Agenda Document Pack - Audit and Scrutiny Committee - 18/06/2026
Moray Council · 18 June 2026
Back to Audit and Scrutiny Committee — 18 June 2026 and its agenda
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Audit and Scrutiny Committee Thursday, 18 June 2026 NOTICE IS HEREBY GIVEN that a Meeting of the Audit and Scrutiny Committee is to be held at Council Chambers, Council Office, High Street, Elgin, IV30 1BX on Thursday, 18 June 2026 at 09:30. BUSINESS 1. Sederunt 2. Declaration of Group Decisions and Members Interests * 3. Minute of meeting of 25 March 2026 7 - 14 4. Written Questions ** 5. Internal Audit Section Update Report Report by Service Manager Internal Audit and Risk 15 - 102 6. Internal Audit Review - Milnes High School Report by Service Manager Internal Audit and Risk 103 - 118 7. Internal Audit Review - Capital Plan Project Review Report by Service Manager Internal Audit and Risk 119 - 130 8. Internal Audit Review - Common Good Fund Report by Service Manager Internal Audit and Risk 131 - 148 9. Internal Audit Review - Payroll Report by Service Manager Internal Audit and Risk 149 - 162 10. Internal Audit Follow Up Review - Adult Social Care Commissioning Report by Service Manager Internal Audit and Risk 163 - 186 Page 1
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11. Internal Audit Annual Report - 2025-26 Report by Service Manager Internal Audit and Risk 187 - 206 12. National Fraud Initiative 2024-25 Report by Service Manager Internal Audit and Risk 207 - 214 13. Best Value Thematic Review 2025-26 - Asset Management Report by Executive Director Finance, Strategy and Transformation 215 - 248 14. Local Government Benchmarking Framework 2024-25 Results Report by Executive Director Finance, Strategy and Transformation 249 - 280 15. Guidance on Agenda Items Report by Executive Director Finance, Strategy and Transformation 281 - 290 16. Grant Thornton - Audit progress report and sector updates Report by Executive Director Finance, Strategy and Transformation 291 - 314 17. Annual Governance Statement Report by Chief Executive 315 - 334 Summary of Audit and Scrutiny Committee functions: The Committee is responsible for upholding high standards of probity and public accountability, overseeing the Council’s audit and governance arrangements, and carrying out scrutiny of service performance and improvement. Its remit includes reviewing reports from Internal Audit, Audit Scotland, and the External Auditor; supporting governance, risk management, internal controls, anti-fraud measures, and financial procedures; agreeing and monitoring the annual audit plan; and considering annual assurance and governance statements. It also scrutinises policy, service delivery, and performance issues where progress is insufficient, considers improvement themes and benchmarking information across Council services, reviews findings from external regulators and corporate improvement frameworks, and from June 2027 will consider the Council’s draft Annual Accounts before final approval by the Council. Page 2
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Watching the Meeting You can watch the webcast live by going to: http://www.moray.gov.uk/moray_standard/page_43661.html Webcasts are available to view for 1 year following the meeting. You can also attend the meeting in person. If you wish to attend in person, please come to the High Street entrance door and a member of staff will let you into the Chamber. Page 3
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GUIDANCE NOTES * Declaration of Group Decisions and Members Interests - The Chair of the meeting shall seek declarations from any individual or political group at the beginning of a meeting whether any prior decision has been reached on how the individual or members of the group will vote on any item(s) of business on the Agenda, and if so on which item(s). A prior decision shall be one that the individual or the group deems to be mandatory on the individual or the group members such that the individual or the group members will be subject to sanctions should they not vote in accordance with the prior decision. Any such prior decisions will be recorded in the Minute of the meeting. ** Written Questions - Any Member can put one written question about any relevant and competent business within the specified remits not already on the agenda, to the Chair provided it is received by the Proper Officer or Committee Services by 5pm three working days prior to the day of the meeting, please see Standing Order 36 for deadlines. A copy of any written answer provided by the Chair will be published on the Council’s committee management system by 12pm the day before the meeting. The Member who has put the question may, after the answer has been published, may ask one supplementary question directly related to the subject matter at the meeting, but no discussion will be allowed. No supplementary question can be put or answered more than 10 minutes after the Council has started on the relevant item of business, except with the consent of the Chair. If a Member does not have the opportunity to put a supplementary question because no time remains, then he or she can submit it in writing to the Proper Officer who will arrange for a written answer to be provided within 7 working days. Page 4
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MORAY COUNCIL Audit and Scrutiny Committee SEDERUNT Councillor Scott Lawrence (Chair) Councillor Theresa Coull (Depute Chair) Councillor Peter Bloomfield (Member) Councillor Tracy Colyer (Member) Councillor John Divers (Member) Councillor Jérémie Fernandes (Member) Councillor Donald Gatt (Member) Councillor David Gordon (Member) Councillor Sandy Keith (Member) Councillor Marc Macrae (Member) Councillor Paul McBain (Member) Councillor Neil McLennan (Member) Councillor John Stuart (Member) Councillor Sonya Warren (Member) Mr Ivan Augustus (Non-Voting Member) Ms Margaret Wilson (Non-Voting Member) Clerk Name: Caroline O'Connor Clerk Telephone: 07779 999296 Clerk Email: committee.services@moray.gov.uk Page 5
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MORAY COUNCIL Minute of Meeting of the Audit and Scrutiny Committee Wednesday, 25 March 2026 Council Chambers, Council Office, High Street, Elgin, IV30 1BX PRESENT Mr Ivan Augustus, Councillor Peter Bloomfield, Councillor Tracy Colyer, Councillor Theresa Coull, Councillor John Divers, Councillor Jérémie Fernandes, Councillor Donald Gatt, Councillor David Gordon, Councillor Sandy Keith, Councillor Scott Lawrence, Councillor Marc Macrae, Councillor Paul McBain, Councillor Neil McLennan, Councillor John Stuart, Councillor Sonya Warren, Ms Margaret Wilson IN ATTENDANCE Chief Executive; Executive Director Economy, Enterprise and Operations; Executive Director Finance, Strategy and Transformation; Service Manager Internal Audit and Risk; Chief Governance Officer (Monitoring Officer); Head of Education (Chief Education Officer); Service Manager Building Services; Service Manager Strategic Planning and Development; Programme Manager Levelling Up Fund; Chief Financial Officer (Depute S95 Officer) and Caroline O'Connor, Committee Services Officer, all Moray Council; and Angela Pieri, Grant Thornton - External Auditors 1. Chair The meeting was chaired by Councillor Scott Lawrence. 2. Pre-Election Period The Chair reminded the Committee the meeting was taking place during the pre- election period and that there are restrictions on the Council over publishing material which could show support for a particular party. As Council meetings are webcast, they fall within these restrictions. The Chair stated the advice from the Monitoring Officer was that, whilst the Committee can continue to deal with "business as usual" items, should debate become overtly political then the Chair may require to intervene. 3. Declaration of Group Decisions and Members Interests * In terms of Standing Orders 21 and 23 and the Councillors' Code of Conduct, there were no declarations from Group Leaders or Spokespersons in regard to any prior decisions taken on how Members will vote on any item on the agenda or any declarations of Member's interests in respect of any item on the agenda. With regard to Item 5 "Internal Audit Section Update Report", Item 10 "Internal Audit Review - Procurement and Creditor Payments" and Item 11 "Annual Audit Plan for the Year Ending 31 March 2026", Councillor Gatt stated, for transparency, that he is Item 3. Page 7
