 1 April 2022 to 5 May 2022) Depute Opposition Leader (From 18 May 2022 to 31 March 2024) - 26,602 - - - - - - - 26,602 2,848 (Full Year Equivalent 29,705) 22,568 (Full Year Equivalent 25,903) G Convery Depute Opposition Leader – Labour (From 1 April 2022 to 5 May 2022) Depute Leader (From 18 May 2022 to 31 March 2024) - 30,507 - - - - - - - 30,507 2,484 (Full Year Equivalent 25,903) 25,880 Full Year Equivalent 29,705) 105
Page 106
20 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ M Cooper Provost (From 18 May 2022 to 31 March 2024) 35,179 - - - 35,179 31,795 (Full Year Equivalent 36,206) M Devlin Business Manager – Opposition (From 1 April 2022 to 5 May 2022) Business Manager Ruling Group (From 18 May 2022 to 31 March 2024) - 30,507 - - - - - - - 30,507 2,241 (Full Year Equivalent 23,370) 25,880 (Full Year Equivalent 29,705) J Fagan Opposition Leader – Labour (From 1 April 2022 to 5 May 2022) Leader of the Council (From 18 May 2022 to 31 March 2024) - 46,902 - - - - - - - 46,902 2,848 (Full Year Equivalent 29,705) 39,788 (Full Year Equivalent 45,669) A Falconer Hamilton Area Committee Chair (From 18 May 2022 to 31 March 2024) 24,001 1,126 - - 25,127 20,361 (Full Year Equivalent 23,370) L Hamilton Education Resources Committee Chair (From 18 May 2022 to 15 January 2023) Education Resources Committee Chair (From 16 April 2023 to 31 March 2024) - 28,363 (Full Year Equivalent 29,579) - - - - - - - 28,363 (Full Year Equivalent 29,579) 19,174 (Full Year Equivalent 28,800) - 106
Page 107
21 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ M Horsham Business Manager Opposition (From 18 May 2022 to 22 October 2023) 13,480 (Full Year Equivalent 24,001) - - - 13,480 (Full Year Equivalent 24,001) 20,361 (Full Year Equivalent 23,370) G Keatt Education Resources Committee Chair (From 16 January 2023 to 15 April 2023) 1,216 (Full Year Equivalent 29,579) - - - 1,216 (Full Year Equivalent 29,579) 5,918 (Full Year Equivalent 28,800) C McClymont Clydesdale Area Committee Chair (From 18 May 2022 to 31 March 2024) 24,001 - - - 24,001 20,361 (Full Year Equivalent 23,370) L McDonald Finance and Corporate Resources Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) M McGeever Climate Change Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) D McLachlan Housing and Technical Resources Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) R Nelson Planning Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) 107
Page 108
22 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ C Nugent Cambuslang and Rutherglen Area Committee Chair (From 1 April 2022 to 5 May 2022) Cambuslang and Rutherglen Area Committee Chair (From 18 May 2022 to 31 March 2024) - 24,001 - - - - - - - 24,001 2,241 (Full Year Equivalent 23,370) 20,361 (Full Year Equivalent 23,370) J Ross Leader of the Council (From 1 April 2022 to 5 May 2022) Opposition Leader – First Opposition (From 18 May 2022 to 31 March 2024) - 30,507 - - - - - - - 30,507 4,379 (Full Year Equivalent 45,669) 25,880 (Full Year Equivalent 29,705) G Thomson Depute Provost (From 18 May 2022 to 31 March 2024) 29,206 - - - 29,206 24,916 (Full Year Equivalent 28,578) M Walker Social Work Resources Committee Chair (From 18 May 2022 to 31 March 2024) 29,579 - - - 29,579 25,092 (Full Year Equivalent 28,800) J Anderson Community and Enterprise Resources Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) J Bradley Social Work Resources Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) 108
Page 109
23 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ P Craig Business Manager Majority Party (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) M Donnelly Hamilton Area Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,241 (Full Year Equivalent 23,370) I Dorman Planning Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) G Ferguson-Miller Finance and Corporate Resources Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) R Lockhart Clydesdale Area Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,241 (Full Year Equivalent 23,370) K Loudon Education Resources Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) I McAllan Provost (From 1 April 2022 to 5 May 2022) - - - - - 3,285 (Full Year Equivalent 34,254) D Shearer Licensing Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,241 (Full Year Equivalent 23,370) 109
Page 110
24 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2023/24 Total £ 2022/23 Total £ J Wilson Housing and Technical Resources Committee Chair (From 1 April 2022 to 5 May 2022) - - - - - 2,848 (Full Year Equivalent 29,705) Total 596,550 1,126 - - 597,676 568,795 Councillors with Joint Board Responsibilities W Brogan Convenor Lanarkshire Valuation Joint Board (From 27 June 2022 to 31 March 2024) 25,128 - - - 25,128 18,635 (Full Year Equivalent 24,467) L Hamilton Depute Convenor Lanarkshire Valuation Joint Board (From 1 April 2022 to 5 May 2022) - - - - - 2,229 (Full Year Equivalent 23,244) Total 25,128 - - - 25,128 20,864 The Council is reimbursed by Lanarkshire Valuation Joint Board for the additional remuneration that the Council paid to the member for being a Convenor of the Joint Board. The following recharges were made to Joint Boards for South Lanarkshire Council Councillors holding Convenor/Depute Convenor roles: • Recharge to Lanarkshire Valuation Joint Board in 2023/2024 - £5,029 (2022/2023 - £4,081) Pension Rights Pension benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS). Councillors’ pension benefits are based on career average pay. The councillor’s pay for each year or part year ending 31 March (other than the pay in the final year commencing 1 April) is increased by the increase in the cost of living, as measured by the appropriate index (or indices) between the end of that year and the last day of the month in which their membership of the scheme ends. The total of the revalued pay is then divided by the period of membership to calculate the career average pay. This is the value used to calculate the pension benefits. Local government employees had a final salary pension scheme prior to 1 April 2015. This means that pension benefits are based on the final year’s pay and the number of years that person has been a member of the scheme. As of 1 April 2015, local government employees are now part of a defined benefit pension scheme worked out on a career average basis. Benefits built up are calculated using pensionable pay each scheme year, rather than final salary. All benefits built up prior to this date are protected. From 1 April 2009, a five-tier contribution system was introduced with contributions from scheme members based on how much pay falls into each tier. This is designed to give more equality between the costs and benefits of scheme membership. Under The Local Government Pension Scheme (Scotland) Regulations 2014, the earnings ranges used to determine annual contribution rates are to be increased each year by any increase applied to pensions under the Pensions (Increase) Act 1971. In accordance with this the salary bands for 2022/2023 were uprated by the Consumer Prices Index (CPI) increase for 2023/2024. The member contribution rates and tiers for 2023/2024 are shown below along with those that applied in 2022/2023: 110
Page 111
25 Pensionable Pay Contribution rate 2023/24 Pensionable Pay Contribution rate 2022/23 On earnings up to an including £25,300 5.50% On earnings up to an including £23,000 5.50% On earnings above £25,300 and up to £31,000 7.25% On earnings above £23,000 and up to £28,100 7.25% On earnings above £31,000 and up to £42,500 8.50% On earnings above £28,100 and up to £38,600 8.50% On earnings above £42,500 and up to £56,600 9.50% On earnings above £38,600 and up to £51,400 9.50% On earnings above £56,600 12.00% On earnings above £51,400 12.00% From April 2015, if a person works part-time their contribution is based on their part-time pay. Prior to this, if a person worked part-time, their contribution rate was worked out on the whole-time pay rate for the job, with actual contributions paid on actual pay earned. There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limit set by the Finance Act 2004. From 1 April 2015, benefits are calculated on the basis of a revalued annual pension built up of 1/49th of pensionable pay each year, plus inflation to keep up with the cost of living. Prior to this date, the accrual rate guaranteed a pension based on 1/60th of final pensionable salary and years of pensionable service and prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service. The value of the benefits has been calculated without exercising any option to commute pension entitlement into a lump sum and without any adjustment for the effects of future inflation. In those cases where members have transferred pension entitlements from previous employments, the pension figures shown relate to the benefits that the person has accrued as a consequence of their total local government service, and not just their current appointment. It also reflects both employer and employee contributions. Table 6 – Pension Benefits: Senior Employees The Pension entitlement of Senior Employees for the year to 31 March 2024 are shown in the table below, together with the contribution made by the council to each senior employees’ pension during the year. The accrued pension benefit reflects both the employer and the employee contributions. Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2022/23 £ C Sneddon Chief Executive (To 2 January 2024) Pension Lump Sum 90 134 3 8 28,374 34,555 111
Page 112
26 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2022/23 £ P Manning Executive Director of Finance and Corporate Resources (To 2 January 2024) Chief Executive and Executive Director of Finance and Corporate Resources (From 3 January 2024 to 10 March 2024) Chief Executive (From 11 March 2024) Pension Lump Sum 82 104 10 5 24,127 8,551 30,114 J Taylor Section 95 Officer (From 3 January 2024 to 10 March 2024) Executive Director of Finance and Corporate Resources (From 11 March 2024) Pension Lump Sum 54 56 n/a n/a 4,048 1,693 n/a n/a D Booth Executive Director of Community and Enterprise Resources Pension Lump Sum 67 99 9 8 29,872 27,777 S Gibson Executive Director of Housing and Technical Resources (From 21 November 2022) Pension Lump Sum 6 - 5 - 29,458 10,111 T McDaid Executive Director of Education Resources (To 16 June 2023) Pension Lump Sum 54 71 4 - 6,382 28,556 C McKenzie Executive Director of Education Resources (From 19 June 2023) Pension Lump Sum 19 - n/a n/a 23,137 n/a S Sengupta Executive Director of Health and Social Care (Note 1) Pension Lump Sum 8 - 3 - 30,284 28,168 112
Page 113
27 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2022/23 £ L Purdie Chief Social Work Officer Pension Lump Sum 60 84 6 5 22,844 21,446 D Lowe Executive Director of Housing and Technical Resources (To 30 September 2022) Pension Lump Sum n/a n/a n/a n/a - 14,333 A Finnan Acting Executive Director of Housing and Technical Resources (From 3 October 2022 to 20 November 2022 Pension Lump Sum n/a n/a n/a n/a - 3,725 Total 208,770 198,785 All senior employees shown in the table above are members of the Local Government Pension Scheme (LGPS). Where employees have joined the council but not transferred previous employment pension benefits into the Strathclyde Pension Fund the pension figures shown relate only to their current appointment, otherwise the figures shown relate to the benefits that the pension has accrued as a consequence of their total local government service including payments for election duties. Table 7 – Pension Benefits: Senior Employees of the Council’s Subsidiary Bodies Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution 2023/24 £ Pension Contribution 2022/23 £ K Morrison General Manager of South Lanarkshire Leisure and Culture Ltd Pension Lump Sum 24 19 21 19 21,466 19,463 S Barr Chief Executive of Routes to Work South Pension Lump Sum - - - - 6,592 6,216 Total 28,038 25,679 Routes to Work South operates a defined contributions scheme for its employees. Accordingly, the only information to be provided in respect of its senior employees is the amount of any pension contributions made to that scheme by the subsidiary body. Table 8 – Pension Benefits: Senior Councillors The Pension entitlement of Senior Councillors for the year to 31 March 2020 are shown in the table below, together with the contribution made by the council to each Senior Councillors’ pension during the year. The accrued pension benefit reflects both the employer and the employee contributions. 113
Page 114
28 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2023/24 £ A Allison Opposition Leader – Conservative (From 1 April 2022 to 5 May 2022) Opposition Leader – Second Opposition (From 18 May 2022 to 31 March 2024) Pension Lump Sum 4 - 1 - 5,134 4,835 A Buchanan East Kilbride Area Committee Chair (From 1 April 2022 to 5 May 2022) East Kilbride Area Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 8 2 1 - 4,632 4,362 M Chalmers Depute Leader of the Council (From 1 April 2022 to 5 May 2022) Depute Opposition Leader (From 18 May 2022 to 31 March 2024) Pension Lump Sum 4 - 1 - 5,134 4,905 G Convery Depute Opposition Leader – Labour (From 1 April 2022 to 5 May 2022) Depute Leader (From 18 May 2022 to 31 March 2024) Pension Lump Sum 1 - - - 5,888 1,995 M Cooper Provost (From 18 May 2022 to 31 March 2024) Pension Lump Sum 6 - 2 - 6,790 5,760 M Devlin Business Manager – Opposition (From 1 April 2022 to 5 May 2022) Business Manager Ruling Group (From 18 May 2022 to 31 March 2024) Pension Lump Sum 6 - 1 - 5,888 5,427 114
Page 115
29 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2023/24 £ J Fagan Opposition Leader – Labour (From 1 April 2022 to 5 May 2022) Leader of the Council (From 18 May 2022 to 31 March 2024) Pension Lump Sum 5 - 2 - 9,052 8,299 A Falconer Hamilton Area Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 5 - 1 - 4,632 3,930 L Hamilton Education Resources Committee Chair (From 18 May 2022 to 15 January 2023) Education Resources Committee Chair (From 16 April 2023 to 31 March 2024) Pension Lump Sum 6 - 1 - 5,474 3,700 M Horsham Business Manager Opposition (From 18 May 2022 to 22 October 2023) Pension Lump Sum 3 - 1 - 2,602 3,930 G Keatt Education Resources Committee Chair (From 16 January 2023 to 15 April 2024) Pension Lump Sum 1 - - - 235 1,142 C McClymont Clydesdale Area Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 6 - 2 - 4,632 3,930 L McDonald Finance and Corporate Resources Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 1 - - - 5,709 4,843 M McGeever Climate Change Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 3 - 1 - 5,709 4,843 115
Page 116
30 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2023/24 £ D McLachlan Housing and Technical Resources Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 8 - 1 - 5,709 4,843 R Nelson Planning Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 3 - - - 5,709 4,843 G Thomson Depute Provost (From 18 May 2022 to 31 March 2024) Pension Lump Sum 1 - - - 5,637 4,782 M Walker Social Work Resources Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum 3 - - - 5,709 4,843 J Anderson Community and Enterprise Resources Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 J Bradley Social Work Resources Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 R Brown Community and Enterprise Resources Committee Chair (From 18 May 2022 to 31 March 2024) Pension Lump Sum n/a n/a n/a n/a - 3,335 P Craig Business Manager Majority Party (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 I Dorman Planning Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 G Ferguson-Miller Finance and Corporate Resources Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 116
Page 117
31 Name and Post Title Accrued Pension Benefits to 31 March 2024 £000 Movement in Accrued pension Benefits since 31 March 2023 £000 Pension Contribution Made by the Council 2023/24 £ Pension Contribution Made by the Council 2023/24 £ K Loudon Education Resources Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 550 I McAllan Provost (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 634 D Shearer Licensing Committee Chair (From 1 April 2022 to 5 May 2022) Pension Lump Sum n/a n/a n/a n/a - 433 Total 94,275 88,914 Councillors with Joint Board Responsibilities W Brogan Convenor Lanarkshire Valuation Joint Board (From 27 June 2022 to 31 March 2023) Pension Lump Sum 8 2 1 2 4,850 3.597 L Hamilton Depute Convenor Lanarkshire Valuation Joint Board (From 1 April 2022 to 5 May 2022) Pension Lump Sum - - - - - - 430 Total 4,850 4,027 All Senior Councillors shown in the table above are members of the Local Government Pension Scheme (LGPS). The pension figures shown relate to the benefits that the pension has accrued as a consequence of their total local government service and not just their current appointment. The council is reimbursed by the Joint Board for the additional pension contributions paid by the council for the Convenor. The following recharges were made to Joint Boards for South Lanarkshire Council Councillors holding Convenor roles: Recharge to Lanarkshire Valuation Joint Board in 2023/2024 - £971 (2022/2023 - £788) 117
Page 118
32 Trade Union Facility Time In addition to the regulation governing Senior Employees and Councillors, the Trade Union (Facility Time Publication Requirements) Regulations 2017, which apply from 1 April 2017, require public sector employers to collect and publish a range of information on trade union facility time in respect of their employees who are Trade Union Representatives. The figures below cover the period 1 April 2023 to 31 March 2024 and include employees of South Lanarkshire Council, South Lanarkshire Leisure and Culture, SEEMIS and Lanarkshire Valuation Joint Board. Relevant Trade Union Officials Number of employees who were relevant union officials during the relevant period 177 FTE Employee Number 151.17 Percentage of Time Spent on Facility Time % Time Number of Representatives 0% 45 1% - 50% 124 51% - 99% 3 100% 5 Percentage of Pay Bill Spent on Facility Time Total cost of facility time £640,359 Total pay bill £721,919,907 Percentage of the total pay bill spent on facility time 0.08% Paid Trade Union Activities Time spent on paid Trade Union activities as a percentage of total paid facility time hours 7.08% Councillor Joe Fagan Leader of the Council Paul Manning Chief Executive 118
Page 119
33 Comprehensive Income and Expenditure Statement The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with the CIPFA Accounting Code of Practice, rather than the amount to be funded from taxation. The council raises taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Expenditure and Funding Analysis and Movement in Reserves Statements. 2022/23 2023/24 Gross Expenditure £000 Gross Income £000 Net Expenditure / (Income) £000 Gross Expenditure £000 Gross Income £000 Net Expenditure / (Income) £000 207,615 40,192 167,423 Community and Enterprise Resources 199,435 39,128 160,307 470,521 50,652 419,869 Education Resources 490,181 53,097 437,084 132,358 75,167 57,191 Finance and Corporate Resources 122,327 72,466 49,860 Housing and Technical Resources 108,058 101,531 6,527 - Housing Revenue Account 115.202 105,649 9,553 87,463 53,842 33,621 - Housing Other 81,368 55,198 26,170 503,604 262,552 241,052 Social Work Resources 505,694 266,428 239,266 2,151 0 2,151 Joint Board 2,052 - 2,052 12,564 8,694 3,870 Corporate Items 2,377 12,003 (9,626) 115 - 115 Corporate and Democratic Core (HRA) 117 - 117 - - - Non-Distributed Costs – Non-Operational Assets (HRA) - - - 1,524,449 592,630 931,819 Net Cost of Services 1,518,753 603,969 914,784 - 2,284 (2,284) Other Operating Expenditure (Note 9) 650 - 650 62,969 4,587 58,382 Financing and Investment (Income) and Expenditure (Note 10) 36,755 16,127 20,627 - 881,636 (881,636) Taxation and Non-Specific Grant Income (Note 11) - 913,708 (913,708) 1,587,418 1,481,137 106,281 (Surplus) / Deficit on Provision of Services 1,556,158 1,533,804 22,354 (64,209) (Surplus) / Deficit on Revaluation of Fixed Assets 29,649 (167,268) Remeasurement of Pension Liability / (Asset) 87,095 (231,477) Other Comprehensive (Income) and Expenditure 116,744 (125,195) Total Comprehensive (Income) and Expenditure 139,098 . 119
Page 120
34 Balance Sheet The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the council. The net assets of the council (assets less liabilities) are matched by the reserves held by the council. Reserves are reported in two categories. ■ The first category of reserves are usable reserves, that is those reserves that the council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). ■ The second category of reserves is those that the council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. 31 March 2023 £000 Note 31 March 2024 £000 3,748,327 Property, Plant and Equipment 20 3,734,534 3,826 Heritage Assets 21 3,853 190 Intangible Assets 21 138 1,809 Long Term Debtors 1,793 52,761 Other Long Term Assets (Pension) 30 - 3,806,913 Non Current Assets 3,740,318 70,458 Short Term Investments - 4,317 Inventories 4,814 81,264 Short Term Debtors 23 102,248 3,408 Assets Held for Sale 21 168 65,890 Cash and Cash Equivalents (see cash flow notes) 12,241 225,337 Current Assets 119,471 (31,111) Short Term Borrowing 33 (63,181) (226,024) Short Term Creditors 25 (203,943) - Contract Liability – IFRS15 7 - (7,098) Other Short Term Liabilities (PPP / Finance Leases) 28 (7,390) (2,454) Provisions 26 (1,676) (1,320) Receipts in Advance 27 (1,331) (268,007) Current Liabilities (277,521) (598) Long Term Provisions 26 (536) (1,014,532) Long Term Borrowing 33 (980,762) (172,036) Other Long Term Liabilities (PPP / Finance Lease) 28 (164,646) (115,321) Other Long Term Liabilities (Pension) 30 (113,666) (1,302,487) Long Term Liabilities (1,259,610) 2,461,756 Net Assets 2,322,658 176,941 Usable Reserves 133,603 2,284,815 Unusable Reserves 2,189,055 2,461,756 Total Reserves 2,322,658 The notes on pages 61 to 116 form part of the financial statements. The unaudited accounts were authorised for issue on 25 June 2024. Jackie Taylor Executive Director (Finance and Corporate Resources) 25 June 2024 120
Page 121
35 Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the council, analysed into ‘usable reserves’ (those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council. Revenue Statutory Fund Revenue Statutory Fund General Fund Balance £000 Housing Revenue Account £000 Repairs and Renewals Fund £000 Insurance Fund £000 Capital Statutory Fund £000 Capital Receipts Reserve £000 Total Usable Reserves £000 (Note 13) Unusable Reserves £000 Total Council Reserves £000 Balance at 1 April 2023 150,283 12,861 7,610 1,411 4,776 - 176,941 2,284,815 2,461,756 Movement in reserves during 2023/24 Total Comprehensive Expenditure and Income (30,687) 8,333 - - - - 22,354 (116,744) (139,098) Adjustments to usable reserves permitted by accounting standards (note 8) 13,723 17,344 - - - - 31,067 (31,067) - Adjustments between accounting basis and funding basis under regulations (note 8) (28,569) (25,318) - - - 1,838 (52,049) 52,049 - Net Increase / (Decrease) before Transfers to Reserves (45,533) 360 - - - 1,838 (43,337) (95,761) (139,098) Transfers to/ (from) Reserves 4,939 - (2,263) (1,216) (801) (660) - - - Increase / (Decrease) in Year (40,596) 360 (2,263) (1,216) (801) 1,178 (43,337) (95,761) (139,098) Balance at 31 March 2024 carried forward 109,687 13,221 5,346 195 3,975 1,178 133,603 2,189,055 2,322,658 121
Page 122
36 Revenue Statutory Fund Revenue Statutory Fund General Fund Balance £000 Housing Revenue Account £000 Repairs and Renewals Fund £000 Insurance Fund £000 Capital Statutory Fund £000 Capital Receipts Reserve £000 Total Usable Reserves £000 (Note 13) Unusable Reserves £000 Total Council Reserves £000 Balance at 1 April 2022 122,424 16,241 6,496 1,295 4,115 1,615 152,186 2,184,375 2,336,561 Movement in reserves during 2022/23 Total Comprehensive Expenditure and Income (106,587) 306 - - - - (106,281) 231,477 125,196 Adjustments to usable reserves permitted by accounting standards (note 8) 13,161 18,499 - - - - 31,660 (31,660) - Adjustments between accounting basis and funding basis under regulations (note 8) 61,471 (22,795) - - - 967 39,643 (39,643) - Net Increase / (Decrease) before Transfers to Reserves (31,955) (3,990) - - - 967 (34,978) 160,174 125,196 Transfers to/ (from) Reserves 59,814 610 1,114 116 661 (2,582) 59,733 (59,733) - Increase / (Decrease) in Year 27,859 (3,380) 1,114 116 661 (1,615) 24,755 100,441 125,196 Balance at 31 March 2023 carried forward 150,283 12,861 7,610 1,411 4,776 - 176,941 2,284,815 2,461,756 122
Page 123
37 Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of the council during the reporting period. The statement shows how the council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the council are funded by way of taxation and grant income or from the recipients of services provided by the council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (that is borrowing) to the council. Further analysis of movements is provided in the cash flow notes following the statement. 2022/23 £000 2023/24 £000 (106,281) Net surplus / (deficit) on the provision of services (22,354) 207,857 Adjust net surplus / deficit on the provision of services for non cash movements 27,888 (64,264) Adjust for items included in the net surplus / deficit on the provision of services that are investing and financing activities (66,944) 37,312 Net cash flows from Operating Activities (61,410) (98,557) Investing Activities 16,627 35,659 Financing Activities (8,868) (25,586) Net increase / (decrease) in cash and cash equivalents (53,651) 91,476 Cash and cash equivalents at the beginning of the reporting period 65,890 65,890 Cash and cash equivalents at the end of the reporting period 12,240 Cash Flow Statement Note – Non-Cash Movements The balance of non-cash movements is made up of the following elements: 31 March 2023 £000 31 March 2024 £000 95,796 Depreciation, impairment and amortisation of assets 103,289 29,046 Movement in creditors (22,385) 7,449 Movement in debtors (20,984) (528) Movement in inventories (479) 69,383 Movement in pension liability (35,989) 6,711 Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised 4,454 Other non cash items charged to the net surplus / deficit on the provision of services - 207,857 Net cash flows from the provision of services for non cash movements 27,888 Cash Flow Statement Note – Operating Activities – Items Included in Net Surplus / (Deficit) on the Provision of Services That are Investing and Financing Activities The cash flows for these activities include the following items: 2022/23 £000 2023/24 £000 (55,270) Capital grants and contributions (63,140) (8,994) Proceeds from the sale of property, plant and equipment, investment property and intangible assets (3,804) (64,264) Net cash flows from items included in the net surplus / (deficit) on the provision of services that are investing and financing activities (66,944) Cash Flow Statement Note – Investing Activities 2022/23 £000 2023/24 £000 (123,666) Purchase of property, plant and equipment and intangible assets (120,334) (274,054) Purchase of short term investments (93,000) 8,994 Proceeds from the sale of property, plant and equipment and intangible assets 3,804 229,049 Proceeds from short term investments 163,000 61,120 Other receipts from investing activities 63,157 (98,557) Net cash flows from investing activities 16,627 123
Page 124
38 Cash Flow Statement Note – Financing Activities 2022/23 £000 2023/24 £000 86,700 Cash receipts of short term and long term borrowing 20,000 (7,157) Cash payments for the reduction of the outstanding liabilities relating to finance leases for PPP contracts (7,098) (43,884) Repayments of short term and long term borrowing (21,770) 35,659 Net cash flows from financing activities (8,868) Cash Flow Statement Note – Cash and Cash Equivalents 31 March 2023 £000 31 March 2024 £000 103 Cash held by officers 103 (25,172) Bank current accounts (1,070) 90,959 Short term deposits 13,207 65,890 Total cash and cash equivalents 12,240 The credit figures shown against Bank Accounts in 2024 relate to balances in the financial ledger. This is due to timing differences in posting transactions in the ledger. Actual balances held at bank are not in an overdraft position. 124
Page 125
39 Notes to the Financial Statements Note 1 Accounting Standards Issued but Not Adopted The Accounting Code of Practice requires the Council to disclose information relating to the impact of an accounting change that is required by a new standard that has been issued but not yet adopted. At the balance sheet date, the following new standards and amendments to existing standards have been published but not yet adopted by The Code: • IFRS 16 Leases - Implementation of IFRS 16 Leases will be mandatorily implemented in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) for 2024/25. Therefore, with effect from 2024/25 the Board will adopt this new accounting standard for Leases. This standard replaces IAS 17 Leases and removes the operating classifi- cation for leases where the Board acts as lessee, eliminating the ability for organisations to keep operating leases off bal- ance sheet, by reporting them as a note to the accounts. This means that, for lease arrangements previously accounted for as operating leases, a right-of -use (ROU) asset and a lease liability will be brought onto the balance sheet as at 1 April 2024. Exemptions are applicable for low value and short- term leases. The Council, as a lessee, had formerly classified leases into either operating or finance leases, depending on whether it met the criteria for transferring the majority of the risks and rewards relating to ownership. Under IFRS 16 the Board will recognise ROU assets and lease liabilities on the balance sheet for most leases. It has been identified that short term leases – those that have a lease term of 12 months or less, and leases of low value assets will not be recognised in accordance with exemption guidelines. IFRS 16 will be applied retrospectively, but with a cumulative effect being recognised as at 1 April 2024. Therefore, the ROU asset and lease liabilities will be calculated as if IFRS 16 had previously been applied but will only be recognised in 2024/25 with no prior year adjustments required. • Classification of Liabilities as Current or Non-current (Amendments to IAS 1) issued in January 2020. The amendments: o specify that an entity’s right to defer settlement must exist at the end of the reporting period; o clarify that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; o clarify how lending conditions affect classification; and o clarify requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. This amendment is not expected to have a significant impact on the financial statements. • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) issued in September 2022. The amendments to IFRS 16 add subsequent measurement requirements for sale and leaseback transactions. This amendment is not expected to have a significant impact on the financial statements. • Non-current Liabilities with Covenants (Amendments to IAS 1) issued in October 2022. The amendments improved the information an entity provides when its right to defer settlement of a liability for at least 12 months is subject to compliance with covenants. This amendment is not expected to have a significant impact on the financial statements. • International Tax Reform: Pillar Two Model Rules (Amendments to IAS 12) issued in May 2023. Pillar Two applies to multinational groups with a minimum level of turnover. The amendments introduced: o a temporary exception to the requirements to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes; and o targeted disclosure requirements for affected entities. These amendments to IAS 12 are not likely to significantly affect the Council’s transactions. • Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) issued in May 2023. The amendments require an entity to provide additional disclosures about its supplier finance arrangements. The IASB developed the new requirements to provide users of financial statements with information to enable them to: o assess how supplier finance arrangements affect an entity’s liabilities and cash flows; and o understand the effect of supplier finance arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements were no longer available to it. The above amendment is not expected to have a material impact on the financial statements. 125
Page 126
40 Note 2 Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty The Financial Statements contain estimated figures that are based on assumptions made by the council about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the council’s Balance Sheet at 31 March 2024 for which there is a significant risk of material adjustment in the forthcoming financial year are as follows: Item Uncertainties Effect if actual results differ from assumptions Pensions Liability – Actuarial Assumptions Estimation of the liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged by Strathclyde Pension Fund, to provide the council with expert advice about the assumptions to be applied. Following decisions in relation to Age Discrimination and Guaranteed Minimum Pensions, the Actuary has included the estimated impact of these in the reported pension liability figure. However, the actual impact is influenced by a number of factors and therefore the actual impact could vary from the impact currently estimated and included in the liability. The effects on the pension liability of changes in individual assumptions can be measured. For instance, a 0.1% decrease in the discount rate assumption would result in an increase in the pension liability of £36.557m. However, the assumptions interact in complex ways. During 2023/2024, the council’s actuaries advised that the net pension liability had increased by £137.234m as a result of the return on fixed assets and estimates being corrected through experience and had decreased by £279.302m attributable to the updating of the demographic and financial assumptions and estimates being corrected through experience. For 2023/2024, the liability is far outweighed by the asset, however due to the pension asset in the balance sheet being capped under IFRIC 14, these figures do not tie to the difference between the 22/23 pension liability and the 23/24 pension asset as stated in the balance sheet. Property, Plant and Equipment – Valuation The Council’s assets are valued on a rolling programme over a maximum of 5 years. The valuation assumptions are ascertained by the professional valuers used by the Council. Given the current financial climate and the changes in the economy experienced across the past 5 years, the Council’s valuers have considered the potential uncertainty regarding the valuation of assets. Their work has concluded that the valuations are not subject to ‘material valuation uncertainty’ due to the current economic climate as at the valuation date. If the actual results differ from the assumptions, the value of the asset could be affected. The value of the assets subject to revaluation over the rolling programme is £3,352.184m. During 2022/2023 the assets that were revalued are now held on the Balance Sheet at a total value of £1,841.633m. The value of assets not revalued in 2022/2023 has been reviewed and the potential impact on valuations is within margins of 10-15% which are considered to be acceptable by RICS. Therefore, the assets not included in this year’s programme for revaluation are not materially misstated. The impact of a 1% change in these valuations would change the value of the assets held on the Balance Sheet by £18.416m, resulting in an increase or decrease to the Revaluation Reserve or change to Net Cost of Services. Any change would also impact on depreciation charged to the Net Cost of Services. Due to statutory mitigation, there would be no impact on the council’s usable reserves. Property, Plant and Equipment – Useful Life Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The Council has a programme of repairs and maintenance on its assets. Any decision to reduce spend in this area could affect the useful lives of assets. If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls, it is estimated that the annual depreciation charge would increase and the carrying value would fall by £10.821m for each year that useful lives were reduced. 126
Page 127
41 This list does not include assets and liabilities that are carried at fair value based on a recently observed market price. Note 3 Material Items of Expenditure and Income Where material items of expenditure and income are not disclosed on the face of the Comprehensive Income and Expenditure Statement, or contained within other notes, the Code requires disclosure of the nature and amounts of these items. Material items of expenditure and income are detailed below: Item Nature Amount £000 Housing Benefit / Discretionary Housing Payment Paid Benefit paid to support customers on low income with Housing rent costs 63,798 Housing Benefit / Discretionary Housing Benefit Received Benefit received to support customers on low income with Housing rent costs 58,776 127
Page 128
42 Note 4 Expenditure and Funding Analysis The objective of the Expenditure and Funding Analysis is to demonstrate to council tax and rent payers how the funding available to the council (i.e. government grants, rents, fees and charges, council tax and business rates) for the year has been used in providing services in comparison with those resources consumed or earned by the council in accordance with the CIPFA Accounting Code of Practice. The Expenditure and Funding Analysis also shows how this expenditure is allocated for decision making purposes between the council’s services. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement on page 55. The segmental analysis in the Expenditure and Funding Analysis reflects the council's management structure, as reported to the relevant Committees during the financial year. 2022/23 2023/24 Net Expenditure Chargeable To the General Fund And HRA Balance £000 (Note 4) Adjustments between the Funding and Accounting Basis £000 Net Expenditure in the Comprehensive Income and Expenditure Statement £000 Net Expenditure Chargeable To the General Fund And HRA Balance £000 (Note 4) Adjustments between the Funding and Accounting Basis £000 Net Expenditure in the Comprehensive Income and Expenditure Statement £000 127,880 39,543 167,423 Community and Enterprise Resources 137,524 22,783 160,307 409,607 10,262 419,869 Education Resources 439,940 (2,856) 437,084 48,040 9,151 57,191 Finance and Corporate Resources 48,004 1,856 49,860 Housing and Technical Resources 3,990 2,537 6,527 - Housing Revenue Account (360) 9,913 9,553 18,958 14,663 33,621 - Housing Other 16,432 9.738 26,170 220,958 20,094 241,052 Social Work Resources 237,204 2,062 239,266 2,151 - 2,151 Joint Board 2,052 - 2,052 (469) 4,339 3,870 Corporate Items (14,193) 4,567 (9,626) - 115 115 Corporate and Democratic Core (HRA) - 117 117 - - - Non-Distributed Costs – Non-Operational Assets (HRA) - - - 831,115 100,704 931,819 Net Cost of Services 866,603 48,180 914,784 (795,170) (30,368) (825,538) Other (Income) and Expenditure (821,429) (71,002) (892,431) 35,945 70,336 106,281 (Surplus) or Deficit 45,174 (22,822) 22,354 General Fund HRA Total General Fund and HRA General Fund HRA Total General Fund and HRA (122,424) (16,241) (138,665) Opening General Fund and HRA Balance (150,283) (12,861) (163,144) 31,955 3,990 35,945 Less/plus (Surplus) or Deficit on General Fund 45,534 (360) 45,174 (59,814) (610) (60,424) Transfers to/from Other Reserves (4,938) - (4,938) (150,283) (12,861) (163,144) Closing General Fund and HRA Balance (109,687) (13,221) (122,908) 128
Page 129
43 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement 2023/24 Adjustments for Capital Purposes (Note a) £000 Net change for the Pensions Adjustments (Note b) £000 Other Differences (Note c) £000 Total Adjustments between Funding and Accounting Basis £000 Community and Enterprise Resources 23,665 (766) (116) 22,783 Education Resources 26,136 (1,037) (27,955) (2,856) Finance and Corporate Resources 2,078 (348) 126 1,856 Housing and Technical Resources - Housing Revenue Account 18,217 (124) (8,180) 9,913 - Housing Other 9,918 (376) 196 9,738 Social Work Resources 3,224 (981) (181) 2,062 Joint Board - - - - Corporate Items - (45) 4,612 4,567 Corporate and Democratic Core (HRA) - - 117 117 Non-Distributed Costs – Non-Operational Assets (HRA) - - - - Net Cost of Services 83,238 (3,677) (31,381) 48,180 Other Income and Expenditure from the Expenditure and Funding Analysis (67,489) (32,312) 28,799 (71,002) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 15,749 (35,989) (2,582) (22,822) 2022/23 Adjustments for Capital Purposes (Note a) £000 Net change for the Pensions Adjustments (Note b) £000 Other Differences (Note c) £000 Total Adjustments between Funding and Accounting Basis £000 Community and Enterprise Resources 23,928 15,756 (141) 39,543 Education Resources 24,123 12,289 (26,150) 10,262 Finance and Corporate Resources 1,927 6,827 397 9,151 Housing and Technical Resources - Housing Revenue Account 7,646 2,509 (7,618) 2,537 - Housing Other 6,106 8,037 520 14,663 Social Work Resources 1,484 18,729 (119) 20,094 Joint Board - - - - Corporate Items - 42 4,297 4,339 Corporate and Democratic Core (HRA) - - 115 115 Non-Distributed Costs – Non-Operational Assets (HRA) - - - - Net Cost of Services 65,214 64,189 (28,699) 100,704 Other Income and Expenditure from the Expenditure and Funding Analysis (61,250) 5,194 25,688 (30,368) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 3,964 69,383 (3,011) 70,336 129
Page 130
