Agenda Document Pack - Risk and Audit Scrutiny Committee - 22/06/2022
South Lanarkshire Council · 22 June 2022
Back to Risk and Audit Scrutiny Committee — 22 June 2022 and its agenda
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Council Offices, Almada Street Hamilton, ML3 0AA Wednesday, 15 June 2022 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: Wednesday, 22 June 2022 Time: 10:00 Venue: By Microsoft Teams and Banqueting Hall, The business to be considered at the meeting is listed overleaf. Yours sincerely Cleland Sneddon Chief Executive Members Elaine McDougall (Chair), Mary Donnelly (Depute Chair), Mathew Buchanan, Cal Dempsey, Alistair Fulton, Ross Gowland, Celine Handibode, Susan Kerr, Richard Lockhart Substitutes Colin Dewar, Gavin Keatt, Monique McAdams, Helen Toner 1
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BUSINESS 1 Declaration of Interests Item(s) for Decision 2 Internal Audit Annual Assurance Report 2021/2022 Report dated 7 June 2022 by the Audit and Compliance Manager, Finance and Corporate Resources. (Copy attached) 5 - 18 3 Annual Governance Statement for 2021/2022 and Significant Governance Areas Quarter 4 Progress Report Report dated 8 June 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 19 - 50 Item(s) for Noting 4 Unaudited Annual Accounts 2021/2022 Report dated 7 June 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 51 - 208 5 Internal Audit Activity as at 3 June 2022 Report dated 7 June 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 209 - 230 6 Audit Scotland – Financial Overview 2020/2021 Report dated 25 May 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 231 - 236 7 Financial Resources Scrutiny Forum Activity Report dated 24 May 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 237 - 240 8 Annual Audit Plan 2021/2022 Report dated March 2022 by Audit Scotland, External Auditor. (Copy attached) 241 - 260 9 Audit Scotland Report The impact of COVID-19 on Scottish Councils’ Benefit Services – A Thematic Study Report dated 17 May 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 261 - 266 10 Forward Programme for Future Meetings Report dated 6 June 2022 by the Executive Director (Finance and Corporate Resources). (Copy attached) 267 - 270 Urgent Business 11 Urgent Business Any other items of business which the Chair decides are urgent. 2
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Clerk Name: Elizabeth-Anne McGonigle Clerk Telephone: 07385403101 Clerk Email: elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 3
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Audit and Compliance Manager (Finance and Corporate Resources) Subject: Internal Audit Annual Assurance Report 2021/2022 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 2022 2. Recommendation(s) 2.1 The Committee is asked to approve the following recommendation(s):- (1) note Internal Audit’s performance; (2) that the overall findings from internal audit work be noted and that they inform the Council’s 2021/2022 governance statement; and (3) note the level of assurance. 3. Background 3.1 The internal audit service is delivered within 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. Professional and regulatory expectations on local government bodies to ensure that their internal audit arrangements conform with PSIAS have not changed throughout the COVID-19 pandemic. The self-assessment exercise undertaken in 2021/2022 has confirmed that South Lanarkshire Council’s internal audit function continues to generally conform to the Public Sector Internal Audit Standards. An external assessment will be undertaken in 2022/2023 to fulfil the requirement for an independent review of compliance once every 5 years. 3.3 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 2 5
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SLC’s framework of governance, risk management and control arrangements based on audit work undertaken in 2021/2022. In this year, planned audit work has been delivered in conjunction with the provision of assistance to implement new processes and procedures that have been required in response to the COVID-19 pandemic. 3.4 In 2020/2021, CIPFA issued guidance around the provision of an audit opinion in a year of unprecedented pressure on public services which was helpful in providing some context around the annual report. Embedded within existing Council systems were controls that had been subject to change. To avoid a limitation of the scope of the audit opinion, CIPFA advised that audit processes could be streamlined to increase capacity, audit scopes could be narrowed to examine only key risks and that assurance and advisory work that supported the annual opinion could be prioritised. All of these approaches were adopted to ensure that an annual audit opinion could be provided for the year ended 31 March 2021. 3.5 Many of these pressures continued into 2021/2022 and the UK Public Sector Internal Audit Standards Advisory Board have also set out some guidance around conformance with Public Sector Standards in the period. This guidance has shaped the Council’s internal audit approach in 2021/2022 to be one that has sought to:- help protect the organisation’s operations by helping management to find new ways of working provide real-time advice and insight in the development of new systems and controls ensure that core internal audit work remains risk-based and relevant and continues to inform longer term planning around risks regularly report activity to the Council’s Audit Committee 3.6 Significant time in the year has been committed to support new ways of working and to contribute to major system upgrades. Time has, however, still been set aside to deliver core internal audit work with assignments mainly focusing on areas identified within the emerging risk audit completed in 2020/2021 and the delivery of the National Fraud Initiative (NFI) exercise by 31 March 2022. Where internal audit staff were diverted into operational roles for the duration, these employees were not operating as internal auditors. Declaration of interest processes will address any impairment to independence and objectivity. 3.7 In 2021/2022, Internal Audit has set out 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 Risk and Audit Scrutiny Committee (RASC). 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 2021/2022 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 Ambition of ‘achiev(ing) results through leadership, good governance and organisational effectiveness’. 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 to ensure that work is focused in areas of greatest risk and, where potentially, an independent review would add greatest value. The 2021/2022 Audit Plan was presented as two separate plans during the year; a first six month plan through to 30 September 2021 in March 2021 and a second six month Plan to 31 March 2022 in November 2021. Both Plans set out a programme 6
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of work that balanced routine assurance work with the ongoing requirement to assist with the delivery of COVID-19 tasks. 4.3 The Plans could not cover all of the organisation’s top risks. Instead, these Plans prioritised audits and tasks that reviewed the key, strategic risks to the Council’s operations in 2021/2022. 5. Internal Audit Workload and Performance 2021/2022 Workload 5.1 The actual number of audit days delivered in 2021/2022 was 1,218 days which was 104% of the target planned days in the year. 92% of the Audit Plan was delivered by 30 April 2022. The four outstanding audit assignments at this date related to 2 special investigations, work for the Risk Sponsor’s Group and advice and guidance re controls around voucher ordering. Total No. Jobs Planned assignments 51 Reports completed to draft 471 Table One - Internal Audit workload analysis for 2021/2022 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. The scope of the 2021/2022 Audit Plan was amended to reflect the practical realities of the ongoing pandemic in the year and the risks that were emerging and evolving as the year progressed. Through this the internal audit function delivered a service that aligned to the strategies, objectives, and risks of the organisation. 5.3 A significant proportion of the total time available was spent on external client work as well as responding to adhoc requests for advice and guidance. These requests are varied but, in the main, cover financial processes (duplicate invoice processes; online banking for school funds and community councils and BACs). Other areas of work included assistance with developing spreadsheets to be used in Passenger Transport Direct Awards. Time to deliver required the original scope of this audit to be amended and a review of the new process and a testing of procedures in practice will now be undertaken by Internal Audit in a future year. 5.4 Internal Audit also continue to sit on a variety of internal working groups such as the Technology and Process Review Group. The key driver to achieve efficiencies will be to use the Microsoft Technology the Council has invested in – such as workflows and automation and in doing so, progress the Digital Transformation agenda. The participation in these areas of work, although not in a traditional audit role, has nonetheless provided assurance that the implementation of internal controls has been a key consideration in the development of new processes or revisions to existing practices and that revised Council systems and processes continue to embed the key internal controls of segregation of duties, authorisation, reconciliation and monitoring. 5.5 In 2021/2022, the Council also began a significant upgrade in relation to Oracle, the Council’s main financial system. Most of the work will take place in 2022/2023 and will require a significant time commitment to ensure that the system meets the needs 1 This includes 10 assignments where audit testing has been completed and a level of review has been undertaken. Progressing these assignments as being impacted by a period of unplanned leave. None of the findings reviewed to date have highlighted significant issues that require mention in this Annual Report. 7
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of the organisation going forward. Internal Audit’s time in 2021/2022 has been around the provision of data to clearly understand key internal controls and areas where the new system needs to deliver improvements in both processes and reporting. 2021/2022 Performance 5.6 A summary of key Internal Audit performance statistics is noted at Table 2 below. Target 2021/2022 Delivery of planned audit days 100% 104% Completion of plan to draft report stage 100% 92% Completed assignments delivered within budget 80% 87% Draft reports issued within 42 days of fieldwork completed 80% 100% Productive time 80% 82% Table Two – Internal Audit performance for 2021/2022 5.7 Most audit assignments were at draft report stage as at 31 March 2022 with Adviser reviews completed by 30 April 2022. The Audit Plan was not delivered in full in year with four assignments outstanding at 31 March 2022. None of these were of a significant nature. Aside from this, performance across the key indicators was ahead of target. 5.8 The Committee are asked to note Internal Audit’s workload and performance in the year to 31 March 2022 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 2021/2022 Internal Audit Plan. The opinion, however, also reflects assurances that Internal Audit have obtained through specific involvement in a range of tasks to respond to the COVID-19 pandemic as well as reports that have been issued by the Council’s external auditors, regulators and inspectors during 2021/2022. 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 6.12. 6.3 Internal Audit have continued to consider the impact of the COVID-19 pandemic on governance arrangements and, where appropriate, this report refers to significant impacts and adaptions in the year, be it adaptation to reflect new ways of working or changes to ‘business as usual’ activities or longer-term changes to priorities, programmes, strategies and plans. 6.4 Work to review and update inventory procedures to reflect the changing nature of working arrangements was carried over from 2020/2021 and is ongoing. Internal Audit continue to input to developing a dual process of physical checks and completion of e-returns to allow a full reconciliation of IT equipment. Extensive work was previously undertaken to develop alternative processes but these require some amendment once more fixed working models are in place. 6.5 Reinforcing Conflict of interest processes remains important. Processes are fit for purpose and provide clear guidance to Managers around their responsibility to monitor ongoing compliance. This will be embedded within annual governance checks going forward. 8
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6.6 Aside from these assignments from a previous financial year, routine governance tasks have been delivered as required; an audit certificate for the Leader EU rural programme was provided and a cross-Resource review of the 2021/2022 Director Statements of Assurance that form part of the process for preparing the Council’s Annual Governance Statement. 6.7 Good governance is also demonstrated by the timeous implementation of actions and recommendations made by both internal and external audit and external inspectors. 6.8 PSAIS places a responsibility for monitoring progress of the delivery of internal audit actions with the Chief Internal Auditor to ensure that recommendations are effectively implemented. Relatively few Internal Audit actions fell due in 2021/2022 reflecting the impact of COVID-19 on the routine audit plan on 2020/2021. Although relatively few in number in 2021/2022, Council-wide, 100% of internal audit actions were delivered on time. This suggests that actions are, in the main, being fully and timeously implemented. This was checked independently by a limited programme of formal follow-up reviews undertaken in the year. 6.9 Audit actions also arise from the 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 in 2021/2022 to follow up specific City Deal actions within the Council and progress with implementation will now be reported to the RASC as part of regular update reports. None of the actions were significant but implementation is nonetheless important to demonstrate good governance. 6.10 Assurance around effective governance comes also from the annual exercise that assesses the effectiveness of the governance arrangements within South Lanarkshire Council. On an annual basis, an assurance mapping process is undertaken in conjunction with the Good Governance Group to inform the Council’s Annual Governance Statement. 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. 6.11 The Council’s External Auditors undertook the 2020/2021 financial audit during 2021/2022 and provided an unqualified opinion in relation to the Council’s financial statements. Interim audit work in relation to the year ended 31 March 2022 has been concluded and two issues were noted regarding reviewing user accesses within some Council systems and evidence of a second officer review of reconciliations. Neither of these points were flagged as significant but will nonetheless be reviewed to assess what action can be taken. Internal Audit have liaised with External Audit periodically throughout the year and have collated financial year-end data for Audit Scotland. 6.12 Audit Scotland also publish wider Public Sector reports throughout the year. Where Resources consider it appropriate, the key messages and their application to SLC are reported to Committees. The Improvement Unit continue to track these reports and, in conjunction with Resources, establish the relevance to SLC and the appropriate route for reporting. The Council also considers wider best practice and output from lessons learned exercises published by other Public Sector organisations. In 2021/2022, this included a review of learning points around Cyber Security that highlighted areas of assurance within SLC and those areas where improvements were 9
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required to further strengthen controls. Progress with the implementation of these actions will be followed up in 2022/2023. Area of Assurance – Risk Management 6.13 The second area of assurance is around the Council’s risk management arrangements and the findings that support the overall assessment of these are detailed in paragraphs 6.14 to 6.38. Recent years have required regular review of the Council’s top risks to reflect the impact of COVID-19 across all of the Council’s operations. Internal audit work reflected this focus and in 2020/2021 a review of the Audit Scotland report published in July 2020, ‘COVID-19 – Emerging Fraud Risks’ by Internal Audit sought to articulate the specific challenges faced by South Lanarkshire Council (and the wider Public Sector) during the pandemic. 6.14 Risks were highlighted as having being heightened across a number of areas and, in 2021/2022, testing was started to examine some of these areas in more detail. It was recognized that within any crisis situation, there is an inherently higher risk of fraud if new processes are designed and implemented within limited and pressured timeframes or if ‘business as usual’ controls are weakened or suspended. It was essential that the Council was aware of these heightened risks and the vulnerabilities within business processes so that additional controls could be put in place to mitigate if necessary. It was also key that relevant employees understood particular fraud risks and that the Council had effective anti-fraud controls in place to mitigate. 6.15 Set out in 6.16 to 6.29 is output from detailed testing undertaken in 2021/2022 in relation to these heightened fraud risks. 6.16 The first of these audits was in relation to overtime claims. At the outset, it was established that there had been little change to the claims process at a corporate level because, pre-pandemic, claims had already been submitted electronically and so the move to remote working did not require any significant change to the process. Nevertheless, it was acknowledged that the pandemic may have impacted Resource level claim submission, checking and authorisation process and it was agreed that a Resource level review would be carried out during 2021/2022. 6.17 The key risk is that a fraudulent (or simply erroneous) claims would not be detected because of a variety of reasons which included routing claims to different approvers due to absences during COVID-19, or because the level of checking had been reduced because of the pressure employees were under during the initial year of the crisis. The ultimate impact of fraudulent claims is financial loss to SLC. 6.18 To mitigate this risk, Internal Audit sought assurances from the audit that current Resource claims processes capture the checking / approval processes and that these were in evidence ahead of claims being approved and before accepting such for processing. 6.19 In terms of context, the audit noted that the Council incur significant expenditure on overtime. In the first year of the pandemic (2020/2021) overtime costs were just under £8m. This is not significantly higher than the preceding, largely pre-pandemic year (when overtime cost were in the region of £7.6m), but a proportion of the 2020/ 2021 spend was directly attributable to COVID-19 specific service provision (and charged to ringfenced “COVID-19” cost centres). A significant proportion of the Council’s overtime is incurred by three Resources. 6.20 From audit testing completed, it is Internal Audit’s opinion that the risk that an employee could submit a fraudulent claim (or someone else, on their behalf, would 10
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alter the claim) may be low, but the “opportunity” given the internal control gaps noted during the audit could be high. 6.21 Although some of the audit findings may have directly linked to circumstances during the pandemic (remote working and absences may have contributed to some findings relating to a lack of “sign-off” audit trail or requests for “alternative” approval during absences), for most of the control weaknesses above, these are inherent in the claims processes and not new control weaknesses introduced because of the pandemic. 6.22 Given the overtime claims process is likely to change with the move to Oracle Fusion in 2022/2023, the audit recommendations focus both on actions that should be taken now, in the interim period, to minimise the opportunities for fraud, and the internal controls which should be fully considered when designing the Fusion overtime claims process. 6.23 Testing in 2021/2022 also considered changes within key financial processes and within new processes introduced to disburse financial support to service users / residents. The original audit considered, at a very high level, the routes through which emergency financial support, specifically school meal vouchers, was being disbursed to the relevant parties and identified that, initially, the majority of these payments were being disbursed via Paypoint voucher. The audit also tested the use of Paypoint by Social Work Resources to disburse payments to service users. 6.24 In this area, the key risk is that a fraudulent (or simply erroneous) payment could be requested and/or made that would not be detected because of a variety of reasons which included control weaknesses in the process to validate and approve claims, which, potentially, could have been impacted by the pandemic in the sense that approvers had to change due to absences during COVID-19, or because the level of checking reduced because of the pressure employees were under during the initial year of the crisis. The ultimate impact of fraudulent claims/payments is financial loss to SLC. 6.25 To mitigate this risk, Internal Audit sought assurances that payments were being appropriately validated and authorised before being processed via Paypoint and that Paypoint administrators were checking that payment requisitions had been appropriately approved before accepting these for processing through the Paypoint Secure Voucher Portal. 6.26 In the first year of the pandemic (2020/2021) the cash-out vouchers disbursed amounted to £3.6m. A significant proportion of this (£2.9m / 81.5%) was directly attributable to COVID-19 specific financial support (and charged to ringfenced COVID- 19 cost centres). 6.27 From the audit testing completed, it is Internal Audit’s opinion that the risk that someone can request a voucher not due to them is low (given the assessment of eligibility that needs to take place). There could, however, be situations whereby the voucher, nevertheless goes to the wrong recipient – via error or fraud as there may be opportunity for fraud whereby an employee involved in the process is able to change the details of an eligible applicant and so divert the voucher. The likelihood of fraudulent diversion happening is likely to be low (given the consequences for employees), but the possibility exists. This is an inherent risk, with limited opportunity to mitigate the risk much further, however, use of “ID check” vouchers could somewhat mitigate this risk. Post payment checks are key to identifying any potential fraud, but other than for queried vouchers, there are no reconciliations of vouchers issued back to the voucher requests (within some of the areas tested) and so there could be a risk 11
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that any vouchers raised in Paypoint without a corresponding certified request would not be identified. These reconciliations are in place in some areas where the detective reconciliation controls should also be acting as a further preventative control representing good practice that should be applied across all Council Services. 6.28 One of the key areas for improvement identified during the audit is in respect of the segregation of duties in the process to identify eligibility for and the processing of vouchers in relation to COVID-19 grants in some areas and it is recommended that these improvement actions are implemented when processing any future grants. 6.29 Lastly, the audit sought some assurances regarding the user and access controls to the Paypoint portal itself. There are standard user access controls, defined user roles and permissions. However, there is no defined “systems administrator role” which results in the approver role also having permissions to amend user permissions. SLC are aware of the risks here and are investigating a revision to the roles directly with Paypoint. A number of actions have been recommended to help mitigate the resulting risks. 6.30 Audit testing around emerging risks has also been completed in 2021/2022 in relation to Purchase Cards; Disclosure Checks and Invoice Authorisation. These assignments are pending final review and will now be concluded early in 2022/2023. 6.31 Aside from emerging risks, the 2021/2022 Audit Plan also included time to review progress with the Council in relation to its sustainability strategy and noted the Council’s commitment to achieving change. 6.32 Audit Scotland will be monitoring the progress made by public bodies given the aspirations of the Scottish Government towards an ultimate target of net zero. Ample evidence of the progress was available together with the recognition that every person who makes a financial, procurement, estates, travel decision etc, has a role to play. Employees have a duty to look at their actions and advocate for change when at all possible. 6.33 The key risks are recognised. Targets may not be met due to factors outwith the Council’s control; reductions achieved may prove not to be permanent or plans lack practical deliverability either in the short, medium or long term. 6.34 The review concluded that the Council has a definitive plan in place albeit this needs to be developed and adopted. This plan needs to be practical and deliverable and reflect the financial implications of implementation. Supporting all of this will be, in part, through embedding cultural change that puts sustainability and carbon/waste reduction at the forefront of all decision making. 6.35 From an Internal Audit perspective, there is an intention to embed the sustainability agenda via our audit work with time to design a bank of standard sustainability audit tests included in the 2022/2023 Internal Audit Plan. 6.36 Other routine tasks continued throughout the year, such as the review of Resource Risk Registers with Internal Audit satisfied that there is evidence of review and update across all Resources. 12
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6.37 Given the evolving nature of fraud and the heightened risk of such, fraud policies were reviewed and consolidated in 2021/2022. The review identified some gaps which will be reflected in the updated policy. 6.38 The most significant anti-fraud work in 2021/2022 was in relation to COVID-19 grants. Routine investigative work was of low value and volume during the year and two of these assignments remain open as at 31 March 2022. These will now be concluded in 2022/2023. A detailed report on fraud statistics will be presented separately to Committee. Area of Assurance – Internal Control 6.39 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 6.40 to 6.48. 6.40 In 2021/2022, some follow up work was undertaken to review management reports available within the Unpaid Work Service team to assess whether these were effective in managing the caseload. 6.41 Case Managers (CM) require key data to progress each case and ensure that, for those cases that are not going to completed on time, that the Court is advised in advance. This was an area of previous audit work. Testing found CMs generally have the management information (MI) required to monitor their cases and are sending the necessary reports to the Courts. There were, however, some examples in delays in reporting to Court due to capacity issues and human error. A couple of recommendations have been agreed in principle to address these delays. 6.42 Agile working continues to change processes and the audit highlighted the importance of the Team Leader role in providing full, accurate and timeous reports to CMs. Likewise, the audit highlighted that the Operations Manager (OM) should review reports to ascertain if monitoring reports could be improved. It is key that the OM knows the overall position with the Service in terms of case allocation; hours worked as directed by the Court and that Key Performance Indicators are being met. The Justice Manager meets regularly with the OM to ensure all of these areas are being managed. 6.43 The overall opinion was that there is a reasonable level of assurance that the MI is sufficient to ensure progress in delivering Court Orders is monitored and that, generally, reports are being sent to Court on time. Discussions between the different parties within the Unpaid Work Service ensure that overview positions are monitored and there are sufficient opportunities for issues to be highlighted across levels of management. A number of recommendations were made to help further strengthen the monitoring arrangements. 6.44 Inputs to internal control reviews were also provided in relation to key Accounts Payable controls and in mobile phone purchasing. Internal Audit were asked to review, and contribute to, the proposal (and the controls required) around people who could submit/authorise (“PTX”) BACS payment runs on the PTX system. 6.45 In addition, Internal Audit provided some input to a review of controls around ensuring that every mobile phone ordered is for a specific (named) recipient and that phones could not be ordered for generic, or un-named, users. The onset of COVID-19 brought supply chain issues which meant that phones could not be obtained in short lead times. 13
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Internal Audit provided some guidance around amending this control given large scale recruitment drives that were underway. This approach is agreed on a case-by-case basis and as a response to specific pressures. Arrangements were put in place for follow up to ensure that previous controls have now been reinstated. 6.46 Routine control work continued in the year through Continuous Controls Monitoring (CCM) analysis that was used to inform ‘intelligent’ sampling by audit assignments within the Plan and provide detailed data to External Audit for the purposes of the Council’s financial year-end audit. 6.47 Internal Audit has also monitored fraud alerts through internal and external sources and disseminated information as appropriate. In 2021/2022, these have continued to relate to adhoc issues and been shared with Council Resources as appropriate. 6.48 In 2020/2021, data was uploaded for the next NFI exercise with matches returned in 2021/2022 for investigation. Final outcomes are currently being collated which broadly align to the previous exercises other than for those new areas of matches in relation to COVID-19 grants in the 2020/2021 exercise. 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. Throughout the year the scope of audit work has continued, in part, to be impacted by the COVID-19 pandemic but not to the extent that this has impaired the ability of Internal Audit to express an independent opinion in 2021/2022. 7.2 Internal control has remained, 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. This responsibility has continued throughout the COVID-19 pandemic and includes any changes to business processes that have been required throughout this period. 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 2021/2022, 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 2022. 7.5 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 One based on the view of the Council’s own internal audit function. 14
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8. Employee implications 8.1 The Internal Audit service in 2021/2022 was delivered by a team of 10. Of the team of ten, all are fully or partly qualified through either the Chartered Institute of Internal Auditors or one of the Consultative Committee of Accountancy Bodies. 8.2 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 2021/2022, delivered a break-even budget position. 10. Future years 10.1 The Council has undergone a period of significant disruption to ‘business as usual’ impacting on both current service delivery and existing governance arrangements. The Council has proven itself able to respond to unprecedented circumstances and the pressures arising therefrom. This has impacted on all Council services and the Audit Plan has remain fluid throughout to reflect best use of resources depending on pressures across the Council. Moving forward, Internal Audit will seek to address the gaps that this has created and aim to resume a more structured approach to planning and delivery of a core programme of audit work. 10.2 Significant pressures remain as public services re-set and Internal Audit will need to build on the lessons learned and retain the benefits that have accrued through new working practices developed in response to the pandemic. 10.3 Anti-fraud work, linked to activity during the pandemic will continue for a period of time. This will include a review and testing of new processes to provide assurance that emergency and adhoc processes do not continue indefinitely without challenge. 10.4 Investing time to fully develop data analytical tools has proved important but must be considered alongside the improved functionality of new systems. This will require the upskilling of the wider Internal Audit team and for approaches to evolve to remain relevant and deliver value-added output. 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 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. 15
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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 7 June 2022 Link(s) to Council Values/Ambitions/Objectives Achieve results through leadership, good governance and organisational effectiveness Previous References 2021/2022 Six Month Audit Plan to 30 September 2021 (Risk and Audit Scrutiny Committee, 25 February 2021) 2021/2022 Six Month Audit Plan to 31 March 2022 (Risk and Audit Scrutiny Committee, 17 November 2021) List of Background Papers 2021/2022 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 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 16
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Appendix One 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 2022. 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. During 2021/2022, SLC systems and controls have continued to be impacted, to some extent, by the COVID-19 pandemic and there has been a continuing requirement to amend governance arrangements and normal business operations. SLC’s risk management framework has evolved and has required to continue to respond to the pandemic. Embedded within existing systems are controls that have been subject to change. Audit processes have been streamlined to increase capacity but there has been no significant amendment to audit scopes that supports the annual opinion expressed. 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. 17
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The Internal Audit Service operated in accordance with the Public Sector Internal Audit Standards (PSAIS) (revised 2017) throughout 2021/2022. An external assessment of the extent of compliance was undertaken in 2017/2018 as part of the Quality Assurance and Improvement Programme. This assessment concluded that the section generally conforms with the requirements set out in PSIAS. Actions have now been implemented to address areas of non-compliance identified by the review. The next external review is scheduled for 2022/2023. 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 2021/2022 and through the continuing delivery of a range of tasks to support the Council’s response to the COVID-19 pandemic. 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 2022. Signature:- Yvonne Douglas BA CA 3 June 2022 18
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Executive Director (Finance and Corporate Resources) Subject: Annual Governance Statement for 2021/2022 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 2021/2022, for inclusion in the Council’s 2021/2022 Annual Accounts [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 2021/2022 Annual Report and Statement of Accounts, be approved; and (2) that progress against the significant governance areas identified within the Annual Governance Statement 2020/2021 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 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 Code is reviewed as part of the Annual Review of Governance arrangements and informs the Annual Governance Statement. 3.4. The 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 3 19
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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 2021/2022 Annual Report and Statement of Accounts and an update on progress against the actions highlighted as significant governance areas in the 2020/2021 Annual Governance Statement. 4. Annual Governance Statement (AGS) 2021/2022 4.1. The Annual Governance Statement for 2021/2022 is attached at Appendix 2. Information on the COVID-19 pandemic governance arrangements has been added to Section 5 of the statement. This details the impact on the council’s governance arrangements and gives examples of the new ways of working which have been required to continue to provide service delivery and respond to the pandemic. It also reflects advice given by CIPFA which is set out at 4.2. 4.2. The CIPFA guidance which was provided via a webinar that took place in February 2021 set out the impacts on governance arrangements to consider when drafting the 2020/2021 statement, the following continued to have relevance in the drafting of the 2021/2022 statement:- the impact of the COVID-19 pandemic, specifically, adaptations to reflect new ways of working and emergency arrangements; changes to ‘business as usual’ activities; and longer-term changes to priorities, programmes, strategies, and plans; areas for improvement and recovery; and the CIPFA Financial Management Code, specifically an overall conclusion on the extent of compliance with the Code; and outstanding matters or areas for improvement set out in the Governance Statement Action Plan (Section 7). 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 2022. 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 AGS 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 2022/2023. 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:- 20
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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 CMT and the Risk and Audit Scrutiny Committee. Also, as a result of the impact of the COVID-19 pandemic on the Council’s governance arrangements further amendments may be required to record any other significant issues that are identified before the sign off of the Annual Accounts. 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 2020/2021 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. Significant Governance Areas identified in 2021/2022 Comments COVID-19 Pandemic The Council will continue to respond to matters arising from the COVID-19 pandemic Carried forward from 2020/2021 COVID-19 Pandemic Recovery actions Carried forward from 2020/2021 Cyber resilience Compliance with legislative and regulatory policy Carried forward from 2020/2021 Financial Challenges Reduction in Council funding, resulting in difficulties maintaining front line services Carried forward from 2020/2021 Integrated 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 to 2025 New Review of Community Planning Provide support to the review of Community Planning arrangements Carried forward from 2020/2021 Community Wealth Building New Sustainable Development and Climate Change Deliver the Sustainable Development and Climate Change Strategy Carried forward from 2020/2021 Economic Recovery and Renewal Deliver the Economic, ‘Response, Recovery and Renewal’ Strategy Carried forward from 2020/2021 Strategic Framework for South Lanarkshire Leisure and Culture (SLLC) Deliver the SLLC Strategic Commissioning Framework Carried forward from 2020/2021 Recruitment New 21
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6.2. The Good Governance Group will evaluate the governance review process and refine this in preparation for the 2022/2023 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 AGS 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. Paul Manning Executive Director (Finance and Corporate Resources) 8 June 2022 Link(s) to Council Objectives Links to all council objectives Previous References Annual Governance Statement 2020/2021 and Quarter 4 Progress Report – 27 May 2021 Annual Review of the Local Code of Corporate Governance- Risk and Audit Scrutiny Committee – 26 January 2022 List of Background Papers None Contacts for Further Information If you would like further information, please contact: - Geraldine McCann, Head of Administration and Legal Services Ext: 4516 (Tel: 01698 454516) Email: geraldine.mccann@southlanarkshire.gov.uk 22
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Annual Accounts 2022 (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 Quarter 4 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: CMT – 26 May 2022 RASC – 22 June 2022 (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 23
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Appendix 2 South Lanarkshire Council Annual Governance Statement 2021/2022 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 2021/2022 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, Connect 2017-22 sets out the council’s vision, values and objectives and what difference this will make to the residents and communities of South Lanarkshire. A mid- term review was finalised during 2020. The council is also a statutory Community Planning Partner and the Community Plan 2017-27 provides a common vision for the South Lanarkshire Community Planning Partnership and sets out how the partners aim to achieve that vision. An update of the plan was completed during 2020/2021. The council has set the framework for strong corporate governance by having a clear vision and values which are outlined in the diagram below: - 3 25
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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 2022 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. 26
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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 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 Standards Commission for Scotland issued one decision notice, finding that a councillor had acted in breach of the Councillors Code of Conduct. This was reported to Council in compliance with Section 18 Ethical Standards in Public Life, etc. (Scotland) Act 2000. • 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 27
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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 2021/2022 was assessed as being within the top rating band of “good”. • Legal Services maintained an overview of Pandemic 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 suite of dedicated Pandemic pages providing advice, help and public health information were created and maintained on the council website. • 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 will continue 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. 28
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• 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 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 Inclusion Strategy 2020 to 2023 sets out the actions that the Council will take to assist those people who are unable to get online to access services digitally. The Council also leads on a partnership Digital Inclusion Group. • 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: • The Council adapted approaches in response to the Pandemic to ensure processes continued to be effective, efficient, and transparent. • The Council has a Capital Strategy that has a long-term outlook on future capital investment (up to 2027/2028). 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 2017 to 2022 and Community Plan 2017 to 2027 have clearly defined economic, social, and environmental outcomes to be delivered during the period. In light of the Pandemic, priorities for both plans will be reviewed during 2021/2022. • A new 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 has been established to oversee the implantation of the Strategy and met for the first time in August 2021. A Community Wealth Building Progress Group has been set up to ensure that timescales within the action plan are met. • 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. 29
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• The Sustainable Development and Climate Change Strategy 2017 to 2022 which sets out the Council’s strategic outcomes 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 new strategy is in development and will be published in April 2022. • The Council’s Climate Change and Sustainability Committee oversees the delivery of the Sustainable Development and Climate Change Strategy 2017-2022, the council’s transition to carbon neutrality and climate resilience. • The Council’s new Procurement Strategy 2020-2023 which will be 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 2021/2022. • 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: • Key services were adapted, and delivery was maintained throughout the Pandemic in line with Public Health guidance and Government guidance and legislation. • There is a standard approach to identifying savings across the Council. The Council’s efficiency 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. There were over 470 responses to the online consultation. 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. 30
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• The Public Bodies (Joint Working Act) sets out those Adult Care Services that are delegated to the Integration Joint Board (IJB) as set out in the South Lanarkshire 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 annual 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. 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 has been developed and rolled out during 2021. • 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. • Three surveys of all Council employees were undertaken during 2021-22. The 3rd related to working from home/hybrid working, the results will be available shortly. Feedback from this survey will be used to inform future 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 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 2020/2023 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. 31