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Convener of the Grampian Valuation Joint Board and would be taking part in the debate. With regard to Item 5 "Internal Audit Section Update Report", Item 10 "Internal Audit Review - Procurement and Creditor Payments" and Item 11 "Annual Audit Plan for the Year Ending 31 March 2026", Councillors Warren and Macrae stated, for transparency, that they were members of the Grampian Valuation Joint Board and would be taking part in the debate. 4. Minute of meeting of 19 November 2025 The minute of the meeting of the Audit and Scrutiny Committee dated 19 November 2025 was submitted for approval. The Chair referenced an amendment from Councillor Gatt relating to paragraph 7 "Internal Audit Review - Procurement and Creditor Payments" requesting that the wording in the third paragraph be amended from "alternative measures" to "disciplinary measures" to accurately reflect what he had said at the meeting. The Chair confirmed he was in agreement with the suggested change. Subject to the amendment above, the Committee unanimously agreed the minute of the meeting. 5. Written Questions ** The Committee noted that no written questions has been submitted. 6. Internal Audit Section Update Report The meeting had before it a report by the Service Manager Internal Audit and Risk providing an update on the work of the Internal Audit Section. With reference to audit recommendation 6 of Appendix 6, Councillor Gatt sought assurance that the practice of pre-signing cheques would not occur in the future. In response, the Head of Education (Chief Education Officer) confirmed advice had been circulated to schools based on the learning from the review that cheques should not be pre-signed and that all audit recommendations from the Keith Grammar School were had been implemented. The Service Manager Internal Audit and Risk advised that, further to the special investigation referred to in the report concerning the windows replacement programme within Building Services, the surplus windows have now been disposed of in accordance with the Council’s Financial Regulations. Following consideration the Committee unanimously agreed to note the contents of the report. 7. Internal Audit Review - Levelling Up Fund The meeting had before it a report by the Service Manager Internal Audit and Risk advising Committee on an internal audit review completed for the period from 19 November 2025 to 25 March 2026. Page 8
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Councillor Macrae expressed concern that while the funding from the UK Government was received in November 2023, there had been no financial monitoring of the expenditure until identified by audit and implemented in November 2025 and, noting the changes in world politics since the funding was received, queried what risks had been identified that could result in slippage of delivery timescales of projects and actions being taken to mitigate any potential risks. In response, the Service Manager Strategic Planning and Development confirmed the audit related to the governance of the administrative arrangements confirming changes made to the programmes and projects within the programme had been reported to Council. He further advised detailed risk register was discussed every few weeks to identify any emerging issue and mitigation measures and, along with regular reporting to Moray Council, any issues relating to adherence to timescales etc would be reported to Corporate Leadership Team, the Transform Board and Moray Council. In terms of transparency, Councillor Gordon asked if the website could be updated with names, photographs and declarations of interest of Project Board member on the Council's website and whether the monthly financial statements should be reported to the relevant service committee. The Service Manager Strategic Planning and Development confirmed they would share details of those on the Board. In response to the query regarding reporting of financial statements to service committees, the Executive Director Economy, Enterprise and Operations advised service committees provide scrutiny at a higher strategic level rather than operational level and the project was being tracked through the transformation strategy updates provided to Corporate Committee. She further confirmed consideration was being given to opportunities to improve communications relating to major programmes. Councillor McLennan joined the meeting during discussion of this item. Following consideration the Committee unanimously agreed to endorse the recommendations contained within the report. 8. Internal Audit Review – Democracy and Governance The meeting had before it a report by the Service Manager Internal Audit and Risk advising Committee on an internal audit review completed for the period from 19 November 2025 to 25 March 2026. Councillor Bloomfield queried whether targeted training would resolve the issue of missing information from reports, in particular Integrated Impact Assessments (IIAs) referenced in the third bullet point under Key Issues. In response, the Executive Director Finance, Strategy and Transformation confirmed the new Head of People, Change and Community Strategy was progressing briefings and training for officers and members with oversight of reports from the Corporate Leadership Team to ensure the appropriate information is included. To provide further assurance the Chief Governance Officer advised the committee reporting writing guidance for officers had been amended to clearly reflect the requirement for IIAs. Councillor Gatt expressed concerned at the non-compliance with Financial Regulations referenced in the second bullet point under Key Issues and highlighted by the Service Manager Internal Audit and Risk in other audits, and stressed the importance of compliance with the Regulations being enforced by officers. In Page 9