44 Note a – Adjustments for Capital Purposes This column adds in depreciation and impairment and revaluation gains and losses in the services line, and for: ■ Other Operating Expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets. ■ Financing and Investment Income and Expenditure – the statutory charges for capital financing and other contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices. ■ Taxation and Non-Specific Grant Income and Expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those that are receivable in the year, to those that are receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non-Specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for which conditions were satisfied in the year. Note b – Net Change for the Pensions Adjustment Net change for the removal of pension contributions and the addition of IAS19 Employee Benefits pension related expenditure and income: ■ For Services this represents the removal of the employer pension contributions made by the council as allowed by statute and the replacement with current service costs and past service costs. ■ For Financing and Investment Income and Expenditure – the net interest on the defined benefit liability is charged to the Comprehensive Income and Expenditure Statement. Note c – Other Differences Other differences between amounts debited/credited to the Comprehensive Income and Expenditure Statement and amounts payable /receivable to be recognised under statute: ■ For Services, this represents the accrual made for the cost of holiday leave entitlements earned by employees but not taken before the year end which employees can carry into the next financial year. These require to be included in the Net Cost of Services under generally accepted accounting practices, however, are not chargeable to the General Fund. ■ For Financing and Investment Income and Expenditure the other differences column recognises adjustments to the General Fund for the timing differences for premiums and discounts. Note 5 Reconciliation of Adjustments Between Funding and Accounting Basis Shown in the Expenditure and Funding Analysis (EFA) to Those Shown In the Movement in Reserves Statement (MIRS) 2022/23 £000 2023/24 £000 70,336 Adjustments between Funding and Accounting Basis as per EFA (22,822) 8,994 Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (Note 8) 3,804 (8,027) Use of Capital Receipts Reserve to finance capital expenditure (Note 8) (1,966) 71,303 Adjustments between Funding and Accounting Basis as per MIRS (20,984) 130
Page 131
45 Note 6 Expenditure and Income Analysed by Nature The council’s expenditure and income is analysed as follows: Community and Enterprise £000 Education £000 Finance and Corporate £000 Housing Revenue Account £000 Housing and Technical £000 Social Work £000 Joint Boards £000 Corporate Items £000 Other Non- Resource Lines £000 2023/24 Total £000 2022/23 Total £000 Expenditure Employee Benefits Expenses 96,677 344,594 38,328 9,748 47,762 118,010 - (14) - 655,105 694,426 Other Services Expenditure 79,023 119,451 81,127 67,186 23,688 384,460 2,052 2,391 117 759,565 734,227 Support Services Recharges - - - - - - - - - - - Depreciation, Amortisation, Impairment 23,665 26,136 1,927 38,268 9,918 3,224 - - - 103,138 95,796 Interest Payment - - - - - - - - 69,598 69,598 59,710 Pension Net Interest Expense - - - - - - - - (32,312) (32,312) 5,193 Impairment on Financial Instruments - - - - - - - - (531) (531) (1,934) Loss on the Disposal of Assets - - - - - - - - 650 650 - Total Expenditure 199,435 490,181 121,382 115,202 81,368 505,694 2,052 2,377 37,522 1,555,213 1,587,418 Income Fees and Charges and Other Service Income 33,241 6,091 1,564 105,649 47,378 207,483 - 12,003 - 413,409 433,248 Interest and Investment Income - - - - - - - - 16,069 16,069 4,814 Impairment on Financial Instruments - - - - - - - - 58 58 (227) Gain on the Disposal of Assets - - - - - - - - - - 2,284 Income from Council Tax - - - - - - - - 159,053 159,053 148,958 Government Grants and Contributions 5,887 47,006 69,957 - 7,820 58,945 - - 754,655 944,270 892,060 Total Income 39,128 53,097 71,521 105,649 55,198 266,428 - 12,003 929,835 1,532,859 1,481,137 (Surplus) or Deficit on the Provision of Services 160,307 437,084 49,861 9,553 26,170 239,266 2,052 (9,626) (892,313) 22,354 106,281 131
Page 132
46 Note 7 Revenue from Contracts with Service Recipients Amounts included in the Comprehensive Income and Expenditure Statement for contracts with service recipients. 2022/23 £000 2023/24 £000 44,877 Revenue from contracts with service recipients 44,754 - Impairment of receivables or contract assets - 44,877 Total included in Comprehensive Income and Expenditure Statement 44,754 Amounts included in Balance Sheet for contracts with service recipients. 2022/23 £000 2023/24 £000 - Receivables which are included in debtors (note 23) - - Contract Assets - - Contract Liabilities - - Total Included in Net Assets - Specific changes in the contract assets and the contract liabilities balances during the period are as follows: 2022/23 2022/23 2023/24 2023/24 Contract Asset £000 Contract Liability £000 Contract Asset £000 Contract Liability £000 - - Contract assets and liabilities at the beginning of the year - - - - Increases / decreases due to cash received (paid) - - - - Transfers from contract assets / (liabilities) recognised at the beginning of the period to receivables (payables) - - - - Changes as a result of changes in the measure of progress - - - - Contract assets and liabilities at the end of the year - - Note 8 Adjustments Permitted Under Accounting Standards and Between Accounting Basis and Funding Basis Under Regulations This note details the adjustments that are made to the total comprehensive income and expenditure recognised by the council in the year in accordance with proper accounting practice to arrive at the resources that are specified by statutory provisions as being available to the council to meet future capital and revenue expenditure. The following sets out a description of the reserves that the adjustments are made against. General Fund The General Fund is the statutory fund into which all the receipts of the council are required to be paid and out of which all liabilities of the council are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund, which is not necessarily in accordance with proper accounting practice. The General Fund balance therefore summarises the resources that the council is statutorily empowered to spend on its services or on capital investment (or the deficit of resources that the council is required to recover) at the end of the financial year. Housing Revenue Account The Housing Revenue Account balance reflects the statutory obligation to maintain a revenue account for local authority housing in accordance with the Local Government and Housing (Scotland) Act 1987. It contains the balance of income and expenditure as defined by the 1987 Act that is available to fund future expenditure in connection with the council’s landlord function. Repairs and Renewals Fund The Repairs and Renewals Fund comprises a combination of balances brought forward from previous years adjusted for any utilisation of funds and contributions to the Fund in year. The funds will be used to deal with repairing or renewing council assets. 132
Page 133
47 Insurance Fund The Insurance Fund is held as a provision against unpaid claims. Council Services contribute to the Fund which meets the cost of property damage, public liability, employee liability, vehicle fleet and other claims. The council holds insurance cover to meet any large claims, the premium for which is charged to the Fund. Actuarial reviews are undertaken on a regular basis. The last full review took place during 2021. Capital Receipts Reserve The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year end. 133
Page 134
48 Usable Reserves 2023/24 General Fund Balance £000 Housing Revenue Account £000 Repairs And Renewals Fund £000 Insurance Fund £000 Capital Statutory Funds £000 Capital Receipts Reserve £000 Total £000 Adjustments to Usable Reserves Permitted by Accounting Standards Adjustment for the Revaluation Element of Depreciation 13,723 17,344 - - - - 31,067 Total Adjustments to Usable Reserves Permitted by Accounting Standards 13,723 17,344 - - - - 31,067 Statutory Adjustments (Between Accounting and Funding Basis) Adjustments to Revenue Resources Amounts by which income and expenditure included in the Comprehensive Income and Expenditure Statement are different from revenue for the year calculated in accordance with statutory requirements: ▪ Pensions Costs transferred to (or from) the Pensions Reserve (34,770) (1,219) - - - - (35,989) ▪ Financial Instruments (transferred to the Financial Instruments Adjustment Account) (270) (90) - - - - (360) ▪ Holiday Pay (transferred to (or from) the Accumulated Absences Reserve) 452 (14) - - - - 438 ▪ Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account) 49,692 23,713 - - - - 73,405 Total Adjustments to Revenue Resources 15,104 22,390 - - - - 37,494 Adjustments between Revenue and Capital Resources Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (1,838) (1,966) - - - 3,804 - Statutory Provision for the repayment of debt (transfer from Capital Adjustment Account) (2,660) - - - - - (2,660) Capital expenditure financed from revenue balances (transfer to Capital Adjustment Account) (1,730) (20,046) - - - - (21,776) Total Adjustments between Revenue and Capital Resources (6,228) (22,012) - - - 3,804 (24,436) Adjustments to Capital Resources Use of the Capital Receipts Reserve to finance capital expenditure - - - - - (1,966) (1,966) Application of capital grants to finance capital expenditure (37,445) (25,695) - - - - (63,140) Total Adjustments to Capital Resources (37,445) (25,695) - - - (1,966) (65,106) Total Statutory Adjustments (Between Accounting and Funding Basis) (28,569) (25,317) - - - 1,838 (52,048) Total Adjustments to Usable Reserves Permitted by Accounting Standards 13,723 17,344 - - - - 31,067 Total Statutory Adjustments (Between Accounting and Funding Basis) (28,569) (25,317) - - - 1,838 (52,048) Total Comprehensive Expenditure and Income (30,687) 8,333 - - - - (22,354) Net Increase / (Decrease) before transfers to / (from) Reserves (45,533) 360 - - - 1,838 (43,337) Transfers to / (from) Reserves (4,939) - (2,263) (1,216) (801) (660) - Increase / (Decrease) in Year (40,596) 360 (2,263) (1,216) (801) 1,178 (43,337) 134
Page 135
49 Usable Reserves 2022/23 General Fund Balance £000 Housing Revenue Account £000 Repairs And Renewals Fund £000 Insurance Fund £000 Capital Statutory Funds £000 Capital Receipts Reserve £000 Total £000 Adjustments to Usable Reserves Permitted by Accounting Standards Adjustment for the Revaluation Element of Depreciation 13,161 18,499 - - - - 31,660 Total Adjustments to Usable Reserves Permitted by Accounting Standards 13,161 18,499 - - - - 31,660 Statutory Adjustments (Between Accounting and Funding Basis) Adjustments to Revenue Resources Amounts by which income and expenditure included in the Comprehensive Income and Expenditure Statement are different from revenue for the year calculated in accordance with statutory requirements: ▪ Pensions Costs transferred to (or from) the Pensions Reserve 66,678 2,705 - - - - 69,383 ▪ Financial Instruments (transferred to the Financial Instruments Adjustment Account) (276) (84) - - - - (360) ▪ Holiday Pay (transferred to (or from) the Accumulated Absences Reserve) (130) 3 - - - - (127) ▪ Reversal of entries included in the Surplus or Deficit on the Provision of Services in relation to capital expenditure (these items are charged to the Capital Adjustment Account) 41,643 20,849 - - - - 62,492 Total Adjustments to Revenue Resources 107,915 23,473 - - - - 131,388 Adjustments between Revenue and Capital Resources Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (967) (8,027) - - - 8,994 - Retrospective Benefit from applying the revised guidance on Service Concessions - - - - - - - Statutory Provision for the repayment of debt (transfer from Capital Adjustment Account) (2,524) - - - - - (2,524) Capital expenditure financed from revenue balances (transfer to Capital Adjustment Account) (874) (26,050) - - - - (29,448) Total Adjustments between Revenue and Capital Resources (4,365) (34,077) - - - 8,994 29,448 Adjustments to Capital Resources - - - - Use of the Capital Receipts Reserve to finance capital expenditure - - - - - (8,027) (8,027) Application of capital grants to finance capital expenditure (43,056) (12,214) - - - - (55,270) Total Adjustments to Capital Resources (43,056) (12,214) - - - (8,027) (63,297) Total Statutory Adjustments (Between Accounting and Funding Basis) (47,781) (22,795) - - - 967 39,643 Total Adjustments to Usable Reserves Permitted by Accounting Standards 13,161 18,499 - - - - 31,660 Total Statutory Adjustments (Between Accounting and Funding Basis) 60,494 (22,818) - - - 967 39,643 Total Comprehensive Expenditure and Income (106,587) 306 - - - - (106,281) Net Increase / (Decrease) before transfers to / (from) Reserves (32,932) (4,013) - - - 967 (35,978) Transfers to / (from) Reserves 4,077 540 (988) (1,009) (219) (2,401) - Increase / (Decrease) in Year (28,855) (3,473) (988) (1,009) (219) (1,434) (35,978) 135
Page 136
50 Note 9 Comprehensive Income and Expenditure Statement – Other Operating Expenditure 2022/23 £000 2023/24 £000 (2,284) (Gains) / losses on the disposal of non-current assets 650 (2,284) Total 650 Note 10 Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure 2022/23 £000 2023/24 £000 59,710 Interest payable and similar charges 69,598 5,193 Pensions interest cost and expected return on pensions assets (32,312) (4,814) Interest receivable and similar income (16,069 (1,707) Impairment on Financial Instruments (590) 58,382 Total 20,627 Note 11 Comprehensive Income and Expenditure Statement – Taxation and Non-Specific Grant Income 2022/23 £000 2023/24 £000 (148,958) Council Tax income (159,053) (422,591) National Non-Domestic Rates (341,536) (254,817) Non-ringfenced Government grants (349,979) (55,270) Capital grants and contributions (61,140) (881,636) Total (913,708) 136
Page 137
51 Note 12 Movements in Usable Reserves This note sets out the amounts set aside from the General Fund and HRA balances in earmarked reserves to provide financing for future expenditure plans and the amounts posted back from earmarked reserves to meet General Fund and HRA expenditure in 2023/2024. 2022/23 Opening Balance 1 April 2022 £000 Transfers Out 2022/23 £000 Transfers In 2022/23 £000 2022/23 Closing Balance 31 March 2023 £000 2023/24 Opening Balance 1 April 2023 £000 Transfers Out 2023/24 £000 Transfers In 2023/24 £000 2023/24 Closing Balance 31 March 2024 £000 Future Budget Strategies – allocated to specific years 33,671 (38,426) 97,716 92,961 92,961 (42,786) 18,836 69,011 Investments (Multi Year) 5,884 (2,931) 946 3,899 3,899 (2,156) 3,293 5,036 Developing Scotland’s Young Workforce (Specific funding) 308 - - 308 308 (308) - - Early Years (Multi-year) 14,465 (2,948) - 11,517 11,517 (3,806) - 7,711 Children and Young People Act inc. Getting It Right for Every Child (Multi-year) 684 (7) - 677 677 (675) - 2 Pupil Equity Fund (Specific funding) 2,590 (2,590) 905 905 905 (905) 323 323 Discretionary Housing Payments - - 115 115 115 (115) - - Warm Welcome Initiative - - 299 299 299 (299) - - Alternative Fuel Payments - - 191 191 191 (191) - - Energy Bill Support Scheme - - 1,055 1,055 1,055 (1,055) - - Wellbeing Day - - 600 600 600 (600) - - Multi Year Projects 4,618 (1,111) - 3,507 3,507 (8) - 3,499 Schools (Multi-year) 2,578 (1,223) - 1,355 1,355 (264) - 1,091 Scheme of Assistance 742 - - 742 742 - - 742 Property Masterplan 209 (3) - 206 206 (206) - - Community and Enterprise Resources including Public Health and Local Plan 1,081 - - 1,081 1,081 (69) 290 1,302 Social Work and Bequest 21 - - 21 21 (21) - - Temporary Homelessness / Community Safety (Specific funding) 1,938 (363) - 1,575 1,575 - - 1,575 Scottish Welfare Fund - - 145 145 145 (145) - - Prevent Grant (Specific funding) 9 - - 9 9 (9) - - New Initiatives (Multi-year) 912 - - 912 912 - - 912 Sanitary Products Funding 339 - - 339 339 (140) - 199 Counselling in Schools 1,256 - - 1,256 1,256 (978) - 278 Additional Support for Learning 1,189 - - 1,189 1,189 (707) - 482 Grants to Voluntary Organisations - Area Grants c/f 123 - 84 207 207 - - 207 National Trauma Training Programme 50 (38) - 12 12 - - 12 Children and Families - Residential Care 2,051 (2,051) 35 35 35 - - 35 Lanarkshire Valuation Joint Board - Scottish Government funding 118 - - 118 118 - - 118 Child Disability Support 83 - - 83 83 (83) - - Whole Family Wellbeing 187 (58) - 129 129 (41) - 88 Telecare Fire and Safety 59 - - 59 59 - - 59 Local Heat and Energy Efficient Strategies - - 75 75 75 - 25 100 COVID-19 Funding (inc. LACER) 30,061 (18,403) - 11,658 11,658 (9,338) - 2,320 Ukraine Resettlement - - - - - - 1,485 1,485 137
Page 138
52 2022/23 Opening Balance 1 April 2022 £000 Transfers Out 2022/23 £000 Transfers In 2022/23 £000 2022/23 Closing Balance 31 March 2023 £000 2023/24 Opening Balance 1 April 2023 £000 Transfers Out 2023/24 £000 Transfers In 2023/24 £000 2023/24 Closing Balance 31 March 2024 £000 School Support Assistant Training - - - - - - 57 57 Total Earmarked General Fund 105,226 (70,152) 102,166 137,240 137,240 (64,905) 24,309 96,644 Uncommitted General Fund Funding for Future Strategies 4,155 (4,155) - - - - - - Uncommitted General Fund 13,043 - - 13,043 13,043 - - 13,043 Total Uncommitted General Fund 17,198 (4,155) - 13,043 13,043 - - 13,043 Total General Fund 122,424 (74,307) 102,166 150,283 150,283 (64,905) 24,309 109,687 Repairs and Renewals Crematorium Sinking Fund and Shelter 332 (141) 50 241 241 (241) - - Fleet Sinking Fund 213 - 40 253 253 (253) 40 40 Waste 1,737 - 1,290 3,027 3,027 (36) - 2,991 Committee Room Audio Visual Upgrade 139 (139) - - - - - - Repairs and Restorations (Various Projects) 3,671 (136) 150 3,685 3,685 (3,155) 1,363 1,893 Winter Maintenance 404 - - 404 404 - 18 422 Total Repairs and Renewals 6,496 (416) 1,530 7,610 7,610 (3,685) 1,421 5,346 Capital Fund Capital Fund - - - - - - - - Education Capital Items Replacement Fund 2,300 - 406 2,706 2,706 (671) - 2,035 Adoptions 279 - - 279 279 - - 279 IT Development Fund / Digital Transformation 1,369 (68) - 1,301 1,301 (70) 58 1,289 Central Energy Efficiency Fund 167 (282) 605 490 490 (364) 246 372 Total Capital Fund 4,115 (350) 1,011 4,776 4,776 (1,105) 304 3,975 Total Usable Capital Receipts 1,615 (10,609) 8,994 - - (660) 1,838 1,178 Total Insurance Fund 1,295 - 116 1,411 1,411 (1,532) 316 195 Total Housing Revenue Account 16,241 (3,990) 610 12,861 12,861 - 360 13,221 Total Usable Reserves 152,186 (89,672) 114,427 176,941 176,941 (71,887) 28,548 133,603 138
Page 139
53 Note 13 Balance Sheet – Unusable Reserves Unusable Reserves are those that the council is not able to utilise to provide services. These reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits and that do not represent usable resources for the council. The two reserves arising from the system of capital accounting are the Revaluation Reserve and the Capital Adjustment Account. The former represents the gains on revaluation of fixed assets not yet realised through sales and the latter relates to amounts set aside from capital resources to meet past expenditure. The reserve arising from accounting for financial instruments is the Financial Instruments Adjustment Account. This is a balancing account to allow for differences in statutory requirements and proper accounting practices for lending and borrowing by the council. The Pensions Reserve as limited by the assets ceiling cap under IFRIC 14, arises from IAS19 Accounting Disclosures for Retirement Benefits and recognises the council’s share of actuarial gains and losses in the Strathclyde Pension Fund and the change in the council’s share of the Pension Fund liability chargeable to the CIES. The Accumulated Absences Reserve arises from IAS19 accounting disclosures for Short Term Accumulated Benefits and recognises the council’s liability for compensated absences (annual leave) earned by staff but not taken in the year. The Statutory Arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Reserve. 139
Page 140
54 Unusable Reserves 2023/24 Revaluation Reserve £000 Capital Adjustment Account £000 Financial Instruments Adjustment Account £000 Pension Reserve £000 Accumulating Compensated Absences Adjustment Account £000 Total £000 Opening Balance 1,395,482 978,675 (4,211) (62,560) (22,570) 2,284,815 Movement in Year (61,928) 17,352 360 (51,106) (438) (95,761) Closing Balance 1,333,554 996,027 (3,851) (113,666) (23,008) 2,189,055 Other Comprehensive Income and Expenditure 29,648 - - (87,095) - (116,743) Adjustments to Usable Reserves Permitted by Accounting Standards Difference Between Fair Value and Historic Cost Depreciation 31,067 31,067 - - - - Adjustments Between Accounting Basis and Funding Basis Under Regulation Charges for Depreciation and Impairment of Non-Current Assets - (96,521) - - - (96,521) Revaluation Gains / Losses on Property, Plant and Equipment - (6,703) - - - (6,703) Amortisation of Intangible Assets - (66) - - - (66) Non-Current Assets Written Off on Disposal or Sale - (3,241) - - - (3,241) Accumulated Gains on Assets Sold or Scrapped (1,213) - - - - (1,213) Use of Capital Receipts Reserve to Finance New Capital Expenditure - 1,966 - - - 1,966 Capital Grants and Contributions - 63,140 - - - 63,140 Statutory Charge for the Repayment of Debt - 3,273 - - - 3,273 Statutory Provision for Financing of Capital Investment - 2,660 - - - 2,660 Capital Expenditure Charged Against the General Fund and HRA Balance - 21,776 - - - 21,776 Retrospective Benefit from applying revised Service Concession Guidance - - - - - - Transfer Between Revaluation Reserve and Capital Adjustment Account - - - - - - Premiums to be Charged Against the General Fund and HRA Balance - - 360 - - 360 Reversal of Items Relating to Retirement Benefits - - - (33,620) - (33,620) Employer’s Pension Contribution Payable in Year - - - 69,609 - 69,609 Amounts Accrued at the End of the Financial Year - - - - (438) (438 Total Movement in Year 61,928 17,352 360 (51,106) (438) (95,761) 140
Page 141
55 Unusable Reserves 2022/23 Revaluation Reserve £000 Capital Adjustment Account £000 Financial Instruments Adjustment Account £000 Pension Reserve £000 Accumulating Compensated Absences Adjustment Account £000 Total £000 Opening Balance 1,362,958 1,009,130 (4,571) (160,445) (22,697) 2,184,375 Restatement of 2020/2021 Balance** 32,524 (30,455) 360 97,885 127 100,441 Revised Opening Balance 1,395,482 978,675 (4,211) (62,560) (22,570) 2,284,815 Movement in Year Closing Balance 64,209 - - 167,268 - 231,477 Other Comprehensive Income and Expenditure (31,660) - - - - (31,660) Adjustments to Usable Reserves Permitted by Accounting Standards Difference Between Fair Value and Historic Cost Depreciation - (66,021) - - - (66,021) Adjustments Between Accounting Basis and Funding Basis Under Regulation - 1,962 - - - 1,962 Charges for Depreciation and Impairment of Non Current Assets - (75) - - - (75) Revaluation Gains / Losses on Property, Plant and Equipment - (6,637) - - - (6,637) Amortisation of Intangible Assets (73) - - - - (73) Non Current Assets Written Off on Disposal or Sale - 8,027 - - - 8,027 Accumulated Gains on Assets Sold or Scrapped - 55,270 - - - 55,270 Use of Capital Receipts Reserve to Finance New Capital Expenditure - 7,352 - - - 7,352 Capital Grants and Contributions - 2,524 - - - 2,524 Statutory Charge for the Repayment of Debt - 26,924 - - - 26,924 Statutory Provision for Financing of Capital Investment - (59,733) - - - (59,733) Capital Expenditure Charged Against the General Fund and HRA Balance 48 (48) - - - - Premiums to be Charged Against the General Fund and HRA Balance - - 360 - - 360 Reversal of Items Relating to Retirement Benefits - - - (130,940) - (130,940) Employer’s Pension Contribution Payable in Year - - - 61,557 - 61,557 Amounts Accrued at the End of the Financial Year - - - - 127 127 Total Movement in Year 32,524 (30,455) 360 97,885 127 100,441 141
Page 142
56 Note 14 Members Allowances The council paid the following amounts to Members of the council during the year: 2023/24 £ 2022/23 £ Salaries 1,169,378 1,138,350 Mileage Allowance 20,177 17,563 Expenses 3,083 4,708 Total 1,192,638 1,160,621 Note 15 External Audit Costs The council has incurred the following external audit costs: 2023/24 £000 2022/23 £000 Fee payable to Audit Scotland for external audit services 622 586 Total 622 586 The council incurred these costs in relation to the audit of the Annual Accounts, the certification of grant claims and a contribution towards Audit Scotland’s national work programme. Fees payable in respect of other services provided by the appointed auditor were nil (2022/2023: nil). Note 16 Related Parties The council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence or to be controlled or influenced by the council. Disclosure of these transactions allows readers to assess the extent to which the council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the council. Central Government Central government has effective control over the general operations of the council – it is responsible for providing the statutory framework within which the council operates, provides the majority of its funding in the form of grants and prescribes the terms of many transactions that the council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in the subjective analysis in Note 6. Officers During 2023/2024, one senior officer of the Council (Executive Director of Finance and Corporate Resources) declared an interest in any RegenFX Youth Trust. No senior officer declared an interest of close family members in any organisations outwith those controlled or significantly influenced by the council. During 2022/2023, no senior officer of the council declared an interest in any organisation outwith those controlled or significantly influenced by the council. In addition, no senior officer declared an interest of close family members in any organisations outwith those controlled or significantly influenced by the council. The total remuneration paid to senior officers is shown in the Remuneration Report on page 35. Members Members of the council have direct control over the council’s financial and operating policies. The total of members’ allowances paid in 2022/2023 is shown in Note 14. During 2022/2023, works and services to the value of £4.031 million were commissioned from companies in which 15 members had an interest (2021/2022 - £5.088 million). Contracts were entered into in full compliance with the council’s standing orders. In addition, grants totalling £2.454 million were paid to voluntary organisations in which 46 members had an interest (2021/2022 - £3.253 million). The relevant members did not take part in any discussion or decision relating to the grants. Details of these transactions are recorded under each individual Councillor and can be found on the council’s website (Elected Members Interests). As these payments relate to payments ledgered in the financial year, there are no outstanding balances to be disclosed. The council has chosen a de minimis level of £0.100m as its threshold disclosure level for individual members interests in companies and voluntary organisations. In addition to the entities controlled or significantly influenced by the council (page 78), the council made individual payments above this threshold to the following companies and voluntary organisations in which members held an interest. These are detailed in the table overleaf. 142
Page 143
57 Member Organisation Individual Payment exceeding £0.100m Cllr John Anderson Cllr Carol Nugent Clyde Gateway 4 payments totalling £0.700m in relation to the Shawfield Regeneration Route project. Cllr Graeme Horne Cllr Susan Kerr SEEMIS 1 payment totalling £0.347m in respect of the council’s annual membership fee. Cllr Alex Allison Cllr John Anderson Cllr Walter Brogan Cllr Maureen Chalmers Cllr Gerry Convery Cllr Margaret Cooper Cllr Maureen Devlin Cllr Joe Fagan Cllr Gladys Ferguson-Miller Cllr Lynsey Hamilton Cllr Graham Horne Cllr Eileen Logan Cllr Katy Loudon Cllr Hugh McDonald Cllr David McLaughlin Cllr Richard Nelson Cllr John Ross COSLA 2 payments totalling £0.325m for the annual subscription to myjobscotland (£0.263m) and (£0.062m) to for the local Government Digital Office. Cllr Allan Falconer North Lanarkshire Council 1 payments totalling £0.114m in relation to inter authority children’s placements (£0.054m) and cross boundary charges (£0.060m). Receipts and Payments Between the Council and Entities Controlled or Significantly Influenced by the Council 2023/24 Receipts £000 2023/24 Payments £000 2022/23 Receipts £000 2022/23 Payments £000 Subsidiaries: Common Good Fund 39 - 46 78 Routes to Work South - 2,565 - 1,810 South Lanarkshire Leisure and Culture Limited 3,367 23,330 2,968 25,013 Total Subsidiaries 3,406 25,895 3,014 26,901 Joint Ventures: South Lanarkshire HSCP Integration Joint Board 245,067 195,709 230,654 173,108 Total Joint Ventures 245,067 195,709 230,654 173,108 Joint Boards: Lanarkshire Valuation Joint Board 165 2,004 163 2,103 Strathclyde Concessionary Travel Scheme Joint Committee 19 15,722 1,664 13,878 Strathclyde Partnership for Transport - 617 - 604 Total Joint Boards 184 18,343 1,827 16,585 Other Entities: Clyde Valley Learning and Development Joint Committee 59 13 59 10 Regen FX Youth Trust - 508 - 115 SEEMIS Group LLP 85 366 84 368 Total Other Entities 144 887 143 493 Total 248,801 240,834 235,638 217,087 The amounts due (to) / from related parties are detailed overleaf: 143
Page 144
58 2023/24 £ 2022/23 £ Strathclyde Partnership for Transport - 1,664 South Lanarkshire Leisure and Culture Limited - 1,520 South Lanarkshire Health and Social Care Partnership (2,809) (8,863) Subsidiaries Common Good Fund The Common Good Fund is for the benefit of the geographical areas of the former burghs and is administered by the council. Routes to Work South Established in 1998, Routes to Work South’s main activity is supporting unemployed and workless residents in South Lanarkshire into employment, training, or further education. Routes to Work South delivers services to, and is funded by, the council. South Lanarkshire Council is the sole member of Routes to Work South and is included in the council’s group financial statements as a 100% subsidiary. South Lanarkshire Leisure and Culture Limited South Lanarkshire Leisure and Culture Limited was established as a Charitable Trust on 1 April 2002, became South Lanarkshire Leisure and Culture Limited in October 2010 and from 3 April 2023, the status of South Lanarkshire Leisure and Culture Limited changed from a Charitable Trust to a Scottish Charitable Incorporated Organisation (SCIO). The SCIO provides the council with a full range of leisure and cultural activities within the South Lanarkshire area. Whilst the Trust is entirely independent of the council under law and for taxation purposes, its activities are directed by means of contractual arrangements with the council, and, in recognition of this, South Lanarkshire Leisure and Culture Limited is treated as a 100% subsidiary, and included in the council’s group financial statements. Joint Ventures South Lanarkshire Health and Social Care Partnership Integration Joint Board The South Lanarkshire HSCP Integration Joint Board was established on 6 October 2015 as a partnership between South Lanarkshire Council and NHS Lanarkshire and is responsible for planning and seeing the delivery of a full range of community health and social work / social care services. In the year 2023/2024, the following financial transactions were made between South Lanarkshire Council and South Lanarkshire HSCP Integration Joint Board relating to the integrated and social care functions: 2023/24 £000 2022/23 £000 Contribution made to South Lanarkshire HSCP Integration Joint Board 195,709 173,108 Commissioning income received from South Lanarkshire HSCP Integration Joint Board 245,067 230,654 South Lanarkshire HSCP Integration Joint Board due (to)/from South Lanarkshire Council (2,809) (8,863) Joint Boards The council is represented on a number of joint boards which are independent public bodies formed by an Act of Parliament. These bodies are Lanarkshire Valuation Joint Board, Strathclyde Concessionary Travel Scheme and Strathclyde Partnership for Transport. All local government functions that relate to these bodies have been delegated from the constituent councils that comprise the area of each board. The members of each board are elected councillors and appointed by the councils in proportions specified in the legislation. The council has no shares, or ownership of any of these boards. Nevertheless, these boards are included within the council’s group accounts as associate, as the council is represented on the board and participate in policy making processes. The council’s share of each board’s net assets is calculated on its percentage share of the aggregate contributions made by the constituent councils. Other entities Details of all other public bodies in which the council has a significant interest are explained in the group accounts at Notes 4 to 7. Note 17 Leases Council as Lessee Finance Leases The council currently has obligations in relation to Glasgow Southern Orbital infrastructure and secondary schools. These are classed as PPP/PFI finance leases and are reported under Note 28 – Public Private Partnerships and Similar Contracts. Operating Leases The council has entered into a number of operating leases and details are provided across the asset categories of Vehicles, Property, Plant and Equipment, and Land and Buildings. Vehicles, Plant and Equipment – the council uses vehicles, computers, photocopying equipment and items of plant financed under the terms of an operating lease. The amount paid under these arrangements in 2023/2024 was £3.316 million (2022/2023 £3.316 million). 144
Page 145
59 Land and Buildings – the council leases a number of properties which have been accounted for as operating leases. The rentals payable in 2022/2023 were £2.476 million (2022/2023 were £2.476 million). The future minimum lease payments due under non-cancellable leases in future years are: 31 March 2024 £000 31 March 2023 £000 Not later than one year 4,445 4,445 Later than one year and not later than five years 9,934 9,934 Later than five years 34,646 34,646 Total 49,025 49,025 The sub lease payments receivable in future years are: 31 March 2024 £000 31 March 2023 £000 Not later than one year 319 319 Later than one year and not later than five years 356 356 Later than five years - - Total 675 675 The expenditure charged to the Comprehensive Income and Expenditure Statement during the year in relation to these leases was: 2023/24 £000 2022/23 £000 Minimum lease payments 5,792 5,792 Sublease payments receivable (368) (368) Total 5,424 5,424 Council as Lessor Operating Leases The council leases out property under operating leases. The purpose of the Lease Portfolio is principally Socio Economic – by supporting the wider corporate objectives of the council as stated in the Council Plan, Connect 2022-27, through strategic influence, control, occupational use and management of lease agreements. In particular, but not exclusively, to ‘support the local Economic Development by providing the right conditions for growth, improving skills and employability’. The future minimum lease payments receivable under non-cancellable leases in future years are: 2023/24 £000 2022/23 £000 Not later than one year 4,473 4,473 Later than one year and not later than five years 10,043 10,043 Later than five years 95,136 95,136 Total 109,652 109,652 The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2023/2024, no contingent rents were receivable by the council (2022/2023 – nil). 145
Page 146
60 Note 18 Grant Income The council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2023/2024: 2023/24 £000 2022/23 £000 Credited to Taxation and Non Specific Grant Income Council Tax 159,053 148,958 Non Ring Fenced Government Grants 349,979 254,817 Non Domestic Rate Redistribution 341,536 422,591 Total 850,568 826,366 Credited to Services Scottish Government 67,226 64,932 European Grant Funding 6,189 1,508 Skills Development Scotland 710 761 Central Government 63,069 59,664 Lottery 153 150 Creative Scotland 410 410 NHS (incl. Resource Transfer) 51,439 58,778 Other Grants 419 294 Total/ 189,615 186,496 Note 19 Events After the Balance Sheet Date The unaudited Annual Accounts were authorised for approval by the Executive Director (Finance and Corporate Resources) on 25 June 2024. There are no events that occurred between 1 April 2024 and the date that the unaudited Accounts were authorised for issue, that would have an impact on the financial statements. Where events taking place before this date provided information about conditions existing at 31 March 2024, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. 146
Page 147
61 Note 20 Property, Plant and Equipment Movements on Balances Movements in 2023/2024: Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets (Note 1) £000 Community Assets £000 Surplus Assets £000 Assets Under Construction £000 Total Property, Plant and Equipment £000 PFI assets Included in Property, Plant and Equipment £000 Cost or Valuation As at 1 April 2023 1,531,316 1,896,008 54,316 1,475 10,192 33,096 3,526,403 507,529 Additions 60,084 3,877 4,524 26,732 229 64 24,809 120,319 179 Revaluation increases / (decreases) recognised in the Revaluation Reserve (122,610) 33,860 - - - 47 - (88,703) 8,225 Revaluation increases / (decreases) recognised in the Surplus / Deficit on the Provision of Services (99) (12,448) - - (119) (66) - (12,732) - De-recognition – Disposals (156) (3,710) (3,503) (89,278) (11) (11) - (96,669) - Assets reclassified from Held for Sale - 1 - - - 479 - 480 - Other movements in Cost or Valuation 8,579 24,012 1,488 865 53 (453) (34,544) - - At 31 March 2024 1,477,114 1,941,600 56,825 1,627 10,252 23,361 3,449,098 515,933 147
Page 148
62 Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets (Note 1) £000 Community Assets £000 Surplus Assets £000 Assets Under Construction £000 Total Property, Plant and Equipment £000 PFI assets Included in Property, Plant and Equipment £000 Accumulated Depreciation and Impairment As at 1 April 2023 - 85,317 19,517 9 17 - 104,860 31,682 Depreciation Charge 37605 38,615 9,194 11,096 1 9 - 96,520 9,448 Depreciation written out to the Revaluation Reserve (37,618) (21,409) - - - - - (59,027) (2,846) Depreciation written out to the Surplus / Deficit on the Provision of Services - (6,024) - - - (5) - (6,029) - Impairment losses / (reversals) recognised in the Revaluation Reserve - - - - - - - - - Impairment losses / (reversals) recognised in the Deficit on the Provision of Services - - - - - - - - - De-recognition – Disposals - (2,194) (3,503) (89,278) - - - (94,975) - Eliminated on reclassification to Assets Held for Sale - - - - - - - - - Other movements in Depreciation and Impairment 13 (13) - - - - - - - At 31 March 2024 - 94,292 25,208 10 21 - 41,349 38,284 Net book value At 31 March 2024 1,477,114 1,847,308 31,617 343,286 1,617 10,231 23,361 3,734,534 477,649 At 31 March 2023 1,531,316 1,810,691 34,799 326,785 1,466 10,175 33,096 3,748,328 475,847 148
Page 149
63 Movements on Balances Movements in 2022/2023: Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets (Note 1) £000 Community Assets £000 Surplus Assets £000 Assets Under Construction £000 Total Property, Plant and Equipment £000 PFI assets Included in Property, Plant and Equipment £000 Cost or Valuation As at 1 April 2022 1,490,806 1,844,497 51,341 3,704 10,899 35,725 3,436,972 506,916 Additions 45,841 5,636 7,538 20,158 85 (9) 36,089 115,338 612 Revaluation increases / (decreases) recognised in the Revaluation Reserve (22,634) 26,896 1,308 - - (11) - 5,559 - Revaluation increases / (decreases) recognised in the Surplus / Deficit on the Provision of Services - (3,377) (16) - - (21) (41) (3,455) - De-recognition – Disposals - (915) (6,007) - - - - (6,922) - Assets reclassified from Held for Sale - (10) - - - (669) - (679) - Other movements in Cost or Valuation 17,304 23,286 151 252 (2,315) 1 (38,678) 1 - At 31 March 2023 1,531,317 1,896,013 54,315 1,474 10,190 33,095 3,546,814 507,528 149
Page 150
64 Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets (Note 1) £000 Community Assets £000 Surplus Assets £000 Assets Under Construction £000 Total Property, Plant and Equipment £000 PFI assets Included in Property, Plant and Equipment £000 Accumulated Depreciation and Impairment As at 1 April 2022 - 74,641 16,782 8 - 91,496 22,268 Depreciation Charge (37,777) (20,873) - - - - - (58,650) (37,777) Depreciation written out to the Revaluation Reserve (37,777) (20,873) - - - - - (58,650) - Depreciation written out to the Surplus / Deficit on the Provision of Services - (5,407) (11) - - - - (5,418) - Impairment losses / (reversals) recognised in the Revaluation Reserve - - - - - - - - - Impairment losses / (reversals) recognised in the Deficit on the Provision of Services - - - - - - - - - De-recognition – Disposals - - (6,007) - - - - (6,007) - Eliminated on reclassification to Assets Held for Sale - - - - - - - - - Other movements in Depreciation and Impairment - 69 - - (69) - - - - At 31 March 2023 - 85,319 19,517 9 17 - 119,103 31,681 Net book value At 31 March 2023 1,531,317 1,810,694 34,798 326,785 1,465 10,173 33,095 3,748,327 475,847 At 31 March 2022 1,490,806 1,769,856 34,559 320,616 3,639 10,891 35,725 3,666,092 484,648 150
Page 151