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• In terms of the 2020-21 Local Government Benchmarking Framework results, based on the information available at the end of January 2022 and in light of the impact of Covid19, the council is performing better than the Scottish average levels for one third of the indicators. The results have been analysed and an action plan developed which will be monitored by the Senior Management Team. • 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: • 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 a revised 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, for example to process pandemic grants, Internal Audit has advised on key internal controls that should be maintained through the identification of alternative controls and has been involved in the development of new systems. • The Information Governance Board is satisfied that Resources have followed the Information Governance operational arrangements in order to promote effective arrangements for the safe collection, storage, use and sharing of data, including processes to safeguard personal data. • 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. • The cost of the pandemic on the council’s budgets has been closely monitored and regular reports have been presented to the Senior Management Team and Committee. 32
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• External Audit of the Council’s accounts is robust and a “clean audit certificate” was issued for 2020/2021. • 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 has completed a self-assessment using the principles of the CIPFA Financial Management Code and an action plan has been developed to ensure full compliance by March 2022. Principle G: Fair, Open and Sustainable; Implementing good practices in transparency, reporting, and audit to deliver effective 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 2020/2021 annual audit report, the external auditor commended the Council’s annual governance statement as good practice for the second year. • All Directors completed their annual Statement of Assurance and where 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 Organisation (ALEO) 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 and re-published on the Council’s website. • Whilst temporary decision-making arrangements were put into place as a result of the pandemic restrictions on people gathering, all agendas, reports and decisions continued to be published (except those exempt under the Local Government (Scotland) Act 1973) on the council’s website. Arrangements were put in place for subtitled recordings of Committee meetings which can be found on the council’s YouTube page. 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. 33
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• Internal Audit changed how their findings are presented to the Risk and Audit Scrutiny Committee to improve scrutiny. • 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. During 2020/2021, the council, its partners and local community organisations continued to strengthen the partnership approach in response to the Pandemic. In 2021/2022 the council continues to manage the impacts of the Pandemic through robust resilience arrangements and controls. As the council has moved through the different phases of response and recovery, changes to governance arrangements have been made to comply with national guidance and legislation. New ways of working have been put in place to continue to maintain the delivery of essential business of the council and to respond to the Pandemic. Priority services have been maintained throughout the Pandemic and many new services/processes established. Throughout the year, schools, nurseries, etc. have adapted in accordance with national decisions and guidance. Costs associated with the Pandemic have been met from funding provided by the Scottish Government and the council will continue to monitor the financial impact of the Pandemic into 2022/2023 and beyond. This will include working with South Lanarkshire Leisure and Culture on the impact of the Pandemic on their business and their recovery. Plans for returning to ‘business as usual’ and ‘Pandemic recovery’ developed during June 2020 are being reviewed. The council and the Community Planning Partnership are currently reviewing their priorities which will be informed through ongoing dialogue with local communities, organisations, and businesses. As the Pandemic response eases, recovery will be a significant area of work for the council and its partners and is highlighted as such in Section 7 of this statement. 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 CODE. The council has reviewed the principles of the FM Code as part of its internal governance process. A self-assessment was carried out during the shadow implementation year (2020- 2021) which identified that the Council had fully embedded 14 of 17 criteria as part of its normal business by the end of the shadow implementation year (2020/2021). This highlights that the council already has a strong approach to financial management and financial resilience including demonstrating value for money, strong governance and controls and adherence to professional guidance, and our approach to financial management and reporting (including budget setting and medium to long term planning). For the remaining three principles which were not fully embedded, actions were agreed which will allow us to further embed and develop our existing financial management controls and measures to provide continued comfort on financial resilience. The action plan is summarised below and with progress up to end of March 2022:- 34
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1. In relation to financial resilience this will be included in a future Budget Strategy paper presented in 2022. 2. As part of the annual budget consultation, we are embedding the 2020/2021 approach going forwards. 3. We will continue to embed options appraisal across the Council. 6. Review of Effectiveness The review of governance arrangements for 2021/2022 has also considered the following assurance outcomes: - 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 2022. 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 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. 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 2022. 7. Significant Governance Areas The 2020-21 Annual Governance Statement identified 12 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 2020/2021 link to be added when published. Of these areas, three have progressed and are now embedded in our processes, the other nine remain as significant areas of action for the council moving forward into 2021/2022 and will continue to be monitored as such. Through the 2021/2022 annual governance review, the following areas which outline the actions being taken to address them have been identified as significant areas of work for the council during 2022/2023:- No. Areas identified in 2021/2022 Actions Lead Officer 1 COVID-19 Pandemic The council will continue to respond to matters The council will continue to monitor national guidance; maintain ongoing resilience arrangements; and implement Chief Executive and all Directors 35
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No. Areas identified in 2021/2022 Actions Lead Officer arising from the COVID- 19 Pandemic further measures as and when required in response to the Pandemic. Corporate and Resource risk registers will continue to be monitored and updated to reflect national and local developments. 2 COVID-19 Pandemic recovery Recovery actions As conditions continue to improve, the council will deliver the right services in the right way, for the benefit of our residents and communities. Chief Executive and all Directors 3 Cyber Resilience Compliance with legislative and regulatory policy A programme of actions to maintain cyber security and resilience in 2022/2023 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 Director of Finance and Corporate Resources 4 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 2023/2024 will be updated and presented to councillors during 2022. Director of Finance and Corporate Resources 5 Integrated Joint Board – Health and Social Care The need for the Council to deliver the objectives set out in the Integrated 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. Director, Health and Social Care, South Lanarkshire Health, and 36
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No. Areas identified in 2021/2022 Actions Lead Officer Joint Board (IJB) Strategic Commissioning Plan 2022-25 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. Social Care Partnership 6 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 will be presented to the CPP Board for approval in June 2022. Following this, further recommendations will be made to the CPP Board in September 2022 detailing the changes required to governance structures in order to deliver the plan. Review work continues with the partners to produce these recommendations. Director of Finance and Corporate Resources 7 Community Wealth Building The Community Wealth Building Strategy which was approved in March 2021 will bring fundamental changes to how the Director of Finance and 37
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No. Areas identified in 2021/2022 Actions Lead Officer Deliver the Community Wealth Building Strategy 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 will be presented to the Commission in early summer 2022 for approval. Year 2 Actions identified in the approved Action will be progressed in 2022/2023. Corporate Resources 8 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 will be developed and presented to Council for approval together with the Council Plan and Community Plan. Director of Community and Enterprise 9 Economic Strategy A new Economic Strategy 2022-2027 is being developed for approval by Council. The draft strategy is scheduled to be presented to Council in June 2022 as part of a suite of documents accompanying the draft Council Plan and Community Plan. The proposed vision within the Strategy is “to make South Lanarkshire a flourishing, green, dynamic and equitable place for communities, visitors, businesses and investors”. The Strategy will be framed around the 3 themes of sustainable, inclusive, economic development- People, Place and Business. The council will continue to lead on local economic recovery for South Lanarkshire Director of Community and Enterprise 38
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No. Areas identified in 2021/2022 Actions Lead Officer businesses through promotion of local economic support networks and contribution to the pan-Lanarkshire Economic Forum. 10 Implement the outcomes following the Cross-Party Working Group review of South Lanarkshire Leisure and Culture (SLLC) Outcomes of the Review will continue to be implemented over the course of the 2022/2023 and include:- • Presentation of the modernised constitution for the new SCIO model approved by the SLLC Board in February 2022 to the Council for approval in 2022 • review of various Service Level Agreements that exist for the provision of shared services with the aim of strengthening the SLC/SLLC partnership); and • Continue to engage with community groups on community asset transfer of SLLC assets. Director of Community and Enterprise 11 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 are being refreshed to reflect the changed environment by 30 June 2022 • A grow your own approach is being used in key areas (recruited graduates in Procurement) Chief Executive and all Directors 39
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No. Areas identified in 2021/2022 Actions Lead Officer • 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 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 2022/2023, 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: Cleland Sneddon Chief Executive Signature: Date: Paul Manning Executive Director (Finance and Corporate Resources) Signature: Date: 40
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Appendix 3 Annual Governance Statement 2020/2021 – Significant Governance Areas Quarter 4 update - April 2021 to March 2022 Areas identified in 2020/2021 Actions Quarter 4 Progress COVID-19 pandemic The Council will continue to respond to matters arising from the COVID-19 pandemic The Council will continue to monitor national guidance; maintain ongoing resilience arrangements; and implement further measures as and when required in response to the pandemic. A recovery working group has been established with the remit to develop a council recovery plan for implementation. The plan will focus on the following 4 themes:- • Council Services; • Business Support; • Health and Social Care Partnership; and • Community Groups Corporate and Resource risk registers will continue to be monitored and updated to reflect national and local developments. Annual report on Risk Management presented to:- All Resource Committees September to November 2021: Community and Enterprise Resources Committee 28 September 2021 Housing and Technical Resources Committee 29 September 2021. South Lanarkshire Integration Joint Board 26 October 2021 Education Resources Committee 9 November 2021 Finance & Corporate Resources Committee 10 November 2021 Social Work Resources Committee 10 November 2021 All Resource risk registers will continue to be monitored and updated. COVID-19 Pandemic Recovery Recovery Actions As conditions improve, the Council will deliver the right services in the right way, for the benefit of our residents and communities. Continuing development and implementation of Resource Recovery Framework Routinely monitored through Resource and Service Management Teams 3 41
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Areas identified in 2020/2021 Actions Quarter 4 Progress IT Infrastructure Migration of computer systems to an external provider • Conduct procurement to identify and award contract for external hosting services. • Complete planning for migration of all computer systems from Caird Data Centre. • Complete preparatory work to set up new network hubs. • Commence move of IT systems to new provider. • Housing and Technical Resources System Procurement completed and contract awarded. • Planning and preparatory work completed. Project completed December 2021. • Project complete. • Project complete. Cyber Resilience Compliance with legislative and regulatory policy • Maintaining Public Sector Network (PSN) accreditation and instilling an ethos of ongoing compliance. • Continued compliance and accreditation to Cyber Essentials Plus. • Moving forward working towards the guidelines outlined within the Scottish Public Sector Cyber Resilience Framework. • Continued awareness training for all SLC staff around the area of Cyber Resilience. On track to achieve PSN and Cyber Essentials Plus Accreditation. PSN accreditation achieved. Cyber Essentials plus accreditation for 2022 in progress. Awareness training for SLC staff included in on-line learning. Cyber awareness campaign conducted on SLC intranet as part of Cyber Scotland week. 42
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Areas identified in 2020-21 Actions Quarter 4 Progress Participatory Budgeting 1% of the Council’s budget to be subject to Participatory Budgeting By 2021 all Scottish councils are required to commit 1% of their budget to Participatory Budgeting (with the “council budget” being defined as the council’s Total Estimated Expenditure (TEE) less Assumed Council Tax Income both taken from the Government’s Finance Settlement). Councillor’s awareness sessions have been conducted and a webinar made available for councillors. Further update reports will be submitted to Committee. Participatory Budgeting now features in School Improvement Plans which is helping to engage more widely with parents and carers. Progress is being made around the areas agreed at Executive Committee with updates provided at Area Committees. Councillor awareness sessions took place and a webinar was made available to all councillors. Progress Reports presented to East Kilbride and Cambuslang and Rutherglen Area Committees in November 2021 detailing Education Resources and Housing and Technical Resources progress with Participatory Budgeting. Update reports to remaining Area Committees – Clydesdale and Hamilton were delivered in February 2022. Financial Challenges 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 2028/2029. The Budget Strategy for 2021/2022 will be updated and presented to councillors during autumn 2021. Following the receipt of the financial settlement in December 2021 the proposed budget for 2022/2023 was presented to Members for approval in February 2022. Budget approved 23 February 2022. Additional funding provided by Scottish Government to support households who have been financially affected by COVID-19. Financial Strategy for 2022/2023 was presented to Councillors in June 2021. 43
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Areas identified in 2020/2021 Actions Quarter 4 Progress 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. During 2021/2022 a review of the Council’s Sustainable Development and Climate Change Strategy (2017 to 2022) will be carried out and concluded; and a new Strategy for 2022 to 2027 will be developed. A review and development of the revised Sustainable Development and Climate Change Strategy, led by Community and Enterprise Resources, is underway and scheduled to be completed during 2022/2023. Actions to be progressed throughout the year include, contributing to the annual review, with actions/measures from all Council resources. Development of the strategy is progressing. Public engagement is complete and has shaped the vision, themes and priorities. The Strategic Environmental Assessment is complete and has been out for public consultation along with the draft of the strategy. The final strategy is intended to be presented for approval to Full Council alongside the Council Plan and Community Plan in June 2022. In the meantime, work is progressing with Services in order to populate the first year's action plan. Integrated 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 2019 to 2022 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 2020/2021 and these Directions were agreed by the IJB at it special budget meeting in March 2020. The Council will provide progress updates against Directions for which it is the lead organisation. Resources were deployed to deliver the Directions throughout 2021-2022. Progress reports on the delivery of the Directions were made to the IJB during 2021/2022. The Health and Social Care Partnership led the Review and Development of the new Strategic Commissioning Plan 2022 to 2025 during 2021/2022 and Housing and Technical Resources will contribute and will lead on 2 directions for both Housing and Homelessness In light of the preparatory work undertaken for the new Strategic Commissioning Plan 2022 to 2025 a review of the strategic directions was carried out to ascertain if they still remained relevant to the delivery of the IJBs vision for health and social care services and presented the IJB at 44
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Areas identified in 2020/2021 Actions Quarter 4 Progress Integrated Joint Board – Health and Social Care The need for the Council to deliver improvements within Care at Home to meet regulatory requirements Following inspection activity in the latter half of 2019, the Care Inspectorate identified concerns in the delivery of Care at Home services in both the Hamilton and Rutherglen/Cambuslang services. Improvement plans have been devised and are being progressed by the services with progress overseen by a Programme Board. Regular updates on progress are provided to the Health and Social Care Partnership Senior Management Team; the council’s Senior Management Team; the Social Work its meeting on 25 January 2022. The Strategic Commissioning Plan 2019 to 2022 outlined 13 strategic priorities and 43 commissioning intentions upon to which 37 Directions were aligned . To summarise the status of the directions:- • On hold. Not possible to progress during this period 2 (5%) • Progressing but a change in outcomes and/or delay expected 27 (73%) • Progressing as originally planned 1 (3%) • Direction completed 7 (19%) The IJB agreed the removal of 8 Directions as they had been completed with those remaining being current. Some have been amalgamated or changed to reflect current arrangements. There are 27 Directions in all and represents an overall reduction of 10 Directions when compared with prior reports. • Final_Agenda___South_Lanarkshire_IJB___2501 22 (15).pdf page 103 Improvement Plans have been completed. An inspection in October 2020 for the Hamilton Care at Home Service showed an improvement in grades:- • Care and Support from 1 (unsatisfactory) to 3 (adequate) • Leadership and Management from 1 (unsatisfactory) to 3 (adequate) • Staffing from 1 (unsatisfactory) to 2 (weak) An inspection in June 2021 has seen further improvement with:- • How well do we support people’s wellbeing graded 45
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Areas identified in 2020/2021 Actions Quarter 4 Progress Integrated Joint Board – Health and Social care (Continued) Committee; and the Integrated Joint Board. 4 (good) • People get the most out of life graded 4 (good) • Infection prevention and control graded 3 (adequate) • Leadership and staffing arrangements are responsive to the changing needs of people experiencing care graded 4 (good) The most recent inspection (November 2020) for the Rutherglen/Cambuslang Care at Home Service showed an improvement in grades:- • How well to we support people’s wellbeing – 4 (good) • How good is our Leadership – from 1 (unsatisfactory) to 4 (good) • How good is our Staff Team – from 2 (weak) to 4 (good) • How good is our care planned – from 1 (unsatisfactory) to 3 (adequate) • Infection / Prevention control measures / COVID- 19 - 4 (good) Care Inspectorate risk rating reduced from high to medium. The Integration Joint Board approved the Strategic Commissioning Plan 2022 to 2025 at its meeting on 29 March 2022. The SCP sets out the overall strategy for health and social care services to 2025. It sets out: • What the public and key stakeholders told us was important to them through extensive and ongoing consultation and engagement activity • The strategic needs profiling of the population of South Lanarkshire • How the IJB, alongside Community Planning Partners, will work to deliver the 9 National Health and Wellbeing Outcomes • How the IJB will 46
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Areas identified in 2020/2021 Actions Quarter 4 Progress commission services to support the recovery from the pandemic. The SCP sets out 12 strategic priorities for the IJB and which drive the strategic commissioning intentions also articulated: • Sustaining statutory functions • Emphasising early intervention, prevention and inequalities • Addressing mental health and addictions • Improving unscheduled care and optimising intermediate care • Supporting Carers • Promoting self-care and self-management, including technology enabled care • Improving transitional arrangements • Facilitating single point of access and increasing access to seven-day service • Investing in enablers for integration • Promoting suitable and sustainable housing • Contributing to homelessness prevention and reduction • Responding to the impact of the COVID-19 pandemic The SCP has been developed to have a mutually reinforcing relationship with key local strategies of the Health Board, Council and Community Planning Partnership. Economic Recovery and Renewal Economic recovery from the Pandemic will incorporate the principles of Community Wealth Building and during 2021/2022 an Economic, ‘Response, Recovery and Renewal’ Strategy framed around the themes of: People; Place; and Business will be developed. The council will also lead on local economic recovery for South Lanarkshire businesses through promotion of local economic support networks and contribution to the pan- Lanarkshire Economic Forum. Development of the new Economic Strategy has shifted focus away from economic recovery, to become a more progressive forward thinking strategy which sets out clear ambitions over the next 5 years (2022 to 2027). The draft strategy is due to be presented to Full Council at the end of June 2022 as part of a suite of documents accompanying the new Council and Community Plans. The proposed vision within the strategy is “to make South Lanarkshire a flourishing, green, dynamic and equitable place for communities, visitors, businesses and investors”, and the strategy is framed around the 3 themes of sustainable, inclusive economic development – People, Place and Business. 47
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Areas identified in 2020/2021 Actions Quarter 4 Progress National expansion in early years education and childcare provision The Council is likely to face challenges in acquiring the necessary physical assets and staffing levels to meet the commitments by 2020 The impact of the COVID-19 pandemic and the announcement by the Scottish Government to close all schools and educational settings from 20 March 2020 for an indefinite period resulted in the delay of meeting the target dates for the full delivery of 1140 hours early learning and childcare by August 2020. COSLA have intimated to councils the extension given in legislation to the timeframe for the delivery of 1140 hours. This will be subject to review by the council in partnership with the Scottish Government. Strategic and operational plans are in place with key milestones identified in terms of infra-structure, financial, personnel, quality standards, training and recruitment and on consultation with partners and parents. Regular reporting mechanisms are also in place with updates provided to committee including engagement with partner providers to increase private and third sector partnership. In line with the Education Recovery Plan a restart of the significant investment made through the Capital Programme to expand the delivery of 1140 hours has taken place The support of the Council Services have been instrumental in restarting the building programme which was delivered and operational by June 2021 with the exception of Clyde Terrace Early Learning Centre in Bothwell .Work progresses with this development however temporary facilities were established to ensure all children and their families accessed their ‘1140 Hour Entitlement’ by August 2021. Approximately 7800 families are currently accessing the ‘1140 Hour Placements’ with 2500 children accessing placements through our Contracted Funded Providers The Capital Programme was completed by June 2021 with the exception of the Clyde Terrace E.L.C. CCTV Policy UK GDPR, Data Protection Act and Code of Practice from the Information Commissioner will be deployed by HTR through CCTV System Operating Procedures which are currently in development. The CCTV operating procedures and data sharing processes have been reviewed and updated to ensure audit trails, data security and governance of data storage and management are fulfilled. Review of Community Planning Provide support to the review of Community Planning arrangements Review of Community Planning (Continued) 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 has been set up to take these forward. The focus of the Council’s Community Engagement Team and Partnership Officers is currently ongoing with communities and partners to co-produce the new Community Plan. The first phase of engagement with communities and partners is complete and priorities are being developed for the second phase of the engagement which will also include communities and partners. The new Outcome Lead Officers are in place and they 48
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Areas identified in 2020/2021 Actions Quarter 4 Progress The review group will consider several key areas including structures, governance and accountability arrangements and the Council will provide resources to support the group and the implementation of the agreed actions. are considering the new Community Plan and the Community Planning Structures. Housing and Homelessness actions to be progressed throughout the year. Review of the Community Plan being progressed with input from Housing and Technical Resources. Implement the outcomes following the Cross Party Working Group review of South Lanarkshire Leisure and Culture (SLLC) The review of leisure and culture provision concluded on 19 May 2021. Outcomes to be implemented over the course of the year include changes to:- • governance arrangements (a new constitution will be developed, reflecting a modernised governance model. This will also involve a review of various Service Level Agreements that exist for the provision of shared services with the aim of strengthening the SLC/SLLC partnership); • pricing arrangements (SLLC will now have latitude to adjust commercial pricing without prior approval by the Council); and • Further engagement with community groups on community asset transfer of SLLC assets. Revised pricing policy was agreed by the SLLC Board for implementation from 1 April 2022. SLLC Board agreed the draft constitution for the new SCIO model at their Board meeting on 23 February 2022, noting that SLC and SLLC’s legal advisors would continue to liaise on the final detail prior to submission of the relevant documentation to OSCR and pending subsequent SLC approval. The Board also agreed the next steps required to progress the transition to the proposed new governance arrangements. It is anticipated that the first meeting of the SLLC Board under the new governance arrangements will take place in August 2022, subject to Council approval and setting up of a nominee company. The Council and SLLC continue to engage with community groups that have expressed interest in the community asset transfer of SLLC assets. 49
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Executive Director (Finance and Corporate Resources) Subject: Unaudited Annual Accounts 2021/2022 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 the unaudited Annual Accounts of the Council and related Charitable Trusts to be submitted to Audit Scotland by the deadline of 30 June, be noted. 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 2022 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 2021/2022 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 2022 are included as Appendix 1 to this report for consideration. 4.3. These unaudited Accounts will be available for public inspection between 30 June 2022 and 21 July 2022, as prescribed by the Local Authority Accounts (Scotland) 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 4 51
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provide any information requested as part of this public consultation. The unaudited Accounts will be on the Council’s website from 30 June 2022 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 later in the year, along with the External Auditor Members’ report for formal approval and signature. Due to the ongoing impact of COVID-19, the Scottish Government has extended the normal audit deadline from 30 September to 30 November 2022. The Council’s external auditors are working to a deadline of 31 October 2022. As a result, the date of the Committee to approve the audited Accounts has been set for 25 October 2022. 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 on 30 June 2022. 4.6. Restatement of Monitoring Figures Reported: The Chartered Institute of Public Finance and Accountancy (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 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 final outturn position of the Council’s Revenue Budget is being presented to the Executive Committee on 29 June 2022. The Executive Committee position shows a surplus of £6.109 million, which it is proposed is transferred to reserves for use in the 2023/2024 Revenue Budget Strategy. This report seeks approval to transfer funds to reserves to meet future budget pressures and commitments, including the £6.109 million surplus. The information contained in the unaudited Accounts takes into account the position reported in the Revenue Outturn report and is, therefore, subject to the approval of the Executive Committee. 4.8. The position shown in Appendix 2 to this report assumes that all of the transfers to reserves are approved by the Executive Committee, resulting in an overall breakeven position for the year. 4.9. Appendix 2 provides a reconciliation of this final breakeven position, as reported to the Council’s Executive Committee (29 June 2022), to the figures included in the Council’s Accounts 2022 (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 3 related Charitable Trusts: South Lanarkshire Educational Trust, South Lanarkshire Council Charitable Trust and the East Kilbride Information Technology Trust. These accounts are attached in Appendix 3 for consideration and will be emailed to all elected members following submission to External Audit on 30 June 2022. They will also be available on the Council’s website on 30 June 2022 for public inspection. 5.2. These audited Accounts will also be brought back for approval and signature in autumn 2022 along with the External Audit Members’ report. 52
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6. Employee Implications 6.1. There are no direct employee implications from this report. 7. Financial Implications 7.1. There are no direct financial implications arising from this report. 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. Paul Manning Executive Director (Finance and Corporate Resources) 7 June 2022 Link(s) to Council Values/Ambitions/Objectives Accountable, Effective, Efficient and Transparent Previous References None List of Background Papers South Lanarkshire Council Annual Accounts 2021/2022 Charitable Trusts’ Annual Accounts 2021/2022 Financial Ledger 2021/2022 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, Finance Manager (Strategy) Ext: 2601 (Tel: 01698 452601) E-mail: lorraine.o'hagan@southlanarkshire.gov.uk 53
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1 Appendix 1 4 55
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2 Contents Introduction by Chief Executive and Council Leader 3 Management Commentary 4 Annual Governance Statement 23 Statement of Responsibilities 33 Remuneration Report 34 Expenditure and Funding Analysis 49 Comprehensive Income and Expenditure Statement 50 Balance Sheet 51 Movement in Reserves Statement 52 Cash Flow Statement 54 Notes to the Financial Statements Note 1 - Accounting Standards Issued but Not Yet Adopted 56 Note 2 - Assumptions Made About the Future and Other Major Sources of Uncertainty 56 Note 3 - Material items and Expenditure and Income 57 Note 4 - Note to Expenditure and Funding Analysis – Adjustments Between Funding and Accounting Basis 58 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) 59 Note 6 - Expenditure and Income Analysed by Nature 60 Note 7 - Revenue From Contracts with Service Recipients 61 Note 8 - Adjustments Permitted Under Accounting Standards and Between Accounting Basis and Funding Basis Under Regulations 61 Note 9 - Other Operating Expenditure 65 Note 10 - Financing and Investment Income and Expenditure 65 Note 11 - Taxation and Non Specific Grant Income and Expenditure 65 Note 12 - Movement in Usable Reserves 66 Note 13 - Balance Sheet – Unusable Reserves 68 Note 14 - Members Allowances 71 Note 15 - External Audit Costs 71 Note 16 - Related Parties 71 Note 17 - Leases 73 Note 18 - Grant Income 74 Note 19 - Events After the Balance Sheet Date 74 Note 20 - Property, Plant and Equipment 75 Note 21 - Other Assets - Intangible, Heritage and Assets Held For Sale 80 Note 22 - Capital Expenditure and Capital Financing 81 Note 23 - Short Term Debtors 82 Note 24 - Debtors For Local Taxation 82 Note 25 - Short Term Creditors 82 Note 26 - Provisions 83 Note 27 - Receipts in Advance 83 Note 28 - Public Private Partnerships and Similar Contracts 84 Note 29 - Pension Schemes Accounted for As Defined Contribution Schemes 84 Note 30 - Defined Benefit Pension Scheme 85 Note 31 - Contingent Assets and Liabilities 90 Note 32 - Financial Instruments 91 Note 33 - Disclosure of Nature and Extent of Risks Arising From Financial Instruments 94 Note 34 - Common Good 98 Note 35 - Trust Funds 99 Note 36 - Accounting Policies 100 Note 37 - Critical Judgments in Applying Accounting Policies 107 Supplementary Statements Statement 1 - Housing Revenue Account Income and Expenditure Statement 108 Statement 2 - National Non Domestic Rates Income and Expenditure Statement 110 Statement 3 - Council Tax Income and Expenditure Statement 111 Group Accounts 112 Audit Arrangements 125 Glossary of Terms 126 56
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3 Joint Introduction by Chief Executive and Council Leader Welcome to the annual accounts for South Lanarkshire Council, covering the financial year 2021/2022. The prime purpose of this document is to show everyone how we provide best value by delivering quality services as efficiently as possible. Reporting this as clearly as possible is a key part of our commitment to public transparency, particularly in how we communicate with our residents and customers. These accounts demonstrate how we once again met our obligation to balance our budget, and it is important to note that this took place in a context of very real challenges across the entire public sector. The impact of Covid-19 in the last two financial years is well documented. In their Local Government in Scotland Overview, published on 25 May 2022, Audit Scotland noted, as their number one key message with regard to 2021/2022: Councils have had a very difficult year. Alongside the ongoing response to the pandemic, councils have faced challenges in recovering services, dealing with increased demand and backlogs, and meeting community needs and expectations. This has taken place against a backdrop of long-standing pressures such as increased demand from an ageing population and rising poverty. Here in South Lanarkshire, there has been a substantial savings requirement each year in order to balance the budget – in the four years between 2018/2019 and 2021/2022 the total was £44m. However, we have a strong record in finding efficiencies and corporate solutions in order to minimise the impact on services. It was against this context that South Lanarkshire Council’s 2021/2022 revenue budget of £795.527 million and our spending plans were agreed at a meeting of the full Council on 24 February 2021. Once again, Education was our area of largest spend across that financial year, largely through the teaching of our young people in our new and refurbished nurseries, primaries and secondary schools. The second biggest area of spend was Social Work, with the remainder of our budget funding Community and Enterprise Resources, Housing and Technical Resources, and Finance and Corporate Resources. When Elected Members agreed the 2021/2022 budget they accepted £5.421m of savings options in addition to another £5.762m that had been identified already by officers in management and operational efficiencies. These efficiencies, together with an improvement in the council’s overall financial position, provided funds for a programme of additional investments. Among other things, these placed a focus on children and young people, attracting inward investment, projects tackling climate change, and roads and footpath improvements. These one-off investments for 2021/2022 were in addition to our broader £85m General Services capital programme, and also a £101m Housing capital programme, both of which were also approved by the Council. These provide significant long-term investments in the future of South Lanarkshire and included sums for roads, bridges and other infrastructure improvements, plus replacement care facilities and nursery expansions, as well as the building of new social housing and improvements to our existing stock of more than 25,000 council homes. Investments like these will help us move forward and deliver on the priorities that our communities identified when they worked with us to devise our new Council Plan, Connect 2022-2027. Our comprehensive public engagement exercise identified a series of outcomes we will work towards under three cross-cutting themes of People, Progress and Planet. Looking ahead, into the first year of that new Council Plan, our budget for 2022/2023 was approved by Council on 23 February 2022. It includes two major capital programmes that will see the council invest a further £82.284m in General Services and another £52.230m through the next phase of our Housing capital programme. The 2022/2023 budget also identified more, one-off investments, including a programme of pavement repairs and tackling fly tipping, early intervention to promote the wellbeing of vulnerable children and young people, grants for community-led projects, and cash to support and value the work of the area’s volunteers. However, we are under no illusions that further challenges lie ahead, not least as we continue the work of helping communities and local businesses become more resilient and thrive in the wake of the Covid pandemic. It has to be said that none of that work would be possible without the ongoing efforts of the council’s fantastic workers. We are very proud of – and frequently humbled by - the efforts of our own staff and their colleagues in South Lanarkshire Leisure and Culture. Our thanks also go to our public sector partners who help us protect lives and support livelihoods, and to those community and volunteer groups that also contribute so much. Once again, we must also thank our residents for understanding the challenges we continue to face. Our pledge is to continue to work with them to make sure South Lanarkshire remains a great place to live, learn, visit, and to do business. 57
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4 South Lanarkshire Council – Management Commentary Background The Management Commentary will provide the reader with key messages in relation to the council’s year-end financial position and also its performance for the year 2021/2022. For the second year running, the global coronavirus pandemic and the council’s response to this, has continued to impact significantly on the council’s financial and operational performance during the year. A summary of this is included in the commentary. As well as providing a summary of 2021/2022, this commentary also looks forward. The council’s future financial plans and the challenges, risks and uncertainties it faces, while trying to maintain service delivery and meet the needs of the people of South Lanarkshire, are outlined. This includes reference to the longer-term impact of the pandemic and the recovery process which is still ongoing. 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, employing the commitment, dedication and ability of our 14,894 employees (12,488.11 full time equivalents). The council’s five Resources, their functions and number of Full Time Equivalent employees: Council Resource Functions FTE Community and Enterprise Resources Facilities, Waste, Fleet, Planning and Economic Development, Roads 2,168.47 Education Resources Early Years, Schools, Quality and Improvement 5,947.67 Finance and Corporate Resources Finance, Information Technology, Personnel, Administration, Legal and Licensing, Communications and Strategy 776.86 Housing and Technical Resources Housing and Property Services 1239.79 Social Work Resources Adults and Older People, Children and Families, Criminal Justice 2,355.32 The Council’s 5 Resources serve around 320,000 people and this population is expected to both grow and age. An increase of 2% is anticipated in the 10 years to 2028 (based on the 2018 based projections) and a further 0.8% increase is projected for the years 2028 to 2038. 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. The Council has an aging population. The number aged between 65 and 69 are expected to rise significantly and the growth in those aged 65 to 79 and 80+ is projected to be greater than in Scotland as a whole. Offsetting this, the numbers in the lower age groups (from the under 5s to the 50 to 64 group) are projected to decline over the 2018-2038 period. These changes in population influence how the council and its partners shape future service design and delivery and feed into the Council Plan. The Council Plan The Council Plan, Connect is the key strategic document that shapes the work of the council. It sets out the key actions to be delivered over five years, around 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. The last Council Plan, for 2017-2022 (Council Plan, Connect 2017-2022), was formally approved by the Council in December 2017. A mid-term review was conducted in 2019 which simplified the Council Plan and – following recommendations from the council’s Best Value Assurance Review (BVAR) – strengthened the links between the Council Plan and the Community Plan. As part of the BVAR, Audit Scotland also required the council to concentrate more on involving the community in decision-making through community engagement. Throughout 2021/2022 and into 2022, the Council has been making preparations for a new Council Plan. In line with the BVAR recommendations and to further align the work of the council and the partnership, a joint review of the Council Plan and Community Plan was carried out to develop a common vision and common set of outcomes, and do so using an extensive and multi-layered engagement and consultation process; and present the plans to Elected Members and the CPP Board at the first opportunity after the Local Government Elections of 5 May 2022. 58