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response, the Executive Director Finance, Strategy and Transformation provided assurance all new staff would be trained in the importance of adherence to financial regulations, particularly those with budget responsibility. To provide further assurance the Service Manager Internal Audit and Risk confirmed Internal Audit would continue monitoring by sampling payments transactions within next years Internal Audit Plan, escalating any issues identified to the Executive Director Finance, Strategy and Transformation, and reporting any findings to this Committee. In response to a question from Councillor Warren asking whether the Council's scrutiny function was not as robust as it should be, noting the limited scrutiny functions highlighted in the report, the Service Manager Internal Audit and Risk agreed it required to be enhance and that work was being undertaken to identify new areas of scrutiny to be reported to this Committee. The Chief Governance Officer referred to the updated remit of Audit and Scrutiny Commission approved at the most recent Moray Council meeting and advised a report would come to a future meeting of this Committee to demonstrate how cross-cutting themes will be identified and agreed. The Chair confirmed the process of identifying relevant scrutiny topics was underway however encouraged members to raise with him any relevant topics they would wish to be considered. During discussion Councillor Keith referred to a consultation document issued to Elected Members seeking their views to inform the report and queried why the headings were not reflected in the report. In response, the Service Manager Internal Audit and Risk confirmed the report had been compiled following analysis of the responses, was based on common themes raised by Elected Members and specific issues raised by Councillor Keith could be addressed by the review of the current committee reporting arrangements detailed in Audit Recommendation 6. Following consideration the Committee unanimously agreed to endorse the recommendations contained within the report. 9. Internal Audit Review – Procurement and Creditor Payments The meeting had before it a report by the Service Manager Internal Audit and Risk advising Committee on an internal audit review completed for the period from 19 November 2025 to 25 March 2026. The Service Manager Internal Audit and Risk explained that the scope of the review related to payments managed under the direction of the Moray Integration Joint Board. During discussion concern was raised by various members of the Committee relating to further non compliance with Financial Regulations and seeking assurance measures were in place to ensure such breaches would not occur in future and that the issues identified in the audit findings were isolated incidents. In response, the Service Manager Internal Audit and Risk confirmed that another review of creditor transactions has been included within next year’s Internal Audit Plan. This review will include further sample testing of transactions to confirm that control measures are operating effectively within the payment process. Audit testing will also undertake checks to identify any potential duplicate payments. The Executive Director Financial, Strategy and Transformation noted the issues in the audit were exceptions in terms of the volume of transactions processed by the Council however reiterated it Page 10
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was recognised training and culture awareness required to be improved, particularly within the Moray Integration Joint Board, and ensuring staff were comfortable raising any capacity issues with managers. Following consideration the Committee unanimously agreed to endorse the recommendations contained within the report. 10. Internal Audit Review – Counter Fraud Review The meeting had before it a report by the Service Manager Internal Audit and Risk advising Committee on an internal audit review completed for the period from 19 November 2025 to 25 March 2026. With reference to the training requirement identified in the Key Issues of Appendix 1 and referred to during consideration of earlier reports on this agenda, Councillor McBain asked how confident management were that staff who require training were undertaking it and how that was being monitored. In response, the Executive Director Finance, Strategy and Transformation advised confidence was high in terms of new staff through the Council induction process with refresher training also being progressed for existing staff by the Head of People, Change and Community Strategy, as previously stated. In response to a question from Councillor Macrae relating to the annual fraud risk assessment of Elgin Neighbourhood Board referenced in Audit Recommendation 2 asking that minutes of the Board should be publicly available given the significant sum of funding awarded and the Council being the accountable body, Councillor Keith, as a member of the Board, confirmed meetings and minutes were public and the project officer was in frequent communication with the relevant officers within the Council. The Service Manager Internal Audit and Risk stated that the requirement to undertake a fraud risk assessment was a condition of the funding and that the Internal Audit Section had assisted the service in completing this exercise. The Service Manager Internal Audit and Risk also confirmed that an annual counter‑fraud review is included within next year’s Internal Audit Plan and will continue to be included in future Plans to support the Council’s governance arrangements. Following consideration the Committee unanimously agreed to endorse the recommendations contained within the report. 11. Internal Audit Plan 2026-27 The meeting had before it a report by the Service Manager Internal Audit and Risk providing the Committee with details of the planned internal audit coverage for the year ending 31 March 2027. The Service Manager for Internal Audit and Risk confirmed that the Internal Audit Plan had been prepared in compliance with the Global Internal Audit Standards. This includes a requirement to annually consider reviews relating to cybersecurity, third‑party arrangements and strategic procurement. It is expected that this list of projects will increase over time. The Internal Audit Plan also includes a copy of the Internal Audit Charter, which sets out the roles and responsibilities for delivering the Internal Audit Service. In response to a question from Councillor Gordon relating to the Moray Integration Joint Board asking for a synopsis of what is being reported to the Board's Risk Page 11
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Committee, the Service Manager Internal Audit and Risk confirmed all audit reports that are reported to the Board's Audit, Performance and Risk (APR) Committee are also reported to this Committee, with the exception of the NHS internal audit report which are reported confidentially to APR. The reporting of NHS internal audit reports required a separate authorisation agreement from NHS Grampian and their Internal Audit Provider. The Chair, as Chair of APR Committee, confirmed the crossover in terms of scrutiny. Councillor Warren sought information on how changes to the plan are managed if emerging risks arise during the year and how Committee would be informed of the amendments to the plan due to there be limited capacity within Internal Audit. In response, the Service Manager Internal Audit and Risk confirmed he was required to report any changes to this Committee given its responsibility under the Global Internal Audit Standards. Any proposed changes to projects detailed within the Internal Audit Plan, whether from Members or Management, should be raised directly with the Service Manager Internal Audit and Risk. This will allow the Service Manager Internal Audit and Risk to assess, in accordance with the Global Internal Audit Standards, how the Internal Audit Service can best meet this additional requirement. This may include expanding the scope of a current review, replacing a project within the Internal Audit Plan or considering the matter for inclusion in a future Audit Plan. In addition, some flexibility may be required in reporting follow-up reviews, as audit projects may require multiple visits and revised implementation dates for recommendations. In response to a question from Councillor McLennan asking what the process is for Elected Members to raise issues they consider should be included in the audit plan, the Service Manager Internal Audit and Risk advised an email is sent to all Elected Members and senior management during the audit planning process in September/October asking if there are any topics they wish to be considered for the audit plan. In addition, a workshop is to be arranged with Members later this year to review compliance with the Chartered Institute of Public Finance and Accountancy guidance on Audit Committees, during which any issues can be raised directly with the Service Manager for Internal Audit and Risk. Following consideration the Committee unanimously agreed the proposed internal audit coverage for the 2026/27 financial year as detailed in the Internal Audit Plan for 2026/27 (Appendix 1). 