65 Note 1: Infrastructure asset values have been disclosed in accordance with the Scottish Government’s Finance Circular 9/2022 Statutory Override - Accounting for Infrastructure Assets. The council has applied both statutory overrides set out in the circular which are as follows: ▪ For accounting periods commencing from 1 April 2021 until 31 March 2024, a local authority is not required to report the gross carrying amount and accumulated depreciation for infrastructure assets. ▪ For the accounting periods from 1 April 2021 to 31 March 2024, the carrying amount to be derecognised in respect of a replaced part of an infrastructure asset is to be accounted for as a nil amount, and no subsequent adjustment can be made to the carrying amount of the asset with respect to that part. The approach is set out in Note 36: Accounting Policies. Capital Commitments At 31 March 2024, the council has entered into a number of contracts for the construction or enhancement of Property, Plant and Equipment for housing and non-housing projects in 2024/2025 and future years. The major commitments for both Housing and General Services are as follows: Housing Projects £000 Non-Housing Projects £000 New Build Housing Housing Investment projects including Heating Projects, Windows and Doors, Fire Doors, External Fabric Upgrades, Roofing and Environmental Works 4,955 11,116 Philipshill Cemetery - Extension Nature Restoration Fund Renewal of Play Parks - Larkhall TACT Hall Rural Development Centre - Lanark Lanark Road Signalisation Clyde Bridge Schools ICT Wooddean Early Learning Centre First Steps Community Nursery - Extension Our Lady of Lourdes Primary School – Extension and Modernisation Oracle Upgrade David Walker Gardens Roof Works Public Space CCTV 327 97 321 129 665 720 834 1,591 368 445 2,680 1,894 182 128 Revaluations The council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured at fair value is revalued at least every five years. All valuations were carried out internally. Valuations of land and buildings were carried out in accordance with the methodologies and bases for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. Valuations of vehicles, plant and equipment are based on current prices where there is an active second-hand market or latest list prices adjusted for the condition of the asset. Vehicles, plant and equipment, despite being valued in the Balance Sheet at current costs are not included in the five year revaluation programme as any changes in valuation are considered to be immaterial. Council dwellings are revalued every year. The significant assumptions applied in estimating the fair values are: ■ All valuations are prepared in accordance with the current edition of the RICS Valuation Standards. ■ All valuations are provided by a Valuer directly employed by South Lanarkshire Council and are accordingly defined as internal valuations. Valuation Assumptions Unless the Appointed Valuer is advised or reports to the contrary, the following valuation assumptions shall apply to all asset valuations provided under this service: ■ It is assumed that the Local Authority shall continue to provide the services to which the assets relate; ■ It is assumed that the property valued, is not at the date of valuation, affected by any mining subsidence and will not be affected in the future; ■ It is assumed that the site is stable and will not occasion any extraordinary costs with regard to mining subsidence; ■ It is assumed that the title to the subject contains no onerous burdens and restrictive conditions and that it has not been ascertained what minerals, rights of support and compensation is attached to the land nor whether rights of use and re-entry have been reserved; ■ It is assumed that the property and its value are unaffected by any matters which would be revealed by local search and replies to the usual enquiries or by inspection of any register and that its condition, use, or intended use was, is or will be lawful; ■ It is assumed that the property has the necessary statutory consents for the current buildings and use and that 151
Page 152
66 there are no policies or proposals by statutory authorities that could impact positively or adversely on the value; ■ No investigation shall be undertaken or information provided regarding the use of hazardous or deleterious materials or techniques in the construction of the property. It is assumed that no such materials or techniques have been used; ■ No investigation shall be undertaken or information provided regarding the presence of contamination or hazardous substances in the property (including the site) and neighbouring properties. It is assumed that no such contamination or hazardous substances are present; ■ No environmental assessment shall be carried out or information provided on the presence of naturally occurring radon gas. It is assumed that no radon gas is present in the property; ■ It is assumed that adequate repairs and maintenance is being undertaken; and ■ Unless otherwise stated, the date of valuation shall be 1 April of the specified financial year. Revaluation Programme The table below shows the progress of the council’s programme for the revaluation of Property, Plant and Equipment that ensures that all its PPE assets required to be measured at fair value are revalued at least every five years. The measurement basis used for determining the gross carrying amount, and the significant assumptions applied in estimating the fair values are disclosed above and in Note 36 Accounting Policies under Section P ‘Property, Plant and Equipment’. Council Dwellings £000 Other Land and Buildings £000 Vehicles, Plant and Equipment £0000 Infrastructure Assets £000 Community Assets £000 Surplus Assets £000 Assets Under Construction £000 Total £000 Carried at historical cost - - 31,617 343,286 1,617 - 23,361 399,881 Valued at fair value 2023/24 1,477,114 311,886 461 1,789,461 2022/23 - 328,887 - - - 329 - 329,216 2021/22 - 249,815 - - - 1,878 - 251,693 2020/21 - 416,647 - - - 5,764 - 422,411 2019/20 - 540,073 - - - 1,799 - 541,872 5 years ago and greater - - - - - - - - Total Cost or Valuation 1,531,318 1,847,308 31,617 343,286 1,617 10,231 23,361 3,734,534 Note 21 Other Assets – Intangible, Heritage and Assets Held For Sale Intangible Assets Intangible Assets Heritage Assets Heritage Assets Assets Held for Sale Assets Held for Sale 2023/24 £000 2022/23 £000 2023/24 £000 2022/23 £000 2023/24 £000 2022/23 £000 Cost or Valuation Balance at 1 April 375 361 3,826 3,826 3,408 213 Additions 15 18 - - - 8,310 Revaluation increases / (decreases) recognised in the Revaluation Reserve - - 27 - - - De-recognition – Disposals - (4) - - (124) (5,794) Assets reclassified (to) / from Assets Held for Sale (87) - - - (479) 679 Balance at 31 March 303 375 3,853 3,826 2,805 3,408 Accumulated Depreciation Balance at 1 April 185 113 - - - - Depreciation charge 66 75 - - - - Depreciation – Disposals (87) (3) - - - - Balance at 31 March 164 185 - - - - Net Book Value at 31 March 139 190 3,853 3,826 2,805 3,408 152
Page 153
67 Note 22 Capital Expenditure and Capital Financing The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the council, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the council that has yet to be financed. The CFR is analysed in the second part of this note. General Fund 2023/24 £000 HRA 2023/24 £000 Total 2023/24 £000 General Fund 2022/23 £000 HRA 2022/23 £000 Total 2022/23 £000 Opening Capital Financing Requirement 1,089,036 292,706 1,381,742 1,015,606 282,854 1,298,460 Capital Investment Property, Plant and Equipment 58,079 62,240 120,319 62,954 60,695 123,648 Intangible Assets 15 0 15 18 - 18 Decrease in PPP Finance Lease Liability (7,097) 0 (7,097) (7,157) - (7,157) Impact of Applying Service Concession Flexibility 4,437 0 4,437 64,366 - 64,366 Sources of Finance Capital Receipts 0 (1,966) (1,966) - (8,027) (8,027) Government Grants and Other Contributions (38,599) (25,712) (64,311) (43,056) (12,235) (55,291) Sums set aside from revenue: ▪ Direct Revenue Contributions (576) (20,046) (20,622) (874) (26,050) (26,924) ▪ Loans Fund Principal (3,268) (5) (3,273) (2,821) (4,531) (7,352) Closing Capital Financing Requirement 1,102,027 307,217 1,409,244 1,089,036 292,706 1,381,742 Explanation of movements in year: Increase in Underlying Need to Borrow 18,919 14,516 33,435 19,042 14,383 33,425 Loans Fund Repayments (3,268) (5) (3,273) (2,821) (4,531) (7,352) Assets Acquired Under PFI/PPP Contracts (7,097) 0 (7,097) (7,157) - (7,157) Impact of Applying Service Concession Flexibility 4,437 0 4,437 64,366 - 64,366 Increase / (Decrease) in Capital Financing Requirement 12,991 14,511 27,502 73,430 9,852 83,282 153
Page 154
68 Note 23 Short Term Debtors 31 March 2024 £000 31 March 2023 £000 Trade Receivables 27,429 33,754 Prepayments 13,780 8,380 Other Receivable Amounts 61,039 39,130 Total 102,248 81,264 Note 24 Debtors for Local Taxation The past due but not impaired amount for local taxation and non-domestic rates can be analysed by age as follows: 31 March 2024 Council Tax £000 31 March 2024 NDR £000 31 March 2023 Council Tax £000 31 March 2023 NDR £000 Less than one year 2,267 2,697 507 2,310 One to two years 357 - 1,065 - Two to five years - - - - More than five years - - - - Total 2,624 2,697 1,572 2,310 Note 25 Short Term Creditors 31 March 2024 £000 31 March 2023 £000 Trade Payables 85,557 87,251 Other Payables 118,386 138,773 Total 203,943 226,024 Note: Included within the Other Payables balance of £118.386m are balances held on behalf of third parties totalling £5.957m. They relate to Lanarkshire Valuation Joint Board, Clyde Valley Learning and Development Joint Committee, SEEMIS LLP, Regen FX Youth Trust, Supplier Development Programme, Common Good and Trust Funds whose financial transactions are hosted in the Council’s Financial Management System. Note 26 Provisions Injury and damage compensation claims (1) £000 Other provisions (2) £000 Total £000 Balance at 31 March 2023 598 2,454 3,052 Additional provisions made in 2023/24 0 1,674 1,674 Amount used in 2023/24 (62) (2,452) (2,514) Unused amounts reversed in 2023/24 0 0 0 Unwinding of discounting in 2023/24 0 0 0 Balance at 31 March 2024 536 1,676 2,212 154
Page 155
69 The above provisions can be further analysed into Short Term and Long Term as follows: Injury and damage compensation claims (1) £000 Other provisions (2) £000 Total £000 Short Term - 1,676 1,676 Long Term 536 - 536 Balance at 31 March 2024 536 1,676 2,212 (1) The majority of this amount relates to a long-term provision in respect of ongoing compensation claims. The council believes that the amount provided accurately represents the best estimate of the amounts due. (2) The amount relates to provisions in respect of orders for bespoke adaptations, and property dilapidations. Note 27 Receipts in Advance The council has received a number of grants and contributions that have yet to be recognised as income. This is because they have conditions attached to them which requires the monies or property to be returned to the giver if these conditions are not met. These monies are committed to spend in 2023/2024. The balances at 31 March 2024 are as follows: 31 March 2024 £000 31 March 2023 £000 Revenue Grants and Contributions Big Lottery - - UK Government 206 72 Clyde Gateway 85 85 Visit Scotland - 28 National Health Service 13 69 Scottish Coal 498 498 Scottish Government 221 333 Scottish Government - COVID-19 Business Support - 6 Department of Works and Pensions - 87 Wind Turbine Construction Compensation (Various) 140 140 Home Office - - Other 168 2 Total 1,331 1,320 Note 28 Public Private Partnership and Similar Contracts The Council has two PPP or similar contracts: Secondary Schools PPP and Glasgow Southern Orbital. Secondary Schools PPP: The council entered the PPP agreement in June 2006 for the provision of 17 new build schools (which includes 2 named Additional Support Needs schools) as well as the major refurbishment of Stonelaw High School and Hamilton Grammar. The Unitary Charge is index linked with the inflation rate in the January of the preceding financial year used to agree the charge for the new financial year. The agreement will last 30 years and will end in 2039/2040. The unitary charge paid to the contractor includes the repayment of construction costs, interest and service charges and the projected payments due under the agreement, based on assumed RPI of 2.5% per annum. Glasgow Southern Orbital: The council entered the PPP agreement in July 2006 for the Design, Build, Finance and Operate Contract which covered both the Glasgow Southern Orbital and the M77 Extension with a contract value of £130m. The agreement will last 30 years and will end in 2035/2036. The actual payments made on PPP contracts are single sum unitary charge payments made to the contractor. For year-end accounting purposes we are required to calculate notional figures. Payments remaining to be made under PFI contracts for both Schools and Glasgow Southern Orbital as at 31 March 2024 (assuming an inflation rate of 2.5% for Schools PPP and excluding any estimation of availability/ performance deductions) are as follows: 155
Page 156
70 Payment For Services £000 Reimbursement Of Capital Expenditure £000 Interest £000 Contingent Rents £000 Total £000 Payable in 2023/24 17,074 7,388 9,052 12,819 46,334 Payable within two to five years 81,203 29,090 32,256 54,650 197,199 Payable within six to ten years 102,753 50,687 30,740 91,323 275,503 Payable within eleven to fifteen years 95,880 76,335 13,770 125,588 311,573 Payable within sixteen to twenty years 10,836 8,560 227 13,893 33,515 Total 307,746 172,059 86,044 298,275 864,124 The impact of a 1% movement in inflation on the 2024/2025 Unitary charge payment would be £0.452m. The liability outstanding to pay the contractor for capital expenditure incurred is as follows: 2023/24 £000 2022/23 £000 Balance outstanding at start of year 179,133 186,290 Payments during year (7,097) (7,157) Capital expenditure incurred in the year - - Reduction in liability for prepaid assets - - Balance outstanding at year end 172,036 179,133 Implementation of PPP Service Concession Flexibilities In accordance with Accounting Policy S on page 114 and in line with Finance Circular 10/2022, the Council implemented the permitted PPP Service Concession flexibility in financial year 2022/2023 on a retrospective annuity basis with a useful life of 50 years. The flexibility being applied is consistent with current Council Loans Fund arrangements and is considered prudent, sustainable, and affordable over the life of the asset. The implementation of this arrangement has no impact on the payments made to the contractor. The current notional repayments noted above have been compared against an annuity repayment profile based on the estimated useful asset lives for the each of the two PPP or similar arrangements, over the contract period. The most appropriate asset life is considered to be 50 years which replicates the useful asset life of other similar type assets held on the Council’s balance sheet (schools and roads). By applying the flexibility, a one-off combined retrospective saving of £59.733m was achieved. In addition to the one-off retrospective element, in-year savings have been realised in the scheduled debt repayments up to 2023/2024 of £9.071m. This will be followed by a reduction in the annual charges for further 17 years and then the continuation of the statutory charges after the PPP and similar contracts have been repaid. Over the full asset life of the arrangement, the total repayment for the debt liability remains the same. PPP debt repayment Current repayment £000 Revised repayment £000 Benefit / (Cost) £000 Pre 2023/2024 92,441 28,075 64,366 Paid in 2023/2024 7,098 2,660 4,438 Payable within one to five years 36,487 15,607 20,880 Payable within six to ten years 50,698 20,282 30,416 Payable within eleven to fifteen years 76,291 26,354 49,937 Payable within sixteen to twenty years 8,560 34,246 (25,686) Payable within twenty-one to twenty-five years 0 44,356 (44,356) Payable within twenty-six to forty years 0 57,521 (57,521) Payable within forty-one to forty-five years 0 42,474 (42,474) Total 271,575 271,575 - 156
Page 157
71 Note 29 Pension Schemes Accounted for as Defined Contribution Schemes Teachers employed by the council are members of the Teachers’ Pension Scheme, administered by the Scottish Government. The Scheme provides teachers with specified benefits upon their retirement, and the council contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Scottish Government uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The council is not able to identify its share of underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purposes of the Financial Statements, it is therefore accounted for on the same basis as a defined contribution scheme. South Lanarkshire Council’s level of participation in the scheme is 5.50% based on the proportion of employer contributions paid in 2022/2023. In 2023/2024, the council paid £41.558 million into the Teachers’ Pension Scheme in respect of employer contributions, being 23.0% of pensionable pay. The figures for 2022/2023 were £38.864 million and 23.0% of pensionable pay. The council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers’ scheme. These costs are accounted for on a defined benefit basis and detailed in Note 30. Note 30 Pension Schemes Accounted for as Defined Benefit Schemes Participation in Pension Schemes The post-employment scheme for employees other than teachers is the Local Government Pension Scheme (LGPS) and is administered in the West of Scotland by Glasgow City Council in respect of all local authorities and admitted bodies in the former Strathclyde area. This is a multi-employer scheme in which it is possible for an employer to identify its share of the assets and liabilities on a consistent and reasonable basis. Employer’s liabilities can be evaluated directly by the Actuary at any time on membership data. Individual employer assets have been apportioned to each employer since 2002. Prior to that date, each employer was considered to have the same funding as the whole Fund. Benefits ■ It is a defined benefit final salary scheme, meaning that the council and employees pay contributions into a fund, calculated at a level to balance the pensions liability with investment assets. ■ A new Career Average Related Earnings (CARE) pension scheme has been introduced from 1 April 2015. The pension accrual rate guarantees a pension that is built up at a rate of 1/49th of the pensionable pay in the financial year. The amount built up in the year is transferred to the member’s pension account and at the end of each financial year the total in the member’s pension account is adjusted in line with the cost of living to ensure it retains its purchasing power. ■ For pension contributions from 2009 to 2015, the pension is based on 1/60th of final pensionable salary and years of service, and prior to 2009, the accrual rate guarantees a pension based on 1/80th and a lump sum based on 3/80th of final pensionable pay and years of pensionable service. ■ There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for lump sum up to the limits set by the Finance Act 2004. The scheme’s retirement age is the normal age for the state pension. Pensions are increased annually in line with changes to the Pensions (Increase) Act 1971 and Section 59 of the Social Security Pensions Act 1975. Governance ■ The Strathclyde Pension Fund is operated under the regulatory framework for the LGPS in Scotland and the governance of the scheme is the responsibility of the Strathclyde Pension Fund Committee. This committee is comprised solely of Elected Members of Glasgow City Council. Employing authorities (including South Lanarkshire Council) are represented at the Strathclyde Pension Fund Representative Forum. ■ Policy is determined in accordance with the Local Government Pension Scheme (Scotland) Regulations. Management of the Fund’s investments is carried out by the Fund’s Investment Advisory Panel which selects and appoints a number of external investment managers/partners and monitors their investment performance. ■ Under the Regulations, employers fall into three categories, scheme employers (also known as schedule bodies) such as South Lanarkshire Council, community admission bodies and transferee admission bodies. Admission agreements are generally assumed to be open-ended. However, either party can voluntarily terminate the admission agreement by giving an appropriate period of notice to the other parties. Any deficit 157
Page 158
72 arising from the cessation valuation will usually be levied on the departing admission body as a capital payment. Principal Risks ■ The principal risks to the scheme are the longevity assumptions, statutory changes to the scheme, changes to inflation, bond yields and the performance of the investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge the General Fund the amount due by statute as described in the accounting policy note. Discretionary Post-employment Benefits ■ Discretionary post-retirement benefits on early retirement are an unfunded defined benefit arrangement, under which liabilities are recognised when an award is made. There are no plan assets built up to meet these pension liabilities. Legal and Regulatory Uncertainty McCloud Ruling – Age Discrimination When the Local Government Pension Scheme (LGPS) Scotland benefit structure was reformed in 2015, transitional protections were applied to certain older members close to retirement age. The benefits accrued from 1 April 2015 by these members are subject to an ‘underpin’ which means that they cannot be lower than what they would have received under the previous benefit structure. In December 2018, the Court of Appeal upheld a ruling (McCloud case) that similar transitional protections were unlawful on the grounds of age discrimination. This means that the LGPS Scotland benefits accrued from 2015 may need to be enhanced so that all eligible members, regardless of age, will benefit from the underpin. The impact of this will depend on the compensation awarded, members’ future salary increases, length of service, retirement age and whether (when) members withdraw from active service. In 2019, Strathclyde Pension Fund’s actuary included an estimate of the impact of this in their IAS19 reports and the Pension Liability reported in the council’s Balance Sheet. In July 2020, the Government published a consultation covering Scotland which proposed amendments to the Local Government Pension Scheme in order to provide a remedy for the McCloud and Sargeant legal rulings and actuaries reviewed their assumptions in the IAS19 reports. The actuary has allowed for the McCloud judgement in the calculation of the latest funding valuation results. The Employer’s funding valuation results are used as the starting point for the accounting rollforward calculations and therefore an allowance is included in the accounting disclosure. Guaranteed Minimum Pension Indexation Treatment (Lloyd’s Ruling) Guaranteed Minimum Pension (GMP) was accrued by members of the Local Government Pension Scheme (LGPS) between 6 April 1978 and 5 April 1997. Although the value of GMP was inherently unequal between males and females due to a number of factors, the overall equality of benefits was achieved through the interaction between scheme pensions and the Second State Pension. The introduction of the new Single State Pension in April 2016 disrupted this arrangement, bringing uncertainty over the ongoing indexation of GMP’s which could lead to inequalities between men and women’s benefits. An interim solution passed the responsibility for ensuring GMP’s kept pace with inflation to pension schemes themselves for members reaching state pension age between 6 April 2016 and 5 April 2021. This leads to increased costs for schemes including the LGPS and scheme employers. The Strathclyde Pension Fund’s actuary has carried out calculations to estimate the impact, assuming that the interim solution will be applied to all members retiring from 6 April 2016 onwards. The value of the full impact of GMP has been included in the pension liability reported in the council’s Balance Sheet. These figures will be updated as part of the Pension Fund valuations and as more information becomes available. Historical Transfers (Further Lloyd’s Ruling) A further ruling was passed in relation to historical transfers and it is the opinion of Strathclyde Pension Fund’s actuary that this is unlikely to have a significant impact on the pension obligations of a typical employer. In addition, the historic individual member data to assess the impact is not readily available, therefore no allowance has been made in the calculations. Goodwin Scottish Public Pension Agency circular (Local Government Pension Scheme 2020/04), refers to a ruling that same-sex survivors were originally entitled to survivor benefits, taking into account the member’s service from 6 April 1978. Following the Goodwin Tribunal, regulatory amendments will now need to be made with effect from the same date to extend that entitlement to male spouse survivors of female members. Previously, the male spouse survivor’s entitlement was based on service accrued from 6 April 1988. The change is backdated to 5 December 2005, therefore affects the pension of male spouse survivors where their entitlement arose on or after 5 December 2005. While there is still uncertainty surrounding the potential remedy to the Goodwin judgement, Strathclyde Pension Fund’s actuary has carried out analysis in order to understand the potential impact of implementing a solution to correct the past underpayment of 158
Page 159
73 spouses’ benefits and have ascertained that they feel the impact is very small for a typical fund (c0.1% of obligations), therefore no allowance has currently been made in the calculations. Other Cases (Walker and O’Brien) The actuary has also highlighted 2 other court cases which may impact on Local Government Pension Scheme benefits in the future. The first was the Walker case where it was ruled that surviving spouses in same sex marriages should be entitled to the same benefits as those in different sex marriages and also the O’Brien case where it was ruled that recognition of part time benefits should apply to service for the period prior to 7 April 2000. The Actuary’s view remains unchanged from previous years and is that they are unlikely to be significant judgements in terms of impact on pension obligations. Until further guidance is released from the relevant governing bodies in the LGPS, no allowance has been made for the potential remedies for these judgements. Virgin Media vs NTL Pension Trustees II Limited The actuary has advised on an initial legal judgement from July 2023 regarding Section 37 confirmations. The actuary has made no additional allowance within the accounting balance sheet for this because at the time of writing the ruling only applies to the above- named private sector pension scheme; the legal judgement is currently being appealed; it is unknown whether there would be any potential remedy required to public service schemes (including the LGPS); it is unknown what the impact of any potential remedy would be and it is unknown whether Section 37 certificates exist for prior scheme amendments. Accordingly, no provision has been made in the accounts. Transactions Relating to Post-Employment Benefits The cost of retirement benefits is recognised in the reported Cost of Services when they are earned by the council’s employees, rather than when the benefits are eventually paid as pensions. However, the charge that is statutorily required to be made against the Council Tax is based upon the pension contributions payable by the council in the year, and an adjustment is made in the Movement in Reserves Statement to achieve this. The following transactions have been made in the accounting statements in 2023/2024 and the prior year 2022/2023. 31 March 2024 £000 31 March 2023 £000 Comprehensive Income and Expenditure Statement (CIES) Cost of Services: Service cost comprising: • current service cost 65,932 125,747 • past service costs - - • unfunded benefits - - Financing and Investment Income and Expenditure • net interest expense (32,312) 5,193 Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services 33,620 130,940 Other Benefits Charged to the CIES Re-measurement of the net defined liability comprising: • Expected return on pension fund assets (137,234) 115,915 • Actuarial (gains) or losses arising on changes in demographic assumptions (28,599) (21,885) • Actuarial (gains) or losses arising on changes in financial assumptions (113,469) (1,135,272) • Actuarial (gains) or losses arising on changes in other experiences 190,037 132,981 • Actuarial (gains) or losses arising on de-recognition of Pension Asset 176,360 740,993 Total Post Employment Benefit Charged to the CIES 87,095 (167,268) Net charge to the Surplus / Deficit on the Provision of Services brought forward 33,620 130,940 Movement in Reserves Statement (MIRS) • Reversal of net charges made to the Surplus or Deficit on the Provision of Services for post-employment benefits in accordance with the Code 35,989 (69,383) Actual amount charged against the General Fund balance for pensions in the year: Employers’ contributions payable to Strathclyde Pension Fund 69,609 61,557 159
Page 160
74 Pensions Assets and Liabilities Recognised in the Balance Sheet The amount included in the Balance Sheet arising from the Council’s obligation in respect of its defined benefit plans is per the table below. The net asset arising from the Council’s involvement in the defined benefit scheme totals £793.754m at 31 March 2023. However, this has been limited to £52.671m in line with the accounting requirements of IFRIC 14 to limit the recognition of a pension asset to the extent to which the Council can recover the benefits through either refunds or reduced contributions. As the Council is not able to withdraw from the scheme or recover funds directly, the asset is therefore limited to the forecast reductions in contributions as compared to the forecast future service costs. This has limited the recognition of the pension asset to £52.671m. Separately the Council has continued to recognise the unfunded element of its pension liabilities as there are no scheme assets to cover the future costs of these liabilities as they are due going forward. 31 March 2024 £000 31 March 2023 £000 Present Value of the Defined Benefit Obligation* (2,008,726) (1,882,768) Fair Value of Pension Fund Assets 2,926,079 2,676,522 De-Recognition of Pension Fund Assets (Surplus) to Asset Ceiling (917,353) (740,993) Present Value of the Unfunded Liability Accounted for Separately (113,666) (115,321) Net Asset / (Liability) arising from Defined Benefit Obligation (113,666) (62,560) *Unfunded liabilities included in the figure for present value of liabilities • unfunded liabilities for Pension Fund (42,716) (43,039) • teachers’ unfunded pensions (60,009) (60,483) • unfunded liabilities prior to 1996 local government reorganisation (10,941) (11,799) A reconciliation of South Lanarkshire Council’s share of the present value of Strathclyde Pension Fund’s defined benefit obligation (liability) is as follows: 31 March 2024 £000 31 March 2023 £000 Opening balance at 1 April (1,998,089) (2,870,632) Current service cost (65,932) (125,747) Interest cost (94,911) (78,488) Contributions by Pension Fund participants (18,691) (16,520) Re-measurement gains and (losses) • Actuarial gains and losses arising on changes in demographic assumptions 28,599 21,885 • Actuarial gains and losses arising on changes in financial assumptions 113,469 1,135,272 • Actuarial losses arising on changes in other experiences (171,387) (132,981) Past service costs (including curtailment) - - Settlements - - Benefits paid 84,550 69,122 Closing balance at 31 March (2,122,392) (1,998,089) A reconciliation of South Lanarkshire Council’s share of the fair value of Strathclyde Pension Fund’s assets is as follows: 31 March 2024 £000 31 March 2023 £000 Opening fair value of pension fund assets 2,676,522 2,710,187 Interest Income 127,223 73,295 Re-measurement gains and (losses) • Expected rate of return on pension fund assets 137,234 (115,915) • Actuarial gains and (losses) - - • Actuarial losses arising on changes in other experiences (18,650) - The effect of changes in foreign exchange rates - - Contributions from employers 69,609 61,557 Contributions from employees into the scheme 18,691 16,520 Benefits paid (84,550) (69,122) Closing balance at 31 March 2,926,079 2,676,522 160
Page 161
75 Analysis of Pension Fund’s Assets 31 March 2024 31 March 2023 Quoted Prices in Active Markets £000 Prices not quoted in Active Markets £000 Total £000 Quoted Prices in Active Markets £000 Prices not quoted in Active Markets £000 Total £000 Cash and cash equivalents 4,558 49,683 54,241 37,018 13,687 50,705 Equity Instruments 590,977 641 591,618 522,659 4,796 523,455 Debt Instruments - - - - 1 1 Real Estate - 230,076 230,076 - 220,678 220,678 Derivatives - - - - (2) (2) Private Equity - 698,575 698,575 - 657,857 657,858 Investment Funds 12,017 1,339,552 1,351,569 11,529 1,208,298 1,219,827 Total Assets 607,552 2,318,527 2,926,079 571,206 2,105,316 2,676,522 Basis for Estimating Assets and Liabilities The council’s share of the net obligations of the Strathclyde Pension Fund is an estimated figure based on actuarial assumptions about the future and is a snapshot at the end of the financial year. The net obligation has been assessed using the “projected unit method”, that estimates the pensions that will be payable in future years dependent upon assumptions about mortality rates, salary levels and so on. The Fund’s obligation has been assessed by Hymans Robertson, an independent firm of actuaries, and the estimates are based on the latest full valuation of the Fund at 31 March 2020. The significant assumptions used by the actuary are shown in the table below. Note 2 includes a sensitivity analysis for the pension obligation based on reasonably possible changes of these assumptions occurring at the reporting date. 31 March 2024 £000 31 March 2023 £000 Long term expected rate of return on assets in the Fund • Equity investment 7.10% 7.10% • Bonds 7.10% 7.10% • Property 7.10% 7.10% • Cash 7.10% 7.10% Mortality Assumptions (years): • Men 19.6 19.6 • Women 22.4 22.4 Longevity at 65 for future pensioners (years): • Men 21.0 21.0 • Women 24.5 24.5 Rate of inflation 3.20% 3.20% Rate of increase in salaries 3.90% 3.90% Rate of increase in pensions 3.20% 3.20% Rate for discounting Fund liabilities 2.70% 2.70% Take-up option to convert annual pension into retirement lump sum - Pre April 2009 service 50.0% 50.0% - Post April 2009 service 75.0% 75.0% Asset and Liability Matching (ALM) Strategy The main fund (Fund 1) of Strathclyde Pension Fund does not have an asset and liability matching strategy [ALM] as this is used mainly by mature funds. The Fund does match, to the extent possible, the types of assets invested to the liabilities in the defined benefit obligation. As is required by the pensions and investment regulations, the suitability of various types of investment has been considered, as has the need to diversify investments to reduce the risk of being invested in too narrow a range. The Fund invests in equities, bonds, properties and in cash. 161
Page 162
76 Impact of High Inflationary Environment The Fund’s actuary had advised that the CARE, deferred pensioner and pensioner obligations are increased each April in line with previous September rate of CPI, and the April 2023 Pension Increase Order of 10.1% has been applied to the obligations within the 31 March 2023 closing Balance Sheet figures. Accounting standards narrowly prescribe how the inflation assumption should be derived from market information at the year- end date. Therefore the current period of high inflation is somewhat allowed for insofar as it is captured in long-term market expectations (at 31 March 2023). However, the assumptions have been adjusted to recognise that the 2024 Pension Order is currently expected to be higher than the single CPI assumption for accounting purposes. Impact on the Authority’s Cash Flow The objectives of the Fund are to keep employers’ contributions at as constant a rate as possible. The Fund has agreed a strategy to achieve a funding rate of 100% in the longer term. The Scheme is a multi-employer defined benefit plan and employers’ contributions have been determined so that employee and employer rates are standard across all participating Local Authorities. Employer’s contributions were set at 19.3% for 2023/2024. Following the completion of the triennial valuation as at 31 March 2023, employers’ contribution rates have now been set at 19.3% The Fund will need to take account of impending national changes to the Local Government Pension Scheme in Scotland such as the move from 1 April 2015 to a new career average revalued earning scheme (CARE) for future accruals. The total contributions expected to be made by the council to Strathclyde Pension Fund in the year to 31 March 2024 is £53.456 million. The assumed weighted average duration of the defined benefit obligation for scheme members is 19.0 years. 162
Page 163
77 Note 31 Contingent Assets and Liabilities As at 31 March 2024 the council has the following material contingent liabilities: Historical Childhood Abuse The council recognises the potential for compensation claims deriving from the Scottish Government’s Limitation (Childhood Abuse) Scotland Act 2017. At this stage the extent of the council’s potential liability is unknown. The Government introduced a Redress Scheme in December 2021. This may have an impact on the extent of the Council’s liability. This cannot be quantified. Strathclyde Regional Council Intromissions Glasgow City Council are the accounting authority for any intromissions in relation to claims/litigation for the former Strathclyde authorities. The Council has included known liabilities to date in the 2023/2024 Accounts, however, at this stage the extent of any further potential liability of the council is unknown. Pensions A circular from the Scottish Public Pensions Agency (Local Government Pension Scheme 2020/04) refers to a ruling that same-sex survivors were originally entitled to survivor benefits, taking into account the member’s service from 6 April 1978. Previously, the male spouse survivor’s entitlement was based on service accrued from 6 April 1988. The change is backdated to 5 December 2005, therefore affects the pension of male spouse survivors where their entitlement arose on or after 5 December 2005. Following the Goodwin Tribunal, regulatory amendments will now need to be made with effect from the same date to extend that entitlement to male survivors of female members. While this could have a financial impact on future years’ costs, and the impact cannot yet be quantified, current information from the Strathclyde Pension Fund actuary suggests that this is likely to be minimal. Given the uncertainty, and the immaterial nature of any potential impact, no provision has been made in the Accounts. In addition, the actuary also highlighted an awareness of 2 other court cases which may impact on pension benefits in the future. The first was the Walker case where it was ruled that surviving spouses in same sex marriages should be entitled to the same benefits as those in different sex marriages and also the O’Brien case where it was ruled that recognition of part time benefits should apply to service for the period prior to 7 April 2000. The actuary’s understanding is that these are unlikely to be significant judgements in terms of impact on future pension obligations of Employers. Again, given the uncertainty, the immaterial nature of any potential impact, and as no further guidance has been released from the relevant governing bodies in the LGPS no provision has been made in the Accounts. Finally the actuary has advised on an initial legal judgement from July 2023 (Virgin Media vs NTL Pension Trustees II Limited ruling) regarding Section 37 confirmations. The actuary has made no additional allowance within the accounting balance sheet for this because at the time of writing the ruling only applies to the above-named private sector pension scheme; the legal judgement is currently being appealed; it is unknown whether there would be any potential remedy required to public service schemes (including the LGPS); it is unknown what the impact of any potential remedy would be and it is unknown whether Section 37 certificates exist for prior scheme amendments. Accordingly, no provision has been made in the accounts. Job Evaluation Scheme As part of the Council’s Job Evaluation Scheme, a range of posts have been identified as requiring review. Where there is no outcome agreed, any liability in respect of these reviews cannot be determined. Contractor Claims There are no outstanding claims that have not been accounted for in the Accounts. 163
Page 164
78 Note 32 Financial Instruments Categories of Financial Instruments The following categories of financial instrument are carried in the Balance Sheet: 31 March 2024 31 March 2023 Long Term £000 Current £000 Total £000 Long Term £000 Current £000 Total £000 Financial Assets Fair value through profit and loss - - - - - - Amortised Cost - 13,784 13,784 - 161,559 161,559 Total Financial Assets - 13,784 13,784 - 161,559 161,559 Financial Liabilities Fair value through profit and loss - - - - - - Amortised cost 1,145,408 70,571 1,215,979 1,186,567 38,209 1,224,776 Total Financial Liabilities 1,145,408 70,571 1,215,979 1,186,567 38,209 1,224,776 164
Page 165
79 Income, Expense, Gains and Losses 2023/24 2022/23 Surplus or Deficit on the Provision of Services £000 Other Comprehensive Income and Expenditure £000 Total £000 Surplus or Deficit on the Provision of Services £000 Other Comprehensive Income and Expenditure £000 Total £000 Net Gains/Losses on: Financial Assets Measured at Fair Value Through Profit and Loss - - - - - - Financial Assets Measured at Amortised Cost - - - - - - Investments in Equity Instruments Designated at Fair Value Through Other Comprehensive Income - - - - - - Financial Assets Measured at Fair Value Through Other Comprehensive Income - - - - - - Financial Liabilities Measured at Amortised Cost - - - - - - Total Net Gains/Losses - - - - - - Interest Revenue Financial Assets Measured at Amortised Cost 8,922 - 8,922 4,716 - 4,716 Other Financial Assets Measured at Fair Value Through Other Comprehensive Income - - - - - - Total Interest Revenue 8,922 - 8,922 4,716 - 4,716 Interest Expense (39,065) - (39,065) (39,644) - (39,644) Fee Income Financial Assets or Financial Liabilities that are not at Fair Value Through Profit and Loss - - - - - - Trust and Other Fiduciary Activities - - - - - - Total Fee Income - - - - - - Fee Expense Financial Assets or Financial Liabilities that are not at Fair Value Through Profit and Loss - - - - - - Trust and Other Fiduciary Activities - - - - - - Total Fee Expense - - - - - - 165
Page 166