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5 From the start, it was agreed that the new Council Plan and Community Plan should be built from communities up, using engagement to place residents’ views and aspirations front and centre. Before any other work was undertaken, an initial phase of engagement therefore was carried out between March and August 2021, during which communities throughout South Lanarkshire were asked to identify the main priorities for their neighbourhoods. This engagement exercise involved residents answering a short, open question survey on their priorities. The survey was promoted extensively through social media and the local media, and by the Participation and Engagement Group and Community Planning Communications Group. At the close of the engagement period on 8 August 2021, more than 3,300 responses had been received. Initial examination of the feedback from the survey identified themes around Education, Communities and Environment, Health Inequalities, Housing, Children’s Services and Inclusive Growth. In-depth analysis of this feedback helped shape a further phase of engagement, when ‘Community Conversation’ focus groups took place between August and October 2021. These involved more than 200 residents taking part in 27 group conversations. This was the largest consultation exercise ever carried out by the council. It added to a body of existing knowledge that had already emerged from work developing a number of neighbourhood plans. The aspiration is that eventually all parts of South Lanarkshire will have their own community-led Neighbourhood Plan, and these will inform and shape the council’s strategic plans going forward. In addition, feedback had been received from the likes of the Lived Experience Fund and events such as the Community Conference held in December 2019, as well as the robust data set which exists for South Lanarkshire. Online seminars were held with Elected Members on 10 June 2021 and then again on 31 January 2022 to keep them updated on progress. Both events were well-attended, with Elected Members engaged and offering their support for the process. The CPP Board also received regular updates. Three cross-cutting themes emerged from the community responses and feedback, around 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 The council’s response to the Coronavirus pandemic Since the start of the coronavirus pandemic in March 2020, and in the various phases since, the council has proven itself able to respond to unprecedented circumstances and the pressures arising from being a Category One Emergency Responder. As the pandemic progressed during 2021/2022, and the restrictions reduced, the council’s focus continued to adapt to deal with the many and varying challenges. During the year, there has continued to be disruption to ‘business as usual’ impacting on our service delivery, albeit this has lessened as the year has progressed with the emphasis as the year ended being more on the payment of grants and financial rather than physical means of support. The payment of grants on behalf of the Scottish Government has been a significant function for the council throughout the pandemic. These are known as Agency payments, where the council acts as a post-box for the financial support provided by the Scottish Government to individuals and businesses. These amounts are not included in the council’s financial position but for information, the total amount of Agency payments facilitated by the council in 2021/2022 is £39.284 million. While these payments do not feature as part of the Council’s financial position, the effort in administering them for a second year cannot be understated and was a key function of the Council as it played its part in supporting the Government and the Community, in managing the impact of the global pandemic. The following bullets show the magnitude of the activities mentioned above, as well as the financial scale of the COVID operations managed by the council during 2021/2022: 59
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6 Wellbeing and assistance: • 52,822 calls to/from Community Wellbeing Helpline • 1,750 community responses to the wellbeing helpline • 1,880 food packs supplied directly to vulnerable groups such as homeless and sheltered housing • 291,984 meals distributed directly to individuals and families or to food organisations in communities Support for Education: • More than 1,100 pre-loved items were donated to the 2021 winter clothing campaign led by Education • 14 “Sensational Summer Sessions” clubs were successfully delivered by the council during the summer holidays, nearly 800 children attended including 151 with additional support needs. • 565 households referred to local food banks. Businesses helped and grants issued: • 51,014 Free School Meal payments (School Holidays and Self- Isolation) totalling £1.590 million • 9,622 Self-Isolation Support Grant (SISG) payments of £500 totalling £4.811 million • 4,256 payments to taxi driver/operators under the 2021-22 scheme, totalling £4.779 million • 351 business grants made under the Covid-19 December/January Hospitality Fund totalling £2,178,900 • Assisted 232 businesses with Scottish Government funded discretionary grants of £2.7million • 34,141 Low Income Pandemic Payments of £130 to low-income households totalling £4.438 million • 11,307 Crisis and Community Care Grants from the Scottish Welfare Fund totalling £3.342 million • 28,549 Scottish Child Payments to low-income households totalling £4.278 million • 72 business grants under the Covid-19 Hospitality & Leisure Fund totalling £160,650 • 108 business grants under the Covid-19 Table Service Fund totalling £290,000 • 17 grants under the Covid-19 Ventilation Fund totalling £22,185 • 3 grants under the Covid-19 Nightclub Closure Fund totalling £135,000 60
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9 Since the start of the pandemic, the council has received invaluable support from local people within our communities, partners and third sector providers in responding to the pandemic. This was acknowledged as part of the 2020/2021 Annual Accounts and must be again. This support continued to expand the council’s capacity to respond during the year. Moving forward, the Council’s Budget for 2022/2023 includes investment monies to support volunteers by establishing an SL Volunteering Strategy. This will enable recruitment and training of volunteers and will ensure every volunteer knows they are valued. The financial impact of this pandemic on the council is detailed in a later section of this commentary. Moving into the early part of 2022/2023, the level of restrictions has much reduced and the financial pressures on the Council and its group members, such as South Lanarkshire Leisure and Culture Trust, are also reducing. However, we are still in the recovery stage as we are still experiencing residual additional costs and lost income. In 2021/2022, the council experienced additional costs in relation to Children and Families, increased demand for Waste Services and a significant loss of income. As the country continues to move towards normality in the Spring of 2022, the Council will continue to adapt as required. The residual financial implications of the pandemic into 2022/2023 will continue to be monitored and reported as required. Brexit From 1 January 2021, the UK has operated under a new framework as agreed in the UK-EU Trade and Cooperation agreement. While we are only 1 year into the new arrangements, the impact of Brexit is noted as one of the council’s key risks, as the uncertainty of the financial and operational impact cannot yet be confirmed. 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 previously completed Cathkin Relief Road and the recently completed 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. Council Performance The council rates its performance using a number of measures. These are aligned to the priorities and objectives set out in the Council Plan. A total of 264 measures were identified within Resource Plans for 2021/2022. Of those 108 (41%) are linked to the achievement of the Connect Objectives 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. In addition, the Connect 2017-2022 Quarter 4 Progress Report 2021/2022 will be reported to the Performance and Review Scrutiny Forum on 16 August 2022. As at the end of Quarter 4 (31 March 2022), 79 (73%) measures had been achieved. Of the remaining measures, 2 experienced significant issues, 9 experienced minor issues and 18 are included for information only or the statistics are not yet available for 2021/2022. 63
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10 Status of performance measures Number of performance measures Blue (Complete – projects only) 16 Green 63 Amber 9 Red 2 Report later/contextual 18 Status of council performance measures The first of the ‘red’ status measure relates to the percentage of total household waste that is recycled. The target of 50% was not achieved (actual 37.2%) due to higher residual waste tonnages collected at the kerbside due to Covid-19 and homeworking, high residual waste content in bulk uplifts (black bag waste accepted), and more non-recyclable waste being disposed of in Household Waste Recycling Centres. The second ‘red’ status measure related to work with partners to bring 15 long term empty homes into use during 2021/2022. Eleven long term empty homes were brought back into use, missing the target by four. The performance of most of the 9 ‘amber’ status measures was adversely affected by the forced closure of services or operation under strict restrictions as a consequence of the global COVID-19 pandemic. 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 (2020/2021) show that across the 95 indicators in that year’s suite, the council’s performance improved against 33 (35%) indicators, remained the same against 2 (2%) indicators, and declined for 31 (33%) indicators. There are 29 (30%) indicators for which there are no results or trend information available for 2020/2021. Council performance against 95 indicators (latest available information – 2020/2021) Number (%) of Indicators 2018/19 Number (%) of Indicators 2019/20 Number (%) of Indicators 2020/21 South Lanarkshire performance ↑ improving performance in SLC 34 (38%) 35 (39%) 33 (35%) ↓ declining performance in SLC 34 (38%) 45 (49%) 31 (33%) ↔ No change in performance in SLC 3 (3%) 1 (1%) 2 (2%) Results / trends not available 18 (21%) 10 (11%) 29 (30%) Comparison with Scottish Average ✓ SLC results better than Scottish average 44 (49%) 42 (46%) 31 (33%) X SLC results worse than Scottish average 28 (32%) 39 (43%) 35 (37%) ↔ SLC results same than Scottish average 3 (3%) 0 (0%) 0 (0%) ---- Results not available 14 (16%) 10 (11%) 29 (30%) IMPROVe Performance Blue (complete - projects only) Green Amber Red Report later/Contextual 64
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11 In terms of South Lanarkshire’s figures relative to the Scottish results, our performance was better than the Scottish average for 31 (33%) indicators and worse for 35 indicators (37%). 65
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12 66
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13 Financial Performance General Fund Position at end 2021/022 The council’s General Fund budget for 2021/2022 was approved by the Council on 24 February 2021. This is the operational budget of the Council. At the end of 2021/2022, the Council’s budget was in a breakeven position after making a number of agreed Transfers to Reserves. These transfers are for ring-fenced monies or for commitments which will fall into future years including in relation to commitments delayed due to the Coronavirus pandemic. The full position for the council’s Resources is detailed in the Revenue Budget Outturn 2021/2022 reported to the Executive Committee on 29 June 2022. This position takes account of the achievement of £8.743 million of the £11.183 million of approved savings for the year, with a significant portion of the remaining £2.440 million being impacted on by the pandemic. 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): Council Resource Spend £m Community and Enterprise Resources 123.982 Education Resources 378.493 Finance and Corporate Resources 51.967 Housing and Technical Resources 19.080 Social Work Resources 189.339 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 (overspend £3.292 million) mainly due to expenditure on COVID-19, offset by Scottish Government funding. In addition, there was additional planning and building standards income. • Education Resources (underspend £6.181 million) due to the timing of spend on multi-year programmes such as Early Learning and Childcare and Pupil Equity Fund. These monies will be carried into 2022/2023. • Finance and Corporate Resources (overspend £7.356 million) mainly due to expenditure on COVID-19, which has been offset by Scottish Government funding in the council’s overall position. • Housing and Technical Resources (overspend £0.541 million) mainly due to expenditure on COVID-19, which has been offset by Scottish Government funding in the council’s overall position. • Social Work Resources (overspend of £0.916 million) mainly reflecting an underspend in Adults and Older People, offset by an overspend on Children and Families due to residential placement pressures and also COVID-19 which is offset by Scottish Government funding. • Loan Charges (underspend of £1.421 million). Due to the level of the council’s cash balances, the requirement to borrow was less than anticipated, resulting in a reduction in interest costs. • Council Tax/Council Tax Reduction Scheme (over-recovery £3.058 million) mainly as a result of lower demand for the Council Tax Reduction Scheme and collection of council tax arrears for previous years. Community and Enterprise Resources Education Resoures Finance and Corporate Resources Housing and Technical Resources Social Work Resources 0 50 100 150 200 250 300 350 400 Spend Across Resources (£m) £m 67
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14 The position shown includes 2021/2022 spend on COVID-19 (£36.880 million) which was funded by a combination of Scottish Government Grant and funding carried forward in reserves from 2020/2021. This will be further discussed later in this commentary. The Comprehensive Income and Expenditure Statement of the Accounts (page 50) sets out the council’s year-end position 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 49 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 49) and then on to the Comprehensive Income and Expenditure Statement (page 50). 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 Building the EFA Net Expenditure Chargeable to the General Fund and HRA Services £m £m £m £m £m £m £m Community and Enterprise 119.475 122.767 (3.292) 122.767 - 122.767 122.767 Education 376.791 370.610 6.181 370.610 - 370.610 370.610 Finance and Corporate 43.738 51.094 (7.356) 51.094 (11.758) 39.336 39.336 HRA - - - - (2.917) (2.917) (2.917) Housing and Technical 18.141 18.682 (0.541) 18.682 - 18.682 18.682 Social Work 186.372 187.288 (0.916) 187.288 - 187.288 187.288 Joint Boards 2.314 2.313 0.001 2.313 - 2.313 2.313 Corporate Items - - - - 3.295 3.295 3.295 Net Cost of Services 746.831 752.754 (5.923) 752.754 (11.380) 741.374 741.374 Other Income and Expenditure (746.831) (818.828) 71.997 (818.828) 73.170 (745.658) (745.658) (Surplus) / Deficit on Provision of Services - (66.074) 66.074 (66.074) 61.790 (4.284) (4.284) The council’s final reported outturn position for the year is a breakeven position (surplus of £66.074 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 surplus of £4.284 million which corresponds to the figures in the first column on the Expenditure and Funding Analysis on page 49. 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 CIES page 50) to arrive at a deficit on the provision of services of £75.791 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 52 reconciles the financial position shown in the Comprehensive Income and Expenditure Statement (page 50) to the movement on the council’s Reserves (pages 66 to 70). During the year, the council drew money down from reserves, to meet current commitments or for agreed use in the 2021/2022 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 Pupil Equity funding and Early Years expansion to meet future commitments. Money was also set aside for future budget strategies. The balance on the council’s total General Fund Reserve is £122.424 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 £152.186 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 2021/2022 are detailed in Note 12. 68
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15 £00 £000 Total Usable Reserves 152,186 Less: General Fund (committed incl budget strategies) 109,381 Repairs and Renewals (incl Winter Maintenance) 6,496 Capital Funds incl Capital Receipts Reserve 5,730 Insurance Fund 1,295 Housing Revenue Account 16,241 Total Committed Usable Reserves 139,143 Uncommitted General Fund 13,043 Note 12 shows that the council’s General Fund reserve comprises an earmarked element (£105.226 million) and an unearmarked balance of £17.198 million, with £4.155 million of this being approved for future budget strategies leaving £13.043 million uncommitted. 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 (£105.848 million in 2021/2022) and the total income received (£108.765m in 2021/22), 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 108-109. At the end of financial year 2021/2022, there was an underspend of £2.917 million on the Housing Revenue Account. This was transferred to the Housing Revenue Account Reserve. The Reserve was also increased by £0.540 million for income received through Council Tax from owners of second homes. These monies are ring-fenced for social housing. These transfers mean an increase of £3.457 million in the Housing Revenue Reserve, taking its total to £16.421 million at the end of 2021/2022. These monies will be carried forward to future years to fund the ongoing impact of welfare reform, 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 51) shows the position as at 31 March 2022 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 2022 as well as the previous year for information, is shown below. 69
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16 The main change year on year is the increase in Long Term Fixed Assets (Property) which reflects the council’s spend on its property assets, as well as an increase in the value of its council housing stock. The long term liabilities decreased mainly due to a reduction in the pension liability and in long term borrowing. Whilst the pension liability is indicative of a broad position, the reader should be aware that the council is meeting its pension costs on an annual basis. Further information is noted on pages 85-90. The council’s assets and liabilities are funded by an equivalent level of Reserves. These Reserves comprise Unusable Reserves of £2,061.3 million (maintained for accounting purposes only) and Usable Reserves of £152.2 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 52 with more detail provided in Note 13 (page 68) and the Accounting Policies (pages 100 to 107). 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 below. Council Resource Spend £m Community and Enterprise Resources 34.685 Education Resources 14.376 Finance and Corporate Resources 1.987 Housing and Technical Resources 5.485 Social Work Resources 5.054 Housing Capital Programme 73.181 The new build Rooftop Nursery in East Kilbride is shown in the image below. 70
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17 The site of the new Care Hub and Housing in Blantyre is shown in the image below. The General Services Capital Programme spend was £61.587 million in 2021/2022, equating to 72% of the budget available. The underspend reflects the continued impact of the Global Coronavirus pandemic as well as 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 works on the 1,140 Hours project at Clyde Terrace, Place Based Investment Projects, a number of City Deal Community Growth Area and Roads projects, Information Technology infrastructure works including the new Audio Visual project in the Committee Suite, investment and essential works on various council buildings, two Social Work IT projects (Community Alarms and the Replacement for the SWIS+ case management system) and works on a care facility in Blantyre. Significant project spend during the year has been incurred on a number of build projects including • the dualling of Greenhills Road in East Kilbride (part of the City Deal programme of works), • significant spend on roads carriageways, • Newton Farm Primary School Extension and • 1,140 Hours Nursey Expansion Programme. The General Services Programme has been funded from a combination of grants from various funding bodies (including Scottish Government) and partner organisations (£49.648 million), borrowing (£10.196 million) and contributions from the council’s Revenue Budget (£1.743 million). As noted above, the ongoing restrictions in relation to the COVID-19 pandemic had an impact on the level of spend in the early part of the financial year. This impact is not anticipated to continue into the new financial year. Any impact on the supply and cost of materials during the year was managed by officers who reprofiled the projects as required in order to maximise spend and delivery. The Housing Capital Programme spent £73.181 million in 2021/2022, 92% of its revised budget target. Part of this underspend related to the New Supply Programme, with a lower number of buy backs than our target due to current market conditions. The remainder of the underspend related to our ongoing investment in stock which has been affected by the Covid-19 restrictions. 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. As noted above, the level of spend on the Housing Programme has been impacted by the COVID-19 lockdown. This could continue into the new financial year and impact on the 2022/2023 Programme. 71
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18 Work in progress at the Law new build housing project shown in the image below. The Capital Budget Monitoring Final Outturn – 2021/2022 for both Programmes was reported to the Executive Committee on 29 June 2022. 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 2021/2022 (Government Grant plus Council Tax Income) is 5.18% 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 2021/2022 Forecast £m 2021/2022 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) 1,324 1,151 964 1,298 1,180 993 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 5.56% 16.21% 5.18% 16.04% 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 £26 million less than forecast due to a reduction in borrowing required to fund the 2021/2022 capital programmes. This reflects the timing of spend across both capital programmes (General Services and HRA), as well as additional funding received, meaning that we needed to borrow less. For both External Debt levels as well as the level of Gross Borrowing, the actual is £29m higher than the target for the year as a small proportion of the Council’s borrowing requirement for 2021/2022 was taken towards the end of the financial year. 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. 72
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19 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, reflecting additional funding from the Scottish Government to assist with the response to COVID-19. For the Housing Revenue Account, the ratio is also lower than forecast due to actual borrowing costs being slightly higher than forecast, with this being offset by increased income. Financial Planning The council is operating in a climate of financial pressures with increasing cost burdens such as pay award and above average contract inflation, reducing the spending power of grant settlements. There is also the added financial burden of the residual spend from the Coronavirus Pandemic. Financial Planning is a key tool in managing these pressures and the council has a number of key documents which assist in this, and includes a Long Term Revenue Budget Strategy and a Long Term Capital Strategy. A Revenue Budget Strategy is prepared every 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. The Revenue Budget Strategy for 2023/2024 was reported to the Executive Committee on 29 June 2022. Financial Outlook including Risks and Uncertainties COVID-19 These Accounts cover a second full year of the pandemic, from April 2021 to end March 2022. The costs of responding to COVID-19 during 2021/2022 include the full cost of recovering from the various phases of lockdown including additional costs of new services implemented, the ongoing loss of income experienced by council services, and the costs of bringing council services back on-stream and potentially working in a new and different way. The financial impact on the council and the resulting loss of income during this period was closely monitored during the year and the final position is included in the 2021/2022 Outturn report to the Executive Committee on 29 June 2022. The report summarises the position and shows that after funding the costs incurred in 2021/2022, there is funding remaining to be carried into 2022/2023 of £23.856 million. Outturn £m Additional Resource Spend 32.596 Lost Income 3.625 Unspent Budget (0.541) Add: Capital Spend 1.200 Total COVID-19 Expenditure 36.880 Total COVID-19 Funding 60.736 Funding Received in 2021/2022 to be c/f to 2022/2023 23.856 The total COVID-19 carry forward is £30.061 million (£23.856 million from 2021/2022 above and £6.205 million balance from 2020/2021) and is split between Specific Funding of £9.378 million and General Funding of £20.683 million. The 2022/2023 Revenue Monitoring report presented to members in June 2022 includes details of how these monies will be allocated in the new financial year. Outlook The council approved its 2022/2023 revenue budget of £834 million in February 2022. The council’s Budget Strategy beyond 2022/2023 indicates an expectation of financial pressure arising from a number of areas including grant reductions, pay awards and inflation. The overall result of these pressures is a significant budget shortfall for the coming years, and a continued need to make savings. Specifically for 2023/2024, the Revenue Budget Strategy was presented to Council on 15 June 2022. This Strategy was based on the best information available and assumed a reducing level of Government Grant going forward, a number of core budget items such as pay awards and demand / growth, and it also includes a number of exceptional budget items including above the norm inflationary increases in PPP contractual payments and the estimated continual increase in utility costs. Including the benefit of corporate solutions totalling £5.064 million, the savings requirement for 2023/2024 is £32.477 million. Moving forward, the position for the years beyond 2023/2024 was presented to Council in February 2022. These estimations will be refreshed as part of a full Budget Strategy and presented to members later in the financial year. The current savings required across the coming years is summarised below: 2024/25 2025/26 2026/27 £m £m £m Total 21.220 27.866 11.806 73
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20 Risks and Uncertainties In addition to the impact and uncertainty brought about by the global coronavirus pandemic, there are a number of other risks and uncertainties faced by the council. In looking at these areas of risk and uncertainty, 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 23. 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 September 2021. 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 detailed below. 1. COVID-19. The council does not provide an adequate response to or recovery from the pandemic: maintaining critical services; delivering emergency response commitments as required as a Category One Responder; and protecting the wellbeing of employees and service users as far as reasonably practicable. This is a key risk as responding to/recovering from the pandemic will impact on everything that the council does. 2. Reduction in external funding/income received by the council, as well as increased demand for services, results in savings difficulties. This is a key risk due to the potential impact it can have on the council’s financial position. The impact is mitigated by a sound financial planning process and good financial controls. 3. Failure to meet the council’s sustainable development and climate change objectives. The council has a legislative requirement to reduce carbon emissions, adapt to a changing climate and act sustainably as a result of public sector climate change duties. Sustainable development and Climate Change is embedded within the Council Plan, Connect, as well as relevant Plans, Policies and Strategies. Progress in this area is reported to the newly formed Climate Change and Sustainability Committee. 4. The council is materially affected by the recommendations arising from the independent review of Adult Social Care in Scotland. The findings of the Feeley Review were published in February 2021 and contained a number of recommendations. One of these was the establishment of a new national care service. It is expected that a Bill will be brought before parliament later this year. The council will continue to monitor developments in this area and develop appropriate control measures where required, once more detailed proposals from the Scottish Government are known. These key risks as well as the remainder of the council’s high-level risks are shown below: Key risks: • Reduction in external funding and fees/income received by the council, as well as increased demand for services, results in savings difficulties. • Covid-19 • The council is materially affected by the recommendations arising from the independent review of Adult Social Care in Scotland • Failure to meet the council’s sustainable development and climate change objectives • The council fails to meet statutory and legislative duties in respect of public protection • Failure to fulfil emergency response commitments befitting the council’s status as a Category One (emergency) responder. • Historic Childhood Abuse • Fraud, theft, organised crime and cyber attacks • Information Governance not subject to adequate control • The council does not fully deliver the strategic outcomes required of the IJB as outlined in their Strategic Commissioning Plan • The council is significantly affected by the impact of the UK leaving the European Union • Procurement activity is affected by a lack of resources, non-compliance or legal challenge • IT development and functionality does not keep pace with changing service requirements • Lack of capacity and skills to meet increased service demands • Insufficient response to adverse weather events • 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 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. 74
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21 South Lanarkshire Council key risks 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 98-99 of the Accounts. Our Group The council has adopted the recommendations of the Accounting Code of Practice in the United Kingdom 2021/2022 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 £128.682 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 112-124. There has been no change to the Group membership since 2020/2021. 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 75
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22 Paul Manning Executive Director, Finance and Corporate Resources Cleland Sneddon Chief Executive Councillor Joe Fagan Leader of the Council 76
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23 South Lanarkshire Council Annual Governance Statement 2021/2022 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 2021/2022 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, Connect 2017-22 sets out the council’s vision, values and objectives and what difference this will make to the residents and communities of South Lanarkshire. A mid-term review was finalised during 2020. The council is also a statutory Community Planning Partner and the Community Plan 2017-27 provides a common vision for the South Lanarkshire Community Planning Partnership and sets out how the partners aim to achieve that vision. An update of the plan was completed during 2020/2021. The council has set the framework for strong corporate governance by having a clear vision and values which are outlined in the diagram below: - 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 2022 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. 77
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24 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 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. 78
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25 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 Standards Commission for Scotland issued one decision notice, finding that a councillor had acted in breach of the Councillors Code of Conduct. This was reported to Council in compliance with Section 18 Ethical Standards in Public Life, etc. (Scotland) Act 2000. • 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 2021/2022 was assessed as being within the top rating band of “good”. • Legal Services maintained an overview of Pandemic 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 suite of dedicated Pandemic pages providing advice, help and public health information were created and maintained on the council website. • 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 will continue 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. 79
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26 • 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 Inclusion Strategy 2020 to 2023 sets out the actions that the Council will take to assist those people who are unable to get online to access services digitally. The Council also leads on a partnership Digital Inclusion Group. • 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: • The Council adapted approaches in response to the Pandemic to ensure processes continued to be effective, efficient, and transparent. • The Council has a Capital Strategy that has a long-term outlook on future capital investment (up to 2027/2028). 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 2017 to 2022 and Community Plan 2017 to 2027 have clearly defined economic, social, and environmental outcomes to be delivered during the period. In light of the Pandemic, priorities for both plans will be reviewed during 2021/2022. • A new 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 has been established to oversee the implantation of the Strategy and met for the first time in August 2021. A Community Wealth Building Progress Group has been set up to ensure that timescales within the action plan are met. • 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 2017 to 2022 which sets out the Council’s strategic outcomes 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 new strategy is in development and will be published in April 2022. • The Council’s Climate Change and Sustainability Committee oversees the delivery of the Sustainable Development and Climate Change Strategy 2017-2022, the council’s transition to carbon neutrality and climate resilience. • The Council’s new Procurement Strategy 2020-2023 which will be 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 2021/2022. • 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: • Key services were adapted, and delivery was maintained throughout the Pandemic in line with Public Health guidance and Government guidance and legislation. • There is a standard approach to identifying savings across the Council. The Council’s efficiency 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. There were over 470 responses to the online consultation. 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 Act) sets out those Adult Care Services that are delegated to the Integration Joint Board (IJB) as set out in the South Lanarkshire 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 annual IJB Directions. 80
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27 • 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. 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 has been developed and rolled out during 2021. • 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. • Three surveys of all Council employees were undertaken during 2021/2022. The 3rd related to working from home/hybrid working, the results will be available shortly. Feedback from this survey will be used to inform future 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 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 2020/2023 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. • In terms of the 2020/2021 Local Government Benchmarking Framework results, based on the information available at the end of January 2022 and in light of the impact of Covid19, the council is performing better than the Scottish average levels for one third of the indicators. The results have been analysed and an action plan developed which will be monitored by the Senior Management Team. • 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: • 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 a revised 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, for example to process pandemic grants, Internal Audit has advised on key internal controls that should be maintained through the identification of alternative controls and has been involved in the development of new systems. 81
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28 • The Information Governance Board is satisfied that Resources have followed the Information Governance operational arrangements in order to promote effective arrangements for the safe collection, storage, use and sharing of data, including processes to safeguard personal data. • 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. • The cost of the pandemic on the council’s budgets has been closely monitored and regular reports have been presented to the Senior Management Team and Committee. • External Audit of the Council’s accounts is robust and a “clean audit certificate” was issued for 2020/2021. • 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 has completed a self-assessment using the principles of the CIPFA Financial Management Code and an action plan has been developed to ensure full compliance by March 2022. Principle G: Fair, Open and Sustainable; Implementing good practices in transparency, reporting, and audit to deliver effective 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 2020/2021 annual audit report, the external auditor commended the Council’s annual governance statement as good practice for the second year. • All Directors completed their annual Statement of Assurance and where 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 Organisation (ALEO) 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 and re-published on the Council’s website. • Whilst temporary decision-making arrangements were put into place as a result of the pandemic restrictions on people gathering, all agendas, reports and decisions continued to be published (except those exempt under the Local Government (Scotland) Act 1973) on the council’s website. Arrangements were put in place for subtitled recordings of Committee meetings which can be found on the council’s YouTube page. 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. • Internal Audit changed how their findings are presented to the Risk and Audit Scrutiny Committee to improve scrutiny. • 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. During 2020/2021, the council, its partners and local community organisations continued to strengthen the partnership approach in response to the Pandemic. In 2021/2022 the council continues to manage the impacts of the Pandemic through robust resilience arrangements and controls. As the council has moved through the different phases of response and recovery, changes to governance arrangements have been made to comply with national guidance and legislation. New ways of working have been put in place to continue to maintain the delivery of essential business of the council and to respond to the Pandemic. Priority services have been maintained throughout the Pandemic and many new services/processes established. Throughout the year, schools, nurseries, etc. have adapted in accordance with national decisions and guidance. 82
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29 Costs associated with the Pandemic have been met from funding provided by the Scottish Government and the council will continue to monitor the financial impact of the Pandemic into 2022/2023 and beyond. This will include working with South Lanarkshire Leisure and Culture on the impact of the Pandemic on their business and their recovery. Plans for returning to ‘business as usual’ and ‘Pandemic recovery’ developed during June 2020 are being reviewed. The council and the Community Planning Partnership are currently reviewing their priorities which will be informed through ongoing dialogue with local communities, organisations, and businesses. As the Pandemic response eases, recovery will be a significant area of work for the council and its partners and is highlighted as such in Section 7 of this statement. 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 Code. The council has reviewed the principles of the FM Code as part of its internal governance process. A self-assessment was carried out during the shadow implementation year (2020/2021) which identified that the Council had fully embedded 14 of 17 criteria as part of its normal business by the end of the shadow implementation year (2020/2021). This highlights that the council already has a strong approach to financial management and financial resilience including demonstrating value for money, strong governance and controls and adherence to professional guidance, and our approach to financial management and reporting (including budget setting and medium to long term planning). For the remaining three principles which were not fully embedded, actions were agreed which will allow us to further embed and develop our existing financial management controls and measures to provide continued comfort on financial resilience. The action plan is summarised below and with progress up to end of March 2022: - 1. In relation to financial resilience this will be included in a future Budget Strategy paper presented in 2022. 2. As part of the annual budget consultation, we are embedding the 2020/2021 approach going forwards. 3. We will continue to embed options appraisal across the Council. 6. Review of Effectiveness The review of governance arrangements for 2021/2022 has also considered the following assurance outcomes: - 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 2022. 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 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. 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 2022. 7. Significant Governance Areas The 2020/2021 Annual Governance Statement identified 12 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 2020/2021. Of these areas, three have progressed and are now embedded in our processes, the other nine remain as significant areas of action for the council moving forward into 2021/2022 and will continue to be monitored as such. Through the 2021/2022 annual governance review, the following areas which outline the actions being taken to address them have been identified as significant areas of work for the council during 2022/2023. 83
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30 No. Areas identified in 2021/2022 Actions Lead Officer 1 COVID-19 Pandemic The council will continue to respond to matters arising from the COVID-19 Pandemic The council will continue to monitor national guidance; maintain ongoing resilience arrangements; and implement further measures as and when required in response to the Pandemic. Corporate and Resource risk registers will continue to be monitored and updated to reflect national and local developments. Chief Executive and all Directors 2 COVID-19 Pandemic recovery Recovery actions As conditions continue to improve, the council will deliver the right services in the right way, for the benefit of our residents and communities. Chief Executive and all Directors 3 Cyber Resilience Compliance with legislative and regulatory policy A programme of actions to maintain cyber security and resilience in 2022/2023 will include: • Refresh/retiral of legacy systems, network equipment and end user devices (mobile phones, PCs) • Programme of security patching of all sys- tems • Compliance with PSN and Cyber Essentials schemes • Incident response • Officer training and awareness (e.g., phish- ing) • Data security reviews as part of new system installation • Security monitoring Director of Finance and Corporate Resources 4 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 2023/2024 will be updated and presented to councillors during 2022. Director of Finance and Corporate Resources 5 Integrated 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 during the year 2022/2023 and these Directions were agreed by the IJB at its special budget meeting in March 2022. The council will provide progress updates against Directions for which it is the lead organisation. Director, Health and Social Care, South Lanarkshire Health, and Social Care Partnership 6 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 Director of Finance and Corporate Resources 84
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31 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 will be presented to the CPP Board for approval in June 2022. Following this, further recommendations will be made to the CPP Board in September 2022 detailing the changes required to governance structures in order to deliver the plan. Review work continues with the partners to produce these recommendations. 7 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 will be presented to the Commission in early summer 2022 for approval. Year 2 Actions identified in the approved Action will be progressed in 2022/2023. Director of Finance and Corporate Resources 8 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 will be developed and presented to Council for approval together with the Council Plan and Community Plan. Director of Community and Enterprise 9 Economic Strategy A new Economic Strategy 2022-2027 is being developed for approval by Council. The draft strategy is scheduled to be presented to Council in June 2022 as part of a suite of documents accompanying the draft Council Plan and Community Plan. The proposed vision within the Strategy is “to make South Lanarkshire a flourishing, green, dynamic and equitable place for communities, visitors, businesses and investors”. The Strategy will be framed around the 3 themes of sustainable, inclusive, economic development- People, Place and Business. 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. Director of Community and Enterprise 10 Implement the outcomes following the Cross-Party Working Group review of Outcomes of the Review will continue to be implemented over the course of 2022/2023 and include: - Director of Community and Enterprise 85
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32 South Lanarkshire Leisure and Culture (SLLC) • Presentation of the modernised constitution for the new SCIO model approved by the SLLC Board in February 2022 to the Council for ap- proval in 2022 • Review of various Service Level Agreements that exist for the provision of shared services with the aim of strengthening the SLC/SLLC partnership); and • Continue to engage with community groups on community asset transfer of SLLC assets. 11 Recruitment and Retention Challenges Covid 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 are being refreshed to re- flect the changed environment by 30 June 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 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 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 2022/2023, 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. Councillor Joe Fagan Leader of the Council Signature: Date: 22June 2022 Cleland Sneddon Chief Executive Signature: Date: 22 June 2022 86
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33 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 the Coronavirus (Scotland) Act 2020), 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 2022. Paul Manning Executive Director (Finance and Corporate Resources) South Lanarkshire Council Date: 22 June 2022 87