12. Annual Audit Plan for the Year Ending 31 March 2026 The meeting had before it a report by the Chief Financial Officer informing Committee of the External Auditor's Annual Audit Plan for the 2025/26 financial period. In response to a question from Councillor Gordon asking whether VAT turnover could be included as an Appendix in the accounts, the Chief Financial Officer agreed to discuss with Councillor Gordon the benefits of that being added as an Appendix to the accounts. The Service Manager Internal Audit and Risk confirmed VAT was a topic in the Internal Audit Plan for 2026/27. Councillor McBain referring to the Significant Risk relating to valuation of land, buildings and Council dwellings referenced in the Introduction and Headlines (1) section of Appendix 1, asked how it was considered a significant risk if revaluations Page 12
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are undertaken every 5 years. In response, the External Auditor advised the value is significantly material from an audit perspective and the requirements on the Chief Financial Officer are to ensure that the accounts are materially correct in terms of programme evaluation or indexation, confirming it would show as a significant risk every year because of the estimated figure. In response to a question from Councillor McLennan querying whether the second last bullet point under Other Work in the Other matters (1) section should be "alleged fraud", the External Auditor confirmed reporting is after the fact in terms of scrutiny and lessons learned for other bodies of types of fraud that can occur. The Service Manager Internal Audit and Risk encouraged any Elected Members or members of the public who had concerns about alleged fraud to raise those with him directly. With reference to paragraph 4.5 of the covering report relating to the two sets of draft financial statements, Ms Wilson asked whether the entire process in terms of consultation, advertising etc would require to be undertaken when issuing the second set of draft accounts. In response, the Chief Financial Officer advised the draft accounts to be reported to Moray Council on 30 June would include a disclosure note that the information does not include revalued housing asset but would seek agreement to publish the second set of accounts including revaluations by mid September which to allow sufficient time for consultation before the final authorised accounts are published by the deadline of 30 September. Following consideration the Committee unanimously agreed to note the contents of the External Auditor's Annual Plan for 2025/26. 13. Accounts Commission Report - Comhairle nan Eilean Siar - Cyber-attack affecting operations and services The meeting had before it a report by the Service Manager Internal Audit and Risk summarising the key issues identified in the Accounts Commission's review of the 2023/24 Comhairle nan Eilean Siar cyber-attack and highlighting lessons for all public sector bodies to consider and apply to strengthen their cyber resilience, governance and business continuity. Following consideration the Committee unanimously agreed to:- i) note the contents of the report and the Account Commission's report regarding the Comhairle nan Eilean Siar cyber-attached affecting operations and services; and ii) note that a review of the Council's systems and processes relative to cybersecurity forms part of the planned internal audit coverage for 2026/27. Page 13
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Section Update Report 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to consider an update on the work of the Internal Audit Section. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 Global Internal Audit Standards requires the Service Manager Internal Audit and Risk to prepare and present reports to committee on internal audit’s activity, performance relative to its Audit Plan, and any other relevant matters. 2.2 This report provides an update on audit activity and projects progressed since the last meeting. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers and notes the contents of this report, seeking clarification on any points. Dafydd Lewis Service Manager Internal Audit and Risk Item 5. Page 15
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4. BACKGROUND AND CONTEXT Moray Integration Joint Board – Internal Audit Service 4.1 As Service Manager Internal Audit and Risk for the Council, I have agreed to the appointment of Chief Internal Auditor for the Moray Integration Joint Board (MIJB) to deliver their internal audit service. This is a two‑year appointment, ending on 31 March 2028. The role provides independent assurance on the adequacy and effectiveness of the internal control framework governing the systems and practices used by the MIJB to deliver delegated services, irrespective of whether those systems are owned by the Council or NHS Grampian. In previous years, I have entered into an agreement with NHS Grampian and its External Internal Audit Provider to enable reliance on and reporting of audit reviews undertaken within NHS Grampian to the MIJB Audit, Performance and Risk Committee. It is intended that this arrangement will continue. In accordance with the requirements of the Chief Audit Executive role, as defined by the Global Internal Audit Standards, I do not consider that this appointment will impair, either in "fact or appearance", my role as Service Manager Internal Audit and Risk for the Council. Chartered Institute of Public Finance and Accountancy (CIPFA) Publication – Audit Committees: Practical Guidance for Local Authorities and Police 4.2 The CIPFA publication Audit Committees: Practical Guidance for Local Authorities and Police sets out a framework for the roles, functions, and operations of audit committees within local authorities and police bodies. It represents CIPFA’s view of best practice for the effective operation of audit committees across the United Kingdom public sector. 4.3 Audit Committees are a key component of an authority’s governance framework and provide an independent and high-level resource to support governance and strong public financial management. The guidance states the purpose of an audit committee is “to provide an independent and high-level focus on the adequacy of governance, risk and control arrangements. The committee’s role in ensuring that there is sufficient assurance over governance risk and control gives greater confidence to all those charged with governance that those arrangements are effective.” 4.4 CIPFA promotes that a high standard of performance against recommended practice, together with a knowledgeable and experienced membership, is essential to the effective operation of audit committees. In support of this, CIPFA has developed a high-level review checklist comprising a Self-Assessment of Compliance with the Good Practice Principles and an Evaluation of Effectiveness. This incorporates the key principles set out in the CIPFA publication Audit Committees: Practical Guidance for Local Authorities and Police. 4.5 A workshop with members of the Audit and Scrutiny Committee was undertaken last year to complete a Self-Assessment and Evaluation Checklist. The findings and recommendations arising from this exercise were reported to the Audit and Scrutiny Committee on 24 June 2025 (paragraph 11 of the minute refers). In accordance with CIPFA guidance, I plan to facilitate a further workshop with members to review and complete the Self-Assessment and Evaluation Checklist. A copy of the full CIPFA publication, Audit Committees: Practical Guidance for Local Authorities and Police, will be shared with members in advance of the meeting. Page 16