80 Fair Value of Financial Assets There are no financial assets held at fair value. Transfers Between Levels of the Fair Value Hierarchy There were no transfers between input levels 1 and 2 during the year. Changes in the Valuation Technique There has been no change in the valuation technique used during the year for the financial instruments. The Fair Values of Financial Assets and Financial Liabilities that are not Measured at Fair Value (but for which Fair Value Disclosures are Required) All financial assets and liabilities held by the authority are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that take place over the remaining life of the instruments, using the following assumptions: ■ For loans from the Public Works Loans Board (PWLB), premature repayment rates from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures. ■ For non PWLB loans, premature repayment rates from the PWLB have been applied to provide the fair value under PWLB debt redemption procedures. ■ Where an instrument has a maturity of less than 12 months the fair value is taken to be the principal outstanding. The fair values calculated are as follows: 2023/24 2023/24 2022/23 2022/23 Carrying Amount £000 Fair Value £000 Carrying Amount £000 Fair Value £000 Financial Liabilities Financial Liabilities held at amortised cost: PWLB Debt 1,015,340 1,030,752 1,037,067 1,100,503 Financial Liabilities held at amortised cost: Non PWLB Debt 28,603 29,228 8,575 9,388 PFI and Finance Lease Liabilities 172,036 193,183 179,134 208,256 Total Financial Liabilities 1,215,979 1,253,163 1,224,776 1,318,147 Financial Assets Financial Assets held at amortised cost 13,482 13,482 161,559 161,599 Total Financial Assets 13,482 13,482 161,559 161,599 The fair value of the liabilities is greater than the carrying amount because the Council’s portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than the rates available for similar loans in the market at the balance sheet date. This shows a notional future loss (based on economic conditions at 31 March 2024) arising from a commitment to pay interest to lenders above current market rates. The fair value of Public Works Loan Board (PWLB) loans of £1,030.752m measures the economic effect of the terms agreed with the PWLB compared with estimates of the terms that would be offered for market transactions undertaken at the Balance Sheet date, which has been assumed as the PWLB redemption interest rates. The difference between the carrying amount and the fair value measures the additional interest that the Council will pay over the remaining terms of the loans under the agreements with the PWLB, against what would be paid if the loans were at prevailing market rates. However, the authority has a continuing ability to borrow at concessionary rates from the PWLB rather than from the markets, termed the PWLB Certainty interest rates. A supplementary measure of the fair value as a result of its PWLB commitments for fixed rate loans is to compare the terms of these loans with the new borrowing rates available from the PWLB. If a value is calculated on this basis, the carrying amount of £1,015.340m would be valued at £956.278m. But, if the authority were to seek to avoid the projected loss by repaying the loans to the PWLB, the PWLB would raise a penalty charge, based on the redemption interest rates, for early redemption of £15.412m for the additional interest that will not now be paid. The exit price for the PWLB loans including the penalty charge would be £1,030.752m. 166
Page 167
81 Fair Value Hierarchy for Financial Assets and Financial Liabilities that are not Measured at Fair Value as at 31 March 2024: Recurring fair value measurements using: Quoted Prices in Active Markets for Identical Assets (Level 1) £000 Other Significant Observable Inputs (Level 2) £000 Significant Unobservable Inputs (Level 3) £000 Total £000 Financial Liabilities Financial Liabilities held at amortised cost: PWLB Debt - 1,030,752 - 1,030,752 Financial Liabilities held at amortised cost: Non PWLB Debt - 29,228 - 29,228 PFI and Finance Lease Liabilities - 193,183 - 193,183 - 1,253,163 - 1,253,163 Financial Assets Financial Assets held at amortised cost 13,482 - - 13,482 Total Assets / Liabilities 13,482 1,253,163 - 1,266,645 Fair Value Hierarchy for Financial Assets and Financial Liabilities that are not Measured at Fair Value as at 31 March 2023: Recurring fair value measurements using: Quoted Prices in Active Markets for Identical Assets (Level 1) £000 Other Significant Observable Inputs (Level 2) £000 Significant Unobservable Inputs (Level 3) £000 Total £000 Financial Liabilities Financial Liabilities held at amortised cost: PWLB Debt - 1,100,503 - 1,100,503 Financial Liabilities held at amortised cost: Non PWLB Debt - 9,388 9,388 PFI and Finance Lease Liabilities - 208,256 208,256 Financial Assets Financial Assets held at amortised cost 161,559 161,559 Total Assets / Liabilities 161,559 1,318,147 - 1,479,706 Note 33 Disclosure of Nature and Extent of Risks Arising From Financial Instruments Key Risks The council’s activities expose it to a variety of financial risks: ■ Credit Risk – the possibility that other parties might fail to pay amounts due to the council ■ Liquidity Risk – the possibility that the council might not have funds available to meet its commitments to make payments ■ Refinancing Risk – the possibility that the council might be required to renew a financial instrument on maturity at disadvantageous interest rates or terms ■ Market Risk – the possibility that financial loss might arise for the council as a result of changes in such measures as interest rates or stock market movements. 167
Page 168
82 Overall Procedures for Managing Risk The procedures for risk management are set out through a legal framework set out in the Local Government (Scotland) Act 2003 and the associated regulations. These require the council to comply with the CIPFA Prudential Code and the CIPFA Treasury Management in the Public Services Code of Practice. Overall these procedures require the Council to manage risk in the following ways: ■ by approving an investment strategy for the forthcoming year setting out its criteria for both investing and selecting investment counterparties; ■ by formally adopting the requirements of the Code of Practice; ■ by approving annually in advance prudential indicators for the following three years limiting: The council’s overall borrowing Its maximum and minimum exposures to fixed and variable rates Its maximum and minimum exposures of the maturity structure of its debt Its maximum annual exposures to investments maturing beyond a year These are required to be reported and approved at, or before, the council’s annual Council Tax budget setting. These items are reported within the Annual Treasury Management Strategy which outlines the detailed approach to managing risk in relation to the council’s financial instrument exposure. Actual performance is also reported quarterly to Members. These polices are implemented by a central treasury team. The council maintains written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, and the investment of surplus cash through Treasury Management Practices (TMPs). Nature and Extent of Risks – Credit Risk Credit Risk Credit Risk arises from deposits with banks and financial institutions, as well as credit exposures to the council’s customers The council manages this risk by ensuring that investments are placed with the Debt Management Office, other local authorities or Banks and Building Societies having sufficiently high credit worthiness as set out in the Treasury Management Strategy. The table below summarises the nominal value of the Council’s investment portfolio at the end of 31 March 2024 into the relative credit ratings. Balance Invested as at 31 March 2024 Counterparty/Country Long Term Rating (Fitch) Up to 1 month £000 Greater than 1 month and up to 3 months £000 Greater than 3 months and up to 6 months £000 Greater than 6 months and up to 9 months £000 Greater than 9 months and up to 12 months £000 Greater than 12 months £000 Total £000 Debt Management Office AA- 13,207 - - - - - 13,207 Total UK Government 13,207 - - - - - 13,207 Local Authorities AA- - - - - - - - Total UK Local Authorities - - - - - - - Bank of Scotland A+ 275 - - - - - 275 The Royal Bank of Scotland A+ 302 - - - - - 302 Total UK Banks 577 - - - - - 577 Total 13,784 - - - - - 13,784 The Ratings are as at 31 March 2024 and are intended to provide an indication of credit risk. These are not necessarily the ratings of institutions at the time deposits were placed. The Ratings above are from Fitch ratings. The Long-Term Rating is the benchmark measure of probability of default. 168
Page 169
83 Amounts Arising from Expected Credit Losses The council’s investments have been assessed and it has been concluded that the expected credit loss is not material and therefore no allowances have been made. The following analysis summarises the council’s potential maximum exposure to credit risk on the level of default on debtors. 2023/24 £000 Bad Debt Provision £000 2022/23 £000 Bad Debt Provision £000 Debtors 79,754 (6,049) 72,509 (5,576) The Debtors figure above does not include debtors for Council Tax, Non-Domestic Rates and Council House Rents as these are not considered to be financial assets. Of the gross Debtors figure included in the note, £14.504m (2022/2023: £16.155m) is considered to be past its date for payment. This past due amount can be analysed by age as follows: 2023/24 £000 2022/23 £000 Less than three months 7,998 9,297 Three to six months 1,359 950 Six months to one year 1,084 1,019 More than one year 4,063 4,889 Total 14,504 16,155 Nature and Extent of Risks – Liquidity Risk Liquidity Risk As the council has ready access to borrowings from the Public Works Loans Board, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. There may be a risk that the council will be bound to replenish a significant proportion of its borrowings at a time of unfavourable interest rates. The approved prudential indicator sets limits on the maturity structure of debt, and the council’s approved treasury and investment strategies address the main risks, and the central Treasury team address the operational risks within the approved parameters. This includes: ■ Monitoring the maturity profile of financial liabilities and amending the profile through either new borrowing or the rescheduling of existing debt. ■ Monitoring the maturity profile of investments to ensure sufficient liquidity is available for the Council’s day to day cash flow requirements. The maturity analysis of financial liabilities is as follows: 2023/24 £000 2022/23 £000 Less than one year 63,181 31,111 Between one and two years 119,653 33,770 Between two and five years 38,707 260,380 More than five years 822,402 720,382 Total 1,043,943 1,045,643 All trade and other payables are due to be paid in less than one year. 169
Page 170
84 Nature and Extent of Risks – Market Risk Interest Rate Risk The council is exposed to interest rate movements on its borrowings and investments. Movements in interest rates have a complex impact on the council. For instance, a rise in interest rates would have the following effects: ■ borrowings at variable rates – the interest expense charged to the Comprehensive Income and Expenditure Statement will rise ■ borrowings at fixed rates – the fair value of the liabilities borrowings will fall ■ investments at variable rates – the interest income credited to the Comprehensive Income and Expenditure Statement will rise ■ investments at fixed rates – the fair value of the assets will fall Borrowings are not carried at fair value, so nominal gains and losses on fixed rate borrowings would not impact on the Comprehensive Income and Expenditure Statement. However, changes in interest payable and receivable on variable rate borrowings and investments will be posted to the Comprehensive Income and Expenditure Statement and affect the General Fund Balance pound for pound. Movements in the fair value of fixed rate investments will be reflected in the Comprehensive Income and Expenditure Statement unless the investments have been designated at fair value through the Comprehensive Income and Expenditure Statement. The council has a number of strategies for managing interest rate risk. The Annual Treasury Management Strategy draws together the council’s prudential indicators and its expected treasury operations, including an expectation of interest rate movements. From this Strategy a prudential indicator is set which provides maximum and minimum limits for fixed and variable interest rate exposure. The central Treasury team will monitor market and forecast interest rates within the year to adjust exposures appropriately. A sensitivity analysis has been carried out to assess the financial effect of a 1% variance in interest rates as suggested in the Code Guidance Notes 2022/2023. If all interest rates had been 1% higher (with all other variables held constant) the financial effect would be: £000 Increase in interest payable on variable rate borrowings 85 Increase in interest receivable on variable rate investments 1,170,082 Impact on Comprehensive Income and Expenditure Statement 1,170,167 Share of overall impact credited to the HRA 361,468 Decrease in fair value of fixed rate investment assets - Impact on Comprehensive Income and Expenditure Statement - Decrease in fair value of fixed rate borrowing liabilities (no impact on Comprehensive Income and Expenditure Statement) (112,989) The approximate impact of a 1% fall in interest rates would be as above but with the movements being reversed. These assumptions are based on the same methodology as used in the Note – Fair Value of Assets and Liabilities carried at Amortised Cost. Price Risk The council does not invest in equity shares and is therefore not exposed to losses arising from movements in the price of shares. Foreign Exchange Risk The Council has no financial assets or liabilities denominated in foreign currencies. It therefore, has no exposure to loss arising from movements in exchange rates. 170
Page 171
85 Note 34 Common Good Common Good funds are for the benefit of the geographical areas of the former burghs and the council’s Finance and Corporate Resources Committee considers the uses to which funds can be put. Summary of Common Good Funds 2022/23 Total £000 Lanark £000 Biggar £000 Hamilton £000 Rutherglen £000 2023/24 Total £000 Income and Expenditure Accounts 204 Income for Year 95 - 191 - 286 (168) Expenditure for Year (106) - (93) (1) (200) 36 Surplus / (Deficit) To Balance Sheet (11) - 98 (1) 86 Balance Sheet Fixed Assets 3,021 Property, Plant and Equipment 1,724 - 1,537 - 3,261 Investments - General - - - - - 881 Advances to South Lanarkshire Council Loans Fund 276 25 596 127 1,024 - Debtors - - - - - 3,902 Total Assets 2,000 25 2,133 127 4,285 Current Liabilities (18) Creditors (4) - (14) - (18) 3,884 Total Assets less Current Liabilities 1,996 25 2,119 127 4,267 Represented by: 2,741 Common Good Account 1,214 25 1,420 128 2,787 36 Surplus / (Deficit) (11) - 98 (1) 86 10 Amortisation of Revaluation Reserve 4 - (8)8 - 12 - Gain / Loss on Disposal of Fixed Assets - - - - - 2,787 1,207 25 1,526 127 2,885 Revaluation Reserve 1,022 Opening Balance 496 - 601 - 1,097 85 Gain / Loss on Revaluation 297 - - - 297 (10) Amortisation of Revaluation Reserve (4) - (8) - (12) 1,097 Closing Balance 789 - 593 - 1,382 3,884 1,996 25 2,119 127 4,267 171
Page 172
86 Note 35 Trust Funds The council acts as sole trustee for a total of 2 Trust Funds. The most significant fund is the Loudon Bequest which is used to finance holiday projects for elderly people. The balance of the fund as at 31 March 2024 was £0.821m. In addition to these funds, the council administers The South Lanarkshire Charitable Trust and The South Lanarkshire Educational Trust on behalf of the Trustees. These Trusts were established by the council in December 2019 for the purposes of reorganising the trust funds for which the council acts as sole trustee. The process of transferring funds from the original to the new Trust Funds is ongoing and will be subject to the approval of OSCR. None of these funds represent assets of the council and as a result are not included in the council’s Balance Sheet. The individual funds are the subject of a separate audit and audit opinion. Summary of Trust Funds 2022/23 Total £000 Charitable £000 The South Lanarkshire Charitable Trust £000 The South Lanarkshire Educational Trust £000 2023/24 Total £000 Note Income and Expenditure Account 37 Income for Year 39 5 5 49 (74) Expenditure for Year (6) (2) (9) (17) (37) Surplus / (Deficit) to Balance Sheet 33 (3) (4) (32) Balance Sheet 831 Investments - General 820 10 - 830 332 Investments - South Lanarkshire Council 144 105 108 357 1,163 Net Assets 964 115 108 1,187 Represented by: 1,017 Capital Account as at 1/4/2023 822 10 - 832 (185) Movement During Year (2) - - (2) 1 832 Capital Account as at 31/3/2024 820 10 - 830 184 Revenue Account as at 1/4/2023 113 108 110 331 147 Movement During Year 31 (3) (2) 26 2 331 Revenue Account as at 31/3/2024 144 105 108 357 1,163 Total Reserves 964 115 108 1,1187 Note 1 The movement on the Capital Accounts represents the net purchase and sale of investments on the Loudon Bequest during the year and the transfer of balances to The South Lanarkshire Educational Trusts Note 2 The movement on the Revenue Accounts represent the surplus(deficit) for the year along with the transfer of balances the South Lanarkshire Educational Trust. 172
Page 173
87 Note 36 Accounting Policies A General Principles The Annual Accounts summarise the council’s transactions for the 2023/2024 financial year and its position at the year-end of 31 March 2024. The council is required to prepare Annual Accounts by the Local Authority Accounts (Scotland) Regulations 2014, which section 12 of the Local Government in Scotland Act 2003 requires to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2023/2024, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2003 Act. The accounting convention adopted in the Annual Accounts is principally historical cost, modified by the revaluation of certain categories of non-current assets and financial instruments. The accounting policies have been applied consistently. B Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: ■ Revenue from contracts is recognised reflecting the transfer of goods or services to the recipient at the amount which the council expects to be entitled to in exchange for those goods or services. ■ Other revenue is recognised when the council can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the council. ■ Supplies are recorded as expenditure when they are consumed – where there is a difference between the date supplies are received and their consumption, they are carried as stock on the council’s Balance Sheet. ■ Expenses in relation to services received are recorded as expenditure when the services are received, rather than when payments are made. ■ The Corporate i-Procurement system operates across the council’s service areas. For 2023/2024 only, due to the implementation of Oracle Fusion, all purchases made via the i- Procurement system, sundry creditors were accrued on the basis of all goods and services received by 27 March 2024, regardless of value and materiality. During the financial year, period end accruals have also been made on a similar period by period basis. For any residual purchases, not made via the i- Procurement System sundry creditors are accrued on the basis of payments made during the first 3 weeks of April, together with specific accruals in respect of further material items. ■ Interest payable on borrowings and receivable on investments is accounted for respectively as expenditure and income on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. ■ Where revenue and expenditure have been recognised but cash has not yet been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. ■ Where revenue relating to a contract has been recognised but cash has not yet been received, this is recorded in the Balance Sheet as a contract asset. ■ Where cash relating to a contract has been received in advance of the transfer of goods or services, this is recorded in the Balance Sheet as a contract liability. ■ Where there is evidence that debts are unlikely to be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. Where the council is acting as an agent for another party (for example in the collection of National Non- Domestic Rates and Council Tax), income and expenditure are recognised only to the extent that commission is receivable by the council for the agency services rendered or the council incurs expenses directly on its own behalf in rendering the services. C Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the council’s cash management. D Charges to Revenue for Non- Current Assets Services are debited or credited with the following amounts to record the cost of holding non-current assets during the year: ■ depreciation attributable to the assets used by the relevant service ■ revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off ■ amortisation of intangible fixed assets attributable to the service ■ the reversal of a revaluation or impairment loss previously charged to the Surplus or Deficit on the Provision of Services. The council is not required to raise Council Tax to cover depreciation, revaluation and impairment losses or amortisation. However, it is required to contribute towards the reduction in its overall borrowing requirement through loans fund principal charges. Depreciation, revaluation and impairment losses and amortisations are therefore replaced by a statutory adjustment in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. 173
Page 174
88 E Employee Benefits Benefits Payable During Employment Short-term employee benefits (those that fall due wholly within 12 months of the year-end), such as wages and salaries, paid annual leave and paid sick leave and any non-monetary benefits for current employees, are recognised as an expense in the year in which employees render service to the council. An accrual is made against services in the Surplus or Deficit on the Provision of Services for the cost of holiday entitlements earned by employees but not taken before the year-end and which employees can carry forward into the next financial year. Any accrual made is required under statute to be reversed out of the General Fund Balance by a debit / credit to the Accumulating Compensated Absences Account in the Movement in Reserves Statement. In February 2018, the Scottish Government issued Financial Circular 2/2018 (replacing FC 3/2010), that amends the absences covered by the statutory mitigation. From 1 April 2018, the flexi and time in lieu absences are no longer covered by the statute and therefore cannot be reversed out. In terms of the teachers Statutory Accumulated Compensated Absences, the methodology for 2023/2024 reflects the changes to teachers’ terms and conditions as per SCNT 11/26 (12 July 2011). Termination Benefits Termination benefits are amounts payable as a result of a decision by the council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy and are charged on an accruals basis to the Comprehensive Income and Expenditure Statement when the council is demonstrably committed to either terminating the employment of an officer or group of officers or making an offer to encourage voluntary redundancy. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the council to the pension fund or pensioner in the year. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for termination benefits related to pensions enhancements and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end. Post Employment Benefits Employees of the council are members of two separate pension schemes: ■ The Local Government Pension Scheme (Strathclyde Pension Fund), administered by Glasgow City Council. ■ Teachers Pension Scheme administered by the Scottish Pension Agency (Scottish Government). Both schemes provided defined benefits to members (retirement lump sums and pensions), earned as employees worked for the council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified specifically to the council. The scheme is therefore accounted for as if it were a defined contributions scheme – no liability for future payment of benefits is recognised in the Balance Sheet and the Education Service line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to Teachers’ Pensions in the year. The Local Government Pension Scheme The Local Government Scheme is accounted for as a defined benefits scheme: ■ The liabilities of the Strathclyde Pension Fund are included in the Balance Sheet on an actuarial basis using the projected unit method – that is an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projected earnings for current employees. ■ Liabilities are discounted to their value at current prices, using a discount rate based on an average of high-quality corporate bonds. ■ Assets of the Strathclyde Pension Fund are ordinarily included in the Balance Sheet at their fair value (current bid prices as required under IAS19), principally the bid price for quoted securities, estimated fair value for unquoted securities and market price for property. However, while the requirements of IAS19 have been applied in the current year, the significant nature of the Asset has been reviewed, and in line with IFRIC14, the asset has been de-recognised to equate to the level of the asset ceiling, provided by the Fund’s actuary. This reflects the net present value of future service costs less the net present value of future obligations over the future working lifetime as at 31 March 2023. In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact on the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits are earned by employees. Discretionary Benefits The council also has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. F Events After the Reporting Period There are events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts is authorised for issue. An adjustment is made to the financial statements where there is evidence that the event relates to the reporting period, otherwise the financial statements are not adjusted, and where the amount is material, a disclosure is made in the notes. Events taking place after the date of authorisation for issue are not reflected in the Annual Accounts. G Material Items of Income and Expenditure When items of income and expenditure are material, their nature and amount is disclosed separately, either on the face of the Comprehensive Income and Expenditure Statement or in the 174
Page 175
89 notes to the financial statements, depending on how significant the items are to an understanding of the council’s financial performance. H Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and initially measured at fair value and carried at their amortised cost. For most of the borrowings that the council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Costs associated with debt restructuring (premiums and discounts) are charged to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repayment of the original debt in accordance with accounting regulations. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations permit the costs of restructuring to be released to revenue over the period of the replacement loan. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. I Statutory Repayment of Loans Fund Advances The repayment of loans fund advances ensures that the council makes a prudent provision each year to pay off an element of the accumulated loans fund advances made in previous financial years. The policy for the repayment of loans fund advances is to use the most appropriate method of repayment for individual capital scheme or projects from the following methods: ■ Asset Life Method – loans fund advances will be repaid with reference to the life of an asset on an annuity basis. ■ Funding/Income Profile Method – loans fund advances will be repaid by reference to an associated income stream. For loans fund advances repaid using the annuity basis, the annual repayment will be calculated using an appropriate interest rate based on an average cost of funding capital advances to services. The council’s strategy for managing debt includes making additional voluntary repayments. These repayments will be used as a tool to reduce interest costs in the short to medium term by lowering the council’s need to borrow. These additional voluntary repayments will be retained and used to offset higher loans fund repayments in the long term. All of this helps to ensure that charges to the revenue account remain prudent and affordable in the long term. J Financial Assets Financial assets are classified into two types: ■ loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market. ■ available-for-sale assets – assets that have a quoted market price and/or do not have fixed or determinable payments. Loans and Receivables Loans and receivables are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value, then at amortised cost. For most of the loans that the council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement. Where assets are identified as impaired because of a likelihood arising from a past event that payments due under the contract will not be made, the asset is written down and a charge made to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The impairment loss is measured as the difference between the carrying amount and the present value of the revised future cash flows discounted at the asset’s original effective interest rate. Available-for-Sale Assets Available for sale assets are assets that have a quoted market price and / or do not have fixed or determinable payments and are recognised on the Balance Sheet when the council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Where the asset has fixed or determinable payments, annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the amortised cost of the asset multiplied by the effective rate of interest for the instrument. Where there are no fixed or determinable payments, income (e.g. dividends) is credited to the Comprehensive Income and Expenditure Statement when it becomes receivable by the council. Assets are maintained in the Balance Sheet at fair value. Values are based on the following principles: ■ instruments with quoted market prices – the market price ■ other instruments with fixed and determinable payments – discounted cash flow analysis ■ equity shares with no quoted market prices – independent appraisal of company valuations. The inputs to the measurement techniques are categorised in accordance with the following three levels: ■ Level 1 inputs – quoted prices (unadjusted) in active markets for identical assets that the authority can access at the measurement date. ■ Level 2 inputs – inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. ■ Level 3 inputs – unobservable inputs for the asset. Changes in fair value are balanced by an entry in the Available-for-Sale Reserve and the gain/loss is recognised in the Surplus or Deficit on Revaluation of Available-for-Sale Financial Assets. The exception is where impairment losses have been incurred – these are debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement, along 175
Page 176
90 with any net gain or loss for the asset accumulated in the Available-for-Sale Reserve. K Government Grants and Contributions Government grants, third party contributions and donations are recognised as due to the council when there is reasonable assurance that: ■ the council will comply with the conditions attached to the payments, and ■ the grants or contributions will be received Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as Receipts in Advance. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants/contributions) or Taxation and Non- Specific Grant Income (non-ring-fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Account. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied. L Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the council as a result of past events (for example, software licences) is capitalised when it is expected that it will bring benefits to the council for more than 12 months. Intangible assets are measured initially at cost. Amounts are not revalued as the fair value of the assets held cannot be determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The useful life of these assets is deemed to be five years. M Interests in Companies and Other Entities The council has material interests in companies and other entities that have the nature of associates and jointly controlled entities and require it to prepare group accounts. More information about these entities is detailed in the Group Accounts and Notes to the Group Accounts (pages 121-133). N Inventories Inventories are included in the Balance Sheet at the lower of cost and net realisable value. The value of work in progress has been made at cost plus an appropriate proportion of overheads, with allowances for foreseeable losses. O Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Where the council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Where the council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. P Overheads and Support Services The 2016/2017 Code removed the requirement for councils to report on a total cost basis per the CIPFA Service Reporting Code of Practice. Councils are only required to reallocate overheads and support costs if this is how they treat/report these services in their management reports throughout the year. The council reports these as services during the year and does not allocate them in the management reports, therefore the only overhead and support allocation will be to the Housing Revenue Account, where appropriate. Q Property, Plant and Equipment Assets that have physical substance and are held for use in the supply of goods or services, for rental to others or for administrative purposes and that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. Recognition Expenditure on the acquisition, creation or enhancement of Property, Plant and Equipment is capitalised on an accruals basis. Expenditure that merely maintains the condition of an asset e.g. repairs and maintenance is charged as an expense when it is incurred. Measurement Assets are initially measured at cost, comprising: the purchase price any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management The council does not capitalise borrowing costs incurred whilst assets are under construction. Assets are then carried in the Balance Sheet using the following measurement bases: dwellings – current value, determined using the basis of existing use value for social housing (EUV-SH) other land and buildings – current value, determined by the amount that would be paid for the asset in its existing use (existing use value – EUV) vehicles, plant and equipment – where non- property assets that have short useful lives or low values (or both), depreciated historical cost basis is used as a proxy for current value infrastructure, community assets and assets under construction – depreciated historical cost surplus assets – current value based on market value in highest and best use. Where there is no market-based evidence of fair value because of the specialist nature of an asset, depreciated replacement cost is used as an estimate of fair value. 176
Page 177
91 Council Dwellings and non-operational lease portfolio are valued annually. The remainder of the land and property assets are valued through a five year rolling programme. The programme is prioritised by asset type to ensure consistency. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Where decreases in value are identified, the revaluation loss is accounted for as follows: where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains) where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007 only, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. The values for land and property assets in the accounts are based upon certificates produced by the council valuer who is MRICS qualified (Member of Royal Institute of Chartered Surveyors) and issued in the name of the council’s Executive Director of Housing and Technical Resources. Impairment or Revaluation Loss Assets are assessed at each year end as to whether there is any indication that an asset may be impaired. Where indications of impairment exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for as follows: ■ where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains). ■ where there is no balance in the Revaluation Reserve or insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service line(s) in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. Assets Held for Sale Property, land and buildings are classified as ‘Held for Sale’ when the following criteria are met: ■ The property is available for immediate sale in its present condition; ■ The sale must be highly probable and an active programme to locate a buyer and complete the plan must have been initiated; ■ The asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value; ■ The sale should be expected to qualify for recognition as a completed sale within one year (although events or circumstances, may extend the period to complete the sale beyond one year) When these criteria are met, assets within the category ‘Property, Plant and Equipment’ will be reclassified to ‘Assets Held for Sale’. Disposals When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is revalued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value costs to sell, the loss is taken to the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previously recognised losses in the Surplus or Deficit in Provision of Services. Disposal and Derecognition of Infrastructure Assets When a component of an infrastructure asset is disposed of or decommissioned, the carrying amount of the component in the Balance Sheet is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement, also as part of the gain or loss on disposal (i.e, netted off against the carrying value of the asset at the time of the disposal). The written-off amounts of disposals is not a charge against the council tax, as the cost of non-current assets is fully provided for under separate arrangements for capital financing. Amounts are transferred to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Where any part of infrastructure assets are replaced, an adaptation provided in a separate update to the Code assumes that from the introduction of the IFRS based Code when parts of an asset are replaced or restored the carrying amount of the derecognised part will be zero because parts of infrastructure assets are rarely replaced before the part has been fully consumed. Depreciation Depreciation is provided for on all Property, Plant and Equipment assets. An exception is made for assets without a determinable finite useful life (that is freehold land and certain Community Assets) and assets that are not yet available for use (i.e. assets under construction). Depreciation is calculated on the following bases: ■ dwellings and other buildings – straight-line allocation over the useful life of the property as estimated by the valuer (dwellings 40 years, other buildings 10 – 50 years). ■ vehicles, plant and equipment – straight line allocation over the useful life of the asset (3 – 20 years). ■ infrastructure – straight line allocation over 40 years. Where an item of Property, Plant and Equipment asset has major components whose cost is significant in relation to the 177
Page 178
92 total cost of the item, the components are depreciated separately, if the component has a different useful life or depreciation method that differs significantly from the remainder of the asset. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. R Heritage Assets South Lanarkshire Council’s heritage assets comprise collections held within the Museum Service, Archives and Information Service and the Library Service. These collections reflect different aspects of our culture, identity and history. Heritage Assets, where the cost or value of the asset are known, are recognised on the balance sheet at valuation and no depreciation is charged on these assets. A de-minimis level of £10,000 has been applied. Assets which have a value of less than £10,000 will not be recorded on the Balance Sheet. Heritage assets will only be revalued where there is specific evidence that a revaluation is required and where the costs of the revaluation do not outweigh the benefit to users of the Annual Accounts. The carrying amounts of heritage assets are reviewed where there is evidence of impairment, for example where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the council’s general policies on impairment – see page 91. As a result of the cultural and education value of these assets, disposals of heritage assets tend to be rare. The proceeds of such disposals are accounted for in accordance with the council’s general provisions relating to the disposal of property plant and equipment and disclosed separately in the Notes to the Accounts. S Public Private Partnership (PPP) and Similar Contracts PPP and similar contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passed to the PPP contractor. As the council is deemed to control the services that are provided under its PPP schemes and as ownership of the property, plant and equipment will pass to the council at the end of the contracts for no additional charge, the council carries the assets used under the contracts on its Balance Sheet as part of Property, Plant and Equipment. The original recognition of these assets at fair value (based on the cost to purchase the property, plant and equipment) was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. For Secondary Schools’ Modernisation Programme – Public Private Partnership (PPP), the liability was written down by an initial capital contribution of £48.050m. The amounts payable to the PPP operators each year are analysed into five elements: fair value of the services received during the year – debited to the relevant service in the Comprehensive Income and Expenditure Statement. finance cost – an interest charge is debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. payment towards liability – applied to write down the Balance Sheet liability towards the PPP operator (the profile of write-downs is calculated using the same principles as for a finance lease). lifecycle replacement costs – there have been no lifecycle costs to date. The Scottish Government’s 2022 Resource Spending Review contained details of a Service Concession flexibility that related to the Council’s PPP schools. The flexibility permits councils to undertake internal accounting changes that extend the period over which the principal repayment of the unitary charge can be made which results in a one-off credit to the General Fund and ongoing annual savings for a period of time. In the remaining years following the end of the SCAs, the rescheduled debt repayments continue until the debt liability has been extinguished. The Council has applied the permitted change in the calculation of the statutory charge in 2022-23 and the adopted approach has been applied across all three such arrangements held by the Council in line with the key accounting principle of consistency. The annual unitary charge will continue to be paid to the contractor over the contract period. The guidance applies to principal and not to interest, service charge costs or grant. These will continue to be accounted for over the contract period. The Council has applied the permitted change in 2022/2023 and has been applied to the Secondary Schools PPP and the Glasgow Southern Orbital financial arrangement. Annuity method for revised repayment of debt liability The recalculation of the debt liability charges applies the annuity method to calculate the revised repayments. This method best represents the consumption of the assets over their useful lives. This methodology is applied within the Councils current Loans Fund repayment policy. The use of an annuity method for the writing down of the PPP debt liability therefore ensures a consistent approach for the writing down of all debt which is financing capital expenditure, in that; The annuity method provides a fairer charge than equal instalments as it takes account of the time value of money, whereby paying £100 in 10 years’ time is less of a burden than paying £100 now. The schedule of charges produced by the annuity method thus results in a consistent charge over an asset’s life, considering the real value of the amounts when they fall due. The annuity method is a prudent basis for providing for assets that provided a steady flow of benefits over their useful life.’ Useful Economic Life The most appropriate asset life for the calculation is considered to be 50 years which replicates the useful asset life of other similar type assets held on the Council’s balance sheet i.e. schools. The Council’s Loans Fund methodology use a Useful Economic Life of 50 years when calculating the repayment of debt liability for 178