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35 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. Circular CO/150 sets the amount of salary for Chief Officers and the Chief Executive of South Lanarkshire Council for 2021/2022. 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 2020 (SSI 2021/18). 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 2021/2022 the salary for the Leader of the Council is £43,412. 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 £32,560 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 £486,049 (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 2021/2022, the Council had 18 Senior Councillors and the salary paid to these councillors totalled £443,304. 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 8 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. 88
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36 Table 1 – General Pay Band Disclosure for Senior Employees Annual Remuneration 2021/22 Number of Employees 2020/21 Number of Employees 50,000 - 54,999 364 351 55,000 - 59,999 189 180 60,000 - 64,999 136 138 65,000 - 69,999 52 47 70,000 - 74,999 23 21 75,000 - 79,999 6 4 80,000 - 84,999 1 1 85,000 - 89,999 4 6 90,000 - 94,999 6 5 95,000 - 99,999 11 17 100,000 - 104,999 5 2 105,000 - 109,999 3 1 110,000 - 114,999 1 - 115,000 - 139,999 (Note 1) - - 140,000 - 144,999 2 4 145,000 - 149,999 1 1 150,000 - 159,999 (Note 1) - - 160,000 - 164,999 - 1 165,000 - 179,999 (Note 1) - - 180,000 - 184,999 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. 89
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37 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 2021/22 Number of Compulsory Redundancies 2020/21 Number of Other Departures Agreed 2021/22 Number of Other Departures Agreed 2020/21 Total Number of Exit Packages by cost Band 2021/22 Total Number of Exit Packages by cost Band 2020/21 Cash Value £ 2021/22 Notional CAY Value £ 2021/22 Total Cost Of Exit Packages In Each Band £ 2021/22 Cash Value £ 2020/21 Notional CAY Value £ 2020/21 Total Cost Of Exit Packages In Each Band £ 2020/21 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 2021/2022, therefore the total cost of exit packages shown for 2021/2022 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 (2022/2023). 90
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38 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 of Routes to Work South which is a subsidiary of South Lanarkshire Council. Comparative figures for 2020/2021 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 2021/2022 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 £ 2021/22 Total £ 2020/21 Total £ C Sneddon Chief Executive 184,895 - - - 184,895 164,701 P Manning Executive Director of Finance and Corporate Resources 149,606 - - - 149,606 147,802 V De Souza Executive Director of Health and Social Care (Note 1) (to 30 May 2021) 22,703 (Full year equivalent 141,081) - - 500 (Full year equivalent 500) 23,203 (Full year equivalent 141,581) 140,113 S Sengupta Executive Director of Health and Social Care (Note 1) (from 9 August 2021) 88,855 (Full year equivalent 137,226) - 88,855 (Full year equivalent 137,226) n/a D Lowe Executive Director of Housing and Technical Resources 141,081 - - - 141,081 140,113 T McDaid Executive Director of Education Resources 141,081 - - - 141,081 140,113 M McGlynn Executive Director of Community and Enterprise Resources (to 31 December 2021) 107,319 (Full year equivalent 141,914) - - - 107,319 (Full year equivalent 141,914) 140,113 A McKinnon Acting Executive Director of Community and Enterprise Resources (21 December 2021 to 25 February 2022) 25,763 (Full year equivalent 137,226) - - - 25,763 (Full year equivalent 137,226) n/a D Booth Executive Director Community and Enterprise Resources (from 28 February 2022) 12,618 (Full year equivalent 137,226) 12,618 (Full year equivalent 137,226) n/a L Purdie 105,948 - - 500 106,448 105,078 91
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39 Chief Social Work Officer Total 979,869 - - 1,000 980,869 978,033 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. 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 £ 2021/22 Total £ 2020/21 Total £ D Booth General Manager of South Lanarkshire Leisure and Culture Ltd (to 27 February 2022) 90,731 - - - 90,731 95,296 K Morrison Secretary of South Lanarkshire Leisure and Culture Ltd (from 28 February 2022 to 20 March 2022) General Manager of South Lanarkshire Leisure and Culture Ltd (from 21 March 2022) 6,731 (Full year equivalent 96,155) - - - 6,731 (Full year equivalent 96,155) n/a S Barr Chief Executive of Routes to Work South 70,743 - - - 70,743 69,883 Total 168,205 - - - 168,205 165,179 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 2021/2022. 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 £ 2021/22 Total £ 2020/21 Total £ 92
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40 A Allison Opposition Leader - Conservative 24,623 - - - 24,623 23,630 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2021/22 Total £ 2020/21 Total £ J Anderson Community and Enterprise Resources Committee Chair 28,237 - - - 28,237 27,099 J Bradley Social Work Resources Committee Chair 28,237 - - - 28,237 27,099 A Buchanan East Kilbride Area Committee Chair 22,215 - - - 22,215 21,320 M Chalmers Depute Leader of the Council 28,237 - - - 28,237 27,099 G Convery Depute Opposition Leader - Labour 24,623 - - - 24,623 23,630 P Craig Business Manager Majority Party 28,237 - - - 28,237 27,099 M Devlin Business Manager - Opposition 22,215 - - - 22,215 21,320 M Donnelly Hamilton Area Committee Chair 22,215 - - - 22,215 21,320 I Dorman Planning Committee Chair 28,237 - - - 28,237 27,099 J Fagan Opposition Leader – Labour 28,237 - - - 28,237 27,099 R Lockhart Clydesdale Area Committee Chair 22,215 - - - 22,215 21,320 K Loudon Education Resources Committee Chair 28,237 - - - 28,237 27,099 I McAllan 93
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41 Provost 32,560 - - - 32,560 31,248 Name and Post Salary £ Taxable Expenses £ Compensation for Loss of Office £ Any Other Remuneration £ 2021/22 Total £ 2020/21 Total £ G Miller Finance and Corporate Resources Committee Chair 28,237 - - - 28,237 27,099 C Nugent Cambuslang and Rutherglen Area Committee Chair 22,215 - - - 22,215 21,320 J Ross Leader of the Council 43,412 - - - 43,412 41,662 D Shearer Licensing Committee Chair 22,215 - - - 22,215 21,320 C Stevenson Depute Provost (to 29 June 2021) 6,666 (Full year equivalent 27,033) - - - 6,666 (Full year equivalent 27,033) 25,943 J Wilson Housing and Technical Resources Committee Chair 28,237 - - - 28,237 27,099 Total 519,307 - - - 519,307 517,924 Councillors with Joint Board Responsibilities L Hamilton Depute Convenor Lanarkshire Valuation Joint Board 22,095 - - - 22,095 21,204 Total 22,095 - - - 22,095 21,204 The Council is reimbursed by Lanarkshire Valuation Joint Board for the additional remuneration that the Council paid to the member for being a Depute Convenor (equivalent to Vice 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 2021/2022 - £3,476 (2020/2021 - £3,336) 94
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42 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 2020/2021 were uprated by the Consumer Prices Index (CPI) increase for 2021/2022. The member contribution rates and tiers for 2021/2022 are shown below along with those that applied in 2020/2021: Pensionable Pay Contribution rate 2021/22 Pensionable Pay Contribution Rate 2020/21 On earnings up to an including £22,300 5.50% On earnings up to an including £22,200 5.50% On earnings above £22,300 and up to £27,300 7.25% On earnings above £22,200 and up to £27,100 7.25% On earnings above £27,300 and up to £37,400 8.50% On earnings above £27,100 and up to £37,200 8.50% On earnings above £37,400 and up to £49,900 9.50% On earnings above £37,200 and up to £49,600 9.50% On earnings above £49,900 12.00% On earnings above £49,600 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. 95
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43 Table 6 – Pension Benefits: Senior Employees The Pension entitlement of Senior Employees for the year to 31 March 2022 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 2022 £000 Movement in Accrued pension Benefits since 31 March 2021 £000 Pension Contribution Made by the Council 2021/22 £ Pension Contribution Made by the Council 2020/21 £ C Sneddon Chief Executive Pension Lump Sum 77 122 5 4 32,948 31,787 P Manning Executive Director Pension Lump Sum 66 92 3 - 28,713 28,526 V De Souza Executive Director (to 30 May 2021) Pension Lump Sum 52 66 1 - 4,382 27,042 S Sengupta Executive Director Health and Social Care (from 9 August 2021) Pension Lump Sum 2 - n/a n/a 17,149 n/a D Lowe Executive Director Pension Lump Sum 63 89 3 - 27,229 27,042 T McDaid Executive Director Pension Lump Sum 47 71 3 - 27,229 27,042 M McGlynn Executive Director (to 31 December 2021) Pension Lump Sum 69 106 3 - 20,552 27,042 A McKinnon Acting Executive Director Community and Enterprise Resources (from 21 December 2021 to 25 February 2022) Pension Lump Sum 55 86 n/a n/a 4,972 n/a D Booth Executive Director Community and Enterprise Resources (from 27 February 2022) Pension Lump Sum - - n/a n/a 2,435 n/a L Purdie Chief Social Work Officer Pension Lump Sum 49 75 3 1 20,448 20,280 Total 186,057 188,761 96
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44 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 2022 £000 Movement in Accrued pension Benefits since 31 March 2021 £000 Pension Contribution 2021/22 £ Pension Contribution 2020/21 £ D Booth General Manager of South Lanarkshire Leisure and Culture Ltd (to 27 February 2022) Pension Lump Sum 4 - 2 - 17,511 18,392 K Morrison Secretary of South Lanarkshire Leisure and Culture Ltd (from 28 February 2022 to 20 March 2022) General Manager of South Lanarkshire Leisure and Culture Ltd (from 21 March 2022) Pension Lump Sum 1 - n/a n/a 1,299 n/a S Barr Chief Executive of Routes to Work South Pension Lump Sum - - - - 5,659 5,590 Total 24,469 23,982 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. 97
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45 Table 8 – Pension Benefits: Senior Councillors The Pension entitlement of Senior Councillors for the year to 31 March 2022 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. Name and Post Title Accrued Pension Benefits to 31 March 2022 £000 Movement in Accrued pension Benefits since 31 March 2021 £000 Pension Contribution Made by the Council 2021/22 £ Pension Contribution Made by the Council 2020/21 £ A Allison Opposition Conservative Leader Pension Lump Sum 2 - - - 4,752 4,561 J Anderson Community and Enterprise Resources Committee Chair Pension Lump Sum 7 2 1 - 5,450 5,230 J Bradley Cambuslang and Rutherglen Area Committee Chair Pension Lump Sum 3 - 1 - 5,450 5,230 A Buchanan East Kilbride Areas Committee Chair Pension Lump Sum 5 1 - - 4,287 4,115 M Chalmers Depute Leader of the Council Pension Lump Sum 3 - 1 - 5,450 5,230 P Craig Business Manager Majority Party Pension Lump Sum 6 2 - - 5,450 5,230 M Devlin Business Manager - Opposition Pension Lump Sum 4 - 1 - 5,450 4,115 I Dorman Planning Committee Chair Pension Lump Sum 4 - - - 5,450 5,230 J Fagan Opposition Leader – Labour Pension Lump Sum 3 - 1 - 5,450 5,230 K Loudon Education Resources Committee Chair Pension Lump Sum 3 - 1 - 5,450 5,230 98
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46 Name and Post Title Accrued Pension Benefits to 31 March 2022 £000 Movement in Accrued pension Benefits since 31 March 2021 £000 Pension Contribution Made by the Council 2021/22 £ Pension Contribution Made by the Council 2020/21 £ G Miller Finance and Corporate Resources Committee Chair Pension Lump Sum 5 - 1 - 5,450 5,230 J Ross Leader of the Council Pension Lump Sum 4 - - - 4,755 8,041 D Shearer Licensing Committee Chair Pension Lump Sum 8 8 1 1 5,450 4,115 C Stevenson Depute Provost (to 29 June 2021) Pension Lump Sum 2 - - - 1,286 5,007 Total 75,864 77,825 Councillors with Joint Board Responsibilities L Hamilton Depute Convenor Lanarkshire Valuation Joint Board Pension Lump Sum 4 - - - 4,264 4,092 Total 4,264 4,092 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 Depute Convenor (equivalent of Vice-Convenor) of such a Joint Board. The following recharges were made to Joint Boards for South Lanarkshire Council Councillors holding Depute Convenor roles: Recharge to Lanarkshire Valuation Joint Board in 2021/2022 - £671 (2020/2021 - £644) 99
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47 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 2021 to 31 March 2022 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 171 FTE Employee Number 157.1 Percentage of Time Spent on Facility Time % Time Number of Representatives 0% 35 1% - 50% 130 51% - 99% 2 100% 4 Percentage of Pay Bill Spent on Facility Time Total cost of facility time £534,736 Total pay bill £594,288,191 Percentage of the total pay bill spent on facility time 0.09% Paid Trade Union Activities Time spent on paid Trade Union activities as a percentage of total paid facility time hours 3.31% 100
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48 Councillor Joe Fagan Leader of the Council Date: 22 June 2022 Cleland Sneddon Cleland Sneddon Chief Executive Date: 22 June 2022 101
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49 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 50. 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. 2020/21 2021/22 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 £000 115,882 25,412 141,294 Community and Enterprise Resources 122,767 38,336 161,103 343,155 (13,099) 330,056 Education Resources 370,610 22,002 392,612 35,041 6,302 41,343 Finance and Corporate Resources 39,336 9,486 48,822 Housing and Technical Resources (2,569) (3,411) (5,980) - Housing Revenue Account (2,917) (1,162) (4,079) 22,568 6,522 29,090 - Housing Other 18,682 17,710 36,392 173,119 13,769 186,888 Social Work Resources 187,288 23,817 211,105 1,966 - 1,966 Joint Board 2,313 - 2,313 6,321 (324) 5,997 Corporate Items 3,295 863 4,158 - 108 108 Corporate and Democratic Core (HRA) - 116 116 - - - Non-Distributed Costs – Non Operational Assets (HRA) - - - 695,483 35,279 730,762 Net Cost of Services 741,374 111,168 852,542 (737,581) (47,374) (784,955) Other (Income) and Expenditure (745,658) (31,093) (776,751) (42,098) (12,095) (54,193) (Surplus) or Deficit (4,284) 80,075 75,791 General Fund HRA Total General Fund and HRA General Fund HRA Total General Fund and HRA (75,579) (9,713) (85,292) Opening General Fund and HRA Balance (116,980) (12,784) (129,764) (39,529) (2,569) (42,098) Less/plus (Surplus) or Deficit on General Fund (1,367) (2,917) (4,284) (1,872) (502) (2,374) Transfers to/from Other Reserves (4,077) (540) (4,617) (116,980) (12,784) (129,764) Closing General Fund and HRA Balance (122,424) (16,241) (138,665) 102
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50 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. 2020/21 2021/22 Gross Expenditure £000 Gross Income £000 Net Expenditure / (Income) £000 Gross Expenditure £000 Gross Income £000 Net Expenditure / (Income) £000 174,157 32,863 141,294 Community and Enterprise Resources 200,564 39,461 161,103 378,591 48,535 330,056 Education Resources 443,501 50,889 392,612 118,356 77,013 41,343 Finance and Corporate Resources 121,979 73,157 48,822 Housing and Technical Resources 88,976 94,956 (5,980) - Housing Revenue Account 93,896 97,975 (4,079) 75,323 46,233 29,090 - Housing Other 82,114 45,722 36,392 423,919 237,031 186,888 Social Work Resources 463,634 252,529 211,105 2,465 499 1,966 Joint Board 2,313 - 2,313 8,555 2,558 5,997 Corporate Items 5,018 860 4,158 108 - 108 Corporate and Democratic Core (HRA) 116 - 116 - - - Non-Distributed Costs – Non Operational Assets (HRA) - - - 1,270,450 539,688 730,762 Net Cost of Services 1,413,135 560,593 852,542 31 - 31 Other Operating Expenditure (Note 9) - 2,752 (2,752) 71,710 695 71,015 Financing and Investment (Income) and Expenditure (Note 10) 66,565 (202) 66,767 - 856,001 (856,001) Taxation and Non Specific Grant Income (Note 11) - 840,766 (840,766) 1,342,191 1,396,384 (54,193) (Surplus) / Deficit on Provision of Services 1,479,700 1,403,909 75,791 (220,675) (Surplus) / Deficit on Revaluation of Fixed Assets 11,376 50,535 Re-measurement of the Net Defined Benefit Liability / (Asset) (365,042) (170,140) Other Comprehensive (Income) and Expenditure (353,666) (224,333) Total Comprehensive (Income) and Expenditure (277,875) Note 1 Internal recharges totalling £89.457m have been removed from the figures (2020/2021: £81.956m). 103
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51 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 2021 £000 Note 31 March 2022 £000 3,521,225 Property, Plant and Equipment 20 3,543,076 3,826 Heritage Assets 21 3,826 239 Intangible Assets 21 247 1,859 Long Term Debtors 1,830 3,527,149 Non Current Assets 3,548,979 48,019 Short Term Investments 25,006 3,780 Inventories 3,789 83,667 Short Term Debtors 23 92,714 618 Assets Held for Sale 21 213 109,734 Cash and Cash Equivalents (see cash flow notes) 91,476 245,818 Current Assets 213,198 (50,028) Short Term Borrowing 32 (52,459) (168,343) Short Term Creditors 25 (190,713) - Contract Liability – IFRS15 7 - (7,452) Other Short Term Liabilities (PPP / Finance Leases) 28 (7,157) (5,727) Provisions 26 (2,109) (11,124) Receipts in Advance 27 (6,403) (242,674) Current Liabilities (258,841) (673) Long Term Provisions 26 (611) (964,586) Long Term Borrowing 32 (949,602) (186,291) Other Long Term Liabilities (PPP / Finance Lease) 28 (179,133) (443,073) Other Long Term Liabilities (Pension) 30 (160,445) (1,594,623) Long Term Liabilities (1,289,791) 1,935,670 Net Assets 2,213,545 145,820 Usable Reserves 152,186 1,789,850 Unusable Reserves 2,061,359 1,935,670 Total Reserves 2,213,545 The notes on pages 56 to 107 form part of the financial statements. The unaudited accounts were authorised for issue on 22 June 2022. Paul Manning Executive Director (Finance and Corporate Resources) 22 June 2022 104
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52 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 2021 116,980 12,784 7,484 2,304 4,334 1,934 145,820 1,789,850 1,935,670 Movement in reserves during 2021/22 Total Comprehensive Expenditure and Income (81,564) 5,773 - - - - (75,791) 353,666 277,875 Adjustments to usable reserves permitted by accounting standards (note 8) 12,360 16,482 - - - - 28,842 (28,842) - Adjustments between accounting basis and funding basis under regulations (note 8) 70,571 (19,338) - - - 2,082 53,315 (53,315) - Net Increase / (Decrease) before Transfers to Reserves 1,367 2,917 - - - 2,082 6,366 271,509 277,875 Transfers to/ (from) Reserves 4,077 540 (988) (1,009) (219) (2,401) - - - Increase / (Decrease) in Year 5,444 3,457 (988) (1,009) (219) (319) 6,366 271,509 277,875 Balance at 31 March 2022 carried forward 122,424 16,241 6,496 1,295 4,115 1,615 152,186 2,061,359 2,213,545 105
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53 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 2020 75,579 9,713 5,918 2,053 8,234 2,093 103,590 1,607,747 1,711,337 Movement in reserves during 2020/21 Total Comprehensive Expenditure and Income 41,940 12,253 - - - - 54,193 170,140 224,333 Adjustments to usable reserves permitted by accounting standards (note 8) 9,800 15,473 - - - - 25,273 (25,273) - Adjustments between accounting basis and funding basis under regulations (note 8) (12,211) (25,157) - - - 132 (37,236) 37,236 - Net Increase / (Decrease) before Transfers to Reserves 39,529 2,569 - - - 132 42,230 182,103 224,333 Transfers to/ (from) Reserves 1,872 502 1,566 251 (3,900) (291) - - - Increase / (Decrease) in Year 41,401 3,071 1,566 251 (3,900) (159) 42,230 182,103 224,333 Balance at 31 March 2021 carried forward 116,980 12,784 7,484 2,304 4,334 1,934 145,820 1,789,850 1,935,670 106
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54 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. 2020/21 £000 2021/22 £000 54,193 Net surplus / (deficit) on the provision of services (75,791) 137,343 Adjust net surplus / deficit on the provision of services for non cash movements 180,292 (80,835) Adjust for items included in the net surplus / deficit on the provision of services that are investing and financing activities (63,443) 110,701 Net cash flows from Operating Activities 41,058 (52,718) Investing Activities (39,809) (37,597) Financing Activities (19,507) 20,386 Net increase / (decrease) in cash and cash equivalents (18,258) 89,348 Cash and cash equivalents at the beginning of the reporting period 109,734 109,734 Cash and cash equivalents at the end of the reporting period 91,476 Cash Flow Statement Note – Non Cash Movements The balance of non-cash movements is made up of the following elements: 31 March 2021 £000 31 March 2022 £000 60,819 Depreciation, impairment and amortisation of assets 99,823 29,629 Movement in creditors 16,882 5,112 Movement in debtors (19,684) (200) Movement in inventories (9) 41,511 Movement in pension liability 82,414 472 Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised 866 - Other non cash items charged to the net surplus / deficit on the provision of services - 137,343 Net cash flows from the provision of services for non cash movements 180,292 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: 2021/22 £000 2021/22 £000 (80,394) Capital grants and contributions (59,825) (441) Capital receipts applied (3,618) (80,835) Net cash flows from items included in the net surplus / (deficit) on the provision of services that are investing and financing activities (63,443) Cash Flow Statement Note – Investing Activities 2020/21 £000 2021/22 £000 (119,987) Purchase of property, plant and equipment and intangible assets (133,644) (126,000) Purchase of short term investments (84,000) 441 Proceeds from the sale of property, plant and equipment and intangible assets 3,618 140,500 Proceeds from short term investments 107,000 52,328 Other receipts from investing activities 67,217 (52,718) Net cash flows from investing activities (39,809) 107
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55 Cash Flow Statement Note – Financing Activities 2020/21 £000 2021/22 £000 - Cash receipts of short term and long term borrowing 28,900 (7,704) Cash payments for the reduction of the outstanding liabilities relating to finance leases for PPP contracts (7,453) (29,893) Repayments of short term and long term borrowing (40,954) (37,597) Net cash flows from financing activities (19,507) Cash Flow Statement Note – Cash and Cash Equivalents 31 March 2021 £000 31 March 2022 £000 105 Cash held by officers 97 6,028 Bank current accounts 4,297 103,601 Short term deposits 87,082 109,734 Total cash and cash equivalents 91,476 The credit figures shown against Bank Accounts in 2022 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. 108
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56 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. For this disclosure, the standards introduced by the 2022/2023 Code, which are required to be applied by 1 April 2022, and will be adopted by the council on 1 April 2022 are: • Annual Improvements to IFRS Standards 2018-2020 IFRS 1(First Time Adoption) - the amendment relates to foreign operations of acquired subsidiaries transitioning to IFRS. IAS37 (Onerous Contracts)- the amendment clarifies the intention of the standard. IFRS16 (Leases) - the amendment removes a misleading example that is not referenced in the Code material. IAS41 (Agriculture) – one of a small number of IFRSs that are expected only to apply to a small number of local authorities. • Property, Plant and Equipment: Proceeds Before Intended Use This amendment introduces changes to IAS16 Adoption of the standards by the council on 1 April 2022 is not expected to have a significant impact on the financial statements. 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 2022 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 net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged by Strathclyde Pension Fund, to provide the council with expert advice about the assumptions to be applied. Following recent 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 net 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 £55.909m. However, the assumptions interact in complex ways. During 2021/2022, the council’s actuaries advised that the net pension liability had decreased by £139.589m as a result of the return on fixed assets and estimates being corrected through experience and had decreased by £225.453m attributable to the updating of the demographic and financial assumptions. 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 £6.298m for each year that useful lives were reduced. This list does not include assets and liabilities that are carried at fair value based on a recently observed market price. 109
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57 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 Paid Benefit paid to support customers on low income with Housing rent costs 66,074 Housing Benefit Received Benefit received to support customers on low income with Housing rent costs 60,378 COVID-19 Related Expenditure The expenditure incurred related to Education Recovery including teachers and support staff, PPE equipment (sanitisers, wipes, masks, screens), IT equipment to enable staff to work from home and devises to assist children in learning remotely, payments to assist voluntary organisations and also assistance to families including Free School Meals during lockdown and school holidays and winter clothing payments. The expenditure was funded through financial assistance from the Scottish Government. 36,880 110
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58 Note 4 Notes to the Expenditure and Funding Analysis Statement Adjustments Between Funding and Accounting Basis Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement 2021/22 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 21,217 17,782 (663) 38,336 Education Resources 32,205 13,497 (23,700) 22,002 Finance and Corporate Resources 2,276 7,370 (160) 9,486 Housing and Technical Resources - Housing Revenue Account 7,598 2,941 (11,701) (1,162) - Housing Other 6,775 9,205 1,730 17,710 Social Work Resources 3,307 21,612 (1,102) 23,817 Joint Board - - - - Corporate Items - 421 442 863 Corporate and Democratic Core (HRA) - - 116 116 Non-Distributed Costs – Non Operational Assets (HRA) - - - - Net Cost of Services 73,378 72,828 (35,038) 111,168 Other Income and Expenditure from the Expenditure and Funding Analysis (67,340) 9,586 26,661 (31,093) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 6,038 82,414 (8,377) 80,075 2020/21 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 16,022 8,363 1,027 25,412 Education Resources 7,065 4,346 (24,510) (13,099) Finance and Corporate Resources 1,500 3,429 1,373 6,302 Housing and Technical Resources - Housing Revenue Account 7,478 1,395 (12,284) (3,411) - Housing Other 2,570 4,449 (497) 6,522 Social Work Resources 1,730 10,647 1,392 13,769 Joint Board - - - - Corporate Items - 47 (371) (324) Corporate and Democratic Core (HRA) - - 108 108 Non-Distributed Costs – Non Operational Assets (HRA) - - - - Net Cost of Services 36,365 32,676 (33,762) 35,279 Other Income and Expenditure from the Expenditure and Funding Analysis (91,699) 8,835 35,490 (47,374) Difference between General Fund surplus or deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services (55,334) 41,511 1,728 (12,095) 111
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59 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 receivable in the year to those 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) 2020/21 £000 2021/22 £000 (12,095) Adjustments between Funding and Accounting Basis as per EFA 80,075 441 Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (Note 8) 3,618 (309) Use of Capital Receipts Reserve to finance capital expenditure (Note 8) (1,536) (11,963) Adjustments between Funding and Accounting Basis as per MIRS 82,157 112
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60 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 2021/22 Total £000 2020/21 Total £000 Expenditure Employee Benefits Expenses 104,591 313,192 42,594 11,388 52,651 126,990 - 534 - 651,940 586,933 Other Services Expenditure 74,756 98,104 77,109 48,465 22,688 333,337 2,313 4,484 116 661,372 622,698 Support Services Recharges - - - - - - - - - - - Depreciation, Amortisation, Impairment 21,217 32,205 2,276 34,043 6,775 3,307 - - - 99,823 60,819 Interest Payment - - - - - - - - 56,802 56,802 58,279 Pension Net Interest Expense - - - - - - - - 9,586 9,586 8,835 Impairment on Financial Instruments - - - - - - - - 177 177 4,596 Loss on the Disposal of Assets - - - - - - - - - - 31 Total Expenditure 200,564 443,501 121,979 93,896 82,114 463,634 2,313 5,018 66,681 1,479,700 1,342,191 Income Fees and Charges and Other Service Income 35,715 4,033 (2,864) 97,975 45,135 180,228 - 860 - 361,082 339,692 Interest and Investment Income - - - - - - - - 132 132 315 Impairment on Financial Instruments - - - - - - - - (334) (334) 380 Gain on the Disposal of Assets - - - - - - - - 2,752 2,752 - Income from Council Tax - - - - - - - - 143,472 143,472 139,757 Government Grants and Contributions 3,746 46,856 76,021 - 587 72,301 - - 697,294 896,805 916,240 Total Income 39,461 50,889 73,157 97,975 45,722 252,529 - 860 843,316 1,403,909 1,396,384 Surplus or Deficit on the Provision of Services 161,103 392,612 48,822 (4,079) 36,392 211,105 2,313 4,158 (776,635) 75,791 (54,193) 113
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61 Note 7 Revenue from Contracts with Service Recipients Amounts included in the Comprehensive Income and Expenditure Statement for contracts with service recipients. 2020/21 £000 2021/22 £000 36,961 Revenue from contracts with service recipients 42,373 - Impairment of receivables or contract assets - 36,961 Total included in Comprehensive Income and Expenditure Statement 42,373 Amounts included in Balance Sheet for contracts with service recipients. 2020/21 £000 2021/22 £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: 2020/21 2020/21 2021/22 2021/22 Contract Asset £000 Contract Liability £000 Contract Asset £000 Contract Liability £000 - (156) Contract assets and liabilities at the beginning of the year - - - 156 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. 114
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62 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 required on a regular basis and for South Lanarkshire this will occur every 3 years. The last full review took place during 2020. 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. 115
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63 Usable Reserves 2021/22 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 12,360 16,482 - - - - 28,482 Total Adjustments to Usable Reserves Permitted by Accounting Standards 12,360 16,482 - - - - 28,482 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 79,100 3,314 - - - - 82,414 ▪ Financial Instruments (transferred to the Financial Instruments Adjustment Account) (279) (81) - - - - (360) ▪ Holiday Pay (transferred to (or from) the Accumulated Absences Reserve) (458) (107) - - - - (565) ▪ 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) 46,833 17,561 - - - - 64,394 Total Adjustments to Revenue Resources 125,196 20,687 - - - - 145,883 Adjustments between Revenue and Capital Resources Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (2,082) (1,536) - - - 3,618 - Statutory Provision for the repayment of debt (transfer from Capital Adjustment Account) (2,401) (6,808) - - - - (9,209) Capital expenditure financed from revenue balances (transfer to Capital Adjustment Account) (2,361) (19,637) - - - - (21,998) Total Adjustments between Revenue and Capital Resources (6,844) (27,981) - - - 3,618 (31,207) Adjustments to Capital Resources Use of the Capital Receipts Reserve to finance capital expenditure - - - - - (1,536) (1,536) Application of capital grants to finance capital expenditure (47,781) (12,044) - - - - (59,825) Total Adjustments to Capital Resources (47,781) (12,044) - - - (1,536) (61,361) Total Statutory Adjustments (Between Accounting and Funding Basis) 70,571 (19,338) - - - 2,082 53,315 Total Adjustments to Usable Reserves Permitted by Accounting Standards 12,360 16,482 - - - - 28,842 Total Statutory Adjustments (Between Accounting and Funding Basis) 70,571 (19,338) - - - 2,082 53,315 Total Comprehensive Expenditure and Income (81,564) 5,773 - - - - (75,791) Net Increase / (Decrease) before transfers to / (from) Reserves 1,367 2,917 - - - 2,082 6,366 Transfers to / (from) Reserves 4,077 540 (988) (1,009) (219) (2,401) - Increase / (Decrease) in Year 5,444 3,457 (988) (1,009) (219) (319) 6,366 116
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64 Usable Reserves 2020/21 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 9,800 15,473 - - - - 25,273 Total Adjustments to Usable Reserves Permitted by Accounting Standards 9,800 15,473 - - - - 25,273 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 39,768 1,743 - - - - 41,511 ▪ Financial Instruments (transferred to the Financial Instruments Adjustment Account) (279) (80) - - - - (359) ▪ Holiday Pay (transferred to (or from) the Accumulated Absences Reserve) 4,990 228 - - - - 5,218 ▪ 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) 11,540 16,774 - - - - 28,314 Total Adjustments to Revenue Resources 56,019 18,665 - - - - 74,684 Adjustments between Revenue and Capital Resources Transfer of non-current asset sale proceeds from revenue to Capital Receipts Reserve (132) (309) - - - 441 - Statutory Provision for the repayment of debt (transfer from Capital Adjustment Account) (2,028) (6,320) - - - - (8,348) Capital expenditure financed from revenue balances (transfer to Capital Adjustment Account) (4,735) (18,134) - - - - (22,869) Total Adjustments between Revenue and Capital Resources (6,895) (24,763) - - - 441 (31,217) Adjustments to Capital Resources Use of the Capital Receipts Reserve to finance capital expenditure - - - - - (309) (309) Application of capital grants to finance capital expenditure (61,335) (19,059) - - - - (80,394) Total Adjustments to Capital Resources (61,335) (19,059) - - - (309) (80,703) Total Statutory Adjustments (Between Accounting and Funding Basis) (12,211) (25,157) - - - 132 (37,236) Total Adjustments to Usable Reserves Permitted by Accounting Standards 9,800 15,473 - - - - 25,273 Total Statutory Adjustments (Between Accounting and Funding Basis) (12,211) (25,157) - - - 132 (37,236) Total Comprehensive Expenditure and Income 41,940 12,253 - - - - 54,193 Net Increase / (Decrease) before transfers to / (from) Reserves 39,529 2,569 - - - 132 42,230 Transfers to / (from) Reserves 1,872 502 1,566 251 (3,900) (291) - Increase / (Decrease) in Year 41,401 3,071 1,566 251 (3,900) (159) 42,230 117
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65 Note 9 Comprehensive Income and Expenditure Statement – Other Operating Expenditure 2020/21 £000 2021/22 £000 31 (Gains) / losses on the disposal of non-current assets (2,752) 31 Total (2,752) Note 10 Comprehensive Income and Expenditure Statement – Financing and Investment Income and Expenditure 2020/21 £000 2021/22 £000 58,279 Interest payable and similar charges 56,802 8,835 Pensions interest cost and expected return on pensions assets 9,586 (315) Interest receivable and similar income (132) 4,216 Impairment on Financial Instruments 611 71,015 Total 66,767 Note 11 Comprehensive Income and Expenditure Statement – Taxation and Non Specific Grant Income 2020/21 £000 2021/22 £000 (139,757) Council tax income (143,472) (226,179) National non domestic rates (319,312) (409,671) Non-ringfenced government grants (318,157) (80,394) Capital grants and contributions (59,825) (856,001) Total (840,766) 118
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66 Note 12 Movements in Usable Reserves This note sets out the movements in the Usable Reserves including amounts set aside 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 2021/2022. 2020/21 Balance At 1 April 2020 £000 Transfers Out 2020/21 £000 Transfers In 2020/21 £000 2020/21 Closing Balance 31 March 2021 £000 2021/22 Balance At 1 April 2020 £000 Transfers Out 2021/22 £000 Transfers In 2021/22 £000 2021/22 Closing Balance 31 March 2022 £000 Future Budget Strategies – allocated to specific years 19,026 (17,525) 18,805 20,306 20,306 (9,109) 22,474 33,671 Investments (Multi Year) - - - - - - 5,884 5,884 Developing Scotland’s Young Workforce (Specific funding) 308 - 90 398 398 (90) - 308 Early Years (Multi-year) 4,190 (400) 7,326 11,116 11,116 (66) 3,415 14,465 Children and Young People Act inc. Getting It Right for Every Child (Multi-year) 2,163 - - 2,163 2,163 (1,479) - 684 Pupil Equity Fund (Specific funding) 1,422 (1,422) 2,326 2,326 2,326 (2,326) 2,590 2,590 Multi Year Projects 944 (61) 3,189 4,072 4,072 (214) 760 4,618 Schools (Multi-year) 1,170 (676) 1,600 2,094 2,094 (739) 1,223 2,578 Scheme of Assistance 344 - - 344 344 - 398 742 Property Masterplan 263 (27) - 236 236 (27) - 209 Community and Enterprise Resources including Public Health and Local Plan 352 (87) 445 710 710 (305) 676 1,081 Social Work and Bequest 21 - - 21 21 - - 21 Temporary Homelessness / Community Safety (Specific funding) 2,199 (237) 574 2,536 2,536 (598) - 1,938 Scottish Welfare Fund - - 129 129 129 (129) - - Prevent Grant (Specific funding) 9 - - 9 9 - - 9 Community Participation Team (Multi-year) 257 (257) - - - - - - New Initiatives (Multi-year) 914 - - 914 914 (2) - 912 Sanitary Products Funding 168 - 171 339 339 - - 339 Counselling in Schools 542 - 714 1,256 1,256 - - 1,256 Additional Support for Learning 959 - 330 1,289 1,289 (100) - 1,189 Grants to Voluntary Organisations - Area Grants c/f - - 60 60 60 - 63 123 National Trauma Training Programme - - - - - - 50 50 Children and Families - Residential Care - - 762 762 762 (762) 2,051 2,051 Lanarkshire Valuation Joint Board - Scottish Government funding - - 277 277 277 (159) - 118 Child Disability Support - - - - - - 83 83 Whole Family Wellbeing - - - - - - 187 187 Telecare Fire and Safety - - - - - - 59 59 COVID-19 Funding c/f - - 32,390 32,390 32,390 (26,185) 23,856 30,061 Scottish Government – 2021/2022 General Revenue Grant Adjustment - - 155 155 155 (155) - - Total Earmarked General Fund 35,251 (20,692) 69,343 83,902 83,902 (42,445) 63,769 105,226 Uncommitted General Fund Funding for Future Strategies 27,285 (8,695) 1,445 20,035 20,035 (15,880) - 4,155 Uncommitted General Fund 13,043 - - 13,043 13,043 - - 13,043 Total Uncommitted General Fund 40,328 (8,695) 1,445 33,078 33,078 (15,880) - 17,198 Total General Fund 75,579 (29,387) 70,788 116,980 116,980 (58,325) 63,769 122,424 119
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67 2020/21 Balance At 1 April 2020 £000 Transfers Out 2020/21 £000 Transfers In 2020/21 £000 2020/21 Closing Balance 31 March 2021 £000 2021/22 Balance At 1 April 2021 £000 Transfers Out 2021/22 £000 Transfers In 2021/22 £000 2021/22 Closing Balance 31 March 2022 £000 Repairs and Renewals Crematorium Sinking Fund and Shelter 350 (68) 25 307 307 - 25 332 Fleet Sinking Fund 160 (77) 90 173 173 - 40 213 Waste 488 (273) 1,220 1,435 1,435 - 302 1,737 Roads Defects 979 (979) - - - - - - Committee Room Audio Visual Upgrade - - 150 150 150 (11) - 139 Repairs and Restorations (Various Projects) 2,861 (38) 516 3,339 3,339 (172) 504 3,671 Winter Maintenance 1,080 - 1,000 2,080 2,080 (1,676) - 404 Total Repairs and Renewals 5,918 (1,435) 3,001 7,484 7,484 (1,859) 871 6,496 Capital Fund Capital Fund 4,703 (4,709) 6 - - - - - Education Capital Items Replacement Fund 1,131 - 597 1,728 1,728 - 572 2,300 Adoptions 278 - - 278 278 - 1 279 IT Development Fund / Digital Transformation 1,400 (630) 1,072 1,842 1,842 (565) 92 1,369 Central Energy Efficiency Fund 722 (479) 243 486 486 (541) 222 167 Total Capital Fund 8,234 (5,818) 1,918 4,334 4,334 (1,106) 887 4,115 Total Usable Capital Receipts 2,093 (600) 441 1,934 1,934 (3,937) 3,618 1,615 Total Insurance Fund 2,053 (763) 1,014 2,304 2,304 (1,015) 6 1,295 Total Housing Revenue Account 9,713 - 3,071 12,784 12,784 - 3,457 16,241 Total Usable Reserves 103,590 (38,003) 80,233 145,820 145,820 (66,242) 72,608 152,186 120
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68 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 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. 121
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69 Unusable Reserves 2021/22 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 1,217,136 1,043,980 (4,931) (443,073) (23,262) 1,789,850 Restatement of 2020/2021 Balance 63,379 (63,379) - - - - Revised Opening Balance 1,280,515 980,601 (4,931) (443,073) (23,262) 1,789,850 Movement in Year (40,573) 28,529 360 282,628 565 271,509 Closing Balance 1,239,942 1,009,130 (4,571) (160,445) (22,697) 2,061,359 Other Comprehensive Income and Expenditure (11,376) - - 365,042 - 353,666 Adjustments to Usable Reserves Permitted by Accounting Standards Difference Between Fair Value and Historic Cost Depreciation (28,842) - - - - (28,842) Adjustments Between Accounting Basis and Funding Basis Under Regulation Charges for Depreciation and Impairment of Non Current Assets - (63,127) - - - (63,127) Revaluation Gains / Losses on Property, Plant and Equipment - (7,773) - - - (7,773) Amortisation of Intangible Assets - (81) - - - (81) Non Current Assets Written Off on Disposal or Sale - (511) - - - (511) Accumulated Gains on Assets Sold or Scrapped (355) - - - - (355) Use of Capital Receipts Reserve to Finance New Capital Expenditure - 1,536 - - - 1,536 Capital Grants and Contributions - 59,825 - - - 59,825 Statutory Charge for the Repayment of Debt - 9,209 - - - 9,209 Statutory Provision for Financing of Capital Investment - 7,453 - - - 7,453 Capital Expenditure Charged Against the General Fund and HRA Balance - 21,998 - - - 21,998 Premiums to be Charged Against the General Fund and HRA Balance - - 360 - - 360 Reversal of Items Relating to Retirement Benefits - - - (139,979) - (139,979) Employer’s Pension Contribution Payable in Year - - - 57,565 - 57,565 Amounts Accrued at the End of the Financial Year - - - - 565 565 Total Movement in Year (40,573) 28,529 360 282,628 565 271,509 122
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70 Unusable Reserves 2020/21 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 1,021,907 960,201 (5,290) (351,027) (18,044) 1,607,747 Movement in Year 195,229 83,779 359 (92,046) (5,218) 182,103 Closing Balance 1,217,136 1,043,980 (4,931) (443,073) (23,262) 1,789,850 Other Comprehensive Income and Expenditure 220,675 - - (50,535) - 170,140 Adjustments to Usable Reserves Permitted by Accounting Standards Difference Between Fair Value and Historic Cost Depreciation (25,273) - - - - (25,273) Adjustments Between Accounting Basis and Funding Basis Under Regulation Charges for Depreciation and Impairment of Non Current Assets - (60,445) - - - (60,445) Revaluation Gains / Losses on Property, Plant and Equipment - 24,953 - - - 24,953 Amortisation of Intangible Assets - (54) - - - (54) Non Current Assets Written Off on Disposal or Sale - (299) - - - (299) Accumulated Gains on Assets Sold or Scrapped (173) - - - - (173) Use of Capital Receipts Reserve to Finance New Capital Expenditure - 309 - - - 309 Capital Grants and Contributions - 80,394 - - - 80,394 Statutory Charge for the Repayment of Debt - 8,348 - - - 8,348 Statutory Provision for Financing of Capital Investment - 7,704 - - - 7,704 Capital Expenditure Charged Against the General Fund and HRA Balance - 22,869 - - - 22,869 Premiums to be Charged Against the General Fund and HRA Balance - - 359 - - 359 Reversal of Items Relating to Retirement Benefits - - - (97,749) - (97,749) Employer’s Pension Contribution Payable in Year - - - 56,238 - 56,238 Amounts Accrued at the End of the Financial Year - - - - (5,218) (5,218) Total Movement in Year 195,229 83,779 359 (92,046) (5,218) 182,103 123
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71 Note 14 Members Allowances The council paid the following amounts to Members of the council during the year: 2021/22 £ 2020/21 £ Salaries 1,064,313 1,025,863 Mileage Allowance 2,756 3,450 Expenses 583 933 Total 1,067,652 1,030,246 Note 15 External Audit Costs The council has incurred the following external audit costs: 2021/22 £000 2020/21 £000 Fee payable to Audit Scotland for external audit services 521 511 Total 521 511 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 (2020/2021: 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. Members Members of the council have direct control over the council’s financial and operating policies. The total of members’ allowances paid in 2021/2022 is shown in Note 14. During 2021/2022, works and services to the value of £5.088 million were commissioned from companies in which 14 members had an interest (2020/2021 - £2.589 million). Contracts were entered into in full compliance with the council’s standing orders. In addition, grants totalling £3.253 million were paid to voluntary organisations in which 48 members had an interest (2020/2021 - £2.123 million). The relevant members did not take part in any discussion or decision relating to the grants. Details of these transactions are recorded in the Register of Members’ Interest which can found on the council’s website. 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. There are no interests above this level. Officers During 2021/2022, 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. During 2020/21, no senior officer of the council declared an interest in any organisation outwith those controlled or significantly influenced by the council. The total remuneration paid to senior officers is shown in the Remuneration Report on page 36. 124
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72 Receipts and Payments Between the Council and Entities Controlled or Significantly Influenced by the Council 2021/22 Receipts £000 2021/22 Payments £000 2020/21 Receipts £000 2020/21 Payments £000 Subsidiaries: Common Good Fund 36 91 28 60 Routes to Work South - 1,486 - 1,023 South Lanarkshire Leisure and Culture Limited 2,931 21,048 2,752 20,055 Total Subsidiaries 2,967 22,625 2,780 21,138 Joint Ventures: South Lanarkshire HSCP Integration Joint Board 211,798 153,085 206,387 139,428 Total Joint Ventures 211,798 153,085 206,387 139,428 Joint Boards: Lanarkshire Valuation Joint Board 166 2,265 978 2,417 Strathclyde Concessionary Travel Scheme Joint Committee - 604 - 597 Strathclyde Partnership for Transport 1,983 11,339 1,842 10,793 Total Joint Boards 2,149 14,208 2,820 13,807 Other Entities: Clyde Valley Learning and Development Joint Committee 59 15 59 10 Regen FX Youth Trust - 113 - 113 SEEMIS Group LLP 83 332 78 317 Total Other Entities 142 460 137 440 Total 217,056 190,378 212,124 174,813 The amounts due (to) / from related parties are detailed below: 2021/22 £ 2020/21 £ Strathclyde Partnership for Transport 2,390 1,936 South Lanarkshire Leisure and Culture Limited 1,923 1,433 South Lanarkshire Health and Social Care Partnership (7,828) (1,262) 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. The Trust became South Lanarkshire Leisure and Culture Limited in October 2010, when cultural services transferred from South Lanarkshire Council. South Lanarkshire Leisure and Culture Limited 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 2021/2022, 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: 125