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Follow Up Reviews 4.6 Internal Audit reports are regularly presented to members, detailing not only audit findings but also management’s responses to the recommendations, including agreed implementation dates. In addition, Internal Audit undertakes follow-up reviews to provide assurance on the implementation of agreed actions. Details of the completed follow-up reviews are set out below: 4.7 Self Directed Support (SDS) – Option 2/3 A follow‑up review has been undertaken to assess the implementation of recommendations arising from the previous audit of Self‑Directed Support (SDS). The Social Care (Self‑Directed Support) (Scotland) Act 2013, which came into effect in April 2014, introduced the term “Self‑Directed Support” to describe how individuals can exercise choice and control over the support or services that enable them to live independently and achieve their agreed outcomes. The original audit examined the systems and procedures for administering SDS Option 2 – Managed Budget, under which individuals, following assessment, choose their preferred support, while Health and Social Care Moray (HSCM) arranges its provision and payment. It also reviewed Option 3 – Managed Support, where HSCM selects, commissions and pays for the appropriate support on behalf of the individual. The audit covered processes relating to supporting individuals in determining their preferred care delivery options, the contractual arrangements with care providers, financial management and the ongoing monitoring of individual care packages. 4.8 The follow-up report, provided in Appendix 1, confirms that the majority of recommendations have now been implemented. Revised implementation dates have been agreed for the outstanding recommendations and the Service has advised that all actions are expected to be fully implemented during 2026/27. As this audit has been ongoing for a number of years, it is proposed that no further follow-up review is undertaken at this time. However, an audit of Self-Directed Support Options 2 and 3 will be considered for inclusion in a future Internal Audit Plan. 4.9 Moray Integrated Community Store An audit was previously undertaken of the Occupational Therapy Store, now known as the Moray Integrated Community Equipment Store. Occupational therapy stock consists of aids and equipment issued to support individuals with daily living activities such as cooking, dressing, and bathing. Items vary significantly in value, ranging from a few pounds to over £1,000 for certain types of hoists and specialised seating. A key feature of this service is the management of equipment returns once items are no longer required. Where feasible, returned equipment is decontaminated and made available for reuse. The original audit identified significant areas requiring improvement in operational arrangements. A follow‑up report evidencing the implementation of the agreed recommendations is provided in Appendix 2. 4.10 Following the Public Pound A follow-up review was undertaken to assess the implementation of recommendations from the audit of Following the Public Pound. The scope of the audit covered the Council’s governance and funding arrangements with Moray Leisure Limited, which manages the leisure centre in Elgin, and Moray Citizens Advice Bureau, which provides advice and support on a range of matters, including benefits entitlements, housing, consumer issues, debt and money management. The follow-up review confirmed that an updated Service Page 17
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4.11 4.12 4.13 Level Agreement has been agreed between the Council and Moray Citizens Advice Bureau. In addition, revised draft Service Level Agreement and Lease Agreement documentation between the Council and Moray Leisure Limited has also been agreed; however, at the time of the follow-up review, these agreements had not yet been formally signed. The follow-up report is provided in Appendix 3. Procurement and Creditor Payments Part of the Annual Internal Audit Plan includes a review of the Council’s main financial systems. This included an audit of non‑payroll expenditure, specifically payments to suppliers and contractors for works, goods and services. The objective of the audit was to provide assurance over key functions of the Financial Management System, focusing on the accuracy of payment processing and expenditure recording. The review identified areas requiring improvement in operating and administrative arrangements. A follow‑up review was undertaken to assess the implementation of the agreed recommendations. It was found that the development of an updated Authorisation Database remains outstanding. The Chief Financial Officer and the Service Manager Finance Operations have advised that implementation has been delayed due to the requirement to procure a replacement Financial Management System, as the current contract expires in March 2027. While further development of the Authorisation Database will be considered, priority has been given to the procurement and implementation of the new system. The Follow‑Up Report, which evaluates the implementation status of the agreed recommendations, is provided in Appendix 4. Housing Rent Collection & Arrears Management A follow‑up review was undertaken to assess the implementation of the recommendations from an audit of housing rent income collection and accounting arrangements. The objective of the audit was to confirm that effective controls and procedures were in place for the administration of rent accounts and the accurate accounting of all income received. In addition, the audit examined the debt recovery arrangements for rent arrears relating to both current and former tenants. It is pleasing to note that the follow‑up review confirmed that all recommendations have been fully implemented. The Follow‑Up Report is provided in Appendix 5. Pool Cars Scheme This follow-up review assessed the implementation of recommendations made in an audit of the Pool Car Scheme. A pool car is a vehicle owned by the Council and made available to employees on a shared basis. At the time of the original audit, the Council’s pool car fleet consisted of 118 vehicles, including 84 classified as general-use vehicles and 34 designated as service-dedicated vehicles. Approximately 10% of the fleet comprised electric vehicles. The scope of the audit was to review the systems and procedures governing the management and use of pool cars. This included an assessment of whether policies and procedures provide sufficient guidance to officers for booking and using these vehicles. The follow-up review found that the majority of recommendations have been completed; however, some actions remain outstanding, and revised implementation dates have been agreed. The Follow-Up Report is provided in Appendix 6. Treasury Management 4.14 This follow-up audit reviewed the implementation of recommendations arising from the audit of procedures and controls relating to the operational management of the Treasury Management function. The overall objective of the audit was to confirm that the Council Page 18