Page 179
93 borrowing to support capital expenditure for similar types of assets. The proposed application a useful economic life of 50 years for the council’s 2 PPP or similar arrangement is therefore considered consistent with current council methodology. Capital Financing Requirement The reprofiling of the debt liability repayments over the life of the asset rather than the life of the contract increases the Capital Financing Requirement as at 1 April 2022. The increase in the Capital Financing Requirement will continue to be reduced by the revised repayments after each PP or similar contract has expired until the end of the revised period. Accounting Treatment The statutory adjustment can be made as at 1 April in the year the revised repayments are applied. This option has been implemented in 2022/2023 and has been applied retrospectively. Being a cumulative statutory adjustment there is no prior year restatement of statutory adjustments in the Annual Accounts. The statutory adjustment up to 31 March 2022 results in a retrospective debit to the Capital Adjustment account in 2022/2023 with a corresponding credit in the Movement in Reserves Statement within the General Fund. Further in year annual reductions will be applied along similar lines as the retrospective adjustment until the end of the contract period for each of the three SCAs. Thereafter the revised charges will result in higher cost being charged to the General fund that the current repayment profile until the end of the Useful Economic Life. T Provisions, Contingent Liabilities and Contingent Assets Provisions Provisions are made where an event has taken place that gives the council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the council becomes aware of the obligation, and measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less than probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Contingent Assets and Liabilities A contingent asset or liability arises where an event has taken place that gives the council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the council. Contingent assets and liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent assets and liabilities are not recognised in the Balance Sheet but disclosed in a Note to the Accounts. U Reserves Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against council tax for the expenditure. Usable Reserves The council has several reserve funds within this category. The Insurance Fund covers the main classes of insurance and is earmarked for insurance purposes. The Repairs and Renewals Fund provides for the upkeep of specific assets held by the council. The Capital Fund is used to meet the costs of capital investment and for the repayment of the principal element of borrowing. Unusable Reserves Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits and that do not represent usable resources for the council. These reserves are explained in Note 13 on pages 75- 77. V Revenue Expenditure Funded from Capital under Statute Any expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a non-current asset has been charged as expenditure to the relevant service in the Comprehensive Income and Expenditure Statement in the year. Where the council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer is made in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account, then reverses out the amount charged so that there is no impact on the level of council tax. W VAT VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income. 179
Page 180
94 Note 37 Critical Judgements in Applying Accounting Policies In applying the accounting policies set out in Note 36, the council has had to make certain judgments about complex transactions or those involving uncertainty about future events. The critical judgements made in the Annual Accounts are: ■ The council has entered into a Public Private Partnership (PPP) for the provision of secondary schools, their maintenance and related facilities. The annual unitary charge payable by the council in respect of this contract is allocated across the various expenditure headings. In the main, these transactions reflect the detailed financial model which is in line with the assumptions made within the service provider’s operating model. However, in relation to the repayment of debt, the Council previously took the opportunity to implement the guidance on Service Concessions and applied this in 2022/2023. This has no impact on the payments made to the contractor nor the lifetime of the contract. Further details are provided in Note 28. ■ In assessing potential liabilities arising from legal claims against the council, legal opinion has been sought. The council has considered and assessed its exposure to potential liabilities and made provision where it is probable that an outflow of resources will occur and where the amount of liability can be reliably quantified. Where it is not possible to measure the liability or is not probable in the council’s opinion that there will be a liability to meet, the contingent liability is disclosed in Note 31. ■ The accounts have been prepared on a going concern basis as it is expected that despite the uncertainty around future finance settlements, that the council’s process of delivering efficiency savings will provide sufficient resources to finance future liabilities. ■ Assets held at current value are revalued on a 5 year rolling basis. The council asserts that at any point in time, the carrying amount does not differ materially from that which would be determined using current value. 180
Page 181
95 Supplementary Statement No 1 Housing Revenue Account Income and Expenditure Statement This statement reflects the statutory requirement to account for local authority housing provision, as defined in the Housing (Scotland) Act 1987. It shows the elements of expenditure incurred in the management and investment of the council’s housing stock and the funding of this by rents, and other income. The council has a duty to cover any deficit, and any accumulated surplus is carried forward to future years for use in the management and investment of its council housing stock. Housing Revenue Account Income and Expenditure Statement 2022/23 2023/24 £000 £000 £000 Expenditure 36,901 Repairs and Maintenance 39,069 23,057 Supervision and Management 31,725 38,221 Depreciation and Impairment on Non-Current Assets 38,238 1,424 Movement in the Allowance for Bad Debts 1,844 7,030 Other Expenditure 4,227 106,633 Total Expenditure 115,103 Income (98,552) Dwelling Rents (102,615) (2,979) Non-Dwelling Rents (3,024) - Housing Support Grants - - Other Income - (101,531) Total Income (105,639) 5,102 Net Cost of HRA Services as included in the Comprehensive Income and Expenditure Statement 9,464 115 HRA Services share of Corporate and Democratic Core 117 - HRA Share of Other Amounts included in the Whole Council Net Cost of Services but not Allocated to Specific Services - 9,581 5,217 Net Cost for HRA Services HRA share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement: (2,353) (Gain) or Loss on the Disposal of Non-Current Assets 827 9,578 Interest Payable and Similar Charges 9,786 (730) Interest and Investment Income (1,728) 196 Pension Interest Cost and Expected Return on Pension Assets (1,094) (12,214) Capital Grants and Contributions Receivable (25,705) (306) (Surplus) / Deficit for the Year on HRA Services (8,333) Note: The expenditure in the table above is higher than that included in the Comprehensive Income and Expenditure Statement (page 55) by £0.099 million (2022/2023: £1.425 million). This reflects the CIPFA Code of Practice requirement to transfer the movement in bad debt from the Net Cost of Services in the CIES to the Financing and Investment Income line, whilst in the Housing Revenue Account it remains part of the Net Cost of Services figure. 181
Page 182
96 Statement of Movement on the Housing Revenue Account Balance 2022/23 2023/24 £000 Notes £000 £000 (16,241) Balance on the HRA at the end of the Previous Year (12,861) (306) Surplus / (Deficit) for the Year on HRA Income and Expenditure Statement (8,333) (18,499) Adjustments Permitted by Accounting Standards (17,345) 22,795 Adjustments between Accounting Basis and Funding Basis Under Statute 25,318 (3,990) Net (Increase) / Decrease Before Transfers to or from Reserves (360) 610 Transfers (to) or from Reserves 0 3,380 (Increase) / Decrease in the Year on the HRA (360) (12,861) Balance on the HRA at the end of the Current Year (13,221) Housing Revenue Account Disclosures 1. Adjustments Permitted by Accounting Standards 2022/23 £000 2023/24 £000 (18,499) Charge for Depreciation and Impairment of Non-Current Assets (17,345) (18,499) Total (17,345) 2. Adjustments Between Accounting Basis and Funding Basis Under Statute 2022/23 £000 2023/24 £000 - Adjustment involving Revaluation Reserve 0 (19,729) Charge for Depreciation and Impairment of Non-Current Assets (20,923) (5,674) Adjustment involving Capital Adjustment Account (2,793) 12,214 Capital Grants and Contributions 25,695 4,531 Statutory Provision for the Financing of Capital Investment 5 26,050 Capital Expenditure funded by the HRA 20,046 8,027 Adjustment involving Capital Receipts Reserve 1,966 84 Adjustments involving Financial Instruments Adjustment Account 89 (2,705) Adjustments involving the Pension Reserve 1,219 (3) Adjustments involving the Statutory Accumulated Compensated Absences Account 14 22,795 Total 25,318 3. Housing Stock The council’s housing stock at 31 March 2024 was 25,742 (25,483 at 31 March 2023) in the following categories: 2022/23 Number 2023/24 Number Average Weekly Rent 11,977 Houses 12,129 £88.56 1,345 High Rise 1,349 £71.68 5,431 Tenements 5,504 £65.39 4,660 4 in a block 4,672 £79.19 2,070 Maisonettes 2,088 £65.82 25,483 Total 25,742 4. Rent Arrears Rent Arrears at 31 March 2024 were £8.633 million (£8.514 million at 31 March 2023). 5. Impairment of Debtors In 2023/2024 an impairment of £13.194 million has been provided in the Balance Sheet for irrecoverable rents, an increase of £0.567 million from the provision in 2022/2023. 6. Exceptional or Prior Year Adjustments There were no exceptional items or prior year adjustments not disclosed in the statement. 7. Void Rent Loss The figures above include rent loss on void properties of £2.899 million (£2.526 million for 2022/2023). 182
Page 183
97 Supplementary Statement No 2 National Non-Domestic Rates Income and Expenditure Statement National Non-Domestic Rates (NNDR) income is collected by councils, but all income is then remitted to the Scottish Government, where it is pooled nationally, and re-distributed back to councils along with the General Revenue Grant. The table below details the actual levels of NNDR collected by the council, and the overall increase/decrease between the rates collected and the amount that the council is entitled to receive under the National Pooling arrangement. 2022/23 2023/24 £000 £000 Note 359,631 Gross rates levied and contributions in lieu 405,892 1 Less: (38,291) Reliefs and other deductions (38,627) - Payments of interest - (4,245) Provision of bad and doubtful debts (6,206) 317,095 Net Non-Domestic Rate Income 361,059 - Adjustment for years prior to the introduction of the pool - 317,095 Contribution to the National Non-Domestic Rate pool 361,059 105,496 Net contribution (to) / from National Non-Domestic Rate pool (19,523) 422,591 Gross Non-Domestic Rate Income to the Comprehensive Income and Expenditure Statement 341,536 - Non-Domestic Rate income retained by council (BRIS) - 2 422,591 Non-Domestic Rate Income per the Comprehensive Income and Expenditure Statement 341,536 Note 1 In 2023-2024, the gross rates levied amount of £405.892m includes an amount of £246.067m in relation to NDR Utilities which South Lanarkshire Council collected on behalf of the Scottish Government. This has resulted in a net contribution TO the NDRI pool FROM the Council of £19.523m. Note 2 The Business Rate Incentivisation Scheme (BRIS) permits the council to retain half of the NDR income, which exceeds the income target set by the Scottish Government. In 2023/2024, the council did not receive any additional funding from BRIS. 2023-2024 £ Analysis of Rateable Values: Rateable Value at 01/04/23 808,860,284 Running Roll (Full Year Rateable Value) (26,182,475) Rateable Value at 31/03/24 782,677,809 Less: Wholly Exempt (2,897,260) Net Rateable Value at 31/03/24 779,780,549 Net Rateable Value Calculation The amount paid for Non-Domestic Rates is determined by the rateable value placed on the property by the Assessor multiplied by the Rate per £ (poundage) announced each year by the Scottish Government. The Scottish Government previously introduced three different property rates linked to the rateable value of properties. The 2023/24 rates are as follows: • Basic Property Rate (£0.498) • Intermediate Property Rate (£0.511) • Higher Property Rate (£0.524) Larger businesses with a Rateable Value between £51,001 and £100,000 pay an additional supplement of 1.3 pence in the pound and businesses with a Rateable Value over £100,000 pay an additional supplement of 2.6 pence in the pound, which contributes towards the cost of the Small Business Bonus Scheme. The Small Business Bonus Scheme provides a discount of between 0.5% and 100% to businesses in Scotland on individual properties with a rateable value of up to £20,000, with a maximum combined rateable value of £35,000. For information, South Lanarkshire Council’s Rateable Values at 1 April 2023: £ Commercial 129,183,164 Industrial and Freight Transport 61,255,660 Public Undertakings 539,831,090 Other 78,590,370 Total 808,860,284 183
Page 184
98 Supplementary Statement No 3 Council Tax Income and Expenditure Statement Local Councils raise taxes from residents by way of a property tax - the Council Tax - which is based on property values. Each dwelling house in a local authority area is placed into one of eight valuation bands A to H. The Council declares a tax for band D properties and all other properties are charged a proportion of this, lower valued properties pay less, higher valued properties pay more. 2022/23 £000 2023/24 £000 195,600 Gross Council Tax levied and contributions in lieu 208,679 1,945 Adjustments for prior years Council Tax 2,360 197,545 211,039 Adjusted for: (21,917) Council Tax Reduction (23,413) (22,328) Other discounts and reductions (23,948) (4,342) Provision for Non-collection (4,625) 148,958 Transfer to General Fund 159,053 From 1 April 2013, the Council Tax Reduction Scheme replaced Council Tax Benefit, with the resultant decrease in Council Tax Income shown in the Taxation and Non-Specific Grant Income line in the Comprehensive Income and Expenditure Statement. Council Tax Benefit grant and payments were previously disclosed as part of General Fund Housing in the Net Cost of Services. The calculation of the Council Tax Base 2023/24 No. of Dwellings No. of Exemptions Disabled Relief Discount 25% Discount 50% C Tax Reduction Total Dwellings Ratio to Band D Band D Equivalent Band A (discount) - - (107) 12 - - 95 5/9 53 Band A 37,113 1,918 (46) 5,179 281 10,608 19,173 6/9 12,782 Band B 31,732 1,259 (27) 4,096 237 6,483 19,684 7/9 15,309 Band C 27,829 739 9 2,755 150 3,685 20,491 8/9 18,213 Band D 22,903 399 (72) 1,831 105 1,610 19,030 9/9 19,031 Band E 21,416 326 103 1,216 75 708 18,988 473/360 24,949 Band F 14,255 132 48 525 43 278 13,229 585/360 21,495 Band G 7,318 59 81 230 31 80 6,837 705/360 13,390 Band H 602 11 10 17 6 4 554 882/360 1,357 Class 18 Dwellings - 118,081 Total 126,579 Provision for non-collection (2.875%) (3,639) Council Tax Base 122,940 Dwellings fall within a valuation band between A to H which is determined by the Assessor. The Council Tax charge is calculated using the Council Tax Base i.e. Band D equivalents. This value is then increased or decreased depending on the band. Based on the Council Tax base available to South Lanarkshire Council, the Band D charge for 2023/2024 was £1,300.81. South Lanarkshire Council £ per year for 2023/2024 Band A £867.21 Band E £1,709.12 Band B £1,011.74 Band F £2,113.82 Band C £1,156.28 Band G £2,574.42 Band D £1,300.81 Band H £3,186.98 184
Page 185
99 GROUP ACCOUNTS Group Comprehensive Income and Expenditure Statement The Comprehensive Income and Expenditure Statement shows the accounting cost in the year of providing services in accordance with the CIPFA Accounting Code of Practice, rather than the amount to be funded from taxation. The council raises taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Expenditure and Funding Analysis and Movement in Reserves Statements. Gross Expenditure £000 2022/23 Gross Income £000 Net Expenditure / (Income) £000 Gross Expenditure £000 2023/24 Gross Income £000 Net Expenditure / (Income) £000 225,949 53,871 172,078 Community and Enterprise Resources 215,979 55,496 160,483 470,521 50,652 419,869 Education Resources 490,181 53,097 437,084 133,063 75,888 57,175 Finance and Corporate Resources 122,792 72,943 49,849 Housing and Technical Resources 108,058 101,531 6,527 - Housing Revenue Account 115,202 105,649 9,553 87,463 53,842 33,621 - Housing Other 81,368 55,198 26,170 503,614 262,552 241,052 Social Work Resources 505,694 266,428 239,266 2,151 - 2,151 Joint Board 2,052 - 2,052 12,564 8,694 3,870 Corporate Items 2,377 12,003 (9,626) 115 - 115 Corporate and Democratic Core (HRA) 117 - 117 - - - Non-Distributed Costs – Non-Operational Assets (HRA) - - - 168 204 (36) Common Good 200 286 (86) 1,543,666 607,234 936,432 Net Cost of Services 1,535,962 621,100 914,862 - 2,284 (2,284) Other Operating Expenditure (Note 9) 650 - 650 62,969 4,587 58,382 Financing and Investment (Income) and Expenditure (Note 10) 36,755 16,127 20,628 - 881,636 (881,636) Taxation and Non-Specific Grant Income (Note 11) - 913,708 (913,708) 1,606,625 1,495,741 110,894 (Surplus) on Provision of Services 1,573,367 1,550,935 22,432 (23,968) Share of the (Surplus) or Deficit on the provision of services by associates (241) 86,926 Group (Surplus) / Deficit 22,191 (64,294) (Surplus) / Deficit on Revaluation of Fixed Assets 29,649 (164,813) Re-measurement of the Pension Liability / (Asset) 12,247 2,630 Share of Other Comprehensive (Income) and Expenditure of Associates and Joint Ventures 198 (226,477) Other Comprehensive (Income) and Expenditure 42,094 (139,551) Total Comprehensive (Income) and Expenditure 64,285 185
Page 186
100 Group Balance Sheet The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the council. The net assets of the council (assets less liabilities) are matched by the reserves held by the council. Reserves are reported in two categories. ■ The first category of reserves are usable reserves, that is those reserves that the council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). ■ The second category of reserves is those that the council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’. Group 31 March 2023 £000 Single Entity 31 March 2024 £000 Group Adjustments 31 March 2024 £000 Group 31 March 2024 £000 3,751,454 Property, Plant and Equipment 3,734,534 3,608 3,738,142 3,826 Heritage Assets 3,853 - 3,853 190 Intangible Assets 138 - 138 87,934 Investments in associates and joint ventures - 88,230 88,230 1,181 Long Term Debtors 1,793 - 1,793 54,869 Other Long Term Assets (Pension) - - - 3,899,454 Non Current Assets 3,740,318 91,838 3,832,156 70,458 Short Term Investments - - - 4,463 Inventories 4,814 152 4,966 85,521 Short Term Debtors 102,248 2,002 104,250 3,408 Assets Held for Sale 168 0 168 74,672 Cash and Cash Equivalents (see cash flow notes) 12,241 8,411 20,652 235,072 Current Assets 119,471 10,565 130,036 (31,111) Short Term Borrowing (63,181) (97) (63,278) (235,072) Short Term Creditors (203,943) (6,590) (210,533) - Contract Liability – IFRS15 - - - (7,098) Other Short-Term Liabilities (PPP / Finance Leases) (7,390) - (7,390) (2,454) Provisions (1,676) - (1,676) (1,320) Receipts in Advance (1,331) - (1,331) (277,055) Current Liabilities (277,521) (6,687) (284,208) (849) Long Term Creditors - (649) (649) - Long Term Provisions (536) (251) (787) (1,014,532) Long Term Borrowing (980,762) - (980,762) Liabilities in Associates and Joint Ventures - - - (172,036) Other Long-Term Liabilities (PPP / Finance Lease) (164,646) - (164,646) (115,321) Other Long-Term Liabilities (Pension) (113,666) 76,713 (36,953) (1,302,738) Long Term Liabilities (1,259,610) 75,813 (1,183,797) 2,558,183 Net Assets 2,322,658 171,529 2,494,187 176,941 Usable Reserves 133,603 - 133,603 2,284,815 Unusable Reserves 2,189,055 - 2,189,055 96,427 Group Reserves - 171,529 171,529 2,558,183 Total Reserves 2,322,658 171,529 2,494,187 The notes on pages 127 to 133 form part of the group financial statements. The unaudited accounts were authorised for issue on 25 June 2024. Jackie Taylor Executive Director (Finance and Corporate Resources) 186
Page 187
101 Group Movement in Reserves Statement This statement shows the movement in the year on the different reserves held by the council, analysed into ‘usable reserves’ (those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the council’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase / Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council. Revenue Statutory Funds General Fund Balance £000 Housing Revenue Account £000 Repairs and Renewals Fund £000 Insurance Fund £000 Capital Statutory Fund £000 Capital Receipts Reserve £000 Total Usable Reserves £000 Unusable Reserves £000 Total Council Reserves £000 Council’s Share of Usable Reserves of Subsidiaries and Associates £000 Council’s Share of Unusable Reserves of Subsidiaries and Associates £000 Total Group Reserves £000 Balance at 1 April 2023 150,283 12,861 7,610 1,411 4,776 - 176,941 2,284,815 2,461,756 48,745 47,724 2,558,225 Movement in reserves during 2023/24 Total Comprehensive Expenditure and Income (30,687) 8,333 - - - - (22,354) (116,744) (139,098) 921 74,139 (64,038) Adjustments permitted under accounting standards 13,723 17,344 - - - - 31,067 (31,067) - - - - Adjustments between accounting basis and funding basis under regulations 13,723 17,344 - - - - 31,067 (31,067) - - - - Adjustments for Changes in Council’s share of associates Net Increase / (Decrease) before Transfers to Reserves (45,533) 360 - - - 1,838 (43,337) (95,761) (139,098) 678 74,382 (64,038) Transfers to/ (from) Reserves 4,939 - (2,263) (1,216) (801) (660) - - - - - - Increase / (Decrease) in Year (40,596) 360 (2,263) (1,216) (801) 1,178 (43,337) (95,761) (139,098) 678 74,382 (64,038) Balance at 31 March 2024 carried forward 109,687 13,221 5,346 195 3,975 1,178 133,603 2,189,055 2,322,658 49,423 122,106 2,494,187 187
Page 188
102 Revenue Statutory Funds Revenue Statutory Funds General Fund Balance £000 Housing Revenue Account £000 Repairs and Renewals Fund £000 Insurance Fund £000 Capital Statutory Fund £000 Capital Receipts Reserve £000 Total Usable Reserves £000 Unusable Reserves £000 Total Council Reserves £000 Council’s Share of Usable Reserves of Subsidiaries and Associates £000 Council’s Share of Unusable Reserves of Subsidiaries and Associates £000 Total Group Reserves £000 Balance at 1 April 2022 122,424 16,241 6,496 1,295 4,115 1,615 152,186 2,184,375 2,336,561 57,548 71,177 2,465,286 Movement in reserves during 2022/23 Total Comprehensive Expenditure and Income (106,587) 306 - - - - (106,281) 231,476 125,195 (18,691) (13,966) 92,538 Adjustments permitted under accounting standards 13,161 18,499 - - - - 31,660 (31,660) - - - - Adjustments between accounting basis and funding basis under regulations 61,471 (22,795) - - - 967 39,643 (39,643) - (1,766) 1,766 - Adjustments for Changes in Council’s share of associates - - - - - - - - - - - - Net Increase / (Decrease) before Transfers to Reserves (31,955) (3,990) - - - - (34,978) 160,173 125,195 (20,457) (12,200) 92,538 Transfers to/ (from) Reserves 59,814 610 1,114 116 661 (2,582) 59,733 (59,733) - 16,419 (16,060) 359 Increase / (Decrease) in Year 27,859 (3,380) 1,114 116 661 (1,615) 24,755 100,440 125,195 (4,038) 28,260 92,897 Balance at 31 March 2023 carried forward 150,283 12,861 7,610 1,411 4,776 - 176,941 2,284,815 2,461,756 53,510 42,917 2,558,183 188
Page 189
103 Group Cash Flow Statement The Cash Flow Statement shows the changes in cash and cash equivalents of the council during the reporting period. The statement shows how the council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the council are funded by way of taxation and grant income or from the recipients of services provided by the council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (that is borrowing) to the council. Further analysis of movements is provided in the cash flow notes following the statement. 2022/23 £000 2023/24 £000 (110,884) Net surplus / (deficit) on the provision of services (22,432) 213,104 Adjust net surplus / deficit on the provision of services for non cash movements 26,634 (64,264) Adjust for items included in the net surplus / deficit on the provision of services that are investing and financing activities (66,944) 37,956 Net cash flows from Operating Activities (62,742) (98,619) Investing Activities 16,735 35,659 Financing Activities (8,868) (25,004) Net increase / (decrease) in cash and cash equivalents (54,875) 100,147 Cash and cash equivalents at the beginning of the reporting period 75,552 75,143 Cash and cash equivalents at the end of the reporting period 20,678 Cash Flow Statement Note – Non-Cash Movements The balance of non-cash movements is made up of the following elements: 31 March 2023 £000 31 March 2024 £000 95,875 Depreciation, impairment and amortisation of assets 103,434 30,317 Movement in creditors (24,183) 6,727 Movement in debtors (20,195) (521) Movement in inventories (503) 73,995 Movement in pension liability (35,992) 6,711 Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised 4,454 - Other non-cash items charged to the net surplus / deficit on the provision of services (381) 213,104 Net cash flows from the provision of services for non-cash movements 26,634 Cash Flow Statement Note – Operating Activities – Items Included in Net Surplus / (Deficit) on the Provision of Services That are Investing and Financing Activities The cash flows for these activities include the following items: 2022/23 £000 2023/24 £000 (55,270) Capital contributions and grants (61,140) (8,994) Capital receipts applied (3,8004) (64,264) Net cash flows from items included in the net surplus / (deficit) on the provision of services that are investing and financing activities (66,944) 189
Page 190
104 Cash Flow Statement Note – Investing Activities 2022/23 £000 2023/24 £000 (123,728) Purchase of property, plant and equipment and intangible assets (120,607) (274,054) Purchase of short term investments (93,000) 8,994 Proceeds from the sale of property, plant and equipment and intangible assets 3,804 229,049 Proceeds from short term investments 163,000 61,120 Other receipts from investing activities 63,538 (98,619) Net cash flows from investing activities 16,735 Cash Flow Statement Note – Financing Activities 2022/23 £000 2023/24 £000 86,700 Cash receipts of short term and long term borrowing 20,000 (7,157) Cash payments for the reduction of the outstanding liabilities relating to finance leases for PPP contracts (7,098) (43,884) Repayments of short term and long term borrowing (21,770) 35,659 Net cash flows from financing activities (8,868) Cash Flow Statement Note – Cash and Cash Equivalents 31 March 2023 £000 31 March 2024 £000 103 Cash held by officers 103 (15,919) Bank current accounts 7,368 90,959 Short term deposits 13,207 75,143 Total cash and cash equivalents 20,678 The credit figures shown against Bank Accounts in 2024 relate to balances in the financial ledger. This is due to timing differences in posting transactions in the ledger. Actual balances held at bank are not in an overdraft position. The group cash flow statement represents the single entity cash flow for South Lanarkshire Council adjusted for its subsidiaries, Routes to Work South, Common Good and South Lanarkshire Leisure and Culture Trust. The adjusted figures are as follows: South Lanarkshire Council £000 Routes to Work South £000 Common Good £000 South Lanarkshire Leisure & Culture Trust £000 Total £000 Net surplus / (deficit) on provision of services (22,354) 86 12 (176) (22,432) Adjust net surplus / (deficit) on the provision of services for non-cash movements 27,888 57 498 (1,809) 26,634 Adjust for items included in the net surplus / (deficit) that are investing and financing activities (66,944) 0 0 0 (66,944) Net Cash Flows from Operating Activities (61,410) 143 510 (1,985) (62,742) Investing Activities 16,627 0 10 98 16,735 Financing Activities (8,868) 0 0 0 (8,868) (53,651) 143 520 (1,887) (54,875) Net increase / decrease in cash and cash equivalents Cash and cash equivalents at beginning of period 65,890 881 1,589 7,193 75,553 Cash and cash equivalents at end of reporting period 12,240 1,024 2,109 5,306 20,678 190
Page 191
105 Notes to Group Financial Statements Note 1 Group Expenditure and Funding Analysis Net Expenditure Chargeable To the General Fund And HRA Balance £000 2022/23 Adjustments between the Funding and Accounting Basis £000 Net Expenditure in the Comprehensive Income and Expenditure Statement £000 Net Expenditure Chargeable To the General Fund And HRA Balance £000 2023/24 Adjustments between the Funding and Accounting Basis £000 Net Expenditure in the Comprehensive Income and Expenditure Statement £000 132,545 39,543 172,088 Community and Enterprise Resources 137,700 22,783 160,483 409,607 10,262 419,869 Education Resources 439,940 (2,856) 437,084 48,024 9,151 57,175 Finance and Corporate Resources 47,993 1,856 49,849 Housing and Technical Resources 3,990 2,537 6,527 - Housing Revenue Account (360) 9,913 9,553 18,958 14,663 33,621 - Housing Other 16,432 9,738 26,170 220,958 20,094 241,052 Social Work Resources 237,204 2,062 239,266 2,151 - 2,151 Joint Board 2,052 0 2,052 (469) 4,339 3,870 Corporate Items (14,193) 4,567 (9,626) - 115 115 Corporate and Democratic Core (HRA) - 117 117 - - - Non-Distributed Costs – Non-Operational Assets (HRA) - - - (36) - (36) Common Good (86) - (86) 835,728 100,704 936,432 Net Cost of Services 866,682 48,180 914,862 (795,170) (30,368) (825,538) Other (Income) and Expenditure (821,428) (71,002) (892,430) 40,558 70,336 110,894 (Surplus) or Deficit 45,254 (22,822) 22,432 (23,968) - (23,968) Share of Associates (241) - (241) 16,590 70,336 86,926 45,013 (22,822) 22,191 General Fund including Subsidiaries and HRA General Fund Group Associates Total Group General Fund including HRA General Fund including Subsidiaries and HRA General Fund Group Associates Total Group General Fund including HRA (126,320) (67,349) (193,669) Opening General Fund and HRA Balance (146,186) (91,317) (237,503) 40,558 (23,968) 16,590 Less/plus Surplus or Deficit on General Fund 45,254 (241) 45,013 (60,424) - (60,424) Transfers to/from Other Reserves (26,338) - (26,338) (146,186) (91,317) (237,503) Closing General Fund and HRA Balance (127,270) (91,558) (218,828) 191
Page 192
106 Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement 2023/24 Adjustments for Capital Purposes £000 Net change for the Pensions Adjustments £000 Other Differences £000 Total Adjustments between Funding and Accounting Basis £000 Community and Enterprise Resources 23,665 (766) (116) 22,783 Education Resources 26,136 (1,037) (27,955) (2,856) Finance and Corporate Resources 2,078 (348) 126 1,856 Housing and Technical Resources - Housing Revenue Account 18,217 (124) (8,180) 9,913 - Housing Other 9,918 (376) 196 9,738 Social Work Resources 3,224 (981) (181) 2,062 Joint Board - - - - Corporate Items - (45) 4,612 4,567 Corporate and Democratic Core (HRA) - - 117 117 Non-Distributed Costs – Non-Operational Assets (HRA) - - - - Net Cost of Services 83,238 (3,677) (31,381) 48,180 Other Income and Expenditure from the Expenditure and Funding Analysis (67,489) (32,312) 28,799 (71,002) Surplus or Deficit 15,749 (35,989) (2,582) (22,822) Share of (Surplus) or Deficit on the Provision of Services by Associates 23,665 (766) (116) 22,783 Difference between General Fund Surplus or Deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 26,136 (1,037) (27,955) (2,856) 2022/23 Adjustments for Capital Purposes £000 Net change for the Pensions Adjustments £000 Other Differences £000 Total Adjustments between Funding and Accounting Basis £000 Community and Enterprise Resources 23,928 15,756 (141) 39,543 Education Resources 24,123 12,289 (26,150) 10,262 Finance and Corporate Resources 1,927 6,827 397 9,151 Housing and Technical Resources - Housing Revenue Account 7,646 2,509 (7,618) 2,537 - Housing Other 6,106 8,037 520 14,663 Social Work Resources 1,484 18,729 (119) 20,094 Joint Board - - - - Corporate Items - 42 4,297 4,339 Corporate and Democratic Core (HRA) - - 115 115 Non-Distributed Costs – Non-Operational Assets (HRA) - - - - Net Cost of Services 65,214 64,189 (28,699) 100,704 Other Income and Expenditure from the Expenditure and Funding Analysis (61,250) 5,194 25,688 (30,368) Surplus or Deficit 3,964 69,383 (3,011) 70,366 Share of (Surplus) or Deficit on the Provision of Services by Associates - - - - Difference between General Fund Surplus or Deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 3,964 69,383 (3,011) 70,336 192
Page 193
107 Note 2 Expenditure and Income Analysed by Nature (Group) The council’s expenditure and income are analysed below: 2023/24 £000 2022/23 £000 Expenditure Employee Benefits Expenses 682,476 687,940 Other Services Expenditure 778,527 759,901 Support Services Recharges - - Depreciation, Amortisation, Impairment 103,277 95,831 Interest Payment 69,598 59,710 Pension Net Interest Expense (32,312) 5,193 Impairment on Financial Instruments (531) (1,934) Loss on the Disposal of Assets 650 - Total Expenditure 1,601,685 1,606,641 Income Fees and Charges and Other Service Income 459,801 447,857 Interest and Investment Income 16,072 4,814 Impairment on Financial Instruments 58 (227) Gain on the Disposal of Assets - 2,284 Income from Council Tax 159,053 148,958 Government Grants and Contributions 944,270 892,060 Total Income 1,579,254 1,495,746 Surplus or Deficit on the Provision of Services 22,432 110,894 Note 3 Investments / Liabilities in Associates and Joint Boards The group’s share of the net asset / liabilities by associate and joint board is shown below: Investments in associates and joint boards 31 March 2024 £000 31 March 2023 £000 Strathclyde Partnership for Transport 72,026 67,179 Strathclyde Concessionary Travel Scheme Joint Committee 762 749 South Lanarkshire Integration Joint Board 14,418 18,970 Lanarkshire Valuation Joint Board 1,024 1,036 Total 88,230 87,934 Liabilities in associates and joint boards 31 March 2024 £000 31 March 2023 £000 Lanarkshire Valuation Joint Board - - Total - - 193
Page 194
108 Note 4 Disclosure of Interests in Other Entities The council has adopted the recommendations of the Code in the United Kingdom 2023/2024, as supported by the International Financial Reporting Standard (IFRS), which requires local authorities to consider their interests in all types of entity to incorporate into Group Accounts. A full set of Group Accounts, in addition to the council’s accounts, has been prepared which incorporates material balances from identified associates and joint ventures. The Financial Statements in the Group Accounts are prepared in accordance with the Accounting Policies set out in the Accounting Policies on pages 109-115. Note 5 Financial Impact of Consolidation By including the group entities (details of which are provided below), the effect on the Group Balance Sheet is an increase in both Reserves and Net Assets of £96.427 million. This represents the council’s share of the net assets in these entities. Note 6 Group Entities The Group Accounts consolidate the results of the council with eight other entities – Common Good Fund, four joint boards, South Lanarkshire Leisure and Culture Limited, Routes to Work South and Clyde Valley Learning and Development Joint Committee. The joint boards are: ■ Strathclyde Partnership for Transport ■ Strathclyde Concessionary Travel Scheme Joint Committee ■ Lanarkshire Valuation Joint Board ■ South Lanarkshire Integration Joint Board. South Lanarkshire Council holds no shares in the bodies governed by these Boards. The joint boards have a wide range of functions to discharge, and members of each Board are elected councillors and are appointed by the councils in proportions specified in the legislation. Under accounting standards guidance, South Lanarkshire Council can be seen to have significant influence over these statutory bodies, through nominated Council Member involvement in the bodies’ governing Boards. The Boards are included within the Group Accounts even when our interest in these bodies is less than the 20% that is normally presumed to represent significant influence. Further details on each of the Boards and the Trust are provided below: Common Good Fund The Common Good Fund is for the benefit of the geographical areas of the former burghs and is administered by the council. The council’s share of the year-end net asset of £3.884m is included in the Group Balance Sheet. The Common Good Account is included within the council’s core financial statements Note 34. Strathclyde Partnership for Transport Strathclyde Partnership for Transport is the statutory body responsible for formulating the public transport policy for the 12 local authorities in the former Strathclyde area of the West of Scotland. The accounting period for the Board is the twelve months to 31 March 2024. In 2023/2024, South Lanarkshire Council contributed 14.38% of the entity’s estimated running costs. This body has been included as an associate in the council’s Group Accounts, with the council’s share of the year-end net asset of £500.878m included in the Group Balance Sheet. Copies of the Board’s accounts may be obtained from the Treasurer to Strathclyde Partnership for Transport, 131 St Vincent Street, Glasgow, G2 5JF. The accounts of the Partnership have been subject to audit. Strathclyde Concessionary Travel Scheme Joint Committee Strathclyde Concessionary Travel Scheme Joint Committee comprises the 12 councils within the West of Scotland and oversees the operation of the concessionary fares scheme for public transport within its area. The Strathclyde Passenger Transport Executive administers the Scheme on behalf of the Joint Committee. The accounting period for the Joint Committee is the twelve months to 31 March 2024. In 2023/2024, South Lanarkshire Council contributed 14.91% of the Committee’s estimated running costs. This body has been included as an associate in the council’s Group Accounts with the council’s share of the year-end net assets of £5.110m included in the Group Balance Sheet. Copies of the Board’s accounts may be obtained from the Treasurer to Strathclyde Concessionary Travel Scheme Joint Committee, 131 St Vincent Street, Glasgow, G2 5JF. The accounts of the Committee have been subject to audit. 194
Page 195
109 Lanarkshire Valuation Joint Board Lanarkshire Valuation Joint Board was formed in 1996 at local government re-organisation. The Board maintains the Electoral, Council Tax and Non- Domestic Rates registers for North and South Lanarkshire. The Board’s running costs are met by the two member councils. Surpluses or deficits on the Board’s operations are shared between the councils. The accounting period for the Board is the twelve months to 31 March 2024. In 2023/2024, South Lanarkshire Council contributed 50.00% of the Board’s estimated running costs. This body has been included as an associate in the Group Accounts, with the council’s share of the year-end net assets of £1.036m included in the Group Balance Sheet. The following additional disclosures are required under accounting regulations for Lanarkshire Valuation Joint Board because the council’s share of the net assets of the Board exceeds 25%. 2023/24 £000 2022/23 £000 Expenditure 3,835 4,531 Total Comprehensive Income and Expenditure 50 747 Fixed Assets 113 135 Long Term Assets 0 290 Current Assets 2,098 1,914 Liabilities due within one year 193 267 Liabilities due after one year 493 496 Capital and reserves 1,525 1,575 Contingent liabilities - - Capital commitments - - Copies of the Board’s accounts may be obtained from the Treasurer to the Lanarkshire Valuation Joint Board, Floor 4, Council Offices, Almada Street, Hamilton, ML3 0AB. The accounts of the Board are subject to audit. South Lanarkshire Integration Joint Board South Lanarkshire Integration Joint Board was established by South Lanarkshire Council with NHS Lanarkshire to formally integrate health and social care provision within South Lanarkshire. South Lanarkshire Council delegated resources of £185.096m or 25.79% of the Board’s income in 2023/2024. This body has been included as a joint venture in the Group Accounts, with the council’s 50% share of the year end net asset of £28.835m included in the Group Balance Sheet. The following table details the main elements of South Lanarkshire Council’s share of assets, liabilities and revenues of the Board. 2023/24 £000 2022/23 £000 Expenditure 726,841 696,984 Total Comprehensive Income and Expenditure 9,105 47,338 Fixed Assets - - Current Assets 28,835 37,940 Liabilities due within one year - - Liabilities due after one year - - Capital and Reserves 28,835 37,940 Contingent Liabilities - - Capital Commitments - - Copies of the Integration Joint Board accounts may be obtained from the Chief Financial Officer of the South Lanarkshire Integration Joint Board, Floor 8, Council Offices, Almada Street, Hamilton, ML3 0AB. The accounts of the Integration Joint Board have been subject to audit. South Lanarkshire Leisure and Culture Limited South Lanarkshire Leisure Limited was established as a Charitable Trust on 1 April 2002, changed to South Lanarkshire Leisure and Culture Limited in October 2010 and then became a SCIO on 3 April 2023. It provides the council with a full range of leisure and cultural services within the South Lanarkshire area. The Trust is entirely independent of the council under law and for taxation purposes. The council and the council’s nominee company are the sole members of the SCIO. South Lanarkshire Council currently has 5 out of the 14 Board positions meaning 35.71% representation on the Board of Directors. The SCIO meets the definition of a structured entity. This describes an entity that has been designed so that the relevant activities are directed by means of contractual arrangements. In recognition of this, South Lanarkshire Leisure and Culture SCIO is included in the Group Financial Statements as a 100% subsidiary. The accounts of the SCIO are published separately and may be obtained from the Secretary, South Lanarkshire Leisure and Culture Limited, Floor 5, Council Offices, Almada Street, Hamilton, ML3 0AB. The accounts of the SCIO have been subject to audit. 195