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73 2021/22 £000 2020/21 £000 Contribution made to South Lanarkshire HSCP Integration Joint Board 153,085 139,428 Commissioning income received from South Lanarkshire HSCP Integration Joint Board 211,798 206,387 South Lanarkshire HSCP Integration Joint Board due (to)/from South Lanarkshire Council (7.828) (1,262) 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 2021/2022 was £3.702 million (2020/2021 £5.104 million). Land and Buildings – the council leases a number of properties which have been accounted for as operating leases. The rentals payable in 2021/2022 were £2.476 million (2020/2021 £2.956 million). The future minimum lease payments due under non-cancellable leases in future years are: 31 March 2022 £000 31 March 2021 £000 Not later than one year 4,640 6,226 Later than one year and not later than five years 9,190 12,450 Later than five years 36,393 37,330 Total 50,223 56,006 The sub lease payments receivable in future years are: 31 March 2022 £000 31 March 2021 £000 Not later than one year 322 361 Later than one year and not later than five years 1,134 1,360 Later than five years - - Total 1,456 1,721 126
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74 The expenditure charged to the Comprehensive Income and Expenditure Statement during the year in relation to these leases was: 2021/22 £000 2020/21 £000 Minimum lease payments 6,428 8,060 Sublease payments receivable (365) (362) Total 6,063 7,698 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 2017-22, 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: 2021/22 £000 2020/21 £000 Not later than one year 4,903 4,650 Later than one year and not later than five years 18,820 17,350 Later than five years 11,483 111,814 Total 35,206 133,814 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 2021/2022, no contingent rents were receivable by the council (2020/2021 – nil). Note 18 Grant Income The council credited the following grants, contributions and donations to the Comprehensive Income and Expenditure Statement in 2021/2022: 2021/22 £000 2020/21 £000 Credited to Taxation and Non Specific Grant Income Council Tax 143,472 139,757 Non Ring Fenced Government Grants * 318,157 409,671 Non Domestic Rate Redistribution 319,312 226,179 Total 780,941 775,607 Credited to Services Scottish Government * 65,754 62,228 European Grant Funding 2,050 1,224 Skills Development Scotland 894 379 Central Government 66,715 66,820 Lottery 262 205 Creative Scotland 330 - NHS (incl. Resource Transfer) 63,080 68,555 Other Grants 426 585 Total 199,511 199,996 *The Non-Ring Fenced Government Grants and Scottish Government funding lines include one-off COVID-19 Funding paid to the council during the year. 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 22 June 2022. There were no events that occurred between 1 April 2021 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 127
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75 information about conditions existing at 31 March 2022, the figures in the financial statements and notes have been adjusted in all material respects to reflect the impact of this information. 128
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76 Note 20 Property, Plant and Equipment Movements on Balances Movements in 2021/2022: Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets £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 2021 1,337,441 1,819,030 48,581 473,679 2,829 9,358 75,764 3,766,682 506,651 Additions 61,512 6,298 7,301 24,830 153 42 33,286 133,422 265 Revaluation increases / (decreases) recognised in the Revaluation Reserve (83,442) 16,850 642 - 34 200 - (65,716) - Revaluation increases / (decreases) recognised in the Surplus / Deficit on the Provision of Services - (13,571) - - 85 (275) - (13,761) - De-recognition – Disposals - (1,076) (5,865) - - (70) - (7,011) - Assets reclassified from Held for Sale - (57) - - - 19 - (38) - Other movements in Cost or Valuation 52,279 14,384 682 1,113 603 4,264 (73,325) - - At 31 March 2022 1,367,790 1,841,858 51,341 499,622 3,704 13,538 35,725 3,813,578 506,916 129
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77 Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets £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 2021 - 65,673 14,326 165,351 47 60 - 245,457 12,852 Depreciation Charge 33,815 35,816 8,646 13,655 18 19 - 91,969 9,416 Depreciation written out to the Revaluation Reserve (33,815) (20,094) (325) - - (30) - (54,264) - Depreciation written out to the Surplus / Deficit on the Provision of Services - (5,951) - - - (37) - (5,988) - Impairment losses / (reversals) recognised in the Revaluation Reserve - - - - - - - - - Impairment losses / (reversals) recognised in the Deficit on the Provision of Services - - - - - - - - - De-recognition – Disposals - (807) (5,865) - - - - (6,672) - Eliminated on reclassification to Assets Held for Sale - - - - - - - - - Other movements in Depreciation and Impairment - (245) - - - 245 - - - At 31 March 2022 - 74,392 16,782 179,006 65 257 - 270,502 22,268 Net book value At 31 March 2022 1,367,790 1,767,466 34,559 320,616 3,639 13,281 35,725 3,543,076 484,648 At 31 March 2021 1,337,441 1,753,357 34,255 308,328 2,782 9,298 75,764 3,521,225 493,799 130
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78 Movements on Balances Movements in 2020/2021: Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets £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 2020 1,174,172 1,766,840 38,173 445,921 2,768 9,185 53,822 3,490,881 500,831 Additions 15,924 4,378 17,142 27,855 20 19 54,382 119,720 27 Revaluation increases / (decreases) recognised in the Revaluation Reserve 132,496 27,992 3,890 16 17 83 - 164,494 - Revaluation increases / (decreases) recognised in the Surplus / Deficit on the Provision of Services - 4,654 - - - 34 - 4,688 5,793 De-recognition – Disposals (315) (23) (12,650) (113) - - - (13,101) - Assets reclassified from Held for Sale - - - - - - - - - Other movements in Cost or Valuation 15,164 15,189 2,026 - 24 37 (32,440) - - At 31 March 2021 1,337,441 1,819,030 48,581 473,679 2,829 9,358 75,764 3,766,682 506,651 131
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79 Council Dwellings £000 Other Land And Buildings £000 Vehicles, Plant And Equipment £000 Infrastructure Assets £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 2020 - 75,933 20,525 152,480 30 47 - 249,015 5,549 Depreciation Charge 31,395 34,576 6,725 12,990 17 15 - 85,718 9,322 Depreciation written out to the Revaluation Reserve (31,437) (24,456) (408) (6) - - - (56,307) - Depreciation written out to the Surplus / Deficit on the Provision of Services - (20,338) - - - (2) - (20,340) (2,019) Impairment losses / (reversals) recognised in the Revaluation Reserve - - - - - - - - - Impairment losses / (reversals) recognised in the Deficit on the Provision of Services - - - - - - - - - De-recognition – Disposals - - (12,516) (113) - - - (12,629) - Eliminated on reclassification to Assets Held for Sale - - - - - - - - - Other movements in Depreciation and Impairment 42 (42) - - - - - - - At 31 March 2021 - 65,673 14,326 165,351 47 60 - 245,457 12,852 Net book value At 31 March 2021 1,337,441 1,753,357 34,255 308,328 2,782 9,298 75,764 3,521,225 493,799 At 31 March 2020 1,174,172 1,690,907 17,648 293,441 2,738 9,138 53,822 3,241,866 495,282 132
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80 Capital Commitments At 31 March 2022, 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 2022/2023 and future years. The major commitments for both Housing and General Services are as follows: Housing Projects £000 Non-Housing Projects £000 Housing Investment projects including Heating Projects, Windows and Doors, External Fabric Upgrades and Environmental Works 36,281 City Deal – Greenhills Road/A726 Strathaven Road East Kilbride Cycle Route Newton Farm Primary School – Extension 1,728 280 2,526 New Build Housing 74,961 Jackton Primary School 14,650 Blantyre Residential Care Facility 2,733 Education Information Computer Technology 5,700 Abington Campus for Enterprise 100 Hamilton HUB – New Cross Centre, Hamilton 996 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 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. 133
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81 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 - - 34,559 320,616 3,639 - 35,725 394,539 Valued at fair value 2021/22 1,367,790 273,036 - - - 2,267 - 1,643,093 2020/21 - 461,292 - - - 6,077 - 467,369 2019/20 - 563,528 - - - 1,947 - 565,475 2018/19 - 294,422 - - - 374 - 294,796 2017/18 - 175,188 - - - 2,616 - 177,804 5 years ago and greater - - - - - - - - Total Cost or Valuation 1,367,790 1,767,466 34,559 320,616 3,639 13,281 35,725 3,543,076 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 2021/22 £000 2020/21 £000 2021/22 £000 2020/21 £000 2021/22 £000 2020/21 £000 Cost or Valuation Balance at 1 April 399 263 3,826 3,826 618 866 Additions 97 164 - - - - Revaluation increases / (decreases) recognised in the Revaluation Reserve - - - - 76 (156) Revaluation increases / (decreases) in the Comprehensive Income and Expenditure Statement - - - - - (92) De-recognition – Disposals (136) (28) - - (519) - Assets reclassified (to) / from Assets Held for Sale - - - - 38 - Balance at 31 March 360 399 3,826 3,826 213 618 Accumulated Depreciation Balance at 1 April 160 134 - - - 47 Depreciation charge 81 54 - - - - Depreciation written out to the Revaluation Reserve - - - - - (30) Depreciation written out to the Surplus / Deficit on Provision of Services - - - - - (17) Depreciation – Disposals (128) (28) - - - - Elimination on reclassification to Assets Held for Sale - - - - - - Balance at 31 March 113 160 - - - - Net book value at 31 March 247 239 3,826 3,826 213 618 134
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82 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 2021/22 £000 HRA 2021/22 £000 Total 2021/22 £000 General Fund 2020/21 £000 HRA 2020/21 £000 Total 2020/21 £000 Opening Capital Financing Requirement 1,015,264 249,720 1,264,984 1,020,543 244,233 1,264,776 Capital Investment Property, Plant and Equipment 60,241 73,181 133,422 70,359 49,361 119,720 Intangible Assets 97 - 97 164 - 164 Decrease in PPP Finance Lease Liability (7,453) - (7,453) (7,704) - (7,704) Sources of Finance Capital Receipts - (1,536) (1,536) - (309) (309) Government Grants and Other Contributions (47,781) (12,066) (59,847) (61,335) (19,111) (80,446) Sums set aside from revenue: ▪ Direct Revenue Contributions (2,361) (19,637) (21,998) (4,735) (18,134) (22,869) ▪ Loans Fund Principal (2,401) (6,808) (9,209) (2,028) (6,320) (8,348) Closing Capital Financing Requirement 1,015,606 282,854 1,298,460 1,015,264 249,720 1,264,984 Explanation of movements in year: Increase in Underlying Need to Borrow 10,196 39,942 50,138 4,453 11,808 16,261 Loans Fund Repayments (2,401) (6,808) (9,209) (2,028) (6,320) (8,348) Assets Acquired Under PFI/PPP Contracts (7,453) - (7,453) (7,704) - (7,704) Increase / (Decrease) in Capital Financing Requirement 342 33,134 33,476 (5,279) 5,488 209 135
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83 Note 23 Short Term Debtors 31 March 2022 £000 31 March 2021 £000 Trade Receivables 41,326 46,964 Prepayments 4,521 5,877 Other Receivable Amounts 46,867 30,826 Total 92,714 83,667 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 2022 Council Tax £000 31 March 2022 NDR £000 31 March 2021 Council Tax £000 31 March 2021 NDR £000 Less than one year 2,257 3,134 2,278 5,454 One to two years 1,038 - 1,180 - Two to five years - - - - More than five years - - - - Total 3,295 3,134 3,458 5,454 Note 25 Short Term Creditors 31 March 2022 £000 31 March 2021 £000 Trade Payables 68,048 52,223 Other Payables 122,665 116,120 Total 190,713 168,343 Note: Included within the Other Payables balance of £122.665m are balances held on behalf of third parties totalling £4.975m. 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. 136
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84 Note 26 Provisions Injury and damage compensation claims (1) £000 Other provisions (2) £000 Total £000 Balance at 1 April 2021 673 5,727 6,400 Additional provisions made in 2021/22 - 343 343 Amount used in 2021/22 (62) (3,961) (4,023) Unused amounts reversed in 2021/22 - - - Unwinding of discounting in 2021/22 - - - Balance at 31 March 2022 611 2,109 2,720 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 - 2,109 2,109 Long Term 611 - 611 Balance at 31 March 2022 611 2,109 2,720 (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, property dilapidations and COVID-19 sustainability payments to social care providers. 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 2022/2023. The balances at 31 March 2022 are as follows: 31 March 2022 £000 31 March 2021 £000 Revenue Grants and Contributions Big Lottery 142 106 Clyde Gateway 121 100 National Health Service 65 73 Scottish Coal 498 511 Scottish Government 1,788 783 Scottish Government - COVID-19 Business Support 3,264 9,104 Department of Works and Pensions 234 2 Wind Turbine Construction Compensation (Various) 108 220 Home Office 110 112 Other 73 113 Total 6,403 11,124 137
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85 Note 28 Public Private Partnership and Similar Contracts 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 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. 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. 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 2022 (assuming an inflation rate of 2.5% for Schools PPP and excluding any estimation of availability/ performance deductions) are as follows: Payment For Services £000 Reimbursement Of Capital Expenditure £000 Interest £000 Contingent Rents £000 Total £000 Payable in 2022/23 13,193 7,157 9,808 7,732 37,890 Payable within two to five years 60,534 29,679 35,383 35,664 161,260 Payable within six to ten years 94,166 40,292 35,367 55,463 225,288 Payable within eleven to fifteen years 77,840 68,919 21,359 86,691 254,809 Payable within sixteen to twenty years 45,987 40,243 3,310 50,228 139,768 Total 291,720 186,290 105,227 235,778 819,015 The impact of a 1% movement in inflation on the 2022/2023 Unitary charge payment would be £0.398m. The liability outstanding to pay the liability to the contractor for capital expenditure incurred is as follows: 2021/22 £000 2020/21 £000 Balance outstanding at start of year 193,743 201,447 Payments during year (7,453) (7,704) Capital expenditure incurred in the year - - Reduction in liability for prepaid assets - - Balance outstanding at year end 186,290 193,743 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. As a proportion of the total contributions into the Teachers’ Pension Scheme during the year ending 31 March 2022, the council’s own contributions equate to approximately 5.57%. In 2021/2022, the council paid £36.457 million to Teachers’ Pensions in respect of teachers’ retirement benefits, representing 23.0% of pensionable pay. The figures for 2020/2021 were £34.934 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. 138
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86 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 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. 139
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87 Age Discrimination (McCloud) and Guaranteed Minimum Pension 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 made no further explicit adjustments to the obligation figures in the 2021/2022 report. 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 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 and also, the historic individual member data to assess the impact is not readily available, therefore no allowance has been made in the calculations. Goodwin A recent circular from the Scottish Public Pension 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. 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 spouses’ benefits and have ascertained that they feel the impact is very small for a typical fund, therefore no allowance has currently been made in the calculations. Other Cases (Walker and O’Brien) The actuary is also aware of 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 is that they are unlikely to be significant judgements in terms of impact on pension obligations and therefore no allowance has been made for the potential remedies for these judgements. 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 2021/2022 and the prior year 2020/2021. 140
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88 31 March 2022 £000 31 March 2021 £000 Comprehensive Income and Expenditure Statement (CIES) Cost of Services: Service cost comprising: • current service cost 130,393 88,914 • past service costs - - • unfunded benefits - - Financing and Investment Income and Expenditure • net interest expense 9,586 8,835 Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services 139,979 97,749 Other Benefits Charged to the CIES Re-measurement of the net defined liability comprising: • Expected return on pension fund assets (142,924) (466,819) • Actuarial (gains) or losses arising on changes in demographic assumptions (17,819) (69,316) • Actuarial (gains) or losses arising on changes in financial assumptions (207,634) 608,367 • Actuarial (gains) or losses arising on changes in other experiences 3,335 (21,697) Total Post Employment Benefit Charged to the CIES (225,063) 148,284 Net charge to the Surplus / Deficit on the Provision of Services brought forward 139,979 97,749 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 (82,414) (41,511) Actual amount charged against the General Fund balance for pensions in the year: Employers’ contributions payable to Strathclyde Pension Fund 57,565 56,238 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 plan is as follows: 31 March 2022 £000 31 March 2021 £000 Present value of the defined benefit obligation* (2,870,632) (2,952,854) Fair value of pension fund assets 2,710,187 2,509,781 Net Liability arising from Defined Benefit Obligation (160,445) (443,073) *Unfunded liabilities included in the figure for present value of liabilities • unfunded liabilities for Pension Fund (53,622) (58,305) • teachers’ unfunded pensions (73,413) (79,523) • unfunded liabilities prior to 1996 local government reorganisation (13,966) (16,365) 141
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89 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 2022 £000 31 March 2021 £000 Opening balance at 1 April (2,952,854) (2,398,810) Current service cost (130,393) (88,914) Interest cost (59,853) (55,980) Contributions by Pension Fund participants (15,392) (14,846) Re-measurement gains and (losses) • Actuarial gains and losses arising on changes in demographic assumptions 17,819 69,316 • Actuarial gains and losses arising on changes in financial assumptions 207,634 (608,367) • Actuarial losses arising on changes in other experiences (3,335) 77,727 Past service costs (including curtailment) - - Settlements - - Benefits paid 65,742 67,020 Closing balance at 31 March (2,870,632) (2,952,854) A reconciliation of South Lanarkshire Council’s share of the fair value of Strathclyde Pension Fund’s assets is as follows: 31 March 2022 £000 31 March 2021 £000 Opening fair value of pension fund assets 2,509,781 2,047,783 Interest Income 50,267 47,145 Re-measurement gains and (losses) • Expected rate of return on pension fund assets 142,924 466,819 • Actuarial gains and( losses) - - • Actuarial losses arising on changes in other experiences - (56,030) The effect of changes in foreign exchange rates - - Contributions from employers 57,565 56,238 Contributions from employees into the scheme 15,392 14,846 Benefits paid (65,742) (67,020) Closing balance at 31 March 2,710,187 2,509,781 Analysis of Pension Fund’s Assets 31 March 2022 31 March 2021 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 68,047 914 68,961 40,433 1,701 42,134 Equity Instruments 595,879 1,289 597,168 586,178 2,698 588,876 Debt Instruments - 1 1 - 1 1 Real Estate - 228,560 228,560 - 203,346 203,346 Derivatives - - - 452 - 452 Private Equity - 530,556 530,556 - 448,901 448,901 Investment Funds 15,035 1,269,906 1,284,941 23,620 1,202,451 1,226,071 Total Assets 678,961 2,031,226 2,710,187 650,683 1,859,098 2,509,781 142
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90 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 2022 £000 31 March 2021 £000 Long term expected rate of return on assets in the Fund • Equity investment 7.10% 25.10% • Bonds 7.10% 25.10% • Property 7.10% 25.10% • Cash 7.10% 25.10% Mortality Assumptions (years): • Men 19.6 19.8 • Women 22.4 22.6 Longevity at 65 for future pensioners (years): • Men 21.0 21.2 • Women 24.5 24.7 Rate of inflation 3.20% 2.85% Rate of increase in salaries 3.90% 3.55% Rate of increase in pensions 3.20% 2.85% Rate for discounting Fund liabilities 2.70% 2.00% 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. Impact of COVID-19 The Fund’s actuary confirmed that the IAS19 Balance Sheet is based on financial market values and future market expectation indicators as at 31 March to comply with the standard. The financial markets at the accounting date will have taken into account COVID-19 risks as one of the many national and worldwide economic considerations. There has been no explicit additional allowance or adjustment made for COVID-19 by the actuary. Impact of Ukraine War The Fund’s actuary confirmed that the IAS19 Balance Sheet is based on financial market values and future market expectation indicators as at 31 March to comply with the standard. The financial markets at the accounting date will have taken into account the risks of the war as one of the many national and worldwide economic considerations. There has been no explicit additional allowance or adjustment made for the Ukraine War by the actuary. 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 have been set at 19.3% for 2021/2022. Following the completion of the triennial 143
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91 valuation as at 31 March 2020, employers’ contributions have been set at 19.3% for the next three years (2021/2022 to 2023/2024). The next triennial valuation of the Fund will take place as at 31 March 2023. 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 2023 is £49.539 million. The assumed weighted average duration of the defined benefit obligation for scheme members is 19.0 years. Note 31 Contingent Assets and Liabilities As at 31 March 2022 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. European Structural Funds The Council delivers projects which form part of the European Structural and Investment Funds Scotland Programme. Payments to councils and other Lead Partners from the European Social Fund (ESF) continue to be subject to a full suspension by the European Commission however, progress does appear to be being made regarding the lifting of this suspension. At this stage, the extent of any potential liability is unknown. There is no reason at this time to believe that this affects the amount of funds that the council will receive. 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, and the immaterial nature of any potential impact, 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. No outcome has been agreed as yet, therefore any liability in respect of these reviews cannot be determined. 144
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92 Note 32 Financial Instruments Categories of Financial Instruments The following categories of financial instrument are carried in the Balance Sheet: 31 March 2022 31 March 2021 Long Term £000 Current £000 Total £000 Long Term £000 Current £000 Total £000 Financial Assets Fair value through profit and loss - - - - - - Amortised Cost - 132,429 132,429 - 171,101 171,101 Total Financial Assets - 132,429 132,429 - 171,101 171,101 Financial Liabilities Fair value through profit and loss - - - - - - Amortised cost 1,128,735 59,616 1,188,351 1,150,877 57,480 1,208,357 Total Financial Liabilities 1,128,735 59,616 1,188,351 1,150,877 57,480 1,208,357 145
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93 Income, Expense, Gains and Losses 2021/22 2020/21 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 104 - 104 240 - 240 Other Financial Assets Measured at Fair Value Through Other Comprehensive Income - - - - - - Total Interest Revenue 104 - 104 240 - 240 Interest Expense (38,407) - (38,407) (39,570) - (39,570) 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 - - - - - - 146
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94 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: 2021/22 2021/22 2020/21 2020/21 Carrying Amount £000 Fair Value £000 Carrying Amount £000 Fair Value £000 Financial Liabilities Financial Liabilities held at amortised cost: PWLB Debt 993,486 1,335,291 1,006,003 1,457,491 Financial Liabilities held at amortised cost: Non PWLB Debt 8,575 10,618 8,611 11,578 PFI and Finance Lease Liabilities 186,290 256,394 193,743 288,359 Total Financial Liabilities 1,188,351 1,602,303 1,208,357 1,757,428 Financial Assets Financial Assets held at amortised cost 132,429 132,429 171,101 171,101 Total Financial Assets 132,429 132,429 171,101 171,101 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 2022) arising from a commitment to pay interest to lenders above current market rates. The fair value of Public Works Loan Board (PWLB) loans of £1,335.291 million 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 council 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 £993.486 million would be valued at £1,196.597 million. 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 £341.805 million for the additional interest that will not now be paid. The exit price for the PWLB loans including the penalty charge would be £1,335.291 million. 147
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95 Fair Value Hierarchy for Financial Assets and Financial Liabilities that are not Measured at Fair Value as at 31 March 2022: 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 - 1,335,291 - 1,335,291 Financial Liabilities held at amortised cost: Non PWLB Debt - 10,618 - 10,618 PFI and Finance Lease Liabilities - 256,394 - 256,394 - 1,602,303 - 1,602,303 Financial Assets Financial Assets held at amortised cost 132,429 - - 132,429 Total Assets / Liabilities 132,429 1,602,303 - 1,734,732 Fair Value Hierarchy for Financial Assets and Financial Liabilities that are not Measured at Fair Value as at 31 March 2021: 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 - 1,457,491 - 1,457,491 Financial Liabilities held at amortised cost: Non PWLB Debt - 11,578 - 11,578 PFI and Finance Lease Liabilities - 288,359 - 288,359 - 1,757,428 - 1,757,428 Financial Assets Financial Assets held at amortised cost 171,101 - - 171,101 Total Assets / Liabilities 171,101 1,757,428 - 1,928,529 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. 148
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96 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 2022 into the relative credit ratings. Balance Invested as at 31 March 2022 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- 44,204 12,470 - - - - 56,674 Total UK Government 44,204 12,470 - - - - 56,674 Local Authorities AA- 51,413 4,001 - - - - 55,414 Total UK Local Authorities 51,413 4,001 - - - - 55,414 Bank of Scotland A+ 20,005 - - - - - 20,005 The Royal Bank of Scotland A+ 336 - - - - - 336 Total UK Banks 20,341 - - - - - 20,341 Total 115,958 16,471 - - - - 132,429 The Ratings are as at 31 March 2022 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. 149
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97 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. 2021/22 £000 Bad Debt Provision £000 2020/21 £000 Bad Debt Provision £000 Debtors 76,400 6,066 76,447 5,724 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, £16.155m (2021/22: £13.496m) is considered to be past its date for payment. The past due amount can be analysed by age as follows: 2021/22 £000 2020/21 £000 Less than three months 9,297 6,681 Three to six months 950 740 Six months to one year 1,019 845 More than one year 4,889 5,230 Total 16,155 13,496 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: 2021/22 £000 2020/21 £000 Less than one year 52,459 50,028 Between one and two years 21,770 43,884 Between two and five years 166,238 117,894 More than five years 761,594 802,808 Total 1,002,061 1,014,614 All trade and other payables are due to be paid in less than one year. 150
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98 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 2021/2022. 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 - Impact on Comprehensive Income and Expenditure Statement 85 Share of overall impact credited to the HRA 19 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) (148,555) 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. 151
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99 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 2020/21 Total £000 Lanark £000 Biggar £000 Hamilton £000 Rutherglen £000 2021/22 Total £000 Income and Expenditure Accounts 147 Income for Year 14 - 141 - 155 (97) Expenditure for Year (209) (8) (42) (1) (260) 50 Surplus / (Deficit) To Balance Sheet (195) (8) 99 (1) (105) Balance Sheet Fixed Assets 2,964 Property, Plant and Equipment 1,470 - 1,499 - 2,969 Investments - General - - - - - 841 Advances to South Lanarkshire Council Loans Fund 191 24 412 127 754 53 Debtors - - 53 - 53 3,858 Total Assets 1,661 24 1,964 127 3,776 Current Liabilities (16) Creditors (2) - (13) - (15) 3,842 Total Assets less Current Liabilities 1,659 24 1,951 127 3,761 Represented by: 2,781 Common Good Account 1,360 32 1,316 128 2,836 50 Surplus / (Deficit) (195) (8) 99 (1) (105) 5 Amortisation of Revaluation Reserve 4 - 7 - 11 - Gain / Loss on Disposal of Fixed Assets - - - - - 2,836 1,169 24 1,422 127 2,742 Revaluation Reserve 1,001 Opening Balance 470 - 536 - 1,006 10 Gain / Loss on Revaluation 24 - - - 24 (5) Amortisation of Revaluation Reserve (4) - (7) - (11) 1,006 Closing Balance 490 - 529 - 1,019 3,842 1,659 24 1,951 127 3,761 152
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100 Note 35 Trust Funds The council acts as sole trustee for a total of a total of 58 Trust Funds, all of which are historically significant and some of which are financially significant. For the purposes of accounting and reporting to OSCR, these funds are grouped into Charitable Trusts, Educational Trusts and EK ITEC Trust. The most significant fund is the Loudon Bequest (shown within the Charitable section) which is used to finance holiday projects for elderly people. The balance of the fund as at 31 March 2022 was £0.823m. The Educational Trusts consist mainly of school prize funds. The Charitable Trust Funds include charitable trusts held by the previous District Councils and are used to provide financial assistance to organisations and individuals who meet the terms set by the specific funds. A report is made to the Finance and Corporate Resources Committee after the year end detailing the expenditure made from each of these funds and the balance remaining within the fund. The governance arrangements are considered and reviewed by the council. 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 2020/21 Total £000 Charitable £000 Educational £000 EK ITEC £000 The South Lanarkshire Charitable Trust £000 The South Lanarkshire Educational Trust £000 2021/22 Total £000 Note Income and Expenditure Account 34 Income for Year 32 - - 1 - 33 (23) Expenditure for Year (15) (1) - (5) - (21) 11 Surplus / (Deficit) to Balance Sheet 17 (1) - (4) - 12 Balance Sheet 836 Investments - General 823 - - 10 - 833 354 Investments - South Lanarkshire Council 183 127 27 31 - 368 1,190 Net Assets 1,006 127 27 41 - 1,201 Represented by: 1,075 Capital Account as at 1/4/2021 938 106 - - - 1,044 (31) Movement During Year (37) - - - - (37) 1 1,044 Capital Account as at 31/3/2022 901 106 - - - 1,007 109 Revenue Account as at 1/4/2021 98 22 27 - - 147 37 Movement During Year 7 (1) - 41 - 47 2 146 Revenue Account as at 31/3/2022 105 21 27 41 - 194 1,190 Total Reserves 1,006 127 27 41 - 1,201 Note 1 The movement on the Capital Account represents the net purchase and sale of investments on the Loudon Bequest during the year and the transfer of Charitable Trusts’ capital balances to the South Lanarkshire Charitable Trust. Note 2 The movement on the Revenue Account represents the transfer of Charitable Trusts’ revenue balances to the South Lanarkshire Charitable Trust. 153
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101 Note 36 Accounting Policies A General Principles The Annual Accounts summarise the council’s transactions for the 2021/2022 financial year and its position at the year- end of 31 March 2022. 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 2021/2022, 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 all purchases made via the i-Procurement system, sundry creditors are now accrued on the basis of all goods and services received by 31 March 2022, 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 following 31 March 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. 154
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102 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. 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. The accrual is made at the remuneration rates applicable in the following 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 addition, any reversals held in the Statutory Accumulated Absences Account Reserve were required to be charged back to the Comprehensive Income and Expenditure Statement, by 31 March 2020. In terms of the teachers Statutory Accumulated Compensated Absences, the methodology for 2021/2022 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. ■ The assets of the Strathclyde Pension Fund are included in the Balance Sheet at their fair value at 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. 155
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103 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 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. 156
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104 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 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 112 -124). 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. 157
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105 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. The Council as Lessee Finance Leases Assets held under finance leases are recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception. The asset recognised is matched by a liability for the obligation to pay the lessor. Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefitting from use of the leased property, plant or equipment. The Council as Lessor Operating Leases Where the council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. 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. 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. 158
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106 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. 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 – 40 years). ■ vehicles, plant and equipment – straight line allocation over the useful life of the asset (5 – 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 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. 159
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107 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 102. 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. 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. 160
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108 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 68-70. 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. 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 based on a detailed financial model, in line with the assumptions made within the service provider’s operating model. ■ 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. 161
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109 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 2020/21 2021/22 £000 £000 £000 Expenditure 29,605 Repairs and Maintenance 31,358 21,588 Supervision and Management 21,073 31,932 Depreciation and Impairment on Non-Current Assets 34,044 3,294 Movement in the Allowance for Bad Debts 2,588 5,851 Other Expenditure 7,421 92,270 Total Expenditure 96,484 Income (92,116) Dwelling Rents (94,967) (2,840) Non Dwelling Rents (3,008) - Housing Support Grants - - Other Income - (94,956) Total Income (97,975) (2,686) Net Cost of HRA Services as included in the Comprehensive Income and Expenditure Statement (1,491) 108 HRA Services share of Corporate and Democratic Core 116 - HRA Share of Other Amounts included in the Whole Council Net Cost of Services but not Allocated to Specific Services - (2,578) Net Cost for HRA Services (1,375) HRA share of the operating income and expenditure included in the Comprehensive Income and Expenditure Statement: 6 (Gain) or Loss on the Disposal of Non-Current Assets (1,536) 9,082 Interest Payable and Similar Charges 8,827 (52) Interest and Investment Income (18) 348 Pension Interest Cost and Expected Return on Pension Assets 373 (19,059) Capital Grants and Contributions Receivable (12,044) (12,253) (Surplus) / Deficit for the Year on HRA Services (5,773) Note: The expenditure in the table above is higher than that included in the Comprehensive Income and Expenditure Statement (page 50) by £2.588 million (2019/2020: £3.294 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. 162
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110 Statement of Movement on the Housing Revenue Account Balance 2020/21 2021/22 £000 Notes £000 £000 (9,713) Balance on the HRA at the end of the Previous Year (12,784) (12,253) Surplus / (Deficit) for the Year on HRA Income and Expenditure Statement (5,773) (15,473) Adjustments Permitted by Accounting Standards (16,482) 25,157 Adjustments between Accounting Basis and Funding Basis Under Statute 19,338 (2,569) Net (Increase) / Decrease Before Transfers to or from Reserves (2,917) (502) Transfers (to) or from Reserves (540) (3,071) (Increase) / Decrease in the Year on the HRA (3,457) (12,784) Balance on the HRA at the end of the Current Year (16,241) Housing Revenue Account Disclosures 1. Adjustments Permitted by Accounting Standards 2020/21 £000 2021/22 £000 (15,473) Charge for Depreciation and Impairment of Non Current Assets (16,482) (15,473) Total (16,482) 2. Adjustments Permitted by Accounting Standards 2020/21 £000 2021/22 £000 (163) Adjustment involving Revaluation Reserve - (16,459) Charge for Depreciation and Impairment of Non Current Assets (17,561) (152) Adjustment involving Capital Adjustment Account - 19,059 Capital Grants and Contributions 12,044 6,320 Statutory Provision for the Financing of Capital Investment 6,808 18,134 Capital Expenditure funded by the HRA 19,637 309 Adjustment involving Capital Receipts Reserve 1,536 80 Adjustments involving Financial Instruments Adjustment Account 81 (1,743) Adjustments involving the Pension Reserve (3,314) (228) Adjustments involving the Statutory Accumulated Compensated Absences Account 107 25,157 Total 19,338 3. Housing Stock The council’s housing stock at 31 March 2022 was 25,328 (25,012 at 31 March 2021) in the following categories: 2020/21 Number 2021/22 Number Average Weekly Rent 11,613 Houses 11,883 £83.61 1,345 High Rise 1,345 £67.77 5,459 Tenements 5,381 £61.75 4,546 4 in a block 4,638 £74.76 2,049 Maisonettes 2,081 £61.87 25,012 Total 25,328 4. Rent Arrears Rent Arrears at 31 March 2022 were £8.585 million (£7.608 million at 31 March 2021). 5. Impairment of Debtors In 2021/2022 an impairment of £12.317 million has been provided in the Balance Sheet for irrecoverable rents, an increase of £1.391 million from the provision in 2020/2021. 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 £2.575 million (£2.181 million for 2020/2021). 163
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111 Supplementary Statement No 2 National Non-Domestic Rates Income Accounts 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. 2020/21 2021/22 £000 £000 Note 374,070 Gross rates levied and contributions in lieu 357,113 1 Less: (77,823) Reliefs and other deductions (50,558) - Payments of interest - (5,450) Provision of bad and doubtful debts (3,286) 290,797 Net Non-Domestic Rate Income 303,269 - Adjustment for years prior to the introduction of the pool - 290,797 Contribution to the National Non Domestic Rate pool 303,269 (64,618) Net contribution (to) / from National Non Domestic Rate pool 16,043 226,179 Gross Non-Domestic Rate Income to the Comprehensive Income and Expenditure Statement 319,312 - Non-Domestic Rate income retained by council (BRIS) - 2 226,179 Non-Domestic Rate Income per the Comprehensive Income and Expenditure Statement 319,312 Note 1 In 2021/2022, the gross rates levied amount of £357.113 million (2020/2021: £374.070 million) includes an amount of £221.232 million (2020/2021: £229.516 million) in relation to NDR Utilities which South Lanarkshire Council collected on behalf of the Scottish Government. This has resulted in a net contribution from the NDRI pool to the council of £16.043 million. 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 2021/2022, the council received £0.225 million additional BRIS funding in relation to 2019/2020. Net Rateable Value Calculation The amount paid for National Non-Domestic Rates is determined by the rateable value placed on the property by the Assessor multiplied by the Rate per £, which is determined each year by the Scottish Government. The National Non Domestic Rates poundage set by the Scottish Government for 2021/2022 were as follows: • 49.0p Rate Poundage (49.8p in 2020/2021) for properties with rateable value not greater than £51,000 • 50.3p Intermediate Property Rate (1.3p supplement on poundage) for properties with rateable value between £51,001 and £95,000 • 51.6p Higher Property Rate (2.6p supplement on poundage) for properties with a rateable value greater than £95,000 The additional supplements on the rate poundage contribute towards the cost of the Small Business Bonus Scheme. The Small Business Bonus Scheme provides a discount of between 25% and 100% to businesses in Scotland with a combined rateable value of £35,000 or less. 2021/22 £ Analysis of Rateable Values: Rateable Value at 01/04/21 745,981,130 Running Roll (Full Year Rateable Value) (52,577,985) Rateable Value at 31/03/22 693,403,145 Less: Wholly Exempt (3,543,010) Net Rateable Value at 31/03/22 689,860,135 South Lanarkshire Council’s Rateable Values at 1 April 2021: £ Commercial 140,954,930 Industrial and Freight Transport 57,526,995 Public Undertakings 476,200,940 Other 71,298,265 Total 745,981,130 164
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112 Supplementary Statement No 3 Council Tax Income Account Statement Councils raise taxes from their residents through the Council Tax – which is a property tax linked to property values. Each dwelling in a council area is placed into one of 8 valuation bands (A to H). The council determines the annual tax for a band D property and all other properties are charged a proportion of this, with lower valued properties (Bands A to C) paying less, and higher valued properties (E to H) paying more. 2020/21 £000 2021/22 £000 185,747 Gross Council Tax levied and contributions in lieu 188,147 2,048 Adjustments for prior years Council Tax 2,086 187,795 190,233 Adjusted for: (21,859) Council Tax Reduction (21,070) (21,195) Other discounts and reductions (21,513) (4,984) Provision for Non-collection (4,178) 139,757 Transfer to General Fund 143,472 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 2021/22 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) - - (119) 11 - - 108 5/9 60 Band A 37,189 1,893 (30) 5,103 271 10,674 19,278 6/9 12,852 Band B 31,443 1,237 (22) 3,967 204 6,386 19,671 7/9 15,300 Band C 27,247 718 (4) 2,632 136 3,550 20,215 8/9 17,969 Band D 22,078 376 (69) 1,715 84 1,543 18,429 9/9 18,429 Band E 20,749 275 117 1,141 64 691 18,461 473/360 24,256 Band F 13,427 111 51 495 31 270 12,469 585/360 20,262 Band G 6,888 48 66 214 22 78 6,460 705/360 12,651 Band H 594 10 9 17 3 5 550 882/360 1,348 Class 18 Dwellings - 115,641 Total 123,127 Provision for non- collection (2.875%) (3,540) Council Tax Base 119,587 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 2021/2022 was £1,203. South Lanarkshire Council £ per year for 2021/2022 Band A £802.00 Band E £1,580.61 Band B £935.67 Band F £1,954.88 Band C £1,069.33 Band G £2,355.87 Band D £1,203.00 Band H £2,947.35 165
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113 GROUP ACCOUNTS Group Expenditure and Funding Analysis Net Expenditure Chargeable To the General Fund And HRA Balance £000 2020/21 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 2021/22 Adjustments between the Funding and Accounting Basis £000 Net Expenditure in the Comprehensive Income and Expenditure Statement £000 118,234 25,412 143,646 Community and Enterprise Resources 127,750 38,336 166,086 343,155 (13,099) 330,056 Education Resources 370,610 22,002 392,612 35,038 6,302 41,340 Finance and Corporate Resources 39,332 9,486 48,818 Housing and Technical Resources (2,569) (3,411) (5,980) - Housing Revenue Account (2,917) (1,162) (4,079) 22,568 6,522 29,090 - Housing Other 18,682 17,710 36,392 173,119 13,769 186,888 Social Work Resources 187,288 23,817 211,105 1,966 - 1,966 Joint Board 2,313 - 2,313 6,321 (324) 5,997 Corporate Items 3,295 863 4,158 - 108 108 Corporate and Democratic Core (HRA) - 116 116 - - - Non-Distributed Costs – Non Operational Assets (HRA) - - - (50) - (50) Common Good 105 - 105 697,782 35,279 733,061 Net Cost of Services 746,458 111,168 857,626 (737,581) (47,374) (784,955) Other (Income) and Expenditure (745,658) (31,093) (776,751) (39,799) (12,095) (51,894) (Surplus) or Deficit 800 80,075 80,875 (16,622) (406) (17,028) Share of Associates (24,612) (529) (25,141) (56,421) (12,501) (68,922) (23,812) 79,546 55,734 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 (80,287) (26,115) (106,402) Opening General Fund and HRA Balance (122,460) (42,737) (165,197) (39,799) (16,622) (56,421) Less/plus Surplus or Deficit on General Fund 800 (24,612) (23,812) (2,374) - (2,374) Transfers to/from Other Reserves (4,617) - (4,617) (122,460) (42,737) (165,197) Closing General Fund and HRA Balance (126,277) (67,349) (193,626) 166
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114 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 2020/21 Gross Income £000 Net Expenditure / (Income) £000 Gross Expenditure £000 2021/22 Gross Income £000 Net Expenditure / (Income) £000 184,748 41,102 143,646 Community and Enterprise Resources 216,077 49,991 166,086 378,591 48,535 330,056 Education Resources 443,501 50,889 392,612 119,243 77,903 41,340 Finance and Corporate Resources 122,638 73,820 48,818 Housing and Technical Resources 88,976 94,956 (5,980) - Housing Revenue Account 93,896 97,975 (4,079) 75,323 46,233 29,090 - Housing Other 82,114 45,722 36,392 423,919 237,031 186,888 Social Work Resources 463,634 252,529 211,105 2,465 499 1,966 Joint Board 2,313 - 2,313 8,555 2,558 5,997 Corporate Items 5,018 860 4,158 108 - 108 Corporate and Democratic Core (HRA) 116 - 116 - - - Non-Distributed Costs – Non Operational Assets (HRA) - - - 97 147 (50) Common Good 260 155 105 1,282,025 548,964 733,061 Net Cost of Services 1,429,567 571,941 857,626 31 - 31 Other Operating Expenditure (Note 9) - 2,752 (2,752) 71,710 695 71,015 Financing and Investment (Income) and Expenditure (Note 10) 66,565 (202) 66,767 - 856,001 (856,001) Taxation and Non Specific Grant Income (Note 11) - 840,766 (840,766) 1,353,766 1,405,660 (51,894) (Surplus) on Provision of Services 1,496,132 1,415,257 80,875 (17,028) Share of the (Surplus) or Deficit on the provision of services by associates (25,141) (68,922) Group (Surplus) / Deficit 55,734 (220,685) (Surplus) / Deficit on Revaluation of Fixed Assets 11,352 59,447 Re-measurement of the Net Defined Benefit Liability / (Asset) (389,181) (556) Share of Other Comprehensive (Income) and Expenditure of Associates and Joint Ventures (7,026) (161,794) Other Comprehensive (Income) and Expenditure (384,855) (230,716) Total Comprehensive (Income) and Expenditure (329,121) 167