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has appropriate procedures and controls in place to ensure compliance with the requirements for borrowing and treasury management, as set out in the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Treasury Management in the Public Services (2021), which defines the policies and objectives for treasury management activities, and the CIPFA Prudential Code for Capital Finance in Local Authorities (2021). The follow-up audit found that, while progress has been made, revised implementation dates have been agreed for the outstanding recommendations. It is acknowledged that a number of significant staffing changes within Financial Services have occurred recently, which may have impacted the implementation of the agreed actions. The Follow-Up Report is provided in Appendix 7. 5. PROPOSALS 5.1 It is recommended that Committee agree to note the progress made by Internal Audit in the period from 25 March 2026 to 18 June 2026. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. Page 19
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☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 20
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APPENDIX 1 Moray Council Internal Audit Section 1 BODY: Health & Social Care Moray SUBJECT: Self Directed Support (Options 2 & 3) REPORT REF: 23'025 Follow Up Audit Review Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Key Control: Effective controls operate in the management and recording arrangements for the delivery of SDS Options 2 and 3 care packages 5.1 In accordance with SDS Regulations, evidence should be maintained to document the discussions held by social workers regarding the various care delivery options discussed with High Yes 30/09/2023 Implemented. The audit follow-up review reported to MIJB’s Audit, Performance & Risk Committee on 19/06/2025 (para 7 of minute refers) and to the Council’s Audit & Scrutiny Committee on 24/06/2025 (para 7 Page 21
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Appendix 1 Moray Council Internal Audit Section 2 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation the individual using care services. of minute refers), noted that new documentation and guidance had been developed on required standards to be met and the first quality assurance review had been undertaken. The Service has introduced a quality assurance review process, in which findings are reported to the Practice Governance Board on a quarterly basis. This internal monitoring process is facilitating improvement and informing ongoing training and development activities, to ensure the required quality of care option discussions are recorded. Page 22
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Appendix 1 Moray Council Internal Audit Section 3 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 5.2 Documented procedures should be developed to support social workers and individuals using care services in the selecting of SDS care delivery options. High Yes 31/03/2024 (Revised Implementation Date 30/09/2025) Implemented. Social Work Assessment Guidance to support officers have been developed by the Service and formally agreed and put into practice from October 2024. This has been supported by further work on information to individuals, through revised guides and improved internet content, aligning available information to SDS standards and the development of a Resource Allocation process. The recommendation is now assessed as fully implemented. 5.3 An annual reference document detailing a breakdown of the rates paid to care providers should be High Yes 30/06/2023 (Revised Implementation Implemented. The annual reference document used for budgetary planning and costing of support packages has been Page 23
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Appendix 1 Moray Council Internal Audit Section 4 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation provided to all relevant officers to assist in budgetary planning and the accurate preparation of an individual's support package. Date 01/04/2025) updated to include breakdown rates for block funded services. Going forward, the extended use of framework agreements will allow the provision of the requisite detail on provider rates for costing purposes. 5.4 All officers should be reminded to update the CareFirst System to ensure the database is up-to-date and accurate for each individual using care services. High Yes 30/09/2023 Implemented. The Guidance referenced in 5.1 & 5.2 defines CareFirst requirements, with training, quality assurance, and ongoing monitoring overseen through service reviews and monthly Practice Governance Board meetings. This was reported in the follow- up report presented to MIJB’s Audit, Page 24
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Appendix 1 Moray Council Internal Audit Section 5 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Performance & Risk Committee on 19/06/2025 (paragraph 7 of the minutes refers) and to the Council’s Audit & Scrutiny Committee on 24/06/2025 (paragraph 7 of the minutes refers). 5.5 A tripartite agreement between the individual using the care service, Council and care provider should be agreed for all SDS Option 2 care packages. Medium Yes 30/09/2024 (Revised Implementation Date 31/07/2025) Implemented. Whilst the first audit follow- up exercise evidenced significant progress in implementing tripartite agreements for Option 2 packages, extension to historical packages was to be undertaken to ensure all Option 2 individuals receiving a social care service had a tripartite agreement in place. The audit review has found that this exercise to identify all Option 2 Page 25
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Appendix 1 Moray Council Internal Audit Section 6 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation arrangements and agree tripartite agreements has been completed. 5.6 A contractual agreement detailing service delivery and costs should be agreed with the 3 providers of day care services noted within the findings. High Yes 31/03/2024 (Revised Implementation Date 31/08/2025) Outstanding. The Service has advised that a significant review of future delivery needs is required for these day services, and this is intended to be completed in 2026/27. It is not intended that a third audit follow up is conducted and instead another review will be included in a future Audit Plan to evidence implementation. 5.7 Annual support plan reviews of individuals in receipt of SDS Option 2 and 3 care packages should be undertaken in accordance with agreed High Yes 30/09/2024 (Revised Implementation Date 31/12/2025) Outstanding. The follow-up review found that significant progress has been made in reviewing and if required, updating the Support Plans of individuals receiving SDS Option 2 and 3 care packages in Page 26
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Appendix 1 Moray Council Internal Audit Section 7 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation procedures. accordance with agreed procedures. However, audit testing identified continuing variances across Teams in the timeliness of Support Plan reviews. Regular reviews are essential to ensure Support Plans remain current, effective and compliant with statutory requirements. Following consultation with the Service, it is intended that progress will be made during 2026/27 to review and where required, update outstanding Support Plans. Progress will be closely monitored by Senior Management 5.8 Consideration should be given for management to undertake regular reviews of the accuracy and recording of the checks completed Medium Yes 30/09/2023 Implemented. A Standard Operating Procedure has been introduced for invoice checks, with monthly management Page 27