Page 196
110 The following additional disclosures are required under accounting regulations for South Lanarkshire Leisure and Culture Limited because the council’s share of the net assets of the Board exceeds 25%. 2023/24 £000 2022/23 £000 Expenditure 46,315 Total Comprehensive Income and Expenditure (7,120) Fixed Assets 83 Long Term Assets 2,108 Current Assets 9,389 Liabilities due within one year (6,926) Liabilities due after one year (628) Long Term Liabilities - Capital and Reserves 4,026 Contingent Liabilities - Capital Commitments - On 3 April 2023, the status of South Lanarkshire Leisure and Culture Limited changed from a Charitable Trust to a Scottish Charitable Incorporated Organisation. This will have no impact on the relationship with the council moving forward. Routes to Work South Routes to Work South was established in 1998. Its main activity is supporting unemployed and workless residents of South Lanarkshire into employment, training or further education. Routes to Work South delivers services to the council and is funded by the council. South Lanarkshire Council is the sole member of Routes to Work South. In recognition of this, Routes to Work South is included in the Group Financial Statements as a 100% subsidiary. The accounts of Routes to Work South are published separately and may be obtained from the Secretary, Routes to Work South, 1-5 Main Street, Cambuslang, Glasgow G72 7EX. The accounts have been subject to audit. The following additional disclosures are required under accounting regulations for Routes to Work South because the Councils’ share of the net assets exceeds 25%. 2023/24 £000 2022/23 £000 Expenditure 3,042 2,530 Total Comprehensive Income and Expenditure (12) (15) Fixed Assets 32 23 Current Assets 2,234 2,276 Liabilities due within one year (1,420) (1,495) Liabilities due after one year (251) (251) Capital and Reserves 595 583 Contingent Liabilities - - Capital Commitments - - Clyde Valley Learning and Development Joint Committee Clyde Valley Learning and Development Joint Committee was established, with the backing of the Scottish Government’s Efficiency and Reform Fund, to provide procurement of training activities to each of its member councils. South Lanarkshire Council is the lead authority for this project and its constituent membership totalled 13.33% in 2023/2024. This body has been included as an associate in the council’s Group Accounts, however, as the Joint Committee net assets at 31 March 2024 are nil, there has been no financial impact on South Lanarkshire’s Single Entity Accounts. The accounts of Clyde Valley Learning and Development Joint Committee are published separately and may be obtained from the Treasurer, Finance and Corporate Resources, Floor 4, Almada Street, Hamilton, ML3 0AB. The Accounts of the Joint Committee are subject to audit. Note 7 Non-Material Interest in Other Entities The council also has an interest in: ■ Scotland Excel (previously Authorities Buying Consortium) is a Joint Committee established to serve the buying requirements of the councils within the former Strathclyde area. South Lanarkshire Council contributed 5.3% of Scotland Excel’s estimated running costs in 2023/2024, but the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. . 196
Page 197
111 ■ West of Scotland European Forum is a Joint Forum established to develop positive links between the communities of the region and the institutions of the European Union. This Joint Forum is in the process of being wound up with 2022/23 being the proposed final year of account. There were no contributions made in year to reduce the residual balance which will be required to be redistributed to members upon dissolution. The financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ West of Scotland Archaeology Service is a Joint Service established to provide planning related archaeological advice to its 11 member councils. South Lanarkshire Council contributed 12.4% of the estimated running costs of the Joint Service in 2023/2024, however, the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ Continuing Education Gateway is a consortium of 10 local authorities in the West of Scotland. It was formed in April 2000 to further the provision of careers and educational guidance services. South Lanarkshire Council contributed 14.50% of the consortium’s estimated running costs in 2023/2024, however, the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ Glasgow and the Clyde Valley Strategic Development Planning Authority was established to advise the member authorities on the structure plan. The Joint Committee was wound up during the year but there is a small staff team that is moving over to the City Region. South Lanarkshire Council contributed 12.5% of the committee’s estimated running costs in 2023/2024, however, the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ SEEMIS Group LLP is a not-for-profit body whose principal activity is the provision of education related information technology solutions to its member councils. South Lanarkshire Council contributed 6.21% of the organisation’s estimated running costs in 2023/2024, however, the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ Glasgow City Region – City Deal Cabinet was established on 20 January 2015. The purpose of the committee is to determine the Strategic Development Priorities for the Clyde Valley Region and to monitor and ensure delivery of the City Deal Programme as agreed between member authorities and the UK and Scottish Governments. The City Deal aims to deliver a £1.1 billion investment programme, including delivery of labour market and innovation programmes. South Lanarkshire Council contributed 17.4% of the organisation’s running costs in 2023/2024, however, the financial results have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ The Rural Development Trust is based in South Lanarkshire and works with local communities to deliver innovative solutions including resolving transport problems in rural areas and developing markets towns. The council supports the Rural Development Trust. The financial results have not been consolidated into the council’s Group Accounts as the amounts are not material. ■ Regen: FX Youth Trust was established as a Charitable Trust on 1 April 2007. It serves the council by developing and co-ordinating out of school diversion activities within the South Lanarkshire area. The Trust is entirely independent of the council under law and for taxation purposes. The council has neither any shares in, nor ownership of the Trust. The financial results have not been consolidated into the council’s Group Accounts, as the amounts are not material. ■ Clyde Gateway was established to re-develop large sections of the East End of Glasgow extending into Shawfield and Rutherglen in South Lanarkshire. The key stakeholders are Glasgow City Council, Scottish Enterprise and South Lanarkshire Council, with the two council partners providing land holdings on a phased basis over the anticipated 20-year lifetime of the project as well as capital funding. The financial results have not been consolidated into the council's Group Accounts as the amounts are not material. 197
Page 198
112 Audit Arrangements Under arrangements approved by the Commission for Local Authority Accounts in Scotland (“The Accounts Commission”) the auditor with overall responsibility for the audit of the accounts of South Lanarkshire Council for the year ended 31 March 2024 is: Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN 198
Page 199
113 Glossary of Terms Much of the terminology used in this report is intended to be self-explanatory, however, the following additional definition and interpretation of terms may be helpful: 1. Current Service Cost (Pensions) The increase in the current value of a defined benefit scheme’s liabilities, expected to arise from employee service in the current financial year. 2. Past Service Costs (Pensions) For a defined benefit scheme, the increase in the present value of the scheme’s liabilities relating to employee service in prior years arising in the current financial year as a result of the introduction of, or improvement to, retirement benefits. 3. Interest Cost (Pensions) For a defined benefit scheme, the expected increase during the financial year of the scheme’s liabilities because the benefits are one year closer to settlement. 4. Actuarial Gains and Losses (Pensions) For a defined benefit scheme, the changes in actuarial deficits or surpluses that arise because events have not coincided with the actuarial assumptions made for the last valuation (experience gains and losses) or the actuarial assumptions have changed. 5. Pension Scheme Liabilities The liabilities of a defined benefits pension scheme for outgoings due after the valuation date. The scheme’s liabilities, measured using the ‘projected unit method’, reflect the benefits that the employer is committed to provide for service up to the valuation date. 6. Pension Reserve The Pension Reserve recognises the council’s share of the actuarial gains and losses in the Strathclyde Pension Fund and the change in the council’s share of the net liability chargeable to the Comprehensive Income and Expenditure Statement. 7. Asset An item having value to the council in monetary terms. Assets are categorised as either current or non-current. A current asset will be consumed or cease to have material value within the next financial year (e.g. cash and stock). A non- current asset provides benefit to the council and the services it provides for a period of more than one year. 8. Liability A liability is where the council owes payment to an individual or another organisation. A current liability is an amount which will become payable within the next financial year. A non-current liability is an amount which by arrangement is payable beyond the next year at some point in the future or to be paid off by an annual sum over the period of time. 9. Contingent Liability A contingent liability is either: • A possible obligation arising from past events whose existence will be confirmed only by the occurrence of one or more uncertain events not wholly within the council’s control, or • A present obligation arising from past events where it is not probable that a transfer of economic benefits will be required, or the amount of the obligation cannot be measured with sufficient reliability. 10. Capital Expenditure and Financing This is expenditure incurred in creating, acquiring or improving assets. Expenditure is normally financed by borrowing (with repayment over a period of years), income from the sale of existing assets, revenue funds or external grants and contributions. 11. Capital Financed from Current Revenue This is expenditure incurred in creating, acquiring or improving assets where that expenditure is funded directly from the revenue account in the year in which it is incurred. 12. Non-Current Assets Fixed Assets are created as a result of the capital expenditure incurred by the council. As such, they comprise buildings, property, vehicles, plant and machinery, and computer equipment etc. 199
Page 200
114 13. Property, Plant and Equipment These are assets with physical substance (tangible assets) that are held for use in the production or supply of goods and services, for rental to others, or for administrative purposes, and expected to be used during more than one year. These are further analysed in the Notes to the Accounts as follows: a) Council Dwellings – these are council houses b) Other Land and Buildings c) Vehicles, Plant and Equipment d) Infrastructure Assets – these are assets where there is no prospect of sale or alternative use e.g. roads, bridges, tunnels, water supply and drainage systems e) Community Assets – assets that the council intends to hold in perpetuity that have no determinable useful life and may have restrictions on their disposal e.g. open land and public parks. f) Surplus Assets – assets that are not being used to deliver services, but which do not meet the criteria to be classified as either investment properties or non-current assets held for sale. g) Assets Under Construction 14. Heritage Assets Heritage assets are assets that have cultural, environmental, or historical association that make their preservation for future generations important. Heritage assets are maintained principally for their contribution to knowledge and culture, and it is this which distinguishes them from other assets e.g. museum artefacts. 15. Assets Held for Sale These are assets where the carrying value of the asset will be realised through its sale rather than continued use. 16. Intangible Asset These are assets which do not have a physical substance (e.g. IT software and licences) 17. Depreciation The measure of the cost of wearing out, consumption or reduction in the useful economic life of the council’s non- current assets during the financial year, whether from use, the passage of time or obsolescence through technical or other changes. 18. Impairment A reduction in the value of non-current asset to below its carrying value in the Balance Sheet. 19. Fair Value The fair value of an asset is the price at which it could be exchanged in an arm’s length transaction, less where applicable, any grants receivable towards the purchase or use of the asset. 20. Net Carrying Value The amount at which non-current assets are included in the Balance Sheet, i.e. historical cost or current value less the cumulative amounts provided for depreciation. 21. Accrual The concept that income and expenditure are recognised as they are earned or incurred, not as the money is paid or received. 22. Provision An amount put aside in the accounts for future liabilities or losses which are certain or very likely to occur but the amounts or dates or when they will arise are uncertain. 200
Page 201
115 201
Page 202
202
Page 203
Appendix 2 Table 1 Reconciliation of Monitoring Position to Annual Accounts Actual to 31/03/24 (Exec Com, 26 June 2024) £m Move Corporate Items £m Remove Transfers from Reserves £m Revised General Fund Position per EFA £m Add: HRA Position £m Total EFA per Annual Accounts £m Statutory Accounting Adjustment £m CIES Figure per Annual Accounts £m Col 1 Col 2 Col 3 Col 4 Col 5 Col 6 Col 7 Col 8 Community and Enterprise Resources 137.522 - - 137.522 - 137.522 22.783 160.307 Education Resources 439.938 - - 439.938 - 439.938 -2.856 437.084 Finance and Corporate Resources 48.007 - 48.007 - 48.007 1.856 49.860 Housing and Technical Resources 16.436 - - 16.436 - 16.436 9.738 26.170 Housing Revenue Account - - - 0.000 0.360 0.360 9.913 9.553 Social Work Resources 237.210 - - 237.210 - 237.210 2.062 239.266 Joint Boards 2.052 - - 2.052 - 2.052 0.000 2.052 Corporate Items - (14.199) - (14.199) - (14.199) 4.567 -9.626 Corporate and Democratic Core - HRA - - - - - - 0.117 0.117 Non-Distributed Costs - HRA - - - - - - - - Total Resources 881.165 (14.199) - 866.966 0.360 866.603 48.180 914.783 CFCR 0.577 1.153 - 1.730 - 1.730 Loan Charges 27.409 - - 27.409 - 27.409 Corporate Items (14.199) 14.199 - - - - Council Tax (159.053) - - (159.053) - (159.053) General Revenue Grant (349.979) - - (349.979) - (349.979) Non Domestic Rates (341.536) - - (341.536) - (341.536) Transfer from Reserves (including CFCR) (70.735) - 70.735 - - - Other Income and Expenditure (907.516) 15.352 70.735 (821.429) - (821.429) (71.002) (892.431) (Surplus)/Deficit on Provision of Services (26.351) 1.153 70.735 45.537 0.360 45.174 (22.822) 22.352 5 203
Page 204
Annual Accounts: Restatement of Monitoring Figures Reported This Appendix reconciles the monitoring figures reported to the Council’s Executive Committee (26 June 2024) to the figures in the Council’s Annual Accounts (in the Expenditure and Funding Analysis Statement and the Comprehensive Income and Expenditure Account). This is detailed below: • The starting point for the Expenditure and Funding Analysis (col 1) is the year-end outturn position shown in Appendix 1 of the report to Executive Committee, 26 June 2024), and is the monitoring surplus of £26.351 million. An adjustment is made to move the Corporate Items from the Other Income and Expenditure to the Resources in Appendix 2 (col 2). This is where they are shown in the Annual Accounts. • Appendix 2 (col 3) then takes this monitoring surplus of £26.351 million, and removes the Transfers from Reserves totalling £70.735 million, as the accounting requirements require us to remove both Transfers To and Transfers From Reserves, from these reported Committee figures. • The table in Appendix 2 then adds the HRA outturn position (col 5) to give the Council’s total position: a deficit on provision of services of £45.174 million. This represents the Council’s outturn position (General Fund plus HRA) on an accounting basis before Transfers To / Transfers From Reserves and is the position shown in the Expenditure and Funding Analysis (col 6). • Finally, the Expenditure and Funding Analysis position (col 6) is adjusted by adding the technical accounting transactions, including depreciation and pension accounting entries, which are out with the normal Council monitoring process, to arrive at the figures in the Comprehensive Income and Expenditure Statement of a deficit of £22.352 million, before the entries to reverse out the accounting transactions and to add in transfers to and from reserves. These transactions are for accounting purposes and reflect the Council spend in line with accounting guidance. They do not change the final outturn position of the Council and have no impact on the actual position of the Council and the funds available. • As detailed in above, the Expenditure and Funding Analysis shows the movement on the General Fund Reserve and HRA Reserve before any transfers to/from other reserves. These transfers relate to transfers from Other Reserves including the Repairs and Renewals Fund (including Winter Maintenance), the Insurance Fund and the IT Development Fund (Capital 204
Page 205
Fund) to offset expenditure and commitments that have been charged to the Revenue Budget but where the funding to pay for these commitments sits in another Reserve and are shown in Table 3 below. • These transfers need to be taken into account to arrive at the total movement in the General Fund Reserve and HRA Reserve included in the Balance Sheet (Table 2 below). Table 2 below shows that when these transfers totalling £4.938 million are taken into account, the total General Fund and HRA position for the year is a decrease of £40.236 million. This increase takes account of the final year end position of breakeven as well as all transfers to and from all reserves, including those above. Table 2 - Total Movement in General Fund Reserve and HRA Reserve General Fund £m HRA £m Total £m Closing General Fund and HRA Balance 150.283 12.861 163.144 Surplus/(Deficit) per EFA (45.534) 0.360 (45.174) Transfer (to)/from Other Reserves (see Table 3) 4.938 0.000 4.938 Total Movement in Year (40.596) 0.360 (40.236) Closing General Fund and HRA Balance 109.687 13.221 122.908 Table 3 - Transfers (to)/from Other Reserves General Fund £m Repairs and Renewals (including Winter Maintenance) 2.262 Insurance Fund 1.215 Capital Fund (including IT Development Fund, Central Energy Efficiency Fund, Education Capital Items Replacement) 0.801 Capital Receipts Reserve 0.660 Total Transfers (to)/from Other Reserves 4.938 205
Page 206
206
Page 207
1 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2024 ________________________________________________________________________ The Trustees present their annual report together with the financial statements and Independent Auditors’ report for the year ended 31 March 2024. Reference and Administration Information Charity Name: South Lanarkshire Council Charitable Trusts Charity Number: SC025089 Principal Office: Finance Services Council Offices Almada Street Hamilton ML3 0AA Trustees: Finance and Corporate Resources Committee, South Lanarkshire Council Independent Auditors: Audit Scotland Structure, Governance and Management Governing Document South Lanarkshire Council Charitable Trusts includes one remaining Charitable Trust Fund / Bequest established under previous local authorities. The Trust Fund / Bequest is restricted for the purpose which it was set up. Charity Trustees The trustees of the charity are elected members (Councillors) of South Lanarkshire Council. Trustees are appointed through their election to the Finance and Corporate Resources Committee of South Lanarkshire Council. The current trustees of South Lanarkshire Council Charitable Trusts are detailed below: Councillor Alex Allison Councillor Graeme Horne Councillor Walter Brogan (Depute Chair) Councillor Martin Hose Councillor Matthew Buchanan Councillor Katy Loudon Councillor Andy Carmichael Councillor Hugh Macdonald Councillor Maureen Chalmers Councillor Catherine McClymont Councillor Margaret Cooper Councillor Lesley McDonald (Chair) Councillor Andrea Cowan Councillor Elaine McDougall Councillor Maureen Devlin Councillor Mark McGeever Councillor Mary Donnelly Councillor Richard Nelson Councillor Joe Fagan (Ex Officio) Councillor Mo Razzaq Councillor Grant Ferguson Councillor John Ross Councillor Gladys Ferguson-Miller Councillor Graham Scott Councillor Celine Handibode (Depute Chair) Councillor Kirsty Williams 5 207
Page 208
2 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2024 ________________________________________________________________________ Organisational Structure The trustees delegate the day-to-day administration of the charity to officers of the Council through the Scheme of Delegation as approved by South Lanarkshire Council on 18 May 2022. The trustees (as elected members of the Council) meet to consider and approve the Annual Accounts for South Lanarkshire Council which includes the financial statements for all South Lanarkshire Council Trust Funds. An annual report on Governance of Trust Funds is presented to the Finance and Corporate Resources Committee. This report details expenditure for the preceding financial year. Related Parties Trustees hold this position because they are elected members of South Lanarkshire Council. South Lanarkshire Council provides administration services to the Trust. Risk Management It is recognised that there is a risk that the funds of the Trust are not used for the purpose that they were intended. To mitigate this risk, the governance arrangements in place ensure that the Finance and Corporate Resources Committee are advised of the balance and distribution of funds. In addition, the Office of the Scottish Charity Regulator (OSCR) also receive an annual report on the Trust and their purpose. Management of Funds and Investment Policy The trustees rely upon the expertise of South Lanarkshire Council to manage the investments to ensure the maximum return at least risk to the charity is achieved. The majority of the funds of the charity are managed on behalf of the Council by Barclays Wealth. The investment objective is to provide a sustainable level of income, along with the prospect of growth in both capital and income through investment in a diversified portfolio of investments. The market value of these funds as at 31 March 2024 was £1,033,607 (2022/2023: £970,657). The remaining fund of the charity is managed by South Lanarkshire Council. The interest received is shown in the Statement of Receipts and Payments. During 2023/2024 income of £38,916 (2022/2023: £34,232) was received and is shown in the Statement of Receipts and Payments. Trustee Indemnity Insurance No such insurance has been taken out. 208
Page 209
3 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2024 ________________________________________________________________________ Reorganisation of South Lanarkshire Council Trust Funds South Lanarkshire Council established The South Lanarkshire Charitable Trusts (Charity Number SC049819) in December 2019 for the purposes of reorganising existing trust funds, including those held under South Lanarkshire Council Charitable Trust (Charity Number SC025089). The constitution of The South Lanarkshire Charitable Trust (SC049819) is a Trust Deed granted by South Lanarkshire Council. It provides a modern constitution with appropriate purposes, powers and governance arrangements. The process of transferring the funds from South Lanarkshire Council Charitable Trusts (SC025089) to The South Lanarkshire Charitable Trust (SC049819) is ongoing. During 2023/24, OSCR approved the transfer of assets totalling £2,053. There remains 1 Charitable Trust Fund / Bequest established under previous local authorities remaining. Objectives and Activities The remaining fund is the Loudon Bequest Trust Fund which was used to help finance holidays for elderly people within 12 Local Authority areas in the West of Scotland. Achievements and Performance During the year to 31 March 2024, no grants were paid out. Financial Review Overview Income during 2023/2024 came from income on external investments of £30,301 (2022/2023: £29,453); interest calculated on the Trust Fund’s revenue balances of £5,692 (2022/2023: £1,848). Proceeds from the sale of investments of £2,923 (2022/2023: £2,931) were received. The trust held cash and bank balances of £144,421 (2022/2023: £114,031) as at 31 March 2024 and investments with a book value of £818,144 (2022/2023: £820,639). 209
Page 210
4 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2024 ________________________________________________________________________ Reserves Policy The trust is managed in order to allow the full potential benefit of the trust to be realised. By ensuring distributed funds are of sufficient value to make a beneficial impact to recipients, there may be some erosion of capital. The Reserves of the Trust will be used in line with the specific requirements of the Trust. External Audit The auditor with responsibility for the audit of the accounts of South Lanarkshire Council Charitable Trusts for the year ended 31 March 2024 is: Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN Declaration The trustees declare that they have approved the trustees’ report above. Signed on behalf of the charity’s trustees Signature(s): Full Name(s): LESLEY MCDONALD Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 25 JUNE 2024 210
Page 211
5 South Lanarkshire Council Charitable Trusts Statement of Receipts and Payments for the year ended 31 March 2024 ___________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current year) Total Funds (last year) Restated £ £ £ £ £ £ Receipts Donations - - - - - - Income from investments other than land and buildings 4 - 35,993 - - 35,993 31,301 Sub Total - 35,993 - - 35,993 31,301 Receipts from Assets and Investments sales Proceeds from sale of investments 4 - 2,923 - - 2,923 2,931 Sub Total - - - - - - Total Receipts - 38,916 - - 38,916 34,232 Payments External Audit Fee 8 - 1,167 - - 1,167 1,808 Investment Management Costs 7 2,923 2,923 2,932 Administration Charge 9 2,383 2,383 2,377 Grants and Donations 5 - 0 - - 0 0 Purchase of Investments 4 0 0 0 Total Payments - 6,473 - - 6,473 7,117 Net Receipts - 32,443 - - 32,443 27,115 Surplus / (Deficit) for the year - 32,443 - - 32,443 27,115 211
Page 212
6 South Lanarkshire Council Charitable Trusts Statement of Balances as at 31 March 2024 ___________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current year) Total Funds (last year) Restated £ £ £ £ £ £ Cash and Bank Balances Opening Balance - 114,031 - - 114,031 182,950 Transfer of Assets to the South Lanarkshire Charitable Trust (2,053) (2,053) (96,034) Surplus shown on receipts and payments account - 32,443 - - 32,443 27,115 Closing Balance - 144,421 - - 144,421 114,031 Investments Market Value of Investments (Clydeport – transferred to The South Lanarkshire Charitable Trust) 7 - - - - - - Market Value of Investments (Managed by Barclays Wealth) 7 - 1,033,607 - - 1,033,607 970,657 Total Investments - 1,033,607 - - 1,033,607 970,657 Signed on behalf of the charity’s trustees Signature(s): Full Name(s): LESLEY MCDONALD Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 25 JUNE 2024 212
Page 213
7 South Lanarkshire Council Charitable Trusts Notes to the Financial Statements ___________________________________________________________________________________________________________________ 1. Basis of Accounting These financial statements have been prepared on the Receipts and Payments basis in accordance with the Charities & Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006 (as amended). 2. Fund Accounting Restricted funds are those funds that can only be applied for particular purposes. 3. Taxation The charity is not liable to income or capital gains tax on its charitable activities. 4. Trustee Remuneration, Expenses and Related Party Transactions • No remuneration or expenses were paid to charity trustees or persons connected to a trustee during the year. • The trust received income from external investments of £30,301 (2022/2023: £29,453) and £5,692 (2022/2023: £1,848) from South Lanarkshire Council. All transactions incoming and outgoing are made via South Lanarkshire Council’s accounts. • Proceeds from the sale of the Loudon Bequest investment of £2,923 (2022/2023: £2,931) were received. • Purchase costs of the Loudon Bequest investment of £0 (2022/2023: £0) were incurred. • There were no transactions between the charity and any trustee or any connected person during the year. 5. Grants In the year to 31 March 2024, there were no grants were paid out as the process of transferring the funds from South Lanarkshire Council Charitable Trusts (SC025089) to The South Lanarkshire Charitable Trust (SC049819) was ongoing. During 2022/23 no grants were paid out. 213
Page 214
8 South Lanarkshire Council Charitable Trusts Notes to the Financial Statements ___________________________________________________________________________________________________________________ 6. Cash and Bank Balances During the year the Trust’s balances were held by South Lanarkshire Council, which manages the administration of the funds on behalf of the Trustees. No costs were incurred by the Trust for this administration. South Lanarkshire Council also acts as the banker for the charity and as detailed above, all transactions incoming and outgoing are made via the Council’s accounts. The balances are repayable on demand and interest is payable on balances. 7. Investments The charity has one investment managed by Barclays Wealth £1,033,607 (2022/2023: £970,657) on behalf of the Council with an objective of achieving a balance between income and capital growth subject to a medium level of risk. Barclays Wealth charged a portfolio management fee of £2,923 (2022/2023; £2,931). 8. External Audit Fee The external audit fee for 2023/2024 £1,167 (2022/2023: £1,808) is paid to Audit Scotland. 9. Administration Charge A charge for administration of the Trust Fund for 2023/2024 £2,383 (2022/2023: £2,377) is paid to South Lanarkshire Council. 214
Page 215
Prepared by Audit Scotland June 2024 Workforce Innovation - how councils are responding to workforce challenges Best Value thematic work in South Lanarkshire Council 2023-24 6 215
Page 216
Best Value thematic work in South Lanarkshire Council 2023-24 | 2 Contents Key facts 3 Key messages 4 Scope of the audit 5 1 Workforce strategy and priorities 7 2 Digital technology and the workforce 12 3 Flexible working and other innovative staff deployment 15 4 Developing future skills and capacity 17 5 Joint workforce arrangements across services and partners 20 6 Measuring the impact of workforce planning 22 Appendix 1 23 216
Page 217
Best Value thematic work in South Lanarkshire Council 2023-24 | 3 Key facts Workforce 15,173 Number of people working for the council – headcount 12,490 Number of people working for the council – full time equivalent 5.1% Turnover of staff in last six months 5.7% Percentage of days lost due to absence in last year Age profile 0.5% Under 20 12% 20 to 29 21.5% 30 to 39 23% 40 to 49 28% 50 to 59 15% 60 and above Sources: • Headcount, FTE and absence: Council-wide Workforce Monitoring – October to December 2023, Report to Finance and Corporate Resources Committee - 6 March 2024 • Turnover: Employee Workforce Monitoring Information, Report to Executive Committee – 22 November 2023 • Age profile: Information provided to Audit Scotland by South Lanarkshire Council 217
Page 218
Key messages | 4 Key messages 1 The Council’s Workforce Plan 2022-25 is supported by detailed service level plans, however there is an opportunity for this to have a more strategic focus. The Council has not had a corporate level workforce strategy since 2019. 2 The Council and service-level workforce plans capture the workforce challenges however actions need to be SMART to allow progress to be monitored and reported. 3 While the Council’s service-level workforce plans contain workforce data, there is no workforce data included in the Council-level Workforce Plan. 4 The Council has developed a comprehensive toolkit to help services with workforce planning. 5 The Council is using digital technology to support new ways of working but has not yet set out how it plans to use digital technology to shape its future workforce. The introduction of Oracle Fusion provides the Council with opportunities to create efficiencies and the increased use of digital technology in education is providing more choice for pupils. 6 The Digital Strategy 2022-27 sets out an intention to address digital exclusion. Around ten per cent of employees who responded to a digital skills survey identified that they do not have basic digital literacy. 7 The Council recognises the need for innovative skills and capacity measures in light of the workforce recruitment and retention challenges it faces. The Council uses a number of approaches to improve the skills and capacity of its future and existing workforce. 8 The Council reports detailed council-wide and resource-level workforce monitoring information to Committee quarterly although there is scope for the content to be further developed. 218
Page 219
Scope of the audit | 5 Scope of the audit 1. The 2023 Local Government Overview (LGO) notes that councils have never faced such a challenging situation. Service demands have increased after the Covid-19 pandemic and funding is forecast to reduce in real terms. Workforce pressures including recruitment in a competitive labour market, employee retention and high sickness absence levels are putting councils under continued pressure. 2. This report sets out how South Lanarkshire Council is responding to current workforce challenges through building capacity, increasing productivity and innovation. 3. The Accounts Commission’s Strategy (2021-26) sets out its priorities to focus on inequalities, funding, communities and recovery. The Code of Audit practice sets out the Best Value work required to report on these priorities. Code of Audit Practice 2020 Best Value reporting requirements Best Value reporting – extract from the Code The Accounts Commission’s approach to Best Value involves reporting on individual local government bodies and thematically across the local government sector through performance reports: • As part of their integrated wider-scope annual audit work appointed auditors use a risk- based approach to assess and report whether the audited body has made proper arrangements for securing Best Value and is complying with its community planning duties, including reporting progress against previous Best Value findings and recommendations. • The Accounts Commission also requires the Controller of Audit to report to the Accounts Commission on each council at least once over the five-year audit appointment on the body’s performance on its Best Value duty. This enables the Accounts Commission to make findings for improvement where appropriate. • The Accounts Commission reports nationally on thematic aspects of local government bodies’ approaches to, and performance in, meeting their Best Value and community planning duties. Local government appointed auditors report locally on any such Best Value thematic work prescribed by the Accounts Commission. 4. This report covers the thematic aspect of the Best Value audit requirements. The Commission has directed auditors to report on workforce innovation and how councils are responding to workforce challenges. In carrying out the work auditors have considered the following questions: • How effectively are the council’s workforce plans integrated with its strategic plans and priorities? 219
Page 220
Scope of the audit | 6 • How effectively has digital technology been used to support workforce productivity and improve service quality and outcomes? • How effectively is the council using hybrid and remote working and other innovative working practice such as a four-day week to achieve service and staff benefits? • What innovative practice is the council using to develop its future workforce capacity and skills needs and manage staff reductions in line with its priorities? • What progress has the council made with sharing roles or functions across its services and/or with other councils and partners? • How effectively is the council measuring the impact of its workforce planning approach? 5. An improvement action plan is included at Appendix 1 of this report. This sets out audit recommendations in key areas, and the Council’s planned response including responsible officers and dates for implementation. 6. The coverage of the work is in line with the expectations for council’s arrangements for the seven Best Value themes in the Local Government in Scotland Act 2003, Best Value Statutory Guidance 2020. 220
Page 221
1 Workforce strategy and priorities | 7 1 Workforce strategy and priorities 7. A council focused on achieving Best Value will have a workforce strategy that sets out expectations on how the local authority’s staff will deliver its vision, priorities and values. 8. To be effective, workforce planning must be integrated across the organisation. Workforce strategies need to support the council in achieving its strategic priorities. They must support other key plans including financial, asset, digital and transformation planning. They need to be under-pinned with detailed workforce plans within services. The Council does not have a corporate level workforce strategy, with the last strategy covering the period 2016-2019 9. South Lanarkshire Council employs over 15,000 people at a cost of nearly £700 million, including pension contributions. Staff costs equate to around 44 per cent of the Council’s overall expenditure. Forty-three per cent of the Council’s workforce are aged over 50. 10. The Council has a shared vision to improve the lives and prospects of the people living in South Lanarkshire. Its three priorities are: • People – we need to put people first • Planet – we need to work towards a sustainable future in sustainable places • Progress - We need to recover, progress, and improve. 11. The Council’s last corporate level workforce strategy (People Strategy) covered the period 2016-19. Although the Council has confirmed the principles of workforce planning set out in the People Strategy remain valid, the context in which councils operate has changed as a result of the Covid-19 pandemic and other external factors. The Council’s Workforce Plan 2022-25 is supported by detailed service level plans, however there is an opportunity for this to have a more strategic focus 12. We reported in our 2022/23 Best Value thematic report on Leadership that the Council renewed its council-level workforce plan in 2022. The Workforce Plan 2022-25 was approved by its Executive Committee in November 2022. 221
Page 222
1 Workforce strategy and priorities | 8 13. The Council-level Workforce Plan outlines the main workforce challenges as having access to a reduced workforce pool, the ability to grow and develop talent and skills and maintaining employee wellbeing. It notes that delivering the plan will need the right people with the right skills in the right place. 14. The Council-level plan is four pages long, with an associated action plan taking up just over an additional page. It does not include or refer to workforce data, such as the age profile of its workforce, the number of casual staff used or indicators of staff wellbeing. Nor does it include any information on what it is currently doing to address any workforce capacity issues or how it plans to develop its future workforce. 15. The Council-level workforce plan is based on the content of workforce plans developed in its five combined service level areas (referred to as resources by the Council): • Community and enterprise resources (made up of facilities, waste and grounds services, planning and regulatory services, roads, transportation and fleet services and enterprise and sustainable development services) • Education resources • Finance and corporate resources (made up of administration and legal services, communications and strategy, finance services, Information Technology services, Personnel services and Audit and compliance services) • Housing and technical resources (made up of housing services and property services) • Social work resources (made up of South Lanarkshire Health and Social Care Partnership, Children and justice services and performance and support services). The Council and service-level workforce plans capture the workforce challenges however actions need to be SMART to allow progress to be monitored and reported 16. Workforce plans for each of the five service levels, covering 2022-25, were approved by respective resource committees in September and October 2022. The Council identified common themes across these, summarising them as follows: • increased demand and a reduced workforce pool • demographic challenges – increased turnover, employees retiring earlier than expected and succession planning • ability to grow and develop talent and skills • ongoing requirement for efficiency savings 222