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115 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 2021 £000 Single Entity 31 March 2022 £000 Group Adjustments 31 March 2022 £000 Group 31 March 2022 £000 3,524,322 Property, Plant and Equipment 3,543,076 3,068 3,546,144 3,826 Heritage Assets 3,826 - 3,826 239 Intangible Assets 247 - 247 82,282 Investments in associates and joint ventures - 113,939 113,939 1,348 Long Term Debtors 1,830 (558) 1,272 3,612,017 Non Current Assets 3,548,979 116,449 3,665,428 48,019 Short Term Investments 25,006 - 25,006 3,903 Inventories 3,789 153 3,942 83,491 Short Term Debtors 92,714 (1,048) 91,666 618 Assets Held for Sale 213 7,918 8,131 115,945 Cash and Cash Equivalents (see cash flow notes) 91,476 - 91,476 251,976 Current Assets 213,198 7,023 220,221 (50,028) Short Term Borrowing (52,459) - (52,459) (171,677) Short Term Creditors (190,713) (3,847) (194,560) - Contract Liability – IFRS15 - - - (7,452) Other Short Term Liabilities (PPP / Finance Leases) (7,157) - (7,157) (5,727) Provisions (2,109) - (2,109) (11,124) Receipts in Advance (6,403) - (6,403) (246,008) Current Liabilities (258,841) (3,847) (262,688) - Long Term Creditors - - - (791) Long Term Provisions (611) (118) (729) (964,586) Long Term Borrowing (949,602) - (949,602) (510) Liabilities in associates and joint ventures - - - (186,291) Other Long Term Liabilities (PPP / Finance Lease) (179,133) - (179,133) (452,701) Other Long Term Liabilities (Pension) (160,445) 9,175 (151,270) (1,604,879) Long Term Liabilities (1,289,791) 9,057 (1,280,734) 2,013,106 Net Assets 2,213,545 128,682 2,342,227 145,820 Usable Reserves 152,186 - 152,186 1,789,850 Unusable Reserves 2,061,359 - 2,061,359 77,436 Group Reserves - 128,682 128,682 2,013,106 Total Reserves 2,213,545 128,682 2,342,227 The notes on pages 119 to 124 form part of the group financial statements. The unaudited accounts were authorised for issue on 22 June 2022. Paul Manning Executive Director (Finance and Corporate Resources) 22 June 2022 168
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116 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 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 2021 116,980 12,784 7,484 2,304 4,334 1,934 145,820 1,789,850 1,935,670 37,260 40,176 2,013,106 Movement in reserves during 2021/22 Total Comprehensive Expenditure and Income (81,564) 5,773 - - - - (75,791) 353,666 277,875 20,057 31,189 329,121 Adjustments permitted under accounting standards 12,360 16,482 - - - - 28,842 (28,842) - - - - Adjustments between accounting basis and funding basis under regulations 70,571 (19,338) - - - 2,082 53,315 (53,315) - 188 (188) - Adjustments for Changes in Council’s share of associates - - - - - - - - - - - - Net Increase / (Decrease) before Transfers to Reserves 1,367 2,917 - - - 2,082 6,366 271,509 277,875 20,245 31,001 329,121 Transfers to/ (from) Reserves 4,077 540 (988) (1,009) (219) (2,401) - - - - - - Increase / (Decrease) in Year 5,444 3,457 (988) (1,009) (219) (319) 6,366 271,509 277,875 20,245 31,001 329,121 Balance at 31 March 2022 carried forward 122,424 16,241 6,496 1,295 4,115 1,615 152,186 2,061,359 2,213,545 57,505 71,177 2,342,227 169
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117 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 2020 75,579 9,713 5,918 2,053 8,234 2,093 103,590 1,607,747 1,711,337 22,485 48,568 1,782,390 Movement in reserves during 2020/21 Total Comprehensive Expenditure and Income 41,940 12,253 - - - - 54,193 170,140 224,333 14,729 (8,346) 230,716 Adjustments permitted under accounting standards 9,800 15,473 - - - - 25,273 (25,273) - - - - Adjustments between accounting basis and funding basis under regulations (12,211) (25,157) - - - 132 (37,236) 37,236 - 46 (46) - Adjustments for Changes in Council’s share of associates - - - - - - - - - - - - Net Increase / (Decrease) before Transfers to Reserves 39,529 2,569 - - - 132 42,230 182,103 224,333 14,775 (8,392) 230,716 Transfers to/ (from) Reserves 1,872 502 1,566 251 (3,900) (291) - - - - - - Increase / (Decrease) in Year 41,401 3,071 1,566 251 (3,900) (159) 42,230 182,103 224,333 14,775 (8,392) 230,716 Balance at 31 March 2021 carried forward 116,980 12,784 7,484 2,304 4,334 1,934 145,820 1,789,850 1,935,670 37,260 40,176 2,013,106 170
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118 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. 2020/21 £000 2021/22 £000 51,894 Net surplus / (deficit) on the provision of services (80,875) 140,495 Adjust net surplus / deficit on the provision of services for non cash movements 187,131 (80,835) Adjust for items included in the net surplus / deficit on the provision of services that are investing and financing activities (63,443) 111,554 Net cash flows from Operating Activities 42,813 (52,760) Investing Activities (39,857) (37,597) Financing Activities (19,507) 21,197 Net increase / (decrease) in cash and cash equivalents (16,551) 94,748 Cash and cash equivalents at the beginning of the reporting period 115,945 115,945 Cash and cash equivalents at the end of the reporting period 99,394 Cash Flow Statement Note – Non Cash Movements The balance of non-cash movements is made up of the following elements: 31 March 2021 £000 31 March 2022 £000 60,980 Depreciation, impairment and amortisation of assets 99,924 30,526 Movement in creditors 17,953 4,487 Movement in debtors (19,323) (165) Movement in inventories (39) 44,195 Movement in pension liability 87,750 472 Carrying amount of non-current assets and non-current assets held for sale, sold or derecognised 866 - Other non cash items charged to the net surplus / deficit on the provision of services - 140,495 Net cash flows from the provision of services for non cash movements 187,131 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: 2020/21 £000 2021/22 £000 (80,394) Capital contributions and grants (59,825) (441) Capital receipts applied (3,618) (80,835) Net cash flows from items included in the net surplus / (deficit) on the provision of services that are investing and financing activities (63,443) 171
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119 Cash Flow Statement Note – Investing Activities 2020/21 £000 2021/22 £000 (120,029) Purchase of property, plant and equipment and intangible assets (133,692) (126,000) Purchase of short term investments (84,000) 441 Proceeds from the sale of property, plant and equipment and intangible assets 3,618 140,500 Proceeds from short term investments 107,000 52,328 Other receipts from investing activities 67,217 (52,760) Net cash flows from investing activities (39,857) Cash Flow Statement Note – Financing Activities 2020/21 £000 2021/22 £000 - Cash receipts of short term and long term borrowing 28,900 (7,704) Cash payments for the reduction of the outstanding liabilities relating to finance leases for PPP contracts (7,453) (29,893) Repayments of short term and long term borrowing (40,954) (37,597) Net cash flows from financing activities (19,507) Cash Flow Statement Note – Cash and Cash Equivalents 31 March 2021 £000 31 March 2022 £000 105 Cash held by officers 97 12,239 Bank current accounts 12,215 103,601 Short term deposits 87,082 115,945 Total cash and cash equivalents 99,394 The credit figures shown against Bank Accounts in 2022 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 (75,791) 4 (105) (4,983) (80,875) Adjust net surplus / (deficit) on the provision of services for non-cash movements 180,292 552 105 6,182 187,131 Adjust for items included in the net surplus / (deficit) that are investing and financing activities (63,443) - - - (63,443) Net Cash Flows from Operating Activities 41,058 556 - 1,199 42,813 Investing Activities (39,809) - - (48) (39,857) Financing Activities (19,507) - - - (19,507) Net increase / decrease in cash and cash equivalents (18,258) 556 - 1,151 (16,551) Cash and cash equivalents at beginning of period 109,734 1,070 - 5,141 115,945 Cash and cash equivalents at end of reporting period 91,476 1,626 - 6,292 99,394 172
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120 Notes to Group Financial Statements Note 1 Notes to the Expenditure and Funding Analysis Statement – Adjustments between Funding and Accounting Basis Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement 2021/22 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 21,217 17,782 (663) 38,336 Education Resources 32,205 13,497 (23,700) 22,002 Finance and Corporate Resources 2,276 7,370 (160) 9,486 Housing and Technical Resources - Housing Revenue Account 7,598 2,941 (11,701) (1,162) - Housing Other 6,775 9,205 1,730 17,710 Social Work Resources 3,307 21,612 (1,102) 23,817 Joint Board - - - - Corporate Items - 421 442 863 Corporate and Democratic Core (HRA) - - 116 116 Non-Distributed Costs – Non Operational Assets (HRA) - - - - Net Cost of Services 73,378 72,828 (35,038) 111,168 Other Income and Expenditure from the Expenditure and Funding Analysis (67,340) 9,586 26,661 (31,093) Surplus or Deficit 6,038 82,414 (8,377) 80,075 Share of (Surplus) or Deficit on the Provision of Services by Associates (1,351) 453 369 (529) Difference between General Fund Surplus or Deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services 4,687 82,867 (8,008) 79,546 2020/21 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 16,022 8,363 1,027 25,412 Education Resources 7,065 4,346 (24,510) (13,099) Finance and Corporate Resources 1,562 3,429 1,373 6,364 Housing and Technical Resources - Housing Revenue Account 7,478 1,395 (12,284) (3,411) - Housing Other 2,508 4,449 (497) 6,460 Social Work Resources 1,730 10,647 1,392 13,769 Joint Board - - - - Corporate Items - 47 (371) (324) Corporate and Democratic Core (HRA) - - 108 108 Non-Distributed Costs – Non Operational Assets (HRA) - - - - Net Cost of Services 36,365 32,676 (33,762) 35,279 Other Income and Expenditure from the Expenditure and Funding Analysis (91,699) 8,835 35,490 (47,374) Surplus or Deficit (55,334) 41,511 1,728 (12,095) Share of (Surplus) or Deficit on the Provision of Services by Associates (1,085) 340 339 (406) Difference between General Fund Surplus or Deficit and Comprehensive Income and Expenditure Statement Surplus or Deficit on the Provision of Services (56,419) 41,851 2,067 (12,501) 173
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121 Note 2 Expenditure and Income Analysed by Nature (Group) The council’s expenditure and income is analysed as follows: 2021/22 £000 2020/21 £000 Expenditure Employee Benefits Expenses 655,983 590,439 Other Services Expenditure 673,660 630,606 Support Services Recharges - - Depreciation, Amortisation, Impairment 99,924 60,980 Interest Payment 56,802 58,279 Pension Net Interest Expense 9,586 8,835 Impairment on Financial Instruments 177 4,596 Loss on the Disposal of Assets - 31 Total Expenditure 1,496,132 1,353,766 Income Fees and Charges and Other Service Income 372,430 348,968 Interest and Investment Income 132 315 Impairment on Financial Instruments (334) 380 Gain on the Disposal of Assets 2,752 - Income from Council Tax 143,472 139,757 Government Grants and Contributions 896,805 916,240 Total Income 1,415,257 1,405,660 Surplus or Deficit on the Provision of Services 80,875 (51,894) 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 2022 £000 31 March 2021 £000 Strathclyde Partnership for Transport 69,158 63,261 Strathclyde Concessionary Travel Scheme Joint Committee 681 511 South Lanarkshire Integration Joint Board 42,640 18,510 Lanarkshire Valuation Joint Board 1,460 - Total 113,939 82,282 Liabilities in associates and joint boards 31 March 2022 £000 31 March 2021 £000 Lanarkshire Valuation Joint Board - (510) Total - (510) 174
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122 Note 4 Disclosure of Interests in Other Entities The council has adopted the recommendations of the Code in the United Kingdom 2021/2022, 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 100-107. 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 £128.682m. 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 £3.761m 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 2022. In 2021/2022, South Lanarkshire Council contributed 14.31% 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 £69.158m 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 are 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 2022. In 2021/2022, South Lanarkshire Council contributed 14.83% 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 £0.681m 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 are subject to audit. 175
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123 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 2022. In 2021/2022, South Lanarkshire Council contributed 51.82% 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 £1.460m 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%. 2021/22 £000 2020/21 £000 Expenditure 4,698 4,533 Total Comprehensive Income and Expenditure (3,835) 812 Fixed Assets 156 177 Long Term Assets 1,273 - Current Assets 1,614 1,485 Liabilities due within one year (225) (479) Liabilities due after one year - (2,200) Capital and reserves 2,818 (1,017) 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 £153.085m or 22.95% of the Board’s income in 2021/2022. 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 £42.640m 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. 2021/22 £000 2020/21 £000 Expenditure 618,673 597,069 Total Comprehensive Income and Expenditure 85,278 (30,846) Fixed Assets - - Current Assets 85,278 37,019 Liabilities due within one year - - Liabilities due after one year - - Capital and reserves 85,278 37,019 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 are subject to audit. South Lanarkshire Leisure and Culture Limited South Lanarkshire Leisure Limited was established as a Charitable Trust on 1 April 2002. The Trust became South Lanarkshire Leisure and Culture Limited in October 2010, when Cultural Services transferred from South Lanarkshire Council. 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 has neither any shares in, nor ownership of the Trust. The Company is limited by guarantee, with each member’s liability limited to £1 in the event of the Company being wound up. The accounting period for the trust is the twelve months to 31 March 2022. South Lanarkshire Council currently has 5 out of the 12 Board positions meaning 41.67% representation on the Board of Directors. The Trust 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 Limited is included in the Group Financial Statements as a 100% subsidiary. The accounts of the Trust are published separately and may be obtained from the Secretary, South Lanarkshire Leisure and Culture Limited, Council Office, Floor 1, North Stand, Cadzow Avenue, Hamilton, ML3 0LX. The accounts of the Trust are subject to audit. 176
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124 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%. 2021/22 £000 2020/21 £000 Expenditure 39,468 33,424 Total Comprehensive Income and Expenditure 19,180 (11,290) Fixed Assets 72 103 Long Term Assets 9,175 - Current Assets 7,923 6,698 Liabilities due within one year (5,840) (5,070) Liabilities due after one year (558) (511) Long Term Liabilities - (9,628) Capital and reserves 10,772 (8,408) Contingent liabilities - - Capital commitments - - 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 following additional disclosures are required under accounting regulations for Routes to Work South because the Councils’ share of the net assets exceeds 25%. 2021/22 £000 2020/21 £000 Expenditure 2,148 1,910 Total Comprehensive Income and Expenditure (4) (3) Fixed Assets 27 30 Current Assets 2,040 1,800 Liabilities due within one year (1,381) (1,149) Liabilities due after one year (117) (117) Capital and reserves 568 564 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 totals 11.87%. This body has been included as an associate in the council’s Group Accounts, however, as the Joint Committee net assets at 31 March 2022 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 2021/2022, but the financial results of this organisation have not been consolidated into the council’s Group Accounts as the amounts are not material. . 177
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125 ■ 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. South Lanarkshire Council contributed 13.01% of the estimated running costs in 2021/2022, however, 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 12.88% of the estimated running costs of the Joint Service in 2021/2022, 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 2021/2022, 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. South Lanarkshire Council contributed 12.5% of the committee’s estimated running costs in 2021/2022, 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 2021/2022, 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 2021/2022, 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. 178
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126 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 2022 is: Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN 179
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127 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. 180
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128 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. 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. 181
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Appendix 2 Table 1 Reconciliation of Monitoring Position to Annual Accounts Actual to 31/03/22 (Exec Com, 29 June ‘22) £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 122.767 - - 122.767 - 122.767 38.336 161.103 Education Resources 370.610 - - 370.610 - 370.610 22.002 392.612 Finance and Corporate Resources 51.094 (11.758) - 39.336 - 39.336 9.486 48.822 Housing Revenue Account - - - - (2.917) (2.917) (1.162) (4.079) Housing and Technical Resources 18.682 - - 18.682 - 18.682 17.710 36.392 Social Work Resources 187.288 - - 187.288 - 187.288 23.817 211.105 Joint Boards 2.313 - - 2.313 - 2.313 - 2.313 Corporate Items - 3.295 - 3.295 - 3.295 0.863 4.158 Corporate and Democratic Core - HRA - - - - - - 0.116 0.116 Non Distributed Costs - HRA - - - - - - - - Total Resources 752.754 (8.463) - 744.291 (2.917) 741.374 111.168 852.542 CFCR 1.743 - 0.618 2.361 - 2.361 Loan Charges 32.922 - - 32.922 - 32.922 Corporate Items 1.231 (1.231) - - - - Council Tax (143.472) - - (143.472) - (143.472) General Revenue Grant (296.269) 5.256 - (291.013) - (291.013) General Revenue Grant - COVID (31.582) 4.438 - (27.144) - (27.144) Non Domestic Rates (319.312) - - (319.312) - (319.312) Transfer from Reserves (64.089) - 64.089 - - - Other Income and Expenditure (818.828) 8.463 64.707 (745.658) - (745.658) (31.093) (776.751) (Surplus)/Deficit on Provision of Services (66.074) - 64.707 (1.367) (2.917) (4.284) 80.075 75.791 4 183
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Annual Accounts: Restatement of Monitoring Figures Reported This Appendix reconciles the monitoring figures reported to the Council’s Executive Committee (29 June 2022) 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, 29 June 2022), and is the monitoring surplus of £66.074 million. An adjustment is made to move the Corporate Items from the Other Income and Expenditure to the Resources in Appendix 8 (col 2). This is where they are shown in the Annual Accounts. • Appendix 2 (col 3) then takes this monitoring surplus of £66.074 million, and removes the Transfers from Reserves totalling £64.707 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 surplus on provision of services of £4.284 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 7) is adjusted by adding the technical accounting transactions, including depreciation and pension accounting entries, which are outwith the normal Council monitoring process, to arrive at the figures in the Comprehensive Income and Expenditure Statement of a deficit of £75.791 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 184
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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 £4.617 million are taken into account, the total General Fund and HRA position for the year is an increase of £8.901 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 (116.980) (12.784) (129.764) (Surplus) /Deficit on General Fund per EFA (1.367) (2.917) (4.284) Transfer to/from Other Reserves (see Table 3) (4.077) (0.540) (4.617) Total Movement in Year (5.444) (3.457) (8.901) Closing General Fund and HRA Balance (122.424) (16.241) (138.665) Table 3 - Transfers to/from Other Reserves General Fund £m Repairs and Renewals (including Winter Maintenance) 0.988 Insurance Fund 1.009 Capital Fund (including IT Development Fund, Central Energy Efficiency Fund, Education Capital Items Replacement) 0.219 Capital Receipts Reserve 2.401 Housing Revenue Account (0.540) Total Transfers to/from Other Reserves (4.077) 185
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Appendix 3 1 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ The Trustees present their annual report together with the financial statements and Independent Auditors’ report for the year ended 31 March 2022. 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 as at 31 March 2022: Finance and Corporate Resources Committee, South Lanarkshire Council Independent Auditors: Audit Scotland Structure, Governance and Management Governing Document South Lanarkshire Council Charitable Trusts comprises 40 Charitable Trust Funds / Bequests established under previous local authorities. Each Trust Fund / Bequest is restricted for the purpose which it was set up. Charity Trustees The trustees of the charities 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 trustees of South Lanarkshire Council Charitable Trusts as at 31 March 2022 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 Colin Dewar Councillor Gladys Ferguson-Miller Councillor Mary Donnelly Councillor Richard Nelson Councillor Joe Fagan (Ex Officio) Councillor Mo Razzaq Councillor Grant Ferguson Councillor John Ross Councillor Celine Handibode (Depute Chair) Councillor Graham Scott 4 187
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2 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ Organisational Structure The trustees delegate the day-to-day administration of the charities 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 Trusts 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 Trusts 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 2022 was £1,044,837 (2020/2021: £989,719). The remaining funds of the charity are managed by South Lanarkshire Council. The interest received is shown in the Statement of Receipts and Payments. During 2021/2022 income of £32,784 (2020/2021: £33,738) was received and is shown in the Statement of Receipts and Payments. Trustee Indemnity Insurance No such insurance has been taken out. 188
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3 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ Reorganisation of South Lanarkshire Council Trust Funds South Lanarkshire Council established The South Lanarkshire Charitable Trust (Charity Number SC049819) in December 2019 for the purposes of reorganising existing trust funds, including those held under South Lanarkshire Council Charitable Trusts (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 2021/22, OSCR approved the transfer of assets totalling £45,236. The remaining assets will be transferred once OSCR has given approval. Objectives and Activities The most significant fund is the Loudon Bequest Trust Fund which is used to help finance holidays for elderly people within 12 Local Authority areas in the West of Scotland. Other Trust Funds are those held by the previous District Councils and provide financial assistance to organisations and individuals who meet the terms set by the specific funds. Within the Clydesdale area, grants are made to the elderly, and those experiencing financial hardship. Within the Rutherglen area, grants are used to cater for a free annual lunch for the elderly to foster spirit within the community. Cash gifts are also presented. Within the East Kilbride area, the grants are made to local churches for use in their charitable work to benefit those experiencing financial hardship. Within the Hamilton Area, individual grants are given to those experiencing financial hardship, the elderly, specified schools and youth groups. Achievements and Performance During the year to 31 March 2022, no grants were paid out. Financial Review Overview Income during 2021/2022 came from income on external investments of £26,283 (2020/2021: £26,528); interest calculated on the Trust Funds’ revenue balances of £80 (2020/2021: £269). Proceeds from the sale of investments of £6,351 (2020/2021: £6,941) were received. 189
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4 South Lanarkshire Council Charitable Trusts Trustees’ Annual Report – for the year ended 31 March 2021 ________________________________________________________________________ The trust held cash and bank balances of £182,949 (2020/2021: £200,335) as at 31 March 2022 and investments with a book value of £823,458 (2020/2021: £825,876). Reserves Policy The trusts are managed in order to allow the full potential benefit of the trusts 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 2022 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): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 190
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5 South Lanarkshire Council Charitable Trusts Statement of Receipts and Payments for the year ended 31 March 2022 ___________________________________________________________________________________________________________________ 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 - 26,363 - - 26,363 26,798 Sub Total - 26,363 - - 26,363 26,798 Receipts from Assets and Investments sales Proceeds from sale of investments 4 - 6,351 - - 6,351 6,941 Sub Total - 6,351 - - 6,351 6,941 Total Receipts - 32,714 - - 32,714 33,739 Payments External Audit Fee 8 - 4,680 - - 4,680 4,692 Investment Management Costs 7 3,105 3,105 2,707 Administration Charge 9 4,212 4,212 - Grants and Donations 5 - 0 - - 0 5,896 Purchase of Investments 4 3,245 3,245 4,234 Total Payments - 15,242 - - 15,242 17,529 Net Receipts - 17,472 - - 17,472 16,210 Surplus / (Deficit) for the year - 17,472 - - 17,472 16,210 191
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6 South Lanarkshire Council Charitable Trusts Statement of Balances as at 31 March 2022 ___________________________________________________________________________________________________________________ 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 - 200,335 - - 200,335 184,125 Transfer of Assets to the South Lanarkshire Charitable Trust (34,857) (34,857) - Surplus shown on receipts and payments account - 17,472 - - 17,472 16,210 Closing Balance - 182,950 - - 182,950 200,335 Investments Market Value of Investments (Clydeport – transferred to The South Lanarkshire Charitable Trust) 7 - - - - - 10,379 Market Value of Investments (Managed by Barclays Wealth) 7 - 1,044,837 - - 1,044,837 989,719 Total Investments - 1,044,837 - - 1,044,837 1,000,098 Signed on behalf of the charity’s trustees Signature(s): Full Name(s): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 192
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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 £26,283 (2020/2021: £26,529) and £80 (2020/2021: £269) 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 £6,351 (2020/2021: £6,941) were received. • Purchase costs of the Loudon Bequest investment of £3,245 (2020/2021: £4,234) 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 2022, 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) had commenced. During 2020/21 no grants were paid out. 193
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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 £1,044,837 (2019/2020: £989,719) 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 £3,105 (2020/2021; £2,707). 8. External Audit Fee The external audit fee for 2021/2022 £4,680 (2020/2021: £4,692) is paid to Audit Scotland. 9. Administration Charge A charge for administration of the Trust Fund for 2021/2022 £4,212 (2020/2021: no charge) is paid to South Lanarkshire Council. 194
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9 South Lanarkshire Council Educational Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ The Trustees present their annual report together with the financial statements and Independent Auditors’ report for the year ended 31 March 2022. Reference and Administration Information Charity Name: South Lanarkshire Council Educational Trusts Charity Number: SC028135 Principal Office: Finance Services Council Offices Almada Street Hamilton ML3 0AA Trustees as at 31 March 2022: Finance and Corporate Resources Committee, South Lanarkshire Council Independent Auditors: Audit Scotland Structure, Governance and Management Governing Document South Lanarkshire Council Educational Trusts comprises 18 Charitable Trust Funds / Bequests established under previous local authorities. Each Trust Fund / Bequest is restricted for the purpose which it was set up. Charity Trustees The trustees of the charities 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 trustees of South Lanarkshire Council Educational Trusts as at 31 March 2022 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 Colin Dewar Councillor Gladys Ferguson-Miller Councillor Mary Donnelly Councillor Richard Nelson Councillor Joe Fagan (Ex Officio) Councillor Mo Razzaq Councillor Grant Ferguson Councillor John Ross Councillor Celine Handibode (Depute Chair) Councillor Graham Scott 195
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10 South Lanarkshire Council Educational Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ Organisational Structure The trustees delegate the day-to-day administration of the charities 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 Trusts 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, OSCR also receive an annual report on the Trusts 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 funds of the charity are held with South Lanarkshire Council. The interest received from South Lanarkshire Council and HM Treasury is shown in the Statement of Receipts and Payments. Trustee Indemnity Insurance No such insurance has been taken out. Reorganisation of South Lanarkshire Council Trust Funds South Lanarkshire Council established The South Lanarkshire Educational Trust (Charity Number SC049823) in December 2019 for the purposes of reorganising existing trust funds, including those held under South Lanarkshire Council Educational Trusts (Charity Number SC028135). The constitution of The South Lanarkshire Educational Trust (SC049823) 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 Educational Trusts (SC028135) to The South Lanarkshire Educational Trust (SC049823) is ongoing and will be subject to the approval of OSCR. 196
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11 Objectives and Activities The objectives of the funds are mainly to provide prizes for school prize givings. Many of the bequests relate to certain areas within South Lanarkshire Council and the schools within those catchment areas. A few of the bequests may be used to support educational projects during the school year, if meeting the specific requirements of the bequests. Achievements and Performance During the year to 31 March 2022, the charity did not pay out any grants as a result of the ongoing reorganisation of the Trust (2020/2021: £4,000). Financial Review Overview Income during 2021/2022 came from interest calculated on the Trust Funds’ revenue balances of £58 (2020/2021: £183). The trust held cash and bank balances of £126,574 (2020/2021: £127,427) as at 31 March 2022. Reserves Policy The trusts are managed in order to allow the full potential benefit of the trusts 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 Educational Trusts for the year ended 31 March 2022 is: Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN 197
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12 South Lanarkshire Council Educational Trusts Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ 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): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 198
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13 South Lanarkshire Council Educational Trusts Statement of Receipts and Payments for the year ended 31 March 2022 ___________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current year) Total funds (last year) £ £ £ £ £ £ Receipts Grants and Donations 4 - - - - - - Income from investments other than land and buildings 5 - 58 - - 58 183 Sub Total - 58 - - 58 183 Receipts from Assets and Investments sales Proceeds from sale of investments 5 - 0 - - 0 0 Sub Total - 0 - - 0 0 Total Receipts - 60 - - 60 183 Payments External Audit Fee 7 - 616 616 609 Administration Charge 8 - 295 - - 295 - Grants and Donations 4 - 0 - - 0 4,000 Total Payments - 911 - - 911 4,609 Net (Payments) / Receipts - (853) - - (853) (4,426) Surplus / (Deficit) for the year - (853) - - (853) (4,426) 199
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14 South Lanarkshire Council Educational Trusts Statement of Balances as at 31 March 2022 ___________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current year) Total funds (last year) £ £ £ £ £ £ Cash and Bank Balances Opening Balance - 127,427 - - 127,427 131,853 Deficit shown on receipts and payments account - (853) - - (853) (4,426) Closing Balance - 126,574 - - 126,574 127,427 Investments Market Value of Investments in South Lanarkshire Council - - - - - - Market Value of Government Bonds - - - - - - Total Investments - - - - - - Signed on behalf of the charity’s trustees Signature(s): Full Name(s): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 200
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15 South Lanarkshire Council Educational 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. Grants and Donations In the year to 31 March 2022, no donations were received. In the year to 31 March 202, no grants were paid out (2020/2021: £4,000 paid to 1 establishment). 5. 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 interest of £58 (2020/2021: £183) from South Lanarkshire Council. • There were no transactions between the charity and any trustee or any connected person during the year. 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. External Audit Fee The external audit fee for 2021/2022 £616 (2020/2021: £609) is paid to Audit Scotland. 201
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16 8. Administration Charge A charge for administration of the Trust Fund for 2021/2022 £295 (2020/2021: no charge) is paid to South Lanarkshire Council. 202
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17 East Kilbride Information Technology Centre Trust Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ The Trustees present their annual report together with the financial statements and Independent Auditors’ report for the year ended 31 March 2022. Reference and Administration Information Charity Name: East Kilbride Information Technology Centre Trust Charity Number: SC015221 Principal Office: Finance Services Council Offices Almada Street Hamilton ML3 0AA Trustees as at 31 March 2022: Councillor Margaret Cowie, Councillor Graeme Horne, Councillor Grant Hose and Councillor Gladys Miller Independent Auditors: Audit Scotland Structure, Governance and Management Governing Document East Kilbride Information Technology Trust is recognised as a Scottish charity. The Deed of Trust states that the charity should provide for young unemployed people living in East Kilbride, training and education appropriate to their needs in basic information technology and the opportunity to develop these skills. Organisational Structure The trustees delegate the day-to-day administration of the Trust 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 is not used for the purpose that they were intended. To mitigate this risk, the governance arrangements in place ensure 203
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18 that the Finance and Corporate Resources Committee are advised of the balance and distribution of funds. In addition, OSCR also receive an annual report on the Trusts and their purpose. East Kilbride Information Technology Centre Trust Trustees’ Annual Report – for the year ended 31 March 2022 ________________________________________________________________________ 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 funds of the charity are internally deposited with South Lanarkshire Council. The interest received from South Lanarkshire Council is shown in the Statement of Receipts and Payments. Trustee Indemnity Insurance No such insurance has been taken out. Reorganisation of South Lanarkshire Council Trust Funds To ensure that funds can be used to benefit residents of South Lanarkshire, a scheme of amalgamation and rationalisation has been approved by trustees (members) and is currently in the process of being formally adopted by the Office of the Scottish Charity Regulator (OSCR). This amalgamation and rationalisation will simplify trusts and make funds more readily accessible to current and future potential beneficiaries. Objectives and Activities To establish and operate the Centre in East Kilbride so as to provide for young unemployed people living in the East Kilbride District. To provide training and education appropriate to their needs in basic electronic assembly computing, electronic office and other work involving the use of new technology. To develop their skills in those fields and make these skills available as a community resource. Also, to take any action in furtherance of or ancillary to the foregoing, to enable the Trustees to fulfil the purposes of the Trust. Achievements and Performance There was no activity during the financial year however, now that we are in the recovery stage of the pandemic, work is ongoing on a proposed approach to utilise the funding in 2022/2023. Interest of £12 (2020/2021: £38) was received on the invested balance. Financial Review Overview Income during 2021/2022 came from interest on deposits with South Lanarkshire Council of £12 (2020/2021: £38). The trust held cash and bank of £26,677 (2020/2021: £26,857). 204
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19 Reserves Policy The balance on reserves is invested in the Council’s Loans Fund in return for interest. The interest has been distributed for the purpose of the Trust. The Council adopts the CIPFA Treasury Code of Practice. External Audit The auditor with responsibility for the audit of the accounts of East Kilbride Information Technology Centre Trust for the year ended 31 March 2022 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): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 205
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20 East Kilbride Information Technology Centre Trust Statement of Receipts and Payments for the year ended 31 March 2022 __________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current year) Total funds (last year) £ £ £ £ £ £ Receipts Income from investments other than land and buildings 4 - 12 - - 12 38 Sub Total - 12 - - 12 38 Payments External Audit Fee 7 - 130 - - 130 124 Administration Charge 8 - 62 - - 62 0 Grants and Donations 5 - 0 - - 0 0 Total Payments - 192 - - 192 124 Net Receipts - (180) - - (180) (86) Surplus / (Deficit) for the year - (180) - - (180) (86) 206
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21 East Kilbride Information Technology Centre Trust Statement of Balances as at 31 March 2022 ___________________________________________________________________________________________________________________ Note Unrestricted Funds Restricted Funds Expendable Endowment Funds Permanent Endowment Funds Total Funds (current period) Total funds last period £ £ £ £ £ £ Cash and Bank Balances 6 Opening Balance - 26,857 - - 26,857 26,943 Surplus shown on receipts and payments account - (180) - - (180) (86) Closing Balance - 26,677 - - 26,677 26,857 Investments Market Value of Investments - - - - - - Total Investments - - - - - - Signed on behalf of the charity’s trustees Signature(s): Full Name(s): Position: CHAIR OF FINANCE AND CORPORATE RESOURCES COMMITTEE Date: 22 JUNE 2022 207
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22 East Kilbride Information Technology Centre Trust Notes to the Financial Statements ___________________________________________________________________________________________________________________ 9. 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). 10. Fund Accounting Restricted funds are those funds that can only be applied for particular purposes. 11. Taxation The charity is not liable to income or capital gains tax on its charitable activities. 12. 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 interest of £12 (2020/2021: £38) from South Lanarkshire Council. • There were no transactions between the charity and any trustee or any connected person during the year. 13. Grants and Donations There was no activity during the financial year to 31 March 2022. 14. 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. The balances are repayable on demand and interest is payable on balances. 15. External Audit Fee The external audit fee for 2021/2022 £130 (2020/2021: £124) is paid to Audit Scotland. 16. Administration Charge A charge for administration of the Trust Fund for 2021/2022 £62 (2020/2021: no charge) is paid to South Lanarkshire Council. 208
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Executive Director (Finance and Corporate Resources) Subject: Internal Audit Activity as at 3 June 2022 1. Purpose of Report 1.1. The purpose of the report is to:- update the Risk and Audit Scrutiny Committee on progress by, and performance of, the Internal Audit service in the period to 3 June 2022 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that progress and performance be 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 January 2022 and reported on work completed in the period 30 October 2021 to 7 January 2022. This report covers all work completed in the period 8 January to 3 June 2022. Performance information is also included. 4. Delivery of the Internal Audit Plan: Progress and Performance 2021/2022 Internal Audit Plan 4.1. As at 30 April 2022, 92% of the 2021/2022 Audit Plan was complete. 4.2. Key performance indicators reflecting quality, on time and within budget for the year to 31 March 2022 are summarised in Appendix 1 together with explanations. 100% of draft reports have been issued on time and 87% within budget against targets of 80% respectively. Quality continues to be monitored through internal quality control procedures. 4.3. Client contributions to the delivery of the Audit Plan take the form of responding to draft reports, agreeing to closing meetings and signing reports quickly once agreed. 95% of audit assignments were concluded to a signed action plan, where this was required, within four weeks of the issue of a draft report against a target set of 80%. 2022/2023 Internal Audit Plan 4.4. In January 2022, the Committee approved the Audit Plan for 2022/2023. An update on progress with the delivery of this Plan is set out in Appendix 2. 5 209
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4.5. The intention was to re-present the Plan to the Committee at this meeting in June 2022 providing further detail around how contingency time would be used alongside a programme of Resource audits for approval. However, work to develop the Plan has been impacted by a period of unplanned leave and it is now proposed that further detail around the allocation of remaining Plan time will be presented to the Committee for approval in September 2022. In the interim, Internal Audit will focus on the delivery of corporate tasks and the continuation and finalisation of audit assignments from the 2021/2022 Plan. 4.6 During this period, Internal Audit will also support Fusion, the Oracle upgrade of the Council’s main financial system and finalise arrangements to backfill the Internal Audit post undertaking this task for the duration of the project. 4.7. Members are asked to note progress and performance and the intention to present an updated Plan to the next meeting of the Committee in September 2022. 5. Findings 5.1. Appendix 3 lists all assignments completed in the period 8 January to 3 June 2022 together with a summary of overall assurances from each area of work. 5.2. Key messages from the assignment reviewing the Council’s progress with implementing Self Directed Support is attached at Appendix 4. To further assist Members with their scrutiny role, this summary concludes by suggesting areas where Members should seek assurances around the Council’s Self Directed Support arrangements. 5.3. Members are asked to note the findings set out in appendices 3 and 4. 6. Glasgow City Region City Deal – Internal Audit Plan 2021/2022 6.1 As advised in January 2022, during the December 2021 Cabinet meeting of the Glasgow City Region City Deal, it was suggested that Audit Committees within member Authorities should have sight of City Deal audit reports. To address this point within South Lanarkshire, the Committee was advised that activity reports would now, periodically, include the audit reports presented to the Cabinet. No Internal Audit reports were presented at the Cabinet meeting in February 2022. The next meeting is in June 2022 and an update will now be provided to the Committee in their meeting later in the same month. 6.2. As previously noted, audit recommendations are followed up by Glasgow City Council as part of the annual audit plan and progress with implementing recommendations are reported to the Cabinet. Where relevant, these actions will now also be added to South Lanarkshire Council’s audit action database to ensure that these are implemented in full and on time. Performance with delivery these actions will be reported within the Key Performance Indicators that are included in the routine activity reports presented at each meeting of the Committee. 7. Chief Internal Auditors Group 7.1. Throughout the year the Chief Internal Auditor’s Group has convened meetings that provide an opportunity to share best practice and attend presentations on topical issues. 7.2. A copy of the 2021 annual report is attached at Appendix 5 setting out the Group’s activities during the year. Attendance at these meetings has now been extended to the wider Internal Audit teams within Local Authorities and this has proven to be a positive development. 210