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Appendix 1 Moray Council Internal Audit Section 8 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation to ensure the accuracy of payments made to care providers. reviews of samples to ensure compliance. These reviews are evidenced through an invoice monitoring spreadsheet maintained by Community Care Finance. This was reported in the follow-up report presented to MIJB’s Audit, Performance & Risk Committee on 19/06/2025 (para 7 of minute refers) and to the Council’s Audit & Scrutiny Committee on 24/06/2025 (para 7 of minute refers). 5.9 The Council's charging policy should be reviewed in regard to day care and a decision made as to whether a charge should be levied for the service in the future. High Yes 30/09/2023 (Revised Implementation Date 30/09/2025) Outstanding. The review of the Social Care Charging Policy was planned but was delayed due to staffing availability and the need to align with emerging COSLA non- Page 28
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Appendix 1 Moray Council Internal Audit Section 9 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation residential care charging guidance. A change of approach has now been determined for the review of day care services charging, with its removal from the remit of the broad charging review to be undertaken for Social Care. A review of day service charging will instead be included in the overall Day Services review being undertaken as part of the 2026/27 Savings Plan. It is not intended that a third audit follow up is conducted and instead, another review will be included in a future Audit Plan to evidence implementation. Page 29
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Appendix 1 Moray Council Internal Audit Section 10 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 5.10 A review of arrangements regarding the authorisation of individual care packages should be undertaken. Thereafter, authorisation requirements should be documented and communicated to all appropriate officers. Medium Yes 31/08/2023 (Revised Implementation Date 30/06/2025) Part-Implemented. The follow-up audit noted that operating arrangements have been developed for the authorisation of individual care packages at differing monetary thresholds. In addition, a High Cost Package Panel has been established to review and authorise complex care packages. However, the authorisation requirements have not yet been formally documented, resulting in a risk of inconsistent application and a lack of clarity regarding the agreed operating arrangements. This matter has been discussed and agreed by the Operational Management Team (OMT), with formal Page 30
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Appendix 1 Moray Council Internal Audit Section 11 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation procedures expected to be issued to officers by 31 July 2026. Page 31
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APPENDIX 2 Moray Council Internal Audit Section 1 DEPARTMENT: Health & Social Care Moray SUBJECT: Moray Integrated Community Equipment Stores REPORT REF: 24'013 Follow Up Audit Review Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Key Control: Effective systems and procedures operating to ensure accurate records are maintained to account for all Occupational Therapy equipment held within Stores and issued to Service Users 5.1 A full stock check should be undertaken to ensure records correspond to the actual number of items held within Stores. High Yes 31/03/2024 Implemented – The review confirmed that Stores officers completed a full stock check after implementing new stock management arrangements. The stock take was verified by an officer from the Internal Audit Section with only minor variances noted between system recorded figures and the actual stock held. Page 32
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Appendix 2 Moray Council Internal Audit Section 2 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Items of equipment should be kept wherever possible in Asset Number order within the Stores Building. Asset Numbers should be clearly recorded where possible on shelving. Medium Yes 31/03/2024 Variances were investigated and explanations obtained. Implemented - Asset numbers are now clearly recorded on shelving used for storing equipment. Shelf locations across the store have also been added to the Stores Software Application (ELMS). 5.2 The software application used for purchasing equipment should be regularly updated with the stock issued to ensure an accurate unit price is maintained. Further exploration should be undertaken of ELMS with the purpose of enabling the direct purchase of equipment. Medium Medium Yes Yes 31/03/2024 (Revised Implementation Date 30/06/2025) 31/10/2024 (Revised Implementation Implemented – The follow-up review found that the separate stores management software application is no longer used to provide stock valuation for occupational therapy equipment. This function is now performed through ELMS. Implemented – The follow-up review found that while the purchasing of occupational therapy equipment is still undertaken through a separate stores management software Page 33
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Appendix 2 Moray Council Internal Audit Section 3 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Date 30/11/2025) application, the ELMS software package has been updated to include a stock valuation function. 5.3 A review should be undertaken of the current policy of revaluing re-used items of equipment at 50% of the original unit price. Medium Yes 31/01/2024 (Revised Implementation Date 30/06/2025) Implemented – It has been agreed by senior management within the service to revalue re- used equipment at 50% of the original purchase price has been reviewed and it has been decided to continue with the policy of 50% revaluation. 5.4 Users of the Service should be advised that any equipment received should be included within their personal property content insurance. Medium No 31/01/2024 (Revised Implementation Date 30/06/2025) Not Implemented – The Service has decided that individuals will not be required to include occupational therapy equipment under their personal property contents insurance. However, individuals will be advised to inform their insurer if the equipment has a structural impact on their property. Page 34
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Appendix 2 Moray Council Internal Audit Section 4 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 5.5 Maximum and minimum stock levels should be implemented in ELMS to assist officers in ensuring the effective management of stock levels. Medium Yes 31/03/2024 Implemented - The review has confirmed that maximum and minimum stock level functions are now used within ELMS. The Service also intends to review these stock level parameters regularly. 5.6 A record should be maintained of the stock checks undertaken, and any adjustments to stock figures for equipment recorded within ELMS should require the authorisation of the supervisor. Medium Yes 31/01/2024 Implemented – Records of weekly stock checks are now maintained. It was also confirmed that adjustments to stock levels within ELMS can now only be authorised by Supervisory Officers. 5.7 In regard to the stock of returned specialised chairs noted during the audit review, a decision should be undertaken regarding their future use. Medium Yes 31/03/2024 Implemented - The Service has decided to retain the chairs. A meeting between officers from the Equipment Stores of Aberdeen City, Aberdeenshire and Moray agreed to explore options regarding the use of these chairs and other equipment within the Grampian area. In Page 35