Page 223
1 Workforce strategy and priorities | 9 • digital developments and new Information Technology (IT) systems • maintaining employee wellbeing. 17. Exhibit 1 sets out the action areas included within the Council level Workforce Plan 2022-25. These actions were informed from a review of the five service level workforce plans. It also has columns for the anticipated outcome from completing the action, lead officer, support required, timescale and financial implications. Exhibit 1 Actions included in the Council’s Workforce Plan 2022-25 • Revised recruitment practices • Development of ‘grow our own’ approach to attract and retain employees • Robust succession planning practices • Managing employee impact of ongoing requirement for efficiency savings and service redesign • Support and development for digital and IT developments • Maintain employee health and wellbeing Source: South Lanarkshire Council Workforce Plan 2022-25 18. As outlined above, each service level developed its own workforce plan, covering the period 2022-25 with each having the following structure: • An overview of what services are included within each service level • The main challenges, risks and new developments for the services • Strategic drivers, e.g. financial savings and efficiency, recruitment and retention. This includes a list of relevant strategic plans. • Current workforce – includes workforce information (age, absence, turnover) and lists workforce challenges • Objectives of the workforce plan • Key actions • Action Plan – containing the same headings as the council-level action plan. 223
Page 224
1 Workforce strategy and priorities | 10 19. The service-level plans provide a detailed overview of the challenges individual services are facing and set out what they are planning to do to address these challenges. 20. Both the Council-level and service-level plan action plans are not SMART. For many actions, the timescales are ‘ongoing’ making it difficult to measure and report on progress. There is an opportunity for the Council to set clearer milestones to monitor progress. The Council has developed a comprehensive toolkit to help services with workforce planning 21. The Council has a comprehensive workforce planning toolkit for services to use. The toolkit includes an assessment tool and action planning templates. It is designed to assist services in identifying supply and demand issues and consider the emerging objectives and actions within their areas. It also suggests a variety of information sources, including workforce data provided by Human Resources, employee audits, absence levels and profiles, and performance review and training records. 22. The toolkit refers to key objectives for the Council’s workforce, including maximising the potential of digital and agile working, effective recruitment processes and employee supports, practices and policies that support employee retention and wellbeing. While the Council’s service-level workforce plans contain workforce data, there is no workforce data included in the Council-level Workforce Plan 23. Workforce planning involves identifying and addressing future capacity and skills gaps, at operational and leadership levels. It requires strategic thinking, comprehensive workforce data (such as wellbeing, projected skills and capacity, vacancies, labour market context) and ongoing consultation and engagement with staff and trades unions. 24. Each of the five service workforce plans includes a short section on workforce data. For example, the Community and Enterprise service workforce plan, which includes facilities, waste and ground services, and roads, transportation and fleet services noted the following: • the number of staff (FTE) across the four services in its area • the most up-to date figures (2021/22) for absence and staff turnover • 58 per cent of its workforce was 50 years old or over. 25. Although the Council’s Workforce Plan 2022-25 does not include or refer to any council-wide workforce data.it does state that each service within the Council has reviewed its workforce data and each service level workforce plan contains a detailed analysis of the data and the potential implications for the service and the Council. 224
Page 225
1 Workforce strategy and priorities | 11 Recommendation 1 The Council should develop a corporate level workforce strategy to demonstrate a clear link to the Connect Council Plan 2022-27. The Council should build on the workforce planning to date and implement a more strategic, data-driven approach to workforce planning, with SMART action plans, setting out how Council level and service level actions are being progressed. 225
Page 226
2 Digital technology and the workforce | 12 2 Digital technology and the workforce 26. The LGO notes that digital technology will make councils’ future workforces look and work quite differently. In order to achieve the change required, councils need to make good use of digital technology and use the workforce in flexible ways. 27. Digital technology has a strong bearing on a council’s workforce needs. It can be used to re-shape jobs to increase productivity and reduce back-office functions while improving service quality. Technology solutions include online services, customer relationship management systems, mobile digital devices and more recently, artificial intelligence (AI) applications. 28. The Accounts Commission’s 2021 Digital Progress in Local Government report highlighted that Covid-19 accelerated the use of digital technology in councils. Councils need to be innovative in their use of technology and build on new working practices that emerged during the pandemic. In doing so, they must also consider service quality and the needs of people experiencing digital exclusion. The Council is using digital technology to support new ways of working 29. The Council approved its Digital Strategy 2022-2027 in June 2022. It sets out how the Council aims to exploit new technologies to help deliver its vision of improving the quality of life for everyone in South Lanarkshire. 30. The Digital Strategy 2022-27 also includes examples of how the Council aims to improve workforce productivity through the use of digital technology to date. For example, the rollout of Microsoft 365 software has improved collaboration and enabled virtual meetings using Teams. There has been an expansion in the number of mobile devices and apps increasing flexibility for the Council’s workforce. The Council has not yet set out how it plans to use digital technology to shape its future workforce 31. The Digital Strategy 2022-27 sets out to focus on service transformation using digital technologies. In terms of workforce planning, it confirms that the Council is at an early stage in establishing links between workforce planning and digital technology: • Future council workforce planning will require to take account of how new technology is changing both how services are delivered, and the roles required to deliver those services in future. 226
Page 227
2 Digital technology and the workforce | 13 The introduction of Oracle Fusion provides the Council with opportunities to create efficiencies 32. The Council is currently implementing new systems including Oracle Fusion - a cloud-based employee system that aims to provide better reporting and efficiencies, a new social work system (Liquid Logic), a homecare scheduling system (Total Mobile) and a new housing management system. These are all long-term multi-year projects, all due to be in place by the end of 2024/25. 33. Once the new systems are in place, employees and elected members will be able to securely access systems from any authorised device and from any location. The Council anticipates increased productivity, reduction in travel time and more efficient use of property as a result and intends to quantity benefits and impact once the new systems are implemented. 34. To provide employees with access to council systems the Council has installed ‘Kiosk computers’ in various locations. These allow employees access to systems they need, such as e-learning and Oracle Fusion. Recommendation 2 The Council should develop measures to capture and monitor the impact of digital technology on workforce productivity and service outcomes. It should also set out how it expects digital technology to shape its future workforce. The increased use of digital technology in education is providing more choice for pupils 35. The Council is aiming to deliver digital technologies to support imaginative, innovative learning environments suitable for learning in the 21st century. The Hybrid Learning Academy pilot commenced in August 2023 with nine secondary schools delivering nine individual Advanced Higher courses, and one Higher course. Subjects range from graphic communication to psychology to politics. Learners from across South Lanarkshire join lessons in-person, or online from a remote location, if their school is not able to deliver the course locally. Fifty-two learners are currently enrolled. 36. The pilot involved equipping each of its 17 mainstream secondary schools with the necessary IT equipment to facilitate learning to be delivered from schools to learners across South Lanarkshire. The investment costs for the supply and installation of the equipment costs were estimated at £11,500 per school. 37. Anticipated benefits of the pilot include reductions in the environmental impact of travel and the costs transportation involved for students to attend other schools. Attending another school two to three times a week also has implications for the learners’ other subjects in their base school. Regular reviews and feedback from schools, teachers, learners, and their families is to inform and shape the development of the programme with the intent on establishing an extended SLC Hybrid Learning Academy from 2024-25. 227
Page 228
2 Digital technology and the workforce | 14 The Digital Strategy 2022-27 sets out an intention to address digital exclusion. Around ten per cent of employees responding to a digital survey identified that they do not have basic digital literacy 38. Digital inclusion is one of 21 principles set out in the Digital Strategy 2022- 27 and is also one of eight themes. The Council is aiming to ensure that “No One is Left Behind” as take-up of digital services increases. It intends to design digital solutions to maximise access for all citizens and for those unable to access services digitally, alternative access will be made available. 39. Between May and October 2022, the Council undertook a digital skills employee survey to explore the potential barriers and skills gaps its workforce was facing in relation to the use of technology. Although this was an online survey, the Council recognised that those most likely to lack skills would not be able to complete it. To address this site visits from learning and development staff to support completion were offered and taken up by building services workers. Paper copies and telephone completion were offered by exception but were not taken up. 40. The response rate was approximately 15 per cent of all council staff, with 2,178 responses received. Nearly half the responses were from users who did not use a computer in their day-to-day work. The key findings were: • 60-90 per cent of all survey respondents are operating within the essentials level of digital literacy • 10 per cent of survey respondents are not fully operating at the foundation level of digital literacy. 41. To help address these results we understand the Council intends to: • include digital enablement in future appraisal discussions • provide guidance notes for identified process difficulties • signpost employees to existing learning and development on Teams • target provision of supported sessions to the those who are currently not meeting the foundation level of digital skills. 42. In areas where employees are unlikely to have access to digital devices, such as in schools, the Council makes use of in-service days to provide training. Employees can request in-person training in digital skills tailored to their needs. Recommendation 3 The Council should develop an action plan to allow it to monitor progress in addressing digital exclusion in its workforce and for its citizens. 228
Page 229
3 Flexible working and other innovative staff deployment | 15 3 Flexible working and other innovative staff deployment 43. During the pandemic councils needed to make the best use of their existing workforce while continuing to monitor employee wellbeing. Councils continue to look to new ways of working to improve job satisfaction, reduce sickness absence and staff turnover. 44. Home-working and hybrid working (a combination of office and home-based working) have now become commonplace. Some councils are also considering more radical working practice such as a standard four-day working week. However, whatever the working practice, employers need to ensure that service quality and productivity are maintained. The Council has adopted agile working. The introduction of Oracle Fusion provides further flexible working and staff deployment opportunities 45. During the pandemic the Council put in place agile working and established alternative shift patterns to ensure services were still able to be delivered. Staff are now categorised as fixed, flexible, mobile or remote. The Council is currently undertaking an exercise on work patterns to understand what proportion of its workforce is in each category. 46. As detailed in paragraphs 32-34 above, the Council is currently implementing a number of new systems, including Oracle Fusion, which are long-term multi-year projects, all due to be in place by the end of 2024/25. The Council anticipates increased productivity, reduction in travel time and more efficient use of property as a result and intends to quantity benefits and impact once the new systems are implemented. 47. The Council has implemented a four-day working week and a nine-day fortnight for some office-based roles. Services continue to work with employees to consider optimum working patterns. The Council offers employees a variety of wellbeing support 48. The Council’s Workforce Plan 2022-25 includes an action to enhance staff wellbeing support as part of increasing staff resilience and furthering our ambitions as an excellent employer. The Council introduced additional support for employees through a ‘New Deal for Employees’ report that went to the Council’s Executive Committee in September 2022. This offered a variety of initiatives for employees including improved paternity leave, a right to disconnect policy and consideration of a four-day working week. 229
Page 230
3 Flexible working and other innovative staff deployment | 16 49. The Council offers employees various training. This is not restricted to job- related learning but includes mental health, suicide prevention and budgeting / cost of living support. There is a wellbeing calendar where employees can sign up for different sessions. Topics include mindfulness, weight loss and men's mental health. There is also signposting for employees to external self-help groups. 230
Page 231
4 Developing future skills and capacity | 17 4 Developing future skills and capacity 50. Councils need to find innovative ways to ensure the workforce capacity and skills they need to deliver services in the future. Training and development opportunities can help to attract and retain employees and ensure skills are in place. Many councils work with their partners to offer apprenticeship schemes or vocational qualifications. Succession planning is also important to develop future leaders and ensure that essential skills are in place. 51. Jobs can be re-designed to optimise the workforce and improve services, for example the introduction of generic roles across health and social care disciplines. Leaders need to engage with staff and trade unions over fundamental workforce reform. This is particularly challenging in an environment of potential job losses. The Council recognises the need for innovative skills and capacity measures in light of the workforce recruitment and retention challenges it faces. The Council uses a number of approaches to improve the skills and capacity of its future and existing workforce 52. The 2022-2025 Workforce Plan identifies the workforce capacity and skills challenges that the Council and each of its five service level areas face. These challenges include difficulties in recruiting and retaining employees and the ability to grow and develop talent and skills. Exhibit 1 sets out the council-wide actions the Council has developed to address these challenges. The Council provides several apprenticeship schemes to help it fill skills and capacity gaps in its workforce 53. The Council operates three apprenticeship schemes in partnership with Skills Development Scotland - Modern, Graduate and Foundation Apprenticeships. 54. Modern Apprenticeships: These are aimed at those who are 16 years or older and who have left school. Apprentices are employed by the Council for the duration of their apprenticeship, which can last between 12 months and four years. Modern Apprenticeships are a key element of the Council’s ‘grow your own’ approach, and recruitment to the programme reflects the forecasted workforce needs of the Council. In February 2023, the Council employed 184 Modern Apprenticeships in a number of key occupational areas, including construction, social care, child care, business and administration and digital apps and IT support. 231
Page 232
4 Developing future skills and capacity | 18 55. Graduate Apprenticeships: These are open to over-16s who are new or existing employees of the Council and run for four to five years. These apprenticeships are delivered in partnership with a learning provider, usually a university or college, and apprentices work towards a qualification of Scottish Credit and Qualifications Framework (SCQF) Level 8 to 11 (equivalent to a master’s degree). Graduate Apprentices are employed by the Council for the duration of their apprenticeship, but the qualification element of the scheme is funded by Skills Development Scotland. As of February 2023, the Council had 39 Graduate Apprentices across all five council resources in areas that have been identified as potential gaps in the council workforce’s skillset. 56. Foundation Apprenticeships: These are targeted at those still in school, usually in the Senior Phase. The Council delivers these apprenticeships in partnership with South Lanarkshire College and New College Lanarkshire. Apprentices spend time learning with one of these colleges and then spend time applying this knowledge in a working environment with an employer. The Council holds a commitment to joining up the Foundation and Modern Apprenticeship schemes and offer a guaranteed interview for any Foundation Apprentice who wishes to pursue a Modern Apprenticeship with the Council. Pupils have access to eight subject frameworks all delivered at SCQF level 6, the equivalent of a higher: • Accountancy • Business Skills • CDM • Mechanical Engineering • Engineering Systems • Civil Engineering • Financial Services • Software Development • Children & Young People • Healthcare. The Council has redesigned some roles in social work to enhance future capacity and staff retention 57. In June 2023, the Social Work Resources Committee approved proposals to redesign some front-line roles in social work. This was to address recruitment and retention challenges, including having to compete with nearby councils, for Qualified Social Worker (QSW) roles. The Council identified that high vacancy rates, which reached 50 per cent in some offices, for QSWs risked compromising public protection and other statutory duties. 232
Page 233
4 Developing future skills and capacity | 19 58. The existing Team Leader roles were replaced with an expanded number of Operations Manager positions, reporting to Fieldwork Managers. The Operations Managers will manage the operational service and contribute to strategic and governance activity. They will also assume wider public protection responsibilities through chairing Adult Protection, Child Protection and high-risk Multi-Agency Public Protection Arrangements, increasing overall capacity. 59. The creation of the new Operations Manager posts were accompanied by an expansion of the number of Senior Practitioner posts, with up to a third of existing Social Worker and Occupational Therapist roles to be advertised and recruited to as Senior Practitioners. These Senior Practitioners report directly to the new Operations Managers. 60. The Council hopes these changes to social work roles and line management arrangements will assist in the recruitment of experienced staff and improve staff retention by creating a clear development and career pathway for existing staff to remain within South Lanarkshire. The Council has activities in place to support succession planning 61. In addition to the Council’s employee performance appraisal process, the Council offers three levels of management development training in conjunction with the Chartered Management Institute to support succession planning: • Ambition (entry) level for employees managing small teams • Consolidation level for employees who are practising managers or team leaders • Development level for senior managers. This includes training on project management, coaching, collaborative working and managing change. 62. The Council also runs leadership development activities, referred to collectively as the Leadership Challenge. Executive Directors select employees to take part in this. It includes skills and attitudes tests, access to speakers to help participants think beyond their current role, participation in service reviews in a different part of the Council and mentoring and coaching. The purpose of the Leadership Challenge is for the Council to ensure its leaders and managers can adapt to different situations and changing circumstances, and can inspire, challenge and encourage. There is open dialogue between union representatives and senior management 63. The Trades Unions take an active role in formal processes of change such as service redesigns and report effective, open dialogue between union representatives and senior management. Union representatives felt there was opportunities for more dialogue between managers and shop stewards in relation to operation changes. 233
Page 234
5 Joint workforce arrangements across services and partners | 20 5 Joint workforce arrangements across services and partners The Council has limited formal arrangements in place for sharing services with other councils or partners to create workforce benefits 64. Councils should look to work collaboratively with their partners to make the best use of their existing workforces and plan for the particular workforce needs in their areas. They should also work across traditional service department roles within councils to deliver improved services and outcomes. 65. Examples of this include generic working across health and social care, professional posts or functions shared between councils, and services delivered through empowered communities. 66. The Council has limited formal arrangements in place for sharing services with other councils or partner bodies. Work is underway to establish the Lanarkshire Care Academy in South Lanarkshire to help the Council ‘grow its own’ social care workforce 67. The establishment of a Lanarkshire Care Academy in South Lanarkshire is a key action in the Lanarkshire Health and Social Care Integrated Workforce Plan 2022-2025. Once established, it will promote social care as a vocation, establish routes into a career in social care and provide a framework that enables the Council to ‘grow its own’ workforce. 68. The North Lanarkshire Care Academy currently operates across the North Lanarkshire Health and Social Care Partnership. South Lanarkshire Council intends to link into this existing framework, creating a single Lanarkshire Care Academy that operates across North and South Lanarkshire. 69. Once implemented, the Lanarkshire Care Academy will consolidate a range of social care workforce activities and programmes currently operated by South Lanarkshire Council and NHS Lanarkshire. Workforce skills and capacity measures that will eventually be captured under the banner of the Lanarkshire Care Academy in South Lanarkshire include: • the provision of placements in social care settings to South Lanarkshire College students • the provision of Scottish Vocational Qualifications (SVQ) for existing employees 234
Page 235
5 Joint workforce arrangements across services and partners | 21 • the Council’s Developing the Young Workforce programme, including Foundation Apprenticeships in social care • the work of the Employability Team in supporting routes to employment in health and social care, including Modern Apprenticeships in social care. 70. Once established, the Lanarkshire Care Academy, will be a joint venture between NHS Lanarkshire, South Lanarkshire Council, North Lanarkshire Council and their respective IJBs. 71. The Council has a service level agreement in place with South Lanarkshire Leisure Trust that allows the Trust to access the Council’s redeployment arrangements. They worked closely during the pandemic and Leisure employees were redeployed to work in residential homes, care at home, children’s residential and in administrative roles. 235
Page 236
6 Measuring the impact of workforce planning | 22 6 Measuring the impact of workforce planning 72. Councils should monitor the impact of their workforce planning and delivery approaches. This should include cost, service quality and productivity benefits as well as employee wellbeing. This in-turn should inform their workforce planning approach. Councils and their partners should also understand the wider impact of their employment practice on the local economy. The Council reports detailed council-wide and service-level workforce monitoring information to Committee quarterly although there is scope for the content to be further developed 73. The Council reports council-wide and service-level workforce monitoring information to the Finance and Corporate Resources Committee on a quarterly basis and to the Executive Committee on a six-monthly basis. These reports provide comprehensive information on the council’s workforce, and include data on: • attendance statistics • employee development (take-up of learning and development) • turnover/analysis of leavers and exit interviews • recruitment monitoring • staffing (headcount and FTE). 74. While the information reported is comprehensive, and previous years’ data is also provided for comparison, no regular information is reported by the council on its vacancies, its use of temporary and casual member of staff or the skills and capacity of its workforce. There are also no targets in place for any of the measures. See Recommendation 1 above 236
Page 237
Appendix 1 | 23 Appendix 1 Improvement Action plan Issue/risk Recommendation Agreed management action/timing 1. Corporate level workforce strategy supported by clear reporting on actions The Council does not have a corporate level workforce strategy. The Council level workforce plan does not include or refer to workforce data, such as the age profile of its workforce, the number of casual staff used or indicators of staff wellbeing. Nor does it include any information on what it is currently doing to address any workforce capacity issues or how it plans to develop its future workforce. Risk – There is a risk that the Council is not using workforce data to inform workforce planning that links to its strategic priorities. The Council should develop a corporate level workforce strategy to demonstrate a clear link to the Connect Council Plan 2022-27. The Council should build on the workforce planning to date and implement a more strategic, data-driven approach to workforce planning, with SMART action plans, setting out how Council level and service level actions are being progressed. Paragraphs 9 to 20 and 73-74 Management response The Council will complete an updated Workforce Strategy for 2025-2027 with accompanying workforce plans to align to the Council Plan Connect Business Planning Cycle. The Council will create a strategic workforce plan for 2025– 2027 to align with the Council plan and will also create workforce plans for this period and reference the data analysis and findings more clearly to show both the high-level actions and specific resource actions. Responsible officer Head of Personnel Services Actioned by 31 March 2025 2. Digital technology The Council is at an early stage in establishing links between workforce planning and digital technology Risk – There is a risk that the workforce planning is not fully utilising the benefits of digital technology. The Council should develop measures to capture and monitor the impact of digital technology on workforce productivity and service outcomes. It should also set out how it expects digital technology to shape its future workforce. Paragraphs 29 to 34 Management response The Council will include links in the 2025-2027 workforce strategy and plans to digital technology. The Council will include measures to capture and monitor the impact of digital technology. Responsible officer Head of Personnel Services Head of IT Services Actioned by 31 March 2025 237
Page 238
Appendix 1 | 24 Issue/risk Recommendation Agreed management action/timing 3. Digital Exclusion Digital inclusion is one of 21 principles set out in the Digital Strategy 2022-27 and is also one of eight themes. The Council is progressing a number of initiatives to support digital inclusion. Risk – There is a risk that without a SMART action plan to monitor progress the Council cannot demonstrate it is achieving the principles set out in the Digital Strategy. The Council should develop an action plan to allow it to monitor progress in addressing digital exclusion in its workforce and for its citizens. Paragraphs 38-42 Management response The Council will develop an action plan within its workforce plans that will detail the next steps in progressing digital inclusion in its workforce. For its citizens, this will be captured within the digital strategy action plans. Responsible officer Head of Personnel Services Head of IT Services Actioned by 31 March 2025 238
Page 239
Appendix 1 | 25 75. Workforce innovation - how councils are responding to workforce challenges South Lanarkshire Council 2023/24 Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk AS.4.0 239
Page 240
240
Page 241
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Internal Audit Activity as at 31 May 2024 1. Purpose of Report 1.1. The purpose of the report is to:- update the Risk and Audit Scrutiny Committee (RASC) on progress of the Internal Audit service in the period 9 March to 31 May 2024 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that progress is noted. 3. Background 3.1. Findings from internal audit assignments are reported to the Committee throughout the year. The last progress report to the Committee was in March 2024 and reported on work completed in the period 13 January to 8 March 2024. This report covers all work completed in the period 9 March to 31 May 2024. Performance information is also included. 4. Delivery of the Internal Audit Plan: Progress and Performance 4.1. As at 31 May 2024, 42% of the 2024/2025 Audit Plan is in progress. 4.2. Appendix 1 lists all assignments completed in the period 9 March to 31 May 2024 together with a summary of overall assurances from each area of work. Two assignments were deferred in 2023/2024 to increase the time available to support significant system implementations. These assignments will be delivered via the use of contingency time in 2024/2025 or considered for inclusion in a future year’s audit plan. 4.3. Key performance indicators for March 2024 (relating to the 2023/2024 Internal Audit Plan) are included within the Internal Audit Annual Report, a separate item on this meeting’s Agenda. 4.4. Member are asked to note progress. 5. Glasgow City Region City Deal – Internal Audit Plan 2023/2024 5.1 At the May 2024 Cabinet meeting of the Glasgow City Region City Deal, audit reports were presented on relationship and stakeholder management along with findings from a review of financial monitoring; an update on progress with 7 241
Page 242
implementing previous audit actions and the proposed 2024/2025 Internal Audit Plan. A link to these reports can be found here. 5.2. The audit of relationship and stakeholder management sought to obtain assurance that appropriate stakeholder engagement and relationship management arrangements were in place across the City Region, and for individual City Deal projects. Based on the audit work carried out, it was reported that a reasonable level of assurance can be placed upon the control environment. The audit identified some scope for improvement in the existing arrangements and 2 recommendations were made which management should address. These were that the Project Manager should update the Programme Management Toolkit to assist member authorities with stakeholder engagement and relationship management. The Toolkit should outline the expectations of member authorities and provide assistance with the production of a stakeholder matrix and a communication and engagement plan for key stakeholder groups. Once the Toolkit has been updated this should be shared with City Deal member authorities. Secondly, that the Project Manager should remind all Member Authorities of the requirement to record and maintain a lessons learned log throughout the duration of a project. 5.3. The second report presented to the Cabinet in May 2024 was in relation to financial monitoring which sought to provide assurance that there were adequate controls in place covering financial monitoring and reporting carried out by the Project Manager and member authorities, and that these were operating effectively. Based on the audit work carried out, assurance was provided that the control environment was satisfactory and there were no audit recommendations. 5.4. Follow up work undertaken in the period reported that 2 recommendations arising from an audit of project procurement strategies had been implemented. 5.5. The final report was in relation to the proposed programme of internal audit work for 2024/2025. The Plan included four separate assignments covering Shared Prosperity Fund (SPF) Regional Project Compliance; a Gateway readiness review; Financial Monitoring Phase 2 and further follow up of previous audit recommendations. The findings from these assignments will be reported to the Cabinet during 2024/2025 and a summary included within future reports to this Committee. 6 Chief Internal Auditors Group 6.1. Throughout the year, the Chief Internal Auditor’s Group has convened meetings that have provided an opportunity to share best practice and attend presentations on topical issues. 6.2. A copy of the 2023 annual report is attached at Appendix 2 setting out the Group’s activities during the year. 7. Progress against Strategy 7.1. The Public Sector Internal Audit Standards (PSIAS) require progress against the audit strategy to be monitored and reported to the Committee as part of regular monitoring reports that are presented at each meeting. 7.2. Delivery of the strategy in 2024/2025 will be evidenced by the completion of the Internal Audit Plan in-year and will be monitored through the performance indicators regularly reported to the Committee. 242
Page 243
8. Employee Implications 8.1. There are no employee issues. 9. Financial Implications 9.1. A breakeven position for 2024/2025 is forecast at the end of the financial year for the Internal Audit section. 10. Climate Change, Sustainability and Environmental Implications 10.1 There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 11. Other Implications 11.1. The main risks to the delivery of the Audit Plan are, generally, vacancies and team up-skilling requirements, unforeseen service demands and delays with client sign-off. These are mitigated by coaching and training, regular meetings and escalation processes as well as inclusion of contingency time within the annual plan. The risk of significant, subsequent amendments to the Plan, arising from a change in the Council’s priorities or risks, are mitigated by regular re-assessment of capacity and Audit Plan content to allow incremental adjustments as the year progresses. 12. Equality Impact Assessment and Consultation Arrangements 12.1. There is no requirement to equality assess the contents of this report. 12.2. Heads of Service are consulted on each and every audit assignment. Jackie Taylor Executive Director (Finance and Corporate Resources) 5 June 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk and Audit Scrutiny Committee - 2024/2025 Internal Audit Plan, 26 March 2024 List of Background Papers Figtree extracts of Action Plans Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Audit and Compliance Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 243
Page 244
Assignments completed 9 March to 31 May 2024 Appendix 1 Job Number Assignment name Draft Issue Final Issue Assurance Info I261116 External Audit Work 30/04/2024 30/04/2024 Provided data to External Audit re 2022/2023 financial year end. I341110 Managing Change 30/04/2024 30/04/2024 Time used for Fusion. I341112 Sustainability 29/03/2024 29/03/2024 Position Statement – see Appendix 3. I342115 Infection Prevention 30/04/2024 30/04/2024 Time used for Liquid Logic. I411096 Informal Follow Up 30/04/2024 30/04/2024 Provided quarterly advance prompts of actions falling due. Collated monthly responses for reporting. I541024 Liquid Logic 30/04/2024 30/04/2024 Participated in Liquid Logic project implementation. I612209 Continuous Controls Monitoring 29/03/2024 29/03/2024 Completed programme of data downloads from main financial systems during 2023/2024 to inform audit sampling and provided management reports. I613210 Fraud Awareness 29/03/2024 29/03/2024 Monitored fraud alerts through internal and external sources and disseminated information as appropriate. In 2023/2024 these have continued to relate to adhoc issues and have been shared with Council Resources as appropriate. I615208 Anti-Fraud Checks 29/03/2024 29/03/2024 Delivered adhoc tasks across unplanned areas including NDR refunds, Paypal fraud, 244
Page 245
Job Number Assignment name Draft Issue Final Issue Assurance Info contractual and employee related issues and a review grant awards. I640207 National Fraud Initiative 29/03/2024 29/03/2024 Facilitated and administered NFI exercise. I710087 Data Protection Concern 29/03/2024 29/03/2024 Reviewed and no issue identified. I738086 Fusion 30/04/2024 30/04/2024 Participated in Fusion project. 245
Page 246
Appendix 2 ANNUAL REPORT FROM THE CHAIR – 2023 “WORKING TOGETHER TO SUPPORT THE KEY ROLE OF INTERNAL AUDIT” 1. INTRODUCTION 1.1 Membership of the CIPFA Scottish Local Authorities Chief Internal Auditors’ Group (SLACIAG) is open to the chief internal auditor from each Scottish local authority and the Strathclyde Partnership for Transport (SPT). SLACIAG is a Special Interest Group of CIPFA in Scotland, with operational arrangements, vision, and objectives set out in a formal Constitution. 1.2 SLACIAG’s vision is to be the voice of internal audit across Scottish local authorities and a driving force for best practice in respect of local authority and public transport bodies internal audit, governance, and operations. 1.3 In support of that vision, SLACIAG has the following objectives: • to secure a quality and responsive service for members of the group; • to develop the influence of the group with key decision makers and institutions in Scotland, as the key representative body for internal audit in local government with a particular emphasis on governance, risk, control and assurance matters; • to strengthen links and build long term relationships across the internal audit community within the public service; • to provide an effective group for the discussion of issues of common concern, sharing of good practice and commissioner of work to develop advanced practice; • to consider the development and training needs of our people as a collective to ensure that the best available products are procured at the best price; • to uphold the group’s key values including: respect; openness and honesty; adding value; professional team working; sharing best practice; integrity; continuous improvement. 1.4 The purpose of this annual report to key stakeholders is to provide an update on SLACIAG’s activities and achievements over the course of 2023 and to recognise actions required to achieve its vision. 1.5 SLACIAG has two long-established sub-groups whose activity is reflected in this report: • the Computer Audit Sub-Group (CASG); and • the Scottish Local Authorities Investigators’ Group (SLAIG). 1.6 During 2023 some further sub-groups were established by SLACIAG to lead on development actions arising from the SLACIAG Conference held in June 2023 within 246
Page 247
specific themes, including risk, data analytics, resourcing, and sustainability/climate change. Their activity is also reflected in this report. 247
Page 248