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7.3. These meetings have been well attended by the Internal Audit team within South Lanarkshire helping to build a greater awareness and understanding of key risk areas. 8. Progress against Strategy 8.1. 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. 8.2. Delivery of the strategy in 2021/2022 has been evidenced by the material completion of the Internal Audit Plan in-year and has been monitored through the performance indicators regularly reported to the Committee. 9. Employee Implications 9.1. There are no employee issues. 10. Financial Implications 10.1. A breakeven position for 2021/2022 was achieved at the end of the financial year for the Internal Audit function. 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. 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. Normally these would be mitigated by coaching and training, regular meetings and escalation processes as well as inclusion of contingency time within the annual plan. However, given the ongoing pandemic during 2021/2022, these risks required particular consideration. A period of unplanned absence has also had an impact on finalising assignments around year end. Arrangements are now in place to conclude work within reasonable timeframes. 13. Equality Impact Assessment and Consultation Arrangements 13.1 There is no requirement to equality assess the contents of this report. 13.2. Heads of Service are consulted on each and every audit assignment. Paul Manning Executive Director Finance and Corporate Resources 7 June 2022 Link(s) to Council Objectives/Improvement Themes/Values Achieve results through leadership, good governance and organisational effectiveness Previous References 2022/2023 Internal Audit Plan – Risk and Audit Scrutiny Committee, 26 January 2022 List of Background Papers Figtree extracts of Action Plans 211
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Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Audit and Compliance Manager Ext: 2618 (Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 212
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Key audit performance indicators as at 31 March 2022 Appendix 1 Indicator Numbers Percentage Target Comment Assignments delivered within budget 41/47 87% 80% Draft reports delivered within 6 weeks of file review 45/45 100% 80% 2021/2022 Audit Plan completed to draft by 31 March 2022 47/51 92% 100% 4 assignments outstanding. 2 special investigations, work for the Risk Sponsor’s Group and advice and guidance re controls around voucher ordering. Internal Audit recommendations delivered on time 6/6 100% 90% Client to agree findings and actions within 4 weeks of draft issue 42/44 95% 80% 213
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2022/2023 Internal Audit Plan Appendix 2 Lead Resource Audit assignment Outline Scope Progress Key year end tasks FCR External Audit Provide 2021/2022 general ledger data to External Audit for the audit of the financial accounts for the year ended 31 March 2022. Interim data was provided in March 2022. Further data to provided July 2022. All 2021/2022 Annual Report Prepare annual statement of assurance for 2021/2022. Present to Risk and Audit Scrutiny Committee (RASC). Complete All Governance Statement Undertake review of evidence that supports SLC’s Annual Governance Statement and provide 2021/2022 annual assurance statement for Glasgow City Region – City Deal. Complete Corporate tasks All Attend internal and external working groups Attend, respond to requests, participate in consultations and providing updates. Ongoing throughout year. All Committee reporting Prepare reports to present to RASC and to External Client Committees and Boards. Ongoing throughout year. FCR Fusion Support implementation of project. Ongoing throughout year. All 2023/2024 Audit Plan Undertake consultation, risk assessment, Resource and Section planning, set scopes and objectives and seek approval through preparation of reports. Quarter 3 task. To be presented to RASC in March 2023 for approval. All National Fraud Initiative (NFI) Coordinate data uploads for new NFI exercise in 2022/2023. Develop and communicate plan for investigation of matches in 2023/2024. Commences Quarter 3. All Advice and guidance Provision of advice and guidance on online banking for school funds and on the revision of duplicate invoice checks. Complete to draft stage. Undergoing final review ahead of issue. 214
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Lead Resource Audit assignment Outline Scope Progress Core programme of audit work All Informal Follow Up Prompt Resources on a quarterly and monthly basis of actions due within that period. Collate responses for reporting. Ongoing throughout year. All Follow Up For all Council Resources, identify audit recommendations due in the period April 2021 to March 2022. Risk assess and follow-up to ensure implementation of all high risk actions. Ongoing throughout year. CER/HTR/FCR Follow Up Undertake follow up of procurements audits within Roads and Property Services and debtors review within Benefits and Revenue Services. Some initial work undertaken but the majority of audit testing still to be completed. All Anti-fraud checks Rolling programme of anti-fraud checks – including procurement, petty cash and purchase cards. Most significant anti-fraud work in 2022/2023 to date has been in relation to COVID-19 grants. Rolling programme of anti-fraud checks were put on hold to allow time to progress higher priority tasks and routine anti- fraud checks will now be completed later in 2022/2023. All Continuous Controls Monitoring (CCM) Continue to download data in current CCM areas. Use data for analysis and to inform internal and external audit testing. Ongoing throughout year. EDR Optimisation software Review of optimisation software to establish benefit of using within other Council Services. Assignment start delayed due to year end tasks. FCR/CER Investigative contingency Undertake investigations as required (including COVID-19 grants). Ongoing throughout year. All General contingency Conclude all 2021/2022 audits and responded to requests for unplanned work 2022/2023. Ongoing throughout year. 215
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Lead Resource Audit assignment Outline Scope Progress All Resource audits Deliver a programme of risk-based audits across Council Resources. To be presented to RASC for approval in September 2022. N/A Audit Plan Deliver internal audit service to External Clients Ongoing throughout year. 216
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Assignments completed 8 January to 3 June 2022 Appendix 3 Job Number Assignment name Draft Issue Final Issue Assurance Info Previous Years I350083 Self Directed Support (SDS) Position statement 31/03/2021 12/01/2022 See Appendix 4. I810034 Audit Plan 2022/2023 13/01/2022 26/01/2022 Preparation and presentation of 2022/2023 Audit Plan to RASC for approval. I672190 Whistle Blowing - Primary School 23/06/2021 01/03/2022 No evidence of fraud but audit trails could be improved. Four recommendations were made and accepted by the Primary School. Implementation of actions will be followed up in 2022/2023. I410095 Follow Up City Deal Actions 31/03/2022 31/03/2022 Collation of actions falling due in 2021/2022 for follow- up in 2022/2023. I410083 Follow up of previous contract audit recommendations 31/03/2022 31/03/2022 Actions reviewed to ensure points addressed in the Oracle upgrade project (Fusion). I342094 Sustainability Test Programme 31/03/2022 30/04/2022 Development of a bank of sustainability tests for inclusion in the standard audit programme. Finalisation of test programme in 2022/2023. I612193 CCM 2021/2022 31/03/2022 31/03/2022 Completion of programme of data downloads from main financial systems during 2021/2022 to inform audit sampling and provide management reports. I411079 Informal Follow Up 2021/2022 31/03/2022 31/03/2022 Provided quarterly advance prompts of actions falling due. Collated responses monthly for reporting. I730055 Attend Internal Working Group 31/03/2022 31/03/2022 Attendance at and participation in internal working groups. 217
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I820030 Provide Reports to Committee 31/03/2022 31/03/2022 Provision of reports to Committee. I420082 Sustainability Strategy Work 31/03/2022 30/04/2022 Research for purposes of annual report. I420084 Technology and Process Review 31/03/2022 31/03/2022 Attendance at and participation in internal working group. I710064 Excel 31/03/2022 31/03/2022 Development of training tool for Internal Audit team. I730066 Fusion Project 31/03/2022 31/03/2022 Participation in Fusion project. Continuing throughout 2022/2023. I650202 Fraud Risk Register 31/03/2022 31/03/2022 Internal Audit satisfied that there is evidence of review and update across all Resources. I710057 Advice and Guidance School Funds Online Banking 31/03/2022 31/03/2022 Draft guidance prepared. I640191 National Fraud Initiative (NFI) exercise 2021/222 31/03/2022 31/03/2022 Facilitate and administer NFI exercise. I732056 Attend External Working Group 31/03/2022 31/03/2022 Attendance at and participation in external working groups. I431088 PSIAS – preparation for external assessment 06/09/2021 31/03/2022 Preparation for PSIAS assessment in 2022/2023. I263109 External Audit Interim Work 31/03/2022 31/03/2022 Provision of interim data to External Audit re 2021/2022 financial year end. External Clients I915117 South Lanarkshire Leisure and Culture (SLLC) ACE membership 19/10/2020 12/01/2022 Reported to SLLC I919140 SLLC COVID-19 Emerging Risks Work 03/08/2021 12/01/2022 Reported to SLLC I920183 Lanarkshire Valuation Joint Board (LVJB) Admin Meetings Board 31/03/2022 31/03/2022 Reported to LVJB I926186 LVJB Fraud Alerts 31/03/2022 31/03/2022 Reported to LVJB I930176 SEEMIS Admin Meetings Board 31/03/2022 31/03/2022 Reported to SEEMIS I936179 SEEMIS Fraud Alerts 31/03/2022 31/03/2022 Reported to SEEMIS I940165 Integrated Health and Social Care (IHSC) Admin, Meetings and Reporting 31/03/2022 31/03/2022 Reported to Integration Joint Board (IJB) I916171 SLLC Fraud Alerts 31/03/2022 31/03/2022 Reported to SLLC 218
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I913191 SLLC Shared Systems Work 31/03/2022 31/03/2022 Reported to SLLC I910169 SLLC Admin Meetings and Reporting 31/03/2022 31/03/2022 Reported to SLLC 219
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I350083 Self Directed Support – Position Statement (SDS) Appendix 4 Key Messages Objective The objective of this audit was to confirm the current status of South Lanarkshire Council’s Self Directed Support process (SLC SDS) – both in terms of its design (including any remaining process actions to be implemented) and areas identified for improvement/development. By understanding the current position, an assessment can then be made of whether SLC are in a position to be able to fully comply with the obligations set out in the Social Care (Self-directed Support) (Scotland) Act 2013, now that the original 2020 target date has passed. Key Observations/Findings Social Work Resources have continued to progress SDS work plans with the aim of ensuring that the necessary processes and procedures are in place to facilitate adherence to the principles of Self-directed Support, where applicable, within South Lanarkshire Council. Audit work has been able to confirm that procedures have been designed which incorporate specific SDS documentation and, generally, systems records/screens have now been amended to facilitate the capture of core SDS data (the final areas to be fully implemented have been delayed as a direct result of the pandemic). In addition, training is available for relevant staff to ensure the SDS process is adhered to. This audit did not seek to provide assurances that the process is being fully implemented in all applicable cases or that the assessments undertaken are adhering fully to the principles of SDS (this was not the scope of this audit); instead the audit sought to provide assurances that the framework is in place, which is supported by training for Social Work staff. On this basis, it is Internal Audit’s opinion that reasonable assurance can be obtained that the necessary framework is largely in place to facilitate adherence to SDS requirements within SLC, now that the indicative deadline of 2020 has passed. This mirrors the findings of the Social Work Scotland’s SDS Project Team and the Care Inspectorate. The level of implementation will be assessed in future audit work, but in the interim period, there is management information to indicate that, pre-Covid, a substantial number of SDS assessments were being undertaken, in particular within Adult and Older Peoples Service. At this point, there are potential areas of risk attached to SDS, include managing the expectations of service users with regards to the timescales that can be attached to the finalisation of SDS assessments. Management information shows that, in many instances, indicative timescales within the procedures are exceeded and, in some cases, the timescales to finalise assessment can exceed one year. Social Work are clear that, in some instances, an extended period of assessment is essential, particularly where a number of stakeholders are involved or where periodic assessment over an extended period of time is necessary to truly assess care needs. Continuing to manage client expectations, at the outset, should help to mitigate the potential for complaints from clients frustrated with long SDS assessment waits. Although an assessment of compliance with carrying out SDS reviews within the necessary timescales was not included in this audit work, the audit did seek to identify the arrangements in place to support the identification and scheduling of reviews. For SDS, this includes ensuring an annual review of the options is undertaken and financial detail for the direct payments and individual living funds are obtained and reviewed. A level of monitoring of reviews due / overdue is undertaken currently, but this may be an area where further pro-active development work could be undertaken to ensure that all reviews due are identified and scheduled particularly for clients who have had a change in Lead Worker following initial assessments. Further work to assess compliance with assessment and review timescales is likely to be undertaken in future year’s audit plans. This work would also seek to obtain assurances that the SDS arrangements are delivering the outcomes intended – a key part of the review process. 220
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Summary of Key Findings • Detailed procedures are in place and training is available for relevant employees. • Documentation has been produced to capture the SDS ‘principles and essence’ • Systems have largely been amended to record the documentation and evidence compliance with the Act (some development work is ongoing including the review screen for Children and Family Services) Recommendations ➢ Focus is placed on the best methods to facilitate scheduling of reviews to ensure that all necessary SDS reviews can be undertaken timeously. Areas where Members should seek assurance:- 1. Are Members satisfied that the Council has reasonable arrangements in place to adhere to the principles of SDS? 2. Are Members satisfied that the report records the key risks that would prevent South Lanarkshire Council complying with the Act? 3. Are Members satisfied that the areas that are proposed for further review by Internal Audit are those of highest risk? 221
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Appendix 5 ANNUAL REPORT FROM THE CHAIR – 2021 “WORKING TOGETHER TO SUPPORT THE KEY ROLE OF INTERNAL AUDIT” 1. INTRODUCTION 1.1 Membership of the Scottish Local Authorities Chief Internal Auditors’ Group (SLACIAG) is made up of the heads of internal audit from each Scottish local authority and the Strathclyde Partnership for Transport. The Group is a Special Interest Group of CIPFA Scotland, with operational arrangements, vision, and objectives set out in a formal constitution. 1.2 The Group’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 internal audit, governance, and operations. In support of that vision the Group 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. 1.3 The purpose of this annual report to key stakeholders is to provide an update on the Group’s activities and achievements over the course of 2021 and to recognise actions required to achieve our vision. 1.4 SLACIAG has two sub-groups whose work is also reflected in this report: • the Computer Audit Sub-Group (CASG); and • the Scottish Local Authorities Investigators’ Group (SLAIG). 2. SLACIAG ACTIVITY AND ACHIEVEMENTS DURING 2021 2.1 I was appointed chair at our AGM on 6 March 2020 in Glasgow which was our last face to face meeting before the Covid-19 lockdown. In accordance with SLACIAG’s constitution my term of office expires at our AGM on 11 March 2022. 2.2 We have continued to meet virtually with all of our meetings in 2021 via videoconferencing technology. I would anticipate that videoconferencing will continue to play a role in our 222
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meeting arrangements going forward, although ultimately that will be for the management committee to decide. 2.3 The management committee met three times during 2021 in January, June and October. The purpose of the meetings is to arrange the main Group meetings, considering topics, setting dates and arranging speakers. The management committee also co-ordinates training for members and responds to consultations on topics relevant to internal audit. As with the main Group, all of the meetings during 2021 were virtual. 2.4 The management committee also monitors progress in relation to 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). 2.5 The management committee at 31 December 2021 was constituted as follows. SLACIAG MANAGEMENT COMMITTEE 2021 Kenneth Ribbons West Lothian Council Chair SLACIAG Pamela Redpath Dundee City Council Secretary SLACIAG Yvonne Douglas South Lanarkshire Council Treasurer SLACIAG Eilidh Mackay East Ayrshire Council member and former Chair Jill Stacey Scottish Borders Council / Midlothian Council member and former Chair Paul Macaskill Comhairle nan Eilean Siar member Gillian McConnachie East Dunbartonshire Council member Duncan Stainbank Midlothian Council member Maureen Leonard South Ayrshire Chair CASG Barry Moncur East Dunbartonshire Council Chair SLAIG 2.6 At 31 December 2021 the vice chair position was vacant. Due to committee members either retiring or moving on to other roles, it has been an ongoing challenge to ensure that the Committee has a full complement of office bearers. SLACIAG members are asked to consider what contribution they are able to make to the Group going forward. 2.7 Since 2018 the Chairs of both CASG and SLAIG have attended the SLACIAG management committee to enable us to benefit from their sectoral expertise and to ensure synergy. The SLACIAG constitution was amended at that time to reflect this change. Our constitution remains under review to ensure it is fit for purpose going forward. 2.8 As SLACIAG is a special interest group of CIPFA there is an expectation that we attend the meetings of the CIPFA Scotland Branch Executive Committee. I have shared that task with Eilidh Mackay. 223
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2.9 During 2021 the Group met on four occasions, all virtual. The June meeting was treated as a virtual conference and ran over two days. Meeting business is summarised overleaf. 224
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Date Attendance (see notes below) Topics / Speakers 23 April 2021 27 Climate Change and its Impacts • George Tarvit, Director, Sustainable Scotland Network Counter Fraud Arrangements - Council Perspectives on Governance and Risk • Eilidh Mackay, East Ayrshire Council; Pamela Redpath, Dundee City Council; Paul Macaskill, Comhairle nan Eilean Siar Counter Fraud Case Study • Stuart Saunders, West Lothian Council 16 June 2021 22 Resilience and Business Continuity - lessons learned from the pandemic response • Graeme Mackenzie, Community Safety & Resilience Service Manager, Dundee City Council Three Lines Model – Institute of Internal Auditors perspective • Derek Jamieson, Regional Director, Chartered Institute of Internal Auditors Three Lines Model - Audit Scotland perspective • John Cornett, Audit Director, Audit Scotland 17 June 2021 23 Resilience and Business Continuity - lessons learned from the pandemic response • Katie Kelly, Depute Chief Executive (Safer Communities), East Ayrshire Council Risk Management: risks associated with pandemic recovery • Colin Carmichael, Corporate Risk Management Co- ordinator, Dundee City Council 1 October 2021 17 Cyber Resilience – Incidents, Lessons and Assurance • Paul Chapman, Head of Public Sector Cyber Resilience at Scottish Government Recovery and Renewal • Eilidh Mackay, Chief Auditor, East Ayrshire Council Annual General Meeting 10 December 2021 42 Audit Scotland Fraud and Irregularity report 2020/21 • Anne Cairns, Audit Scotland Cyber risks: resilience and incident management • Paul Kelly, Director of Audit & Assurance, Azets ; Rachel Wilson, Cyber Security & Privacy Manager, Azets 225
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Notes: Because some heads of internal audit are responsible for more than one council, the maximum potential attendance from heads of internal audit is 29. The June meetings were open to team members within the internal audit teams. Attendance records for team members were not retained. From December 2021, attendance at meeting presentations has been opened to the wider internal audit teams. The December attendance figure reflects that. 2.10 The main themes that emerged during 2021 were climate change, the pandemic response including lessons learned, the three lines model, and cyber security. There was also an understandable interest in counter fraud matters, given the sums of money being disbursed by local government as part of the pandemic response. 2.11 The management committee will very soon need to consider the extent to which the Group wishes to revert back to face to face meetings, taking account of attendance levels, environmental impact, and the relative merits of videoconferencing as against face to face meetings. 3. COMPUTER AUDIT SUB-GROUP 3.1 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. 3.2 The Sub Group met four times in 2021, all meetings virtual, with business as follows. Date Topics / Speakers 18 February 2021 Group Discussion - Top five IT Risks in each local authority and examples from risk registers Presentation on an audit of remote access controls around the Education Network. • Yvonne Trundle, North Lanarkshire Council Group Discussion – Cyber Security & preparedness /planning for managing cyber-attacks in our L.A.’s; understanding limitations from system outages including email. 14 June 2021 Annual General Meeting 26 August 2021 Security Maturity Assessment • Anne Yeo, ICT Security Analyst, South Ayrshire Council Cash Receipting Audit Review – Application Controls • Maureen Leonard, South Ayrshire Council SEPA Ransomware Attack • Robbie MacDonald, Resilience Manager, Scottish Environment Protection Agency (SEPA) 226
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18 November 2021 Cloud Migrations • Ashley Bickerstaff, Manager Business Technology Consulting, Azets Cyber Security • Stan Dormer, Director Learning Systems, Mindgrove 227
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4. 4. SCOTTISH LOCAL AUTHORITY INVESTIGATORS SUB-GROUP (SLAIG) 4.1 The main aim of 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. 4.2 The Sub Group met four times in 2021, all meetings were virtual, with business as follows. Date Topics / Speakers 24 February 2021 Competition and Markets Authority Overview • Lucy Stone, Senior Intelligence Officer, Competition and Markets Authority Open Source/Internet Investigations • Kevin Scott, Midlothian Council NFI Business Grants • Shona Duncan, Dundee City Council /Barry Moncur, East Dunbartonshire Council 26 May 2021 Open Source Training • Mark Bentley, Bentac Overview of Tenancy Fraud Forum • Katrina Robinson/Alan Bryce, Tenancy Fraud Forum Zac O’Neill, Head of Counter Fraud Profession, Scottish Gov - Introduction Sickness Fraud Case Study • Stuart Saunders, West Lothian Council 26 August 2021 Insurance Fraud Group – Overview of IFG • Steven Jackson & Nashi Woodley, IFG 2 December 2021 Competition & Markets Authority • Catherine O’Neill The Cabinet Office – Update on NFI • Nathan Nash Scottish Government – Investigatory Powers update • Zac O’Neill 4.3 The group established a short life working group to produce a business case for the creation of investigatory powers, similar to those already held by authorities in England & Wales. Case studies have been submitted to The Cabinet Office who are undertaking a review of fraud within the UK. A business case is being finalised and that this will be submitted to The Scottish Government. 228
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5. CONCLUSION 5.1 During the year the Covid-19 pandemic continued have an impact on us and our biennial conference, which would normally have been a face to face event, was instead held virtually over two mornings in June. 5.2 Notwithstanding the challenges presented by the pandemic, SLACIAG and its sub groups have had another successful year, as evidenced by the attendance at our meetings and the range of topics discussed. Although the impact of the pandemic has continued to feature on our agenda, we also considered matters such as climate change, the three lines model, counter fraud, and cyber security, specifically the impact of the cyber attack on SEPA in December 2020. In line with their remits the CASG and SLAIG meetings focussed on IT and counter fraud matters respectively. 5.3 I would like to thank the management committee for their assistance and efforts during the year. I would also like to thank 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 be with us at our meetings and assist us in enhancing our effectiveness as auditors and counter fraud investigators. 5.4 Finally I would also like to thank our members for their support, as evidenced not just by attendance at our meetings, 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. Kenneth Ribbons Audit, Risk and Counter Fraud Manager, West Lothian Council Chair of SLACIAG 11 March 2022 229
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland – Financial Overview 2020/2021 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 Report ‘Financial Overview 2020/2021, published in March 2022 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 Overview Report 2020/2021 (detailed in sections 4 to 6), be noted; and (2) that the Council’s position in relation to these messages/recommendations (section 7), be noted. [1rec 3. Background 3.1. In March 2022, Audit Scotland published the Financial Overview 2020/2021 report on behalf of the Accounts Commission. Audit Scotland publish 2 overview reports each year, this one focuses on financial matters, and the other report on councils' performance and outcomes was published in May 2022 (a report on that publication will follow at a later date). A copy of the Local Government in Scotland: Financial Overview 2020/21 report can be found on the Audit Scotland website. 3.2. The report recognises the impact that COVID-19 is likely to have had on 2020/2021, and that future reports will re-focus to take cognisance of this. 3.3. The Audit Scotland report is divided into 3 parts:- Part 1: Councils’ Income in 2020/2021 Part 2: Councils’ Financial Position Part 3: Councils’ Financial Outlook 3.4. The key messages from each of the 3 parts are outlined in sections 4 to 6 of this report. Comments in relation to the Council’s position on these are included in italics alongside the Audit Scotland key messages with a summary noted in section 7. 4. Part 1 – Councils’ Income in 2020/2021 4.1. A number of key messages are presented by Audit Scotland in their report, in relation to councils’ funding and income in 2020/2021:- 6 231
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Revenue funding and income received by councils grew by £1.8 billion (10% in cash terms) in 2020/21, mainly as a result of additional COVID-19 funding (£1.5 billion). South Lanarkshire Council (SLC) received additional grant funding (GRG and specific) of £65.227m in respect of COVID-19 in 2020/2021 resulting in a total increase of £94.675m (16.3%) from 2019/2020. When COVID-19 funding is excluded, total revenue and income increased by £0.3 billion or 1.6% in cash terms (decreased by 0.7% in real terms), compared with the previous year. The Council’s GRG/NDR grant funding (excluding COVID-19) increased by £29.448m (5.1%) from 2019/2020 to 2020/2021. Specific grant funding accounted for 40% of the cash increase in revenue funding from 2019/2020 to 2020/2021, with more than half of this being to fund the expansion of early learning and childcare services. The Councils’ specific grant increased from £11.996m mainly due to Early Years, accounting for 40.7% of increase in funding from 2019/2020. Over the last 7 years (2013/2014 to 2020/2021), funding from the Scottish Government to local government (excluding COVID-19 funding) decreased by 4.2% in real terms. The increased funding in 2020/2021 improved the position that existed in 2019/2020, when the total reduction was 4.7%. SLC does not have the equivalent real terms position, which will include the impact of inflation, however, in cash terms since 2013/2014, SLC grant has increased by 23% in cash terms, however, this includes ring fenced monies for specific policy intent. Councils’ income from customer and client receipts reduced by £0.5 billion, an average of 25%, mainly due to significant reduction in income streams, including cultural and community income and car parking income, as a result of the COVID- 19 restrictions and measures. The Council’s lost income from customers due to COVID-19 in 2020/2021 was £7.299m, including licensing and registration, school meals, planning applications and parking. This doesn’t include South Lanarkshire Leisure and Culture (SLLC). Council Tax rates increased by an average of 4.5% across Scotland in 2020/2021. Twenty councils increased the council tax rate by the maximum 4.8%, while 3 councils, including South Lanarkshire, increased by the lowest, at 3%. Council Tax collection rates across Scotland fell by 1%, which contributed to a reduction in income of £30 million. The Council’s Council Tax collection rates excluding the water element in 2020/2021 was 95.55%, behind comparable performance achieved in 2019/2020 by 0.31%. 5. Part 2 – 2020/2021 Councils’ Financial Position 5.1. A number of key messages are presented by Audit Scotland in their report in relation to the 2020/2021 Financial Performance of councils:- In 2020/2021, councils identified an initial funding gap of £0.5 billion (1.7%), consistent with the £0.5 billion identified in 2019/2020. In 2020/2021, SLC’s Revenue Budget Strategy identified an initial budget gap of £41.551m. Councils planned to manage this mainly through savings, although the degree to which savings were achieved varied significantly across councils. All councils reported surpluses and increased their usable reserves in 2020/2021. The total increase of £1.2 billion (46%), being mainly due to late COVID-19 funding, which is earmarked to be spent on COVID-19 recovery activity over the next 2 financial years. SLC reported an increase in their usable reserves of £42.230m, of which £32.390m related to COVID-19 funding carried forward. Audit Scotland state that the elements of COVID-19 funding that are being carried forward in general earmarked and unearmarked reserves in the accounts should 232
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be clearly identified. SLC reports its COVID-19 carry forward and spend position as part of its routine monitoring reports. Capital expenditure decreased by £1.2 billion (29%) to £2.4 billion in 2020/2021. Glasgow City Council’s sale and leaseback transactions, as part of their equal pay funding strategy, make up £0.5 billion of the decrease. Excluding this, the overall reduction in capital expenditure in 2020/2021 was £0.7 billion (22%, based on the underlying spending last year). The progress in delivery of SLC’s Capital Programmes during 2020/2021 was severely impacted by the lockdown due to COVID-19. General Services Capital spend was £37m less than original budget, and HRA was £84m less. Auditors reported that COVID-19 restrictions have had a significant adverse impact on the cost and delivery plans of capital projects in 2020/2021. 26 councils reported reduced capital expenditure (average decrease was 31%) in 2020/2021. The number of new houses completed fell by 92% in the first quarter of 2020/2021, due to COVID-19, but this was recovered over the year. Capital project costs increased in 2020/2021, largely because of the impact of COVID-19. The key factors included increases in the cost of raw materials and supply chain delays. Most councils decreased their net debt (total debt less cash and investments) in 2020/2021, with only 7 councils increasing their net debt balances. Total net debt across councils decreased by £1 billion (5.7%) to £16 billion. The most significant element of this change is the increase in cash and investment balances: unspent COVID-19 funding received late in 2020/2021 contributed £720 million to the decrease in net debt. SLC’s net debt decreased in 2020/2021 from £880m to £835m. It is noted that councils administered £1.4 billion of COVID-19 grants on behalf of the Scottish Government in 2020/2021 and acted as agents in administering and disbursing these grants to businesses and individuals. This additional administrative burden put additional pressure on Council finance staff. SLC administered £77.556m of COVID-19 grants on behalf of the Scottish Government. Some councils have updated their long-term financial plans to reflect the ongoing impact of COVID-19. Auditors at 9 councils reported issues relating to workforce capacity in 2020/2021, including additional pressures because of staff absences, unsuccessful recruitment and sickness. Pension fund investment returns were positive in 2020/2021, ranging from 15.6% to 38.3%. The improvement in asset valuations during 2020/2021 followed the global impact on investment values due to COVID-19 in the last quarter to March 2020. Audit Scotland state that councils review and improve how they comply with the key expectations of transparency in their management commentaries within the financial statements. South Lanarkshire Council was one of 7 councils whose management commentaries did include these key aspects. 6. Part 3 – Councils’ Financial Outlook 6.1. A number of key messages are presented by Audit Scotland in their report in relation to the Financial Outlook for councils, namely:- Uncertainty over the amount of funding available for COVID-19 recovery at the end of 2020/2021 led to difficulties in setting budgets. SLC prepared an updated COVID-19 position in early 2020/2021, including funding carried forward from 2020/2021, and reported it to the Executive Committee on 25 August 2021established updated COVID-19 budgets in the autumn of 2021. 233
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Initial Scottish Government revenue funding in 2021/2022, excluding COVID-19 funding, has increased by 3.4% in cash terms (1.1% in real terms). SLC’s Scottish Government funding (excl COVID-19) increased by £15.456m from 2020/2021. However, the majority of this was ring fenced for new policy commitments including Health and Social Care. Councils approved net expenditure budgets of £13.8 billion for 2021/2022, including a budget gap of £0.2 billion (1.5%). SLC’s initial budget gap for 2021/2022 was £52.741m, however, through corporate solutions, management and operational savings, and funding from the Scottish Government, a balanced budget was approved. Non-recurring funding related to COVID-19 has fallen from £1.3 billion in 2020/2021 to £0.3 billion in 2021/2022. As a result, total revenue funding has fallen by 7.4% in real terms, from £11.9 billion in 2020/2021 to £11.3 billion in 2021/2022. As COVID-19 funding was not incorporated into Council budgets for 2021/2022, many councils presented additional “COVID-19 budgets” in autumn 2021. Councils consistently identified short and long-term cost pressures in their initial 2021/2022 budget papers, including costs associated restarting services, inflation, increased pay awards, demand pressures and pressures on capital budgets. COVID-19 resulted in revised medium-term financial plans, but longer-term planning will need to be updated as COVID-19 uncertainty diminishes. Longer term plans will consider the longer term impacts of COVID-19. Capital funding increased significantly up to 2019/2020 before falling in 2020/2021 and 2021/2022 (33% increase between 2018/2019 and 2019/2020). Total capital funding has fallen to a level below that in 2013/2014 in real terms. The fall in capital funding may have a significant impact on councils’ investment plans. General Capital Grant increased significantly from £24m in 2016/2017 up to £33m in 2019/2020 before falling in 2020/2021 and 2021/2022 to c£21m. This has had a significant impact on the level of Capital spend which can be undertaken. Councils’ future funding position remains uncertain, with many challenges ahead. The funding settlement from the Scottish Government to councils continues to be provided on an annual basis, which makes it challenging for councils to plan and budget effectively for the medium and longer term and creates uncertainty over future funding. COSLA expects that uncertainty over the continuity of COVID-19 funding in future years will bring substantial challenges to councils in developing effective medium and longer-term financial plans. The report states that the Scottish Government and COSLA are discussing the extent of ring-fencing in the local government budget. 7. South Lanarkshire Council – Financial Overview 2020/2021 7.1. The Audit Scotland report contains a number of tables that set out information for all councils, however, there are only 2 tables of data which show the performance of individual councils, being the Council Tax Collection rates and the Increase in Councils’ Usable Reserves during 2020/2021. 7.2. The average Council Tax collection rate across Scotland fell by 1% (greatest fall was 2.3%, and the smallest 0.1%), contributing to a £30 million drop in Council Tax income collected across Scotland during 2020/2021. South Lanarkshire Council’s rate fell by 0.31%. This drop in income is on a par with that of Argyll and Bute, East Dumbarton and West Lothian, with only Shetland Council’s collection reducing by less. Glasgow had the greatest reduction at 2.3% (ranked 1), East Renfrewshire fell 1.1% (ranked 8) and North Lanarkshire by 0.8% (ranked 18). 234
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7.3. In terms of the Increase in Councils’ Usable Reserves during 2020/2021, all councils recorded an increase, ranging from £7 million (Inverclyde) to over £130m (Edinburgh). South Lanarkshire Council’s usable reserves increased by £42.230m (ranked 8 in terms of increase), with East Renfrewshire ranked 25, North Lanarkshire at 4 and Glasgow at 3. 8. Employee Implications 8.1. None. 9. Financial Implications 9.1. 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. 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. None. 12. Equality Impact Assessment and Consultation Arrangements 12.1. 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. 12.2. There is also no requirement to undertake any consultation in terms of the information contained in the report. Paul Manning Executive Director (Finance and Corporate Resources) 25 May 2022 Link(s) to Council Values/Ambitions/Objectives Accountable, Effective, Efficient and Transparent Previous References None List of Background Papers Local Government in Scotland – Financial Overview 2020/2021 - Audit Scotland, March 2022. Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Jackie Taylor, Head of Finance, Finance (Strategy) Ext: 5637 (Tel: 01698 455637) E-mail: jackie.taylor@southlanarkshire.gov.uk 235
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 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:- [purpose] provide, for information, a summary of reports considered by the Financial Resources Scrutiny Forum from July 2021 to March 2022 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 July 2021 to March 2022, as detailed in Appendix 1 of this report, be noted. 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 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 June 2021. 4. Agenda Items 4.1. The table attached at Appendix 1 notes the reports submitted to the Financial Resources Scrutiny Forum during the period July 2021 to March 2022, under the main areas of responsibility. 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. 6. Financial Implications 6.1. There are no financial implications. 7 237
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7. Climate Change, Sustainability and Environmental Implications 7.1. There are no specific climate change, sustainability or environmental implications arising from the information contained within 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. Paul Manning Executive Director (Finance and Corporate Resources) 24 May 2022 Link(s) to Council Values/Ambitions/Objectives Accountable, Effective, Efficient and Transparent Previous References Risk and Audit Scrutiny Committee, 22 June 2021 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 238
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Reports Submitted to Financial Resources Scrutiny Forum Appendix 1 Date Revenue Monitoring Capital Monitoring 1 July 2021 Provide an update on the position on: 2020/2021 Recurring Variances and 2021/2022 Outlook Provide an update on the position as at 31 March:- • Revenue Budget Monitoring 2020/2021 • Revenue Budget Monitoring 2020/2021 - Detailed Resource Analysis Provide an update on the position as at 21 May (period 3) for the following:- • Revenue Budget Monitoring 2021/2022 • Revenue Budget Monitoring 2021/2022 - Detailed Resource Analysis Provide an update on the position as at 31 March:- • 2020/2021 General Fund Capital – Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects • 2020/2021 Housing Capital Programme – Financial Information and Physical Progress Provide an update on the position as at 21 May (period 3) for the following: • 2021/2022 General Fund Capital Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects • 2021/2022 Housing Capital Programme- Financial Information and Physical Progress 2 September 2021 Provide an update on the position as at 16 July (period 4) for the following:- • 2021/2022 Revenue Budget Monitoring • 2021/2022 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 16 July (period 4) for the following:- • 2021/2022 Housing Capital Programme - Financial Information and Physical Progress • 2021/2022 General Services Capital Programme- Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 30 September 2021 Provide an update on the position as at 13 August (period 5) for the following:- • 2021/2022 Financial Monitoring • 2021/2022 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 13 August (period 5) for the following:- • 2021/2022 Housing Capital Programme - Financial Information and Physical Progress • 2021/2022 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 11 November 2021 Provide an update on the position as at 10 September (period 6) for the following:- • 2021/2022 Financial Monitoring • 2021/2022 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 10 September (period 6) for the following:- • 2021/2022 Housing Capital Programme - Financial Information and Physical Progress • 2021/2022 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 239
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Date Revenue Monitoring Capital Monitoring 9 December 2021 Provide an update on the position as at 8 October (period 7) for the following:- • 2021/2022 Financial Monitoring • 2021/2022 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 8 October (period 7) for the following:- • 2021/2022 Housing Capital Programme - Financial Information and Physical Progress • 2021/2022 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 10 Feb 2022 Provide an update on the position as at 31 December (period 10) for the following:- • 2021/2022 Financial Monitoring • 2021/2022 Detailed Resource Analysis for the General Services Budget and Housing Revenue Account Provide an update on the position as at 31 December (period 10) for the following:- • 2021/2022 Housing Capital Programme - Financial Information and Physical Progress • 2021/2022 General Services Capital Programme - Financial Information, Programme exceptions approved by Executive Committee and Physical Progress for Build, Non-Build and Roads Projects 240
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Prepared for South Lanarkshire Council March 2022 South Lanarkshire Council Annual Audit Plan 2021/22 8 241
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South Lanarkshire Council Annual Audit Plan 2021/22 | 2 Contents Introduction 3 Annual accounts audit planning 5 Audit dimensions and Best Value 12 Reporting arrangements, timetable, and audit fee 15 Other matters 18 242
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Introduction | 3 Introduction Summary of planned audit work 1. This document summarises the work plan for our 2021/22 external audit of South Lanarkshire Council (the council). The main elements of our work include: • evaluation of the key controls within the main accounting systems • an audit of the annual accounts and provision of an Independent Auditor’s Report • an audit opinion on the other statutory information published within the annual accounts including the Management Commentary, the Annual Governance Statement, and the Remuneration Report • consideration of the arrangements in relation to the audit dimensions: financial management, financial sustainability, governance and transparency and value for money that frame the wider scope of public sector audit • consideration of Best Value arrangements • providing assurance on the Housing Benefit Subsidy Claim, Non-Domestic Rates Return and the Whole of Government Accounts return • review of the council’s arrangements for preparing and publishing statutory performance information • review of the council’s participation in the National Fraud Initiative. Impact of Covid-19 2. The coronavirus (Covid-19) pandemic has had a significant impact on public services and public finances, and the effects will be felt well into the future. 3. The Auditor General for Scotland, the Accounts Commission and Audit Scotland continue to assess the risks to public services and finances from Covid- 19 across the full range of our audit work, including annual audits and the programme of performance audits. The well-being of audit teams and the delivery of high-quality audits remain paramount. Changes in our approach may be necessary and where this impacts on annual audits, revisions to this Annual Audit Plan may be required. Adding value 4. We aim to add value to the council through our external audit work by being constructive and forward looking, by identifying areas for improvement and by recommending and encouraging good practice. In so doing, we will help the council promote improved standards of governance, better management and 243