2. MANAGEMENT COMMITTEE 2.1 I, Jill Stacey, Scottish Borders Council, was appointed as Chair of SLACIAG at the AGM on 11 March 2022. I previously served as Chair of SLACIAG during 2014-2015. In accordance with SLACIAG’s Constitution, my term of office will expire after serving 2 years at the SLACIAG AGM in March 2024. There is an expectation that the Chair of SLACIAG joins the meetings of the CIPFA Scotland Branch Executive Committee, as SLACIAG is a special interest group of CIPFA in Scotland. 2.2 Yvonne Douglas, South Lanarkshire Council, was re-elected as Treasurer of SLACIAG at the AGM March 2022 having initially been appointed to the role in June 2020. Yvonne provided regular updates on the financial position of SLACIAG to enable the Management Committee to plan activity. 2.3 The appointments to the SLACIAG Management Committee were approved at the AGM March 2022. New members were welcomed to the Management Committee, with former Chairs providing valuable continuity. The same membership has continued during 2023, as follows: SLACIAG MANAGEMENT COMMITTEE 2023 Jill Stacey Scottish Borders Council Chair SLACIAG Yvonne Douglas South Lanarkshire Council Treasurer SLACIAG Eilidh Mackay East Ayrshire Council member and former Chair Kenneth Ribbons West Lothian Council member and former Chair Pamela Redpath Fife Council member Gillian McConnachie East Dunbartonshire Council member Duncan Stainbank East Lothian Council member Duncan Black Glasgow City Council member Peter Moore East Lothian Council Chair CASG Barry Moncur East Dunbartonshire Council Chair SLAIG 2.4 There were six SLACIAG Management Committee virtual meetings during 2023 in January, February and July (weekly meetings). The purpose of these meetings was to reflect on learning and review actions arising from past meetings in order to forward plan meetings, considering topics, setting dates and arranging speakers. The weekly meetings held in July 2023 were to analyse the extensive content from the workshop Menti results from the Conference to determine actions for the Group and sub-groups, take early steps to re-focus and re-purpose the SLAIG and CASG sub-groups, consider new sub-groups, and agree future collaborations to implement actions. 2.5 The Chairs of both CASG and SLAIG participate in the SLACIAG Management Committee meetings to derive benefits from their sectoral expertise and to ensure synergy when forward planning the regular meetings. 2.6 The Management Committee also oversees the External Quality Assessment (EQA) process, which is a peer review process established by SLACIAG to enable external validation of compliance with the Public Sector Internal Audit Standards (PSIAS). The Management Committee monitors progress with completion against a recommended 248
Page 249
programme of reviews each year to ensure that all participating organisations comply with the requirement to undertake an EQA once every 5 years. 249
Page 250
3. SCOTTISH LOCAL AUTHORITIES CHIEF INTERNAL AUDITORS GROUP (SLACIAG) SLACIAG Conference 2023 3.1 The SLACIAG Conference was held on 15-16 June at Dumfries House in East Ayrshire, the first in-person conference held since 2019. The event was attended by 137 delegates from Internal Audit teams representing 31 local authorities and Strathclyde Partnership for Transport. 3.2 There were excellent networking opportunities for all individuals, significant sharing of knowledge and practice during the workshop sessions, and lots of suggestions for improvement actions in keeping with the conference title ‘Connections Collaborations Catalysts’. 3.3 The themes of the conference were: • Counter fraud • Data analytics • Climate change • Resourcing the function. 3.4 Keynote speakers were the Chief Executive of East Ayrshire Council and the Executive Director of Finance of Glasgow City Council. They shared their perspectives on the role of Internal Audit in challenging times, the value of Internal Audit and the vital role it has in councils across the country (not only in terms of providing assurance, but through insight and advice on a whole range of areas of work) and reflected on the significant challenges facing the public sector. They also acted as catalysts for the workshop connections and collaborations each day. 3.5 There were also a range of virtual and in-person speakers including representatives from: • Tenancy Fraud Forum • Scotland Excel • Chartered Institute of Internal Auditors • Birmingham City Council • Sustainable Scotland Network • Audit Scotland. 3.6 Images from the SLACIAG Conference 2023 were featured in East Ayrshire’s blog for that week and the #SLACIAG23 hashtag was used to promote the event through social media. Digital tools were used to capture output from the workshop sessions. SLACIAG Meetings 2023 3.7 There were three other SLACIAG virtual meetings in 2023 with topics/speakers set out in the table below in addition to core business. The network continues to be strongly supported by members with a focus on significant and current issues. 250
Page 251
3.8 Date Topics / Speakers 17 March 2023 AGM • SLACIAG Annual Report 2022 (Chair) • SLACIAG Constitution (Chair) • SLACIAG Annual Accounts 2022 (Treasurer – Yvonne Douglas, South Lanarkshire Council) Consultation on Internal Audit Standards (CIPFA Group) • Francis Scott, Glasgow City Council Group discussion on CIA Issues and Challenges • Duncan Black, Glasgow City Council 15 & 16 June 2023 SLACIAG Conference 2023 title ‘Connections Collaborations Catalysts’ The themes of the conference were: • Counter fraud • Data analytics • Climate change • Resourcing the function. There were also a range of virtual and in-person speakers including representatives from: • Tenancy Fraud Forum • Scotland Excel • Chartered Institute of Internal Auditors • Birmingham City Council • Sustainable Scotland Network • Audit Scotland 8 September 2023 Management Committee / Sub-Groups recommendations arising from SLACIAG Conference 15 and 16 June 2023 • SLACIAG Management Committee CIPFA Publication 'Internal audit: untapped potential' (learning and development session including a broad range of Chairs and Vice Chairs from Scottish Council’s and IJB’s Audit Committees) • Diana Melville, CIPFA Governance Advisor EQA2 Update and EQA3 Planning • Pamela Redpath, EQA Sub-Group – Lead, Fife Council 251
Page 252
Date Topics / Speakers 8 December 2023 Update from Risk Group – draft Terms of Reference • Pamela Redpath, Fife Council, Eilidh Mackay, East Ayrshire council, and Jill Stacey, Scottish Borders Council SLACIAG Risk in Focus 2023 – Analysis of Key Risks and Potential Impact on Internal Audit Assurance Work • Pamela Redpath, Fife Council Update from Data Analytics Group (Workshops; Skills; Strategy) • Duncan Black, Glasgow City Council Update from Resourcing Group (Challenges; Training; Delivery Model) • Laura Calder, City of Edinburgh Council Update from Sustainability / Climate Change Group (Shared audit experience; Information Requests; Membership) • Laura Miller, North Ayrshire Council 3.9 The Treasurer, Yvonne Douglas of South Lanarkshire Council, produced the 2022 annual accounts, which were considered by the Group at the AGM in March 2023. Thanks to those at South Ayrshire Council for completing the audit of the 2022 Accounts. The Treasurer provided regular updates on the financial position of SLACIAG which is of particular importance during 2023 due to the significant income and expenditure associated with the Conference to ensure the Group remains financially sustainable. Thanks to Yvonne for her professionalism in fulfilling this role. External Quality Assessment (EQA) 3.10 There are increasing challenges for the EQA2 schedule including staff resourcing issues in Councils, knock-on effect of delays in EQA2 completions during the pandemic response and recovery periods, and conflicts of interest arising from increased Internal Audit shared services arrangements. Responsibility is on the reviewee Council CAE to meet EQA requirements and to keep their Audit Committee informed of any delays in meeting the 5-year timeframe. 3.11 The appointments to the re-established SLACIAG EQA Sub-Group and Moderation Panel were approved at the December 2022 meeting. The same membership has continued during 2023, as follows, to oversee the completion of the EQA2 schedule, and initiative planning of the EQA3 schedule: EQA Sub-Group Moderation Panel Pamela Redpath Fife Council Paul MacAskill Argyll & Bute Council Andrew Paterson Orkney Islands Council Ken Adamson North Lanarkshire Council Cecilia McGhee South Ayrshire Council Gordon O’Connor Stirling Council 252
Page 253
New Sub-Groups 3.12 SLACIAG agreed to formally constitute the Data Analytics subgroup at the December 2023 meeting and appointed Duncan Black, Glasgow City Council (GCC) as CAE lead/sponsor, with Will Hart, GCC, as coordinator of workshops. SLACIAG agreed to an iterative workplan (all to offer to organise presentations and topics). GCC had hosted a Data Analytics workshop that had been held in-person in September 2023 in Glasgow, then virtual workshops were held in October and November 2023 to which CASG members were invited as an opportunity to share practice. There had been very good participation at all these workshops including Scottish Government (September), South West Audit Partnership (SWAP) (November), and Derek Jamieson of Chartered Institute of Internal Auditors (CIIA). 3.13 At the September 2023 meeting, it was agreed to set up a Resourcing Group to cover all matters resourcing our teams including recruitment, succession planning, training, soft skills, ways of working, and mentoring. Volunteers for Resourcing Group were Laura Calder (City of Edinburgh Council) - Lead, Eilidh Mackay (East Ayrshire Council), Richard Fox (Dumfries & Galloway Council), Michelle Blair (East Renfrewshire Council), Cathie Wyllie (Angus Council/Dundee City Council). 3.14 At the September 2023 meeting, volunteers were approved to join a short life Sustainability / Climate Change Group to develop an Internal Audit Programme covering the broad aspects of this topic, linked to new statutory guidance that is being developed by Sustainable Scotland Network in collaboration with SLACIAG and Audit Scotland on the Role of Audit. Volunteers were Laura Miller (North Ayrshire Council), Andrew Steven (East Lothian Council), Chris Hurt (Scottish Borders Council), Paul Brown (East Dunbartonshire Council), Paul Davies (East Ayrshire Council). 3.15 At the December 2023 meeting whilst noting that not all CAEs have the corporate risk management framework as part of their remit, a Risk Group was established with an approved Terms of Reference. Volunteers were Jill Stacey (Scottish Borders Council), Pamela Redpath (Fife Council), Eilidh Mackay (East Ayrshire Council), with their corporate risk officers, and Kenneth Ribbons (West Lothian Council). SLACIAG Knowledge Hub 3.16 All Agendas, Minutes, and Presentations of SLACIAG meetings, Conference, EQA Framework Guidance, and other relevant documents are uploaded to the SLACIAG Knowledge Hub to enable access by all members in a secure way. New Members have been registered on the SLACIAG Knowledge Hub, including those delegates at the SLACIAG Conference 2023, thus enabling greater participation. 253
Page 254
4. COMPUTER AUDIT SUB-GROUP 4.1 The main aim of the Computer Audit Sub-Group (CASG), which is a permanent sub- group of SLACIAG, is to provide a forum to share and discuss computer audit practices and developments. This includes raising awareness of new standards, updates to legislation, new and current topics of interest, and computer audit developments, resources, and techniques. 4.2 The Computer Audit Sub Group (CASG) met twice in 2023, all meetings were virtual, with topics/speakers as follows in addition to core business: Date Topics / Speakers 23 March 2023 Power Query • Callum Justice, Glasgow City Council - CASG acknowledged that Power Query is a useful tool to use for members who don’t have other data analytics systems such as IDEA and are dealing with large amounts of data. 30 August 2023 Cyber Security in Internal Auditing • Adam Howie, Glasgow City Council 29 November 2023 Introduction to AI • Recorded Teams presentation from Charlie Anderson, Head of BTS (Business Technology Solutions), Fife Council AI and Ethics of AI • Recorded Teams presentation from Fi Wiliams, Team Manager (Digital Skills and Learning), Fife Council 4.3 A common discussion point at CASG meetings during 2023 has continued to be the sustainability of the sub-group. One specific action arising from the SLACIAG Conference June 2023 has been discussion on widening the role and outputs of CASG in light of suggestions to cover, for example, Digital Transformation, Artificial Intelligence (AI), IT/Cyber Security, and Data Analytics, in addition to core Computer Audit work. The sub-group is keen to influence its future, as evidenced by the topics at August and November 2023 meetings. 4.4 It was also agreed that one of the SLACIAG Management Committee would be assigned as Senior Sponsor of CASG to provide direction from SLACIAG re Group’s cycle of meetings and agendas; this will be considered as part of the AGM business in March 2024. 4.5 All Agendas, Minutes, and Presentations for CASG meetings are uploaded to the SLACIAG Knowledge Hub (CASG sub-folder) to enable access by all members in a secure way. 254
Page 255
5. SCOTTISH LOCAL AUTHORITY INVESTIGATORS GROUP (SLAIG) 5.1 The main aim of the Scottish Local Authority Investigators Group (SLAIG), which is a permanent sub-group of SLACIAG, is to provide a forum to share and discuss counter fraud practices and developments. This includes raising awareness of updates to legislation, new and current topics of interest, and developments in counter fraud activities. 5.2 The Scottish Local Authority Investigators Group (SLAIG) met four times in 2023, all meetings bar one were virtual, with topics/speakers as follows in addition to core business: Date Topics / Speakers 1 March 2023 Presentation on the work of the Scottish Social Security Agency • John Gregson, Dean Liddle & Susan Marr – SSSA Intelligence and Teresa Cullen and Amanda Bissett - SSSA Investigation Team Brief update presentation on the Digital Economy Act (2017) • Jabeen Kamran, Michael Sowerby, Ryan White - Cabinet Office and Alison Dewar, Scottish Government 31 May 2023 Presentation on the work of Trading Standards Scotland entitled ‘Opportunities for Joint Working’ and sharing case studies • Andy Wilson, Principal Investigator, Trading Standards Scotland 30 September 2023 Feedback from the SLACIAG Conference June 2023 to outline and discuss ongoing objectives for SLAIG • Jill Stacey, Chair of SLACIAG, Scottish Borders Council 13 December 2023 Overview of role of HMRC RIS Intelligence Bureau • Lucy Biggerstaff and Audrey Fulton, HMRC RIS Intelligence Outline of the facility to provide local authorities in Scotland and England to trace and verify individuals • Jacqueline Davenport and Steve Black, LOCTA Case Study - Sharing lessons learned from case study where a Head Teacher had embezzled School Funds • Stuart Saunders, West Lothian Council 5.3 In order to align with the vison and objectives of SLACIAG and SLAIG’s Terms of Reference, one specific task arising from the SLACIAG Conference June 2023 assigned to SLAIG was the Benchmarking on fraud activity and resources. It has been agreed that all local authorities will participate in a benchmarking exercise. The core 255
Page 256
content of the exercise has still to be agreed but will also include resources, training, and outcomes. It was also agreed that one of the SLACIAG Management Committee would be assigned as Senior Sponsor of SLAIG to provide direction re Group’s meetings and agendas; this will be considered as part of the AGM business in March 2024. 5.4 All Agendas, Minutes, and Presentations of SLAIG meetings, and other relevant documents are uploaded to the SLAIG Knowledge Hub to enable access by all members in a secure way. 256
Page 257
6. CONCLUSION 6.1 Notwithstanding the challenges that continue to affect our organisations, SLACIAG and its sub groups have had another successful year, as evidenced by the attendance at our 2-day in-person Conference at Dumfries House, East Ayrshire, as well as other virtual meetings, and the range of topics discussed. 6.2 During the year Chief Internal Auditors: considered matters such as consultation on Internal Audit Standards, data analytics, counter fraud and crime, climate change, and internal audit developments; discussed key issues facing our assurance functions, including resourcing, workforce planning, and the skills and knowledge mix; and shared approaches being taken to address these. In line with their remits, the CASG and SLAIG sub-groups focussed on computer audit and counter fraud matters respectively. New Data Analytics, Resourcing, and Sustainability/Climate Change sub- groups were established during the year to explore and develop specific matters. 6.3 I would like to thank the Management Committee and the office bearers of our sub groups for their work in organising meetings and responding to the challenges that have arisen. I would also like to thank our speakers for giving up their time to join us at our Conference and other virtual meetings during 2023 and assist us in enhancing our effectiveness as internal auditors and fraud investigators. 6.4 My thanks are also extended to our members for their support, as evidenced not just by engaging in our Conference and other virtual meetings during 2023, but also by the generous advice and assistance provided in relation to the myriad of audit, risk and governance questions which have arisen within our membership during the year. 6.5 I am very proud to have been SLACIAG Chair for the past two years, engaging with such dedicated and hard-working public sector professionals in these challenging times. Jill Stacey Chief Officer Audit & Risk, Scottish Borders Council Chair of SLACIAG 14 March 2024 257
Page 258
Position Statement: I341112 Sustainability Appendix 3 Objective To continue with the “watching brief” objective of monitoring developments and actions being taken by the Council to manage / mitigate this strategic risk, specifically in relation to the reducing emissions theme. Key Summary It continues to be clear that achieving the aim of no longer generating carbon emissions from the Council’s non-domestic buildings within the next 14 years (by 2038) will be extremely challenging (costs, timescales, capacity etc) and it essential that future use of these buildings is understood so that plans can be made. An energy demand reduction plan is being developed as required by the Council motion to “cut fuel bills, carbon reduction.” Currently the Council are working to reducing emissions from its buildings. Defined targets cannot be set until the outcome of reviews is better understood (when it will be cleared how reductions will be achieved and when these can be expected). The development of the draft Local Heat and Energy Efficiency Strategy (LHEES) is a key area of progress which will compliment and facilitate progress of the aims and objectives within the Sustainable Development and Climate Change Strategy whilst also focusing on legislative compliance relating to fuel poverty, heat networks, standards for social housing and national planning frameworks. All of this will support the Council in devising their detailed “route map” for decarbonising heat in buildings. It continues to be reiterated that a comprehensive financial strategy is required to support the work required. Audit Scotland’s comments that developing a supply chain and skilled workforce for decarbonising heat (to manufacture and install) will be challenging. But it is also noted that, in addition to the challenges, there are opportunities to support the local economy (particularly the business opportunities associated with retrofit). From this year, new social housing and new non-domestic buildings will no longer be heated with direct emission heating systems – this is a significant action. Similarly, building warrants from 2024 will require zero emissions heating and cooling systems in order to be approved – another significant step. In relation to transport - the Council are no longer procuring petrol and diesel cars – another significant action. In terms of the future actions, the Council continue to be committed to working towards phasing out petrol and diesel cars. Again, the financial strategy required to support this is currently being discussed. In relation to household waste, the kerbside collection service review is seeking not only to maximise recycling opportunities (to support the residual waste targets), but to also encourage further change – a key component of embedding the cultural shift required for a “greener” way of living. 258
Page 259
Although this audit review largely focused on the progress / work being done to facilitate further carbon reduction, there continues to be many examples of other actions being taken to support the other objectives of the sustainable development and climate change strategy. It is still very much the Council’s position (recognised in SLC’s strategy and action plan) that underlying all of the corporate decisions is a need for consistent consideration of the actual implications for the residents and communities in South Lanarkshire, in particular, the impact of decisions in areas of existing challenge, such as fuel and food poverty or other areas of inequality. There are many actions that are planned to be taken in the next year and into the rest of the five-year action plan with some notable “next steps” in 2024/2025. Future audit plans will continue to monitor progress. 259
Page 260
260
Page 261
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland – Financial Bulletin 2022/2023 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] provide the Risk and Audit Scrutiny Committee with a summary of the information contained within the Audit Scotland Financial Bulletin 2022/2023, published in January 2024 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the key messages and recommendations of the Audit Scotland Financial Bulletin 2022/2023 (detailed in sections 4 and 5), be noted; and (2) that the commentary on the Council’s position as included in the Audit Scotland report (section 6), be noted. [1rec 3. Background 3.1. In January 2024, Audit Scotland published the Financial Bulletin 2022/2023 report on behalf of the Accounts Commission. Audit Scotland publish two overview reports each year, this one focuses on financial matters, and the other report on councils' performance and outcomes is expected be published in Summer 2024. A copy of the Local government in Scotland: Financial Bulletin 2022/23 report can be found on the Audit Scotland website. 3.2. The Audit Scotland report is divided into 2 parts:- Part 1: Funding and Outturn Part 2: Councils’ Financial Position and Outlook 3.3. The key messages from each of the 2 parts are outlined in sections 4 and 5 of this report. Comments in relation to the Council’s position on these are included in italics alongside the Audit Scotland key messages. Section 6 notes commentary on the Council’s data included in the Audit Scotland report. 4. Part 1 – Funding and Outturn 4.1. A number of key messages are presented by Audit Scotland in their report in relation to the 2022/2023 Funding and Outturn of councils:- a. Revenue Funding and Income Total funding and income fell by 2.8% in real terms (£619 million) in 2022/2023 compared to the previous year. 8 261
Page 262
Core revenue funding from the Scottish Government to councils increased in cash and real terms from 2021/2022 to 2022/2023. The Council does not have the equivalent real terms movement. However, in cash terms, the 2022/2023 net funding at the start of the year was an increase of £57.836 million on the previous year starting position, with most being earmarked for policy intent. An increasing proportion of Scottish Government funding is formally ring-fenced or provided with the expectation it will be spent on specific services. The Council’s formal ring-fenced grants for 2022/2023 totalled £43.109 million, however, there are other funding sources that are informally ring-fenced where the money is allocated to the Council with specific policy intent attached. Over the last decade, the proportion of the Scottish Budget allocated to local government has been reduced. b. Council Budget Setting At the time of setting their 2022/2023 budgets, councils in the sample identified budget gaps of over £476 million for the year. For 2022/2023, the Council’s Revenue Budget Strategy identified an initial budget gap of £54.403 million (June 2021) before any corporate solutions or savings were identified. Councils largely relied on reserves and making recurring savings to deliver a balanced budget. The Council’s 2022/2023 Revenue Budget relied on the use of £30.575 million of funds as result of implementing the Loans Fund review, as well as £2.235 million of recurring savings. The use of Loans Fund Review funds was in line with the longer-term Budget Strategy to manage the Budget Gap over a longer period of time. c. Outturn Achievement of savings targets was high, but improvements are required in the transparency of reporting. For 2022/2023, the Council had an underspend in its Revenue Budget. This position and the achievement of savings was detailed in the Management Commentary at the front of Annual Accounts. Over half of councils used financial flexibilities in 2022/2023. The Council implemented the Loans Fund Review arrangements in 2021/2022, and utilised the Reserves generated to support the Revenue Budget in 2022/2023 (and beyond). d. Capital Funding and Expenditure Increases in capital expenditure were driven by increased borrowing. The Council only borrows for approved capital projects. No unplanned borrowing was incurred during 2022/2023. 262
Page 263
Capital funding from the Scottish Government rose in 2022/2023 but remains lower than before the pandemic. The Council’s base General Capital Grant funding for 2022/2023 was £21.860 million, compared to £21.458 million for 2021/2022, and to £27.224 million pre- pandemic (2019/2020). e. Reporting on Financial Outturn in Management Commentaries Councils could improve the transparency of their reporting on financial outturn and progress against savings plans. A detailed outturn report is presented to Executive Committee at the end of each financial year and then onto the Financial Resources Scrutiny Forum. Resources’ own year-end position is reported to their respective Committees. The progress against planned savings is included as part of the Council’s Management Commentary at the front of the Annual Accounts. 5. Part 2 – Councils’ Financial Position and Outlook 5.1. A number of key messages are presented by Audit Scotland in their report in relation to the Financial Position and Outlook for councils, namely:- a. 2022/2023 Financial Position In 2022/2023, councils increased their total usable reserves by £0.310 billion to £4.460 billion. The level of reserves as a proportion of total net revenue expenditure is higher in 2022/2023 than before the pandemic. Councils increased their general fund reserves, but this is driven by growth in committed funds. The Council’s Executive Committee approved the increase in useable Reserves to £176.9 million by the end of 2022/2023, an increase of £24.7 million. The vast majority of these reserves are set aside for future commitments, with the increase mainly reflecting the implementation of the Service Concession arrangements. There has been no change to the unearmarked Reserve of £13.043 million. The Council’s useable Reserves as a proportion of total net expenditure was 19.85% at the end of 2022/2023. This is compared to 14.18% at the end of 2019/2020 (pre pandemic). Some councils hold very low levels of uncommitted reserves but have specific reserves earmarked for contingency instead. As noted above, the Council’s holds £13.043 million of unearmarked monies. All other Useable Reserves are earmarked for future commitments. Councils’ total net debt increased by £1.000 billion (6%) between 2021/2022 and 2022/2023. The Council’s Net Debt is £1,036 million at the end of 2022/2023, compared to £993 million at the end of 2021/2022. 263
Page 264
Councils’ borrowing costs have reduced over the past nine years. However, decisions to reschedule debt repayment in recent years may create financial pressure in the longer-term. Any plans to borrow to fund capital expenditure are approved by Members. b. Scottish Government Funding for 2023/2024 Revenue funding to local government from the Scottish Government in 2023/2024 saw a cash and real-terms increase on 2022/2023. While the Council experienced a cash increase in Scottish Government grant, this included additional policy asks from the Government and did not necessarily result in increased spending power for the Council. Councils’ capital funding allocation for 2023/2024 represents a real-terms decrease on 2022/2023. The Council’s General Capital Grant allocation of £22.900 million for 2023/2024 was a reduction on the 2022/2023 General Capital Grant of £25.293 million. c. Councils’ Budget Setting for 2023/2024 Councils’ budget gaps increased significantly in 2023/2024 compared to 2022/2023. The Council’s Budget Gap initially advised (June 2022) was £32.477 million. d. Financial Sustainability In real terms, councils’ core revenue funding is similar to levels a decade ago. However, over that time, councils’ have experienced periods of reduced budgets and increasingly ring-fenced funding. The Council’s formal ring-fenced grants for 2022/2023 totalled £43.109 million. There are other funding sources that are informally ring-fenced where the money is allocated to the Council with specific policy intent attached. As demand for council services continues to rise, councils have reduced spending on ‘unprotected’ services to balance budgets. Councils’ medium and longer-term financial plans demonstrate a clear recognition of the significant financial challenges that lie ahead. The Council’s medium-term projections show a budget gap in excess of £77 million. Some councils use indicators to assess their financial resilience but the extent to which they are used and their effectiveness varies. Consideration of financial resilience is part of the medium-term financial strategy of the Council and a full report will be presented to the Risk and Audit Scrutiny Committee later in the year. The pensions’ triennial funding valuation as at 31 March 2023 is not yet complete, but preliminary results suggest a potential positive impact on finances at some councils in the short term. 264
Page 265
The valuation is now complete and a short-term reduction in pension contributions has been taken into account to support the Council’s medium term Budget Strategy. 6. South Lanarkshire Council – Financial Overview 2022/2023 6.1. The Audit Scotland report contains a number of tables that set out information for all councils, however, there are 3 tables of data which show the performance of individual councils. Commentary on the Council’s position in each of these tables is provided below. 6.2. The Budget Gap as a percentage of net cost of services in 2022/2023 ranged between 0% and 24%. The Council’s Budget Gap was 6%, 5th highest behind Shetland (24%), Orkney (11%), Falkirk (6%) and Moray (6%). Renfrewshire was the lowest with 0%. 6.3. In terms of the Savings Achieved compared to Targets, 14 councils fully achieved their savings target. The Council achieved 89% of its targeted savings in-year. This was due to timing only and the shortfall in 2022/2023 was managed by the Resources in-year. 6.4. The Council’s Level of Usable Reserves as a Proportion of Net Revenue Expenditure was 19% in 2022/2023. This is ranked 19 out of 30 councils (Orkney and Shetland were excluded from this sample). The highest percentage was Renfrewshire with 42% and the lowest was West Dunbartonshire with 11%. The Council sits lower than the Scotland total (27%). 7. Employee Implications 7.1. None. 8. Financial Implications 8.1. The Audit Scotland Report raises a number of financial areas for consideration by councils, however, there are no direct financial implications as a result of the content of this report. 9. Climate Change, Sustainability and Environmental Implications 9.1. There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 10. Other Implications 10.1. None. 11. Equality Impact Assessment and Consultation Arrangements 11.1. 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. 11.2. There is also no requirement to undertake any consultation in terms of the information contained in the report. Jackie Taylor Executive Director (Finance and Corporate Resources) 18 May 2024 265
Page 266
Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References None List of Background Papers Local Government in Scotland – Financial Overview 2022/2023. Audit Scotland, January 2024. Contact for Further Information If you would like to inspect the background papers or want further information, please contact: Jackie Taylor, Executive Director (Finance and Corporate Resources) Ext: 5637 (Tel: 01698 455637) E-mail: jackie.taylor@southlanarkshire.gov.uk 266
Page 267
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 26 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Financial Resources Scrutiny Forum Activity 1. Purpose of Report 1.1. The purpose of the report is to:- provide a summary of reports considered by the Financial Resources Scrutiny Forum from August 2023 to March 2024 for information 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the summary of reports considered by the Financial Resources Scrutiny Forum for the period August 2023 to March 2024, as detailed in Appendix 1 of this report, be noted. [1rec 3. Background 3.1. In May 2017, the Council agreed details relating to the review of Member Scrutiny Forums. This included consideration of the Terms of Reference and Powers and Responsibilities for the Forums. In respect of the Financial Resources Scrutiny Forum, the focus can be summarised as: scrutinise all of the Council’s revenue budgets review the financial and operational progress of the Council’s capital programmes review the financial and operational progress of the Council’s trading operations. 3.2. This report will cover items submitted to the Financial Resources Scrutiny Forum since the last update to the Risk and Audit Scrutiny Committee in May 2023. 4. Agenda Items 4.1. The table attached at Appendix 1 notes the reports submitted to the Financial Resources Scrutiny Forum during the period August 2023 to March 2024, under the main areas of responsibility. The meeting on 24 August 2023 was the first of the new financial year, 2023/2024 and also covered the closing position of the old year (2022/2023). 4.2. Further reports will be provided to this Committee on an annual basis advising of the business presented to the Financial Resources Scrutiny Forum. 5. Employee Implications 5.1. There are no employee implications. 9 267
Page 268
6. Financial Implications 6.1. There are no financial implications. 7. Climate Change, Sustainability and Environmental Implications 7.1. There are no significant implications in terms of climate change, sustainability and environmental implications associated with this report. 8. Other Implications 8.1. The main risk associated with the Council’s Revenue Budget is that there is an overspend. The risk has been assessed as low given the detailed budget management applied across the Resources. The risk is managed through four weekly Budget Monitoring Meetings at which any variance is analysed. In addition, the probable outturn exercise ensures early warning for corrective action to be taken where appropriate. 8.2. The main risk associated with the Council’s Capital Programme is that there is an overspend. The risk has been assessed as low given the detailed project management plans prepared and monitored for each project. The risk of an overspend is managed through four weekly Investment Management Meetings. 9. Equality Impact Assessment and Consultation Arrangements 9.1. 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. 9.2. There is also no requirement to undertake any consultation in terms of the information contained in the report. Jackie Taylor Executive Director (Finance and Corporate Resources) 24 April 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Risk and Audit Scrutiny Committee, 23 May 2023 List of Background Papers None Contact for Further Information If you would like to inspect the background papers or want further information, please contact: Lorraine O'Hagan, Finance Manager (Strategy) Ext: 2601 (Tel: 01698 452601) lorraine.o'hagan@southlanarkshire.gov.uk 268
Page 269
Reports Submitted to Financial Resources Scrutiny Forum Appendix 1 Date Revenue Monitoring Capital Monitoring 24 August 2023 Provide an update on the position as at 31 March: • Revenue Budget Monitoring 2022/2023 • Revenue Budget Monitoring 2022/2023 - Detailed Resource Analysis Provide an update on the position as at 14 July (period 4) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 31 March: • 2022/2023 General Fund Capital – Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects • 2022/2023 Housing Capital Programme – Financial Information and Physical Progress Provide an update on the position as at 14 July (period 4) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 21 September 2023 Provide an update on the position as at 11 August (period 5) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 11 August (period 5) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 2 November 2023 Provide an update on the position as at 08 September (period 06) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 08 September (period 06) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 30 November 2023 Provide an update on the position as at 06 October (period 7) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 06 October (period 7) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 269
Page 270
Date Revenue Monitoring Capital Monitoring 1 February 2024 Provide an update on the position as at 01 December (period 9) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 01 December (period 9) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 29 February 2024 Provide an update on the position as at 28 December (period 10) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 28 December (period 10) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 28 March 2024 Provide an update on the position as at 26 January (period 11) for the following: • 2023/2024 Financial Monitoring • 2023/2024 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 26 January (period 11) for the following: • 2023/2024 Housing Capital Programme - Financial Information and Physical Progress • 2023/2024 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 270
Page 271
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 25 June 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Forward Programme for Future Meetings 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] advise members of the forward programme for the meetings of the Risk and Audit Scrutiny Committee to 25 June 2025 invite members to suggest topics for inclusion in the Committee’s forward programme [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that the report and the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 25 June 2025, attached as an Appendix to the report, be noted. [1recs] 3. Background 3.1. As part of a range of improvement measures introduced as a result of Audit Scotland’s report on the Audit of Best Value and Community Planning (2009), an Action Plan was prepared. One of the actions was to include, as a standard agenda item, a list of items proposed for consideration at subsequent meetings of this Committee to provide an opportunity for members to inform future agendas. The outline forward programme to 25 June 2025 is attached, for members’ information, as an Appendix to the report. 4. Employee Implications 4.1. There are no employee implications. 5. Financial Implications 5.1. There are no financial implications. 6. Climate Change, Sustainability and Environmental Implications 6.1. There are no Climate Change, Sustainability or Environmental implications in terms of the information contained within this report. 7. Other Implications 7.1. There are no risk implications in terms of the information contained within this report. 10 271
Page 272
8. Equality Impact Assessment and Consultation Arrangements 8.1. The report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment is required. 8.2. There was no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 28 May 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Executive Committee 8 July 2009 List of Background Papers Audit Scotland Audit of Best Value and Community Planning Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Elizabeth-Anne McGonigle, Administration Adviser Tel: 0738 5403101 E-mail:- elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 272
Page 273
APPENDIX – RASC OUTLINE FORWARD PROGRAMME Meeting Date Item Responsibility 24 September 2024 External Auditor’s Annual Report to South Lanarkshire Council 2023/2024 External Audit Audited Annual Accounts 2023/2024 Head of Finance (Strategy) Internal Audit Activity Report Audit and Compliance Manager 2022 NFI Exercise Audit and Compliance Manager Year End Insured Risks Report 2023/2024 Head of Finance (Transactions) Fraud Statistics Annual Report 2023/2024 Audit and Compliance Manager 19 November 2024 Internal Audit Activity Report Audit and Compliance Manager Audit Scotland: The National Fraud Initiative in Scotland 2022 Audit and Compliance Manager Year End Risk Management Report 2023/2024 and Review of Council’s Top Risks 2024/2025 Head of Finance (Transactions) Audit Scotland Report – Local Government in Scotland 2023 Head of Communications and Strategy 18 February 2025 Internal Audit Activity Report Audit and Compliance Manager Performance and Review Scrutiny Forum Annual Update Head of Communications and Strategy 2025/2026 Internal Audit Plan Audit and Compliance Manager Fraud Statistics Six Monthly Update 2024/2025 Audit and Compliance Manager Good Governance Update Head of Administration and Legal Services 273
Page 274
Meeting Date Item Responsibility 6 May 2025 Internal Audit Activity Report Audit and Compliance Manager Audit Scotland – Financial Bulletin 2023/2024 Head of Finance (Strategy) Financial Resources Scrutiny Forum Activity Head of Finance (Strategy) 25 June 2025 Internal Audit Assurance Report 2024/2025 Audit and Compliance Manager Annual Governance Statement for 2024/2025 and Significant Governance Areas Quarter 4 Progress Report Audit Scotland: Best Value Thematic Report Head of Administration and Legal Services External Audit Unaudited Annual Accounts 2024/2025 Head of Finance (Strategy) Interim Management Report External Audit Internal Audit Activity Report Audit and Compliance Manager N.B:- Audit Scotland national studies and reviews will appear as a recurring item but the frequency and subject matter will vary according to their programme. 274