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Introduction | 4 decision making and more effective use of resources. Additionally, we attend meetings of the Risk and Audit Scrutiny Committee and actively participate in discussions. Respective responsibilities of the auditor, the council and Executive Director of Finance and Corporate Resources 5. The Code of Audit Practice (2016) sets out in detail the respective responsibilities of the auditor and the council. Key responsibilities are summarised below. Auditor responsibilities 6. Our responsibilities as independent auditors are established by the Local Government (Scotland) Act 1973 and the Code of Audit Practice (including supplementary guidance) and guided by the Financial Reporting Council’s Ethical Standard. 7. Auditors in the public sector give an independent opinion on the financial statements and other information within the annual accounts. We also review and report on the arrangements within the council to manage its performance and use of resources. In doing this, we aim to support improvement and accountability. Risk and Audit Scrutiny Committee and Executive Director of Finance and Corporate Resources responsibilities 8. Audited bodies are responsible for ensuring the proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety and regularity that enable them to deliver their objectives. At the council, the Executive Director of Finance and Corporate Resources is the proper officer, with responsibility for the administration financial affairs (section 95 officer). 9. The council has delegated responsibility for the oversight of internal and external audit to its Risk and Audit Scrutiny Committee. Communication of fraud or suspected fraud 10. In line with the auditing standards, in presenting this plan to the Risk and Audit Scrutiny Committee we seek confirmation from those charged with governance of any instances of actual, suspected, or alleged fraud that should be brought to our attention. Should members of the committee or council have any such knowledge or concerns relating to the risk of fraud within the council, we invite them to communicate this to the appointed auditor for consideration. Managing the transition to 2022/23 audits 11. Audit appointments are usually for five years but were extended to six years due to Covid-19. The 2021/22 audit year is the final year of the current appointment, and we will work closely with our successors to ensure a well- managed transition. 244
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Annual accounts audit planning | 5 Annual accounts audit planning Audit of the annual accounts 12. Our approach to the audit of the 2021/22 annual accounts, including the financial statements, has been designed to support the appointed auditor’s opinion as to whether the annual accounts give a true and fair view of the council’s finances for the year ended 31 March 2022, and have been properly prepared in accordance with International Financial Reporting Standards and the applicable financial reporting framework. Materiality 13. Materiality is an expression of the relative significance of a matter in the context of the annual accounts. We are required to plan our audit to determine with reasonable confidence whether the annual accounts are free from material misstatement. The assessment of what is material is a matter of professional judgement over both the amount and the nature of the misstatement. Materiality values for the 2021/22 audit 14. Materiality values for the council, and its group, are set out in exhibit 1. Exhibit 1 2021/22 materiality values for the council Materiality values Council Group Planning materiality – This is the figure we calculate to assess the overall impact of audit adjustments on the financial statements. It has been set at 1% of gross expenditure based on the latest audited annual accounts for 2020/21. £13.420 million £13.540 million Performance materiality – This acts as a trigger point. If the aggregate of errors identified during the financial statements audit exceeds performance materiality, this would indicate that further audit procedures should be considered. Using our professional judgement, we have assessed performance materiality at 50% of planning materiality. £6.710 million £6.770 million Reporting threshold – We are required to report to those charged with governance on all unadjusted misstatements more than the ‘reporting threshold' amount. £0.135 million £0.135 million Source: Audit Scotland 245
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Annual accounts audit planning | 6 Significant risks of material misstatement to the annual accounts 15. Our risk assessment draws on our cumulative knowledge of the council, its major transaction streams, key systems of internal control and risk management processes. Also, it is informed by our discussions with management, meetings with internal audit, attendance at committees and a review of supporting information. 16. Based on our risk assessment process, we identified the following significant risks of material misstatement to the annual accounts. These are risks which have the greatest impact on our planned audit procedures. Exhibit 2 summarises the nature of the risk, the sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurance over the risk. Exhibit 2 2021/22 significant risks of material misstatement to the annual accounts Significant risk of material misstatement Sources of management assurance Planned audit response 1. Risk of management override of controls International Auditing Standards require that audits are planned to consider the risk of fraud, which is presumed to be a significant risk in any audit. This includes the risk of fraud due to the management override of controls. • Owing to the nature of this risk, assurances from management are not applicable in this instance. • Assess the design and implementation of controls over journal entry processing. • Make inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries and other adjustments. • Test journals at the year-end and post-closing entries and focus on significant risk areas. • Evaluate significant transactions outside the normal course of business. • We will assess any changes to the methods and underlying assumptions used to prepare accounting estimates compared to the prior year. 246
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Annual accounts audit planning | 7 Significant risk of material misstatement Sources of management assurance Planned audit response 2. Significant estimation and judgment: other land and buildings revaluations The council held other land and buildings, including its council dwellings, with a net book value of more than £3.0 billion as at 31 March 2021. Valuations are based on specialist and management assumptions and changes in these can result in material changes to valuations. Risk: Valuations of these assets are materially misstated. • Revaluations completed by Royal Institute of Chartered Surveyors (RICS) qualified surveyors. • Revaluations carried out for all assets as part of rolling revaluation programme. • Detailed working papers retained to support asset reviews and impairments. • An annual impairment review is undertaken by the registered valuer and reviewed by management • Regular Asset Valuation Working Group meetings with representatives from Finance and Property Services. • Review the information provided to the valuer to assess for completeness. • Evaluate the competence, capabilities, and objectivity of the professional valuer. • Obtain an understanding of management’s involvement in the valuation process to assess if appropriate oversight has occurred. • Critically evaluate the approach the council has adopted to assess the risk that assets not subject to valuation are materially misstated and consider the robustness of that approach. • Test the reconciliation between the financial ledger and the asset register. • Critically assess the adequacy of the council’s disclosures regarding the assumptions in relation to the valuation of other land and buildings and council dwellings. Source: Audit Scotland Other areas of audit focus 17. As part of our assessment of audit risks, we have identified other areas where we consider there are also risks of material misstatement to the annual accounts. Based on our assessment of the likelihood and magnitude of the risk, we do not consider these to represent significant risks. We will keep these areas under review as our audit progresses. If our assessment of risk changes and we consider these risks to be significant, we will communicate this to management and those charged with governance and revise our planned audit approach accordingly. 247
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Annual accounts audit planning | 8 18. The areas of specific audit focus are: • Pension liability: This an area of audit focus due to the material value and significant assumptions used in the calculation of the liability. • Accounting for non-current assets: Over several years we have identified a number of errors in the accounting for non-current assets. While the errors identified were corrected in the accounts, there remains a risk that similar issues are identified this year. In response to our audit findings, an Asset Valuation Working Group has been established. It includes members of staff from Finance Strategy and Property Services which should improve communications and reduce the likelihood of errors in the asset figures. We will report on the findings of our audit work on the council’s non-current assets in our Annual Audit Report. Consideration of the risks of fraud in the recognition of income and expenditure 19. As set out in International Standard on Auditing (UK) 240: The auditor’s responsibilities relating to fraud in an audit of financial statement, there is a presumed risk of fraud over the recognition of income. There is a risk that income may be misstated resulting in a material misstatement in the annual accounts. We have rebutted this presumed risk in 2021/22 because, while the possibility of fraud exists, we do not judge it to be a significant risk due to the nature of the council’s income streams, namely government grants. 20. In line with Practice Note 10: Audit of financial statements and regularity of public sector bodies in the United Kingdom, as most public-sector bodies are net expenditure bodies, the risk of material misstatement due to fraud related to expenditure recognition may in some cases be greater than the risk relating to income recognition. We have considered each of the council’s expenditure streams in turn, and based on our knowledge of the council, prior year considerations and our risk assessment to date, we do not consider these to be susceptible to material misstatement due to fraud. We have therefore rebutted the risk of material misstatement due to fraud in expenditure recognition for 2021/22. 21. We have not, therefore, incorporated specific work into our audit plan in these areas over and above our standard audit procedures. Our audit testing will maintain an oversight of any unusual transactions or accounting entries. Group consideration 22. As group auditors, we are required under International Standard on Auditing (UK) 600: Audits of group financial statements (including the work of component auditors) to obtain sufficient appropriate audit evidence on which to base our audit opinion on the group financial statements. 23. The council has a group which comprises component entities, including subsidiaries, associates, and joint ventures. The audits of the financial information of some of the components are performed by other auditors. Based on our discussion with management and assessment of the group, the only 248
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Annual accounts audit planning | 9 significant group component is the council, which accounts for 99% of consolidated gross expenditure and 96% of the group’s net assets. We will discuss with management their updated assessment in respect of other entities where the council has a relationship, but at this stage, it has been assessed that there are no other significant components. All non-significant components will be covered by an analytical review at the group level. Audit of the Management Commentary, Annual Governance Statement and Remuneration Report 24. In addition to the appointed auditor’s opinion of the financial statements, the Accounts Commission prescribes that the appointed auditor should provide opinions as to whether the Management Commentary, Annual Governance Statement, and the audited part of the Remuneration Report, have been compiled in accordance with the appropriate regulations and frameworks and are consistent with the financial statements. 25. To inform these opinions we will consider whether the disclosures within each statement comply with the requirements of the applicable guidance, and confirm that relevant information reflects the contents of the financial statements and other supporting documentation, including: • Management Commentary: Consideration of performance information reported to council committee’s and published during the year. • Annual Governance Statement: Reviewing the Local Code of Corporate Governance, considering the annual assurance statements completed, and prepared by Executive Directors to provide assurances to the Chief Executive, and Internal Audit’s Annual Assurance Report. • Remuneration Report: Obtaining and reviewing payroll data and HR reports. 26. Based on our knowledge of the audit, and the established procedures in place to produce these statements, we have not identified any specific risks to be communicated to those charged with governance in relation to the audit of the Management Commentary, Annual Governance Statement, and audited part of the Remuneration Report. Audit of the trusts registered as Scottish charities 27. The preparation and audit of the annual accounts of registered charities is regulated by the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Accounts (Scotland) Regulations 2006. The 2006 regulations require charities to prepare annual accounts and require an accompanying auditor's report. The Local Government (Scotland) Act 1973 specifies the audit requirements for any trust fund where some or all members of a council are the sole trustees. A full and separate audit and Independent Auditor's Report is required for each registered charity where members of the council are sole trustees, irrespective of the size of the charity. 28. Members and officers of South Lanarkshire Council are trustees for three registered Scottish charities, with combined assets of some £1.154 million. 249
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Annual accounts audit planning | 10 Following our recommendations in previous years, the council has prepared and approved new arrangements for the administration of the three charitable trusts under its control. The new arrangements were approved by the Office of the Scottish Charity Regulator (OSCR) in December 2019. In 2021/22, the council began the process of transferring the assets to the new charities. These transfers are ongoing and will be subject to the approval of the charity’s regulator, OSCR. Materiality levels for the 2021/22 audit of trusts registered as Scottish charities 29. Materiality levels for the various trusts are set out in exhibit 3. Exhibit 3 2021/22 materiality levels for charitable trusts Charitable trust Planning Materiality Performance Materiality Reporting Threshold South Lanarkshire Council Charitable Trusts £24,000 (Based on 2% of audited 2020/21 net assets) £18,000 (Based on 75% of planning materiality) £1,200 South Lanarkshire Council Educational Trusts £2,550 (Based on 2% of audited 2020/21 net assets) £1,900 (Based on 75% of planning materiality) £100 East Kilbride Technology Centre Trust £535 (Based on 2% of audited 2020/21 net assets) £400 (Based on 75% of planning materiality) £100 Source: Audit Scotland Significant risk of material misstatement to the annual accounts of the trusts 30. Based on our risk assessment process, we identified the following significant risks of material misstatement to the annual accounts of the trusts: • Risk of management override of controls: Auditing standards require that audit work is planned to consider the risk of misstatement arising from the management override of controls. In response to this risk, we will review accounting estimates, judgments and decisions made by management and evaluate any significant transactions that are outside the normal course of the trust business. 250
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Annual accounts audit planning | 11 Audit risk assessment process 31. Audit risk assessment is an iterative and dynamic process. Our assessment of risks set out in this plan may change as more information and evidence becomes available during the progress of the audit. Where such changes occur, we will advise management and where relevant, report them to those charged with governance. 251
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Audit dimensions and Best Value | 12 Audit dimensions and Best Value Introduction 32. The Code of Audit Practice sets out the four dimensions that frame the wider scope of public sector audit. The Code of Audit Practice requires auditors to consider the adequacy of the arrangements in place for the audit dimensions in audited bodies. Audit dimensions 33. The four dimensions that frame our audit work are shown in exhibit 4. Exhibit 4 Audit dimensions Source: Code of Audit Practice 34. In summary, the four dimensions cover the following: • Financial management: Financial management is concerned with financial capacity, sound budgetary processes and whether the control environment and internal controls are operating effectively. • Financial sustainability: As auditors, we consider the appropriateness of the use of the going concern basis of accounting as part of the annual audit. We 252
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Audit dimensions and Best Value | 13 will also comment on financial sustainability in the longer term. We define this as medium term (two to five years) and longer term (longer than five years). • Governance and transparency: Governance and transparency is concerned with the effectiveness of scrutiny and governance arrangements, leadership, and decision-making and transparent reporting of financial and performance information. • Value for money: Value for money refers to using resources effectively and continually improving services. Best Value 35. The 2021/22 audit year is the final year of the extended six-year approach to auditing Best Value in councils. Best Value work is integrated within the annual audit. It is being assessed comprehensively over the period of the audit appointment. Conclusions and judgements on Best Value are being reported through the Annual Audit Reports for each council. 36. In addition, a Best Value Assurance Report (BVAR) for each council will be considered by the Accounts Commission at least once over the period of the audit appointment. 37. The South Lanarkshire Council BVAR was published in March 2019. Our work in 2021/22 will focus on following-up on the findings reported in the BVAR to assess the council’s progress with the recommendations raised in the report. Our findings will be reported through our Annual Audit Report. 38. BVARs will be considered by the Accounts Commission between February and September 2022 on the following councils: • Comhairle Nan Eilean Siar • Shetland Islands • Angus • Moray - follow-up Audit dimension risks 39. We have identified audit risks in the areas set out in exhibit 5. This exhibit sets out the risks, sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurances over the risks. 253
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Audit dimensions and Best Value | 14 Exhibit 5 2021/22 audit dimension risks Description of risk Sources of management assurance Planned audit response 1. Financial Sustainability As is the position across Scotland, the council continues to operate in an increasingly complex and challenging environment, where core national funding is reducing, relative to rising demand for services. A wide range of financial uncertainties has been further complicated due to the ongoing pandemic and the council faces significant challenges to remain financially resilient and deliver services sustainably. The council has identified a savings requirement of £86.591 million between 2023/24 - 2026/27. Risk: The financial pressures impact on the sustainability and quality of council services in the future. • The council has set a balanced budget for 2022/23. • The council’s medium-term strategy will continue to be updated to take account of any new information affecting the council’s finances. • Funding is held in the council's balance sheet to contribute towards the ongoing costs of Covid-19. • Monitor how the council’s budget is affected in 2022/23 and the impact on medium/longer term financial planning. • Report the 2021/22 outturn in our Annual Audit Report • Monitor the council’s performance reports to establish the impact of any financial, and ongoing Covid- 19, pressures on services. Source: Audit Scotland 254
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Reporting arrangements, timetable, and audit fee | 15 Reporting arrangements, timetable, and audit fee Reporting arrangements 40. Audit reporting is the visible output for the annual audit. All Annual Audit Plans and the outputs, as detailed in exhibit 6, and any other outputs on matters of public interest will be published on our website: www.audit-scotland.gov.uk. 41. Matters arising from our audit will be reported on a timely basis and will include agreed action plans. Draft management reports will be issued to the relevant officers to confirm factual accuracy. 42. We will provide an Independent Auditor’s Report to the council and Accounts Commission setting out our opinions on the annual accounts. We will provide the council and the Accounts Commission with an annual report on the audit containing observations and recommendations on significant matters which have arisen during the audit. 43. Exhibit 6 outlines the target dates for our audit outputs, and we aim to issue the Independent Auditor’s Report by the statutory deadline of 31 October 2022. We acknowledge this will be challenging due to the ongoing pressures and uncertainties caused by Covid-19. Due to the May 2022 Local Government elections, the committee dates from June 2022 onwards are yet to be finalised. However, our audit work has been scheduled to ensure the planned statutory deadline is met. Exhibit 6 2021/22 audit outputs Audit Output Audit Scotland target date Risk and Audit Scrutiny Committee Date Annual Audit Plan 31 March 2022 Date TBC Independent Auditor's Report 31 October 2022 Date TBC Annual Audit Report 31 October 2022 Date TBC Source: Audit Scotland 255
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Reporting arrangements, timetable, and audit fee | 16 Timetable 44. To support an efficient audit, it is critical that the timetable for producing the annual accounts for audit is achieved. We have included a proposed timetable for the audit at exhibit 7 that has been discussed with management. 45. Covid-19 has had a considerable impact on the conduct and timeliness of the audit. We recognise that it is in the best interests of public accountability to get the reporting of audited accounts back to pre-pandemic timelines. To this end, 2021/22 is a transition year with the reporting deadline brought forward by one month relative to the two prior years. We are identifying ways to work more efficiently to expedite the 2021/22 audits whilst at the same time maintaining high standards of quality. 46. We will continue to work in close partnership with management with clarity over timescales and the requirement for high quality unaudited accounts and supporting working papers. Progress will be discussed with management and finance officers over the course of the audit. Exhibit 7 Proposed annual accounts timetable Key stage Provisional date Consideration of the unaudited annual accounts by those charged with governance. Date TBC Latest submission date for the receipt of the unaudited annual accounts with complete working papers package. By 30 June 2022 Latest date for final clearance meeting with management. Date TBC Agreement of audited and unsigned annual accounts. Date TBC Issue of proposed Annual Audit Report to those charged with governance. Date TBC Signed Independent Auditor’s Report (council and three charities). Issue of final Annual Audit Report. By 31 October 2022 Latest date for Whole of Government Accounts assurance. Date TBC Source: Audit Scotland 256
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Reporting arrangements, timetable, and audit fee | 17 Audit fee 47. The agreed audit fee for the 2021/22 audit of the council is £521,060 (2020/21: £511,150). In determining the audit fee, we have taken account of the risk exposure of the council, the planned management assurances in place and the level of reliance we plan to take from the work of internal audit. 48. We have also agreed an audit fee for the audit of the three registered charities of £5,425 (2020/21 fee £5,425). 49. Where our audit cannot proceed as planned through, for example, late receipt of unaudited annual accounts, the absence of adequate supporting working papers, a supplementary fee may be levied. An additional fee may also be required in relation to any work or other significant exercises out with our planned audit activity. 257
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Other matters | 18 Other matters Internal audit 50. International standards on Auditing (UK) 610: Considering the work of internal audit requires us to: • consider the activities of internal audit and their effect on external audit procedures. • obtain an understanding of internal audit activities to inform our planning and develop an effective audit approach that avoids duplication of effort. • perform a preliminary assessment of the internal audit function when there is scope for relying on internal audit work which is relevant to our financial statements' responsibilities; and • evaluate and test the work of internal audit, where use is made of that work for our financial statements responsibilities to confirm its adequacy for our purposes. 51. The council’s internal audit function is provided by its internal audit section led by the Audit and Compliance Manager. Our assessment of the internal audit function concluded that it has sound documentation standards and reporting procedures in place and complies with the main requirements of the Public Sector Internal Audit Standards (PSIAS). 52. We will not be placing formal reliance on internal audit’s work to support our financial statements audit opinion this year. However, we do plan to use the work of internal audit where relevant in respect of our audit dimension responsibilities. Independence and objectivity 53. Auditors appointed by the Auditor General for Scotland or Accounts Commission must comply with the Code of Audit Practice and relevant supporting guidance. When auditing the annual accounts, auditors must also comply with professional standards issued by the Financial Reporting Council and those of the professional accountancy bodies. These standards impose stringent rules to ensure the independence and objectivity of auditors. Audit Scotland has robust arrangements in place to ensure compliance with these standards including an annual ‘fit and proper’ declaration for all members of staff. The arrangements are overseen by the Director of Audit Services, who serves as Audit Scotland’s Ethics Partner. 54. The engagement lead (i.e., appointed auditor) for the council is Fiona Mitchell-Knight, Audit Director. Andrew Kerr, Senior Audit Manager is the engagement lead for the charitable trusts. Auditing and ethical standards require 258
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Other matters | 19 the appointed auditor to communicate any relationships that may affect the independence and objectivity of audit staff. We are not aware of any such relationships pertaining to the audits of the council or charitable trusts. Quality control 55. International Standard on Quality Control (UK) 1 (ISQC1) requires a system of quality control to be established, as part of financial audit procedures, to provide reasonable assurance that professional standards and regulatory and legal requirements are being complied with and that the independent auditor’s report or opinion is appropriate in the circumstances. 56. The foundation of our quality framework is our Audit Guide, which incorporates the application of professional auditing, quality and ethical standards and the Code of Audit Practice (and supporting guidance) issued by Audit Scotland and approved by the Auditor General for Scotland. To ensure that we achieve the required quality standards, Audit Scotland conducts peer reviews and internal quality reviews. Additionally, the Institute of Chartered Accountants of Scotland (ICAS) have been commissioned to carry out external quality reviews. 57. As part of our commitment to quality and continuous improvement, Audit Scotland will periodically seek your views on the quality of our service provision. We welcome feedback at any time, and this may be directed to the engagement lead. 259
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Other matters | 20 South Lanarkshire Council Annual Audit Plan 2021/22 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.4.0 260
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland Report: The impact of COVID-19 on Scottish Councils’ Benefit Services – A Thematic Study 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 Audit Scotland Report ‘The impact of COVID-19 on Scottish Councils’ benefit services – A Thematic Study released in October 2021 [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the key messages and recommendations be noted. [1recs] 3. Background 3.1. In March 2020, in response to the COVID-19 pandemic and in line with UK and Scottish Government advice, Council buildings were closed to the public and staff were required, where possible, to work from home. 3.2. As a key Council service, this presented a significant challenge for benefit services with staff having to manage personal responsibilities whilst delivering the service remotely. In addition, the Scottish Government’s response to the pandemic led to the creation of local and national hardship schemes, and many councils’ benefit services were responsible for administering and processing applications for support grants offered by these schemes. 3.3. Audit Scotland issued a questionnaire to all 32 Scottish councils for information to measure the impact of the pandemic on benefit services. South Lanarkshire Council (SLC) was one of 29 councils to return all information requested. The data and analysis in the Audit Scotland report is based on the questionnaire responses and has not been independently validated, except for claims processing performance, which was validated against Department for Work and Pensions (DWP) published data. 4. Report Content and Key Messages 4.1. The impact of COVID-19 on Scottish council’s benefit services is analysed under 4 main headings:- Housing benefit (HB) resources Information Technology Claims processing Accuracy 9 261
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Housing Benefit resources 4.2. This section looks at the impact of the pandemic on staff resources, recognising that this is the most important resource that councils have, and the readiness of councils to transition to home working, highlighting that:- SLC was 1 of 17 councils (59%) who operated throughout the year below their FTE establishment. Across these councils, this ranged on average between 1% and 20% below establishment, with SLC operating 8% below. SLC operational staffing levels met the workload requirements and were in line with improvement activities being undertaken within the service with a continued focus on increased customer self-serve and automation of back-office processes. 7 of 29 councils (24%) reported no COVID-19 related absences during 2020/2021 with a further 15 council’s (52%) reporting COVID-19 related absences of less than 1%. SLC had COVID-19 reporting procedures in place during the pandemic, recording sickness related absence of 3.8%. analysis of staff days lost as a direct result of health related COVID-19 absences during 2020/2021 highlighted only 6 councils (21%) recorded any absence due to shielding and self-isolation with 19 councils (66%) recording any COVID-19 related illness. SLC recorded and reported on absence related to each of these categories. COVID-19 related absence accounted for 33% of days lost in 2020/2021 with general absence accounting for 67%. General absence included sickness and maternity leave with 3 councils reporting no general absences in 2020/2021 and 1 Council unable to provide any data in this respect. In 11 out of 29 councils (38%), more than 80% of benefits staff worked from home during 2020/2021. SLC is included in this group. A further 16 councils (55%) reported that all benefit staff had exclusively home worked throughout the year. Although some councils had existing homeworking policies in place and benefit staff that already worked from home prior to the pandemic, most staff were generally office based with on-site access to management and IT support. The move to homeworking therefore understandably presented logistical challenges to most councils. This was the case in SLC where we had no dedicated laptops in the Benefits service resulting in, despite a rapid deployment of suitable equipment, a reported 490 days lost due to staff being unable to work from home and unable to attend the office. This represented less than 3% of total working days available to the service over the year. There is no comparison within the report with other councils. Issue/risk:- HB claims processing could be delayed affecting customers relationship with their landlord and jeopardising their tenancy. Councils will not be able to make fully informed future resource planning decisions without a full and detailed breakdown of absence data. 4.3. Information Technology This section looks at the impact of information technology on the ability of councils to adapt quickly and effectively to delivering the benefits service remotely and highlighted that:- 262
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The move to homeworking led many organisations to act simultaneously, resulting in an unprecedented worldwide demand for IT equipment which presented councils with significant logistical challenges against a backdrop of a worldwide shortage of IT. 15 of the 29 councils (52%) reported significant IT issues with network connectivity cited as the main issue affecting claims processing performance. In SLC, the main issue related to the availability of IT equipment, for example, laptops and monitors with more minor issues in terms of network connectivity experienced early in the pandemic. Issue/risk:- Most councils experienced difficulties when establishing the remote delivery of the benefit service, particularly around network connectivity and the procurement of equipment. 4.4. Claims Processing This section analyses the impact of the pandemic on claims processing, highlighting that:- The development of benefit services over recent years has resulted in many councils moving towards a paperless office by utilising document management systems, and digitally enabling the HB application process to allow customers to make and update their claim online. This helped customers maintain contact with the service during the pandemic, and enabled staff to work remotely. SLC has a well established and effective Electronic Document Management System and on- line application and change reporting process which significantly mitigated many of the challenges faced during the pandemic. To ensure the safety of customers and staff, and to minimise disruption to benefit processing, DWP recommended that councils adopted its ‘Trust and Protect’ principles, where required, placing trust in evidence provided over the phone, meaning claimants did not have to leave their home to supply documents or obtain evidence. Although this easement presented an increased risk of fraud and error, DWP considered it necessary to ensure that customers were not impacted by processing delays if they were unable to provide documentary evidence in support of their claim. To minimise the potential for overpayments, DWP advised that claims processed using this easement should be checked later, and corrective action taken, as appropriate. There was no requirement to implement ‘Trust and Protect’ in SLC as the ability to verify the vast majority of information internally i.e. DWP benefits, earnings and works pensions and the internal processes in place minimised disruption to processing during the pandemic. While all Scottish councils have been affected by COVID-19 during 2020/2021, for some, the impact on claims processing performance has been minimal, despite the unprecedented logistical challenges and additional work processing a significant increase in claims for Council Tax Reduction. In SLC between March and May 2020, applications for Council Tax Reduction increased by over 300%. Despite this and the logistical challenges, SLC achieved improved housing benefit processing times compared to the previous year. SLC was 1 of 17 councils (59%) who had maintained or improved performance over the course of the year in respect of the average time to process new claims and change events. 263
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Issue/risk:- There is a risk of fraud or error entering the system un-checked, and for an avoidable overpayment to occur, if councils are unable to identify and verify claims that have been processed using the DWP’s ‘Trust and Protect’ protocols. There is a distinct correlation between a decline in claims processing performance and councils that were under-resourced throughout 2020/2021. 4.5. Accuracy This section looks at benefit processing accuracy and the impact the pandemic has had on this. To provide assurance that claims are being processed correctly and that errors, in particular financial errors, are minimised, councils carry out regular management checking activities. These can include checking a random sample of claims processed or targeting specific claim types based on known risks. The report highlights that:- In 2020/2021, claims processing accuracy performance was maintained, or improved in 21 of the 28 councils (75%) that provided data and, although performance had declined in the remaining 7 councils, the level of decline was within normal parameters previously seen by Audit Scotland (≤ 2%). 5 councils reported accuracy at 100% with a further 5 councils declaring accuracy at 99% from the results of audits they carried out throughout the year. SLC was 1 of 7 councils where accuracy slightly declined with reported accuracy at 93% compared to 94% the previous year. SLC has a robust independent audit process to mitigate the financial risks to the council of paying more than £60 million of HB annually. A robust audit process is also vitally important to ensure that the customer receives the correct amount of HB as they may have to repay any wrongly paid benefit. Issue/risk:- The transition to remote working has not resulted in a significant decline in claims processing accuracy. 4.6. The Audit Scotland report contains several recommendations which are listed below, together with an assessment of the position in South Lanarkshire Council: Audit Scotland: - Recommendations SLC position • Councils should ensure that absence data is recorded to a sufficient level of detail to fully determine the impact of the pandemic on the benefit service, and to inform future decisions on resourcing. • Councils should consider how best to maximise resources to ensure that, in the event of a future pandemic, or Clear guidance was provided by the council’s Personnel Service for recording COVID-19 related absence from the start of the pandemic. This enabled the Council to assess the reasons for absence and determine the necessary priorities and appropriate actions including prioritising actions to address the issue where staff were unable to work from home and unable to attend the office, for example, lack of equipment to allow home working to mitigate issues around no access to alternative childcare arrangements or shielding. The resilience of the benefits service against future high impact events has substantially improved with homeworking now a feature of service delivery. This is 264
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Audit Scotland: - Recommendations SLC position similar high impact event, the benefit service is able to operate at full capacity. For example, by having contracts in place for additional experienced agency staff at short notice. • Councils should consider the COVID-19 pandemic as an opportunity to review operating procedures to ensure that service delivery is agile and responsive to customer and business needs, and that business continuity/resilience plans are updated to take account of the lessons learned. • Councils should ensure that claims processed using ‘Trust and Protect’ protocols can be identified, and that action is taken to verify evidence at the earliest opportunity to minimise the potential for fraud or error to enter the benefit system, and for avoidable overpayments to occur. • In the 17 councils (Exhibit 1, page 7) where the benefit service was under- resourced throughout 2020/2021, the reason should be investigated with a view to addressing the shortfall. • As accuracy levels were not significantly adversely affected by homeworking, councils should investigate the reasons for this when considering post pandemic approaches to the structure and delivery of the benefit service. supported by an established and effective Electronic Document Management System and comprehensive on-line services which minimise the use of paper. The benefits service has successfully implemented changes to working practises as a result of the pandemic i.e. a mix of home and office working and continues to work to modernise the service provision digitally to meet both customer and business needs and improve resilience. The Council did not process any claims using the ‘Trust and Protect’ protocols. The shortfall noted in the report was planned and a result of careful management of resources in line with improvement activities being undertaken within the service with a continued focus on increased customer self-serve and automation of back-office processes. This along with a flexible agile working approach enabled the service to continue to improve HB performance during the pandemic as demonstrated by the improved processing times achieved. The Council has a robust, independent audit process within the benefits service to provide assurance of the accuracy in benefit processing. This highlights any issues with individual processors or trends which require to be addressed through training, briefings etc. This will ensure agile working in the benefits service continues to be effective. During the pandemic the audit process highlighted a slight reduction in accuracy due primarily to the unplanned move to homeworking although accuracy at 92.6% in 2020/21 was still achieved with all the disruption experienced and was only 265
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Audit Scotland: - Recommendations SLC position 0.4% below the target set prior to the pandemic. 5. Employee Implications 5.1. There are no direct employee implications. 6. Financial Implications 6.1. There are no direct financial implications. 7. Climate Change, Sustainability and Environmental Implications 7.1. There are no implications for climate change, sustainability or the environment in terms of the information contained in this report. 8. Other Implications 8.1. There are no other implications. 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 no requirement for consultation on the content of the report. Paul Manning Executive Director (Finance and Corporate Resources) 17 May 2022 Link(s) to Council Values/Ambitions/Objectives Promote Performance Management and Improvement Previous References None List of Background Papers Audit Scotland Report – The impact of COVID-19 on Scottish councils’ benefit services – A Thematic Study Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Craig Fergusson, Head of Finance (Transactions) Ext 4951 (01698 454951) 266
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Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 22 June 2022 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 6 December 2022 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 6 December 2022, 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 6 December 2022 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. 10 267
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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. Paul Manning Executive Director (Finance and Corporate Resources) 6 June 2022 Link(s) to Council Values/Objectives/Ambitions Value – 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 Officer Tel: 0738 5403101 E-mail:- elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 268
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APPENDIX – RASC OUTLINE FORWARD PROGRAMME TO 6 DECEMBER 2022 Meeting Date Item Responsibility 27 September 2022 1. 2022/2023 Internal Audit Plan Update 2. Internal Audit Activity Report 3. Year End Insured Risks Report 2021/2022 4. Fraud Statistics Annual Report 2021/2022 5. National Fraud Initiative Exercise 2020/2021 Audit and Compliance Manager Audit and Compliance Manager Head of Finance (Transactions) Audit and Compliance Manager Audit and Compliance Manager 25 October 2022 1. External Auditor’s Annual Report to South Lanarkshire Council 2021/ 2022 2. Audited Annual Accounts 2021/ 2022 3. Internal Audit Activity Report 4. Year End Risk Management Report 2021/2022 and Review of Council’s Top Risks 2022/2023 5. The National Fraud Initiative in Scotland 2020/2021 External Audit Head of Finance (Strategy) Audit and Compliance Manager Head of Finance (Transactions) Audit and Compliance Manager 6 December 2022 1. Good Governance Update 2. Public Sector Internal Audit Standards (PSIAS) – External Assessment 3. Internal Audit Activity Report 4. Performance and Review Scrutiny Forum Annual Update Head of Administration and Legal Services Audit and Compliance Manager Audit and Compliance Manager Head of Corporate Communications 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. 269
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