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Appendix 2 Moray Council Internal Audit Section 5 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation addition, the Service has advised that the chairs could be adapted to meet the specific needs of individuals, potentially providing an alternative to procuring new items. 5.8 Further development should be undertaken of ELMS to enable greater use of the software application in the management of stock items. Medium Yes 31/03/2024 Implemented – It was found that the Service is making greater use of the reporting functions within ELMS. In addition, data from ELMS is exported to another software application to allow for greater analysis of information. 5.9 Officers should be instructed to utilise the facility within ELMS to mark stock as out for delivery. Low Yes 30/06/2024 Implemented - Procedures are now in place requiring drivers delivering equipment from Stores to mark equipment as out for delivery within ELMS. 5.10 A review of off contract expenditure should be carried out and where necessary contracts developed. Low Yes 31/03/2024 (Revised Implementation Date 30/06/2025 Implemented – Formal contracts are now in place for the procurement of the majority of equipment, including the provision of Page 36
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Appendix 2 Moray Council Internal Audit Section 6 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Revised Implementation Date 31/10/2025) specialised chairs, as noted in the audit report findings. 5.12 Current operating practices should be recorded within a Service Operating Manual. Medium Yes 31/03/2024 Implemented - Operating Procedures are now in place to provide officers with a point of reference guidance in the administration of the Moray Integrated Community Equipment Store. 5.13 A review of service procedures should be undertaken to ensure the store is informed of a change in circumstance in a service user’s condition where an item of equipment may no longer be required. Arrangements should then be undertaken for collection at the earliest opportunity. Medium Yes 29/02/2024 Implemented - The Moray Integrated Community Equipment Service is informed of equipment issued to an individual but is no longer required. Testing has confirmed that when informed, arrangements are made for the collection of this equipment. Page 37
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Appendix 2 Moray Council Internal Audit Section 7 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation If no agreement can be made for an item of equipment to be returned to the store, consideration should be given to invoicing the service user. Medium Yes 31/01/2024 (Revised Implementation Date 30/06/2025 Revised Implementation Date 30/11/2025) Implemented – The Service has formalised procedures for issuing invoices to users when an agreement cannot be reached regarding the return of previously allocated equipment. 5.14 Improvements identified to the Service during the audit review regarding the physical security of the Occupational Therapy Stores building should be implemented as a matter of urgency. High Yes 31/03/2024 Implemented - A new alarm system has been fitted at the Moray Integrated Community Equipment Store and is now in operation. Page 38
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APPENDIX 3 1 Final Internal Audit Report (Follow-up Review) Following the Public Pound March 2026 Distribution: Chief Governance Officer Service Manager Leisure & Culture Service Manager Benefits & Money Advice The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 4 Priority 2 3 Priority 3 0 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 39
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Appendix 3 2 Contents Page Following the Public Pound 1. Introduction & Scope 3 2. Key Issues 4 Detailed Report 3. Findings/Recommendations 5-16 4. Management Response 6-17 5. Follow Up Reviews 7-17 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 40
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Appendix 3 3 1. Introduction and Audit Scope The Internal Audit Plan for 2024/25 provided for a “Following the Public Pound” review to ensure proper accountability for public funds used in delivering services, irrespective of the means of service delivery. Councils fund Arm’s Length External Organisations (ALEOs) to provide important services to the public. These funding arrangements are often more complex than purchase contracts for goods or services but can bring both financial and operational benefits to councils. Audit Scotland describes an ALEO as an organisation that is ‘formally separate to the council but is subject to its control or influence.’ Ownership, provision of funding, and significant shareholdings in a company indicate significant control or influence and therefore constitute an arm’s length relationship with an external organisation. A council is responsible for ensuring that Audit Scotland’s ‘Following the Public Pound’ principles are consistently applied by any ALEOs that it provides funding to and must ensure that ALEOs can demonstrate value for money. A ‘Code of Guidance on Funding External Public Bodies and Following the Public Pound’ was published by the Convention of Scottish Local Authorities (COSLA) and the Accounts Commission in 1996, detailing principles and requirements that should be considered when determining funding for ALEOs. This Code along with more recent publications from Audit Scotland including "Arm's length external organisations (ALEOs): are you getting it right?" (2011) and "Following the Public Pound" (2004 and 2005) was also considered in the development of the audit programme for this review. The audit scope did not include checking the procedures for small charitable donations or external bodies where the Council has entered into a contractual relationship. The audit has instead reviewed the arrangements in place with regard to Moray Leisure Limited for the operational management of a leisure centre in Elgin, and the Moray Citizens Advice Bureau for providing support and advice on a number of different topics, including benefits entitlement, housing, consumer issues, debt and money management. Whilst Moray Citizens Advice Bureau is not specifically categorised as an ALEO, the Council has a significant funding contribution and has been included in this review. The audit was carried out in accordance with Global Internal Audit Standards (GIAS). Page 41
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Appendix 3 4 2. Key Issues • Moray Leisure Centre operated by Moray Leisure Limited, was established as an ALEO in 1993, and in addition to Council operated sports and community centres contribute to meeting the leisure and sporting needs of Moray. The audit noted that reviews have been undertaken over the last 10 years regarding the future delivery direction for leisure services. A Moray Sport and Leisure Asset Review report by the Depute Chief Executive (Education, Communities and Organisational Development) to the Moray Council Committee on 26 June 2024 (item 12) agreed to procure a company called Alliance Leisure to conduct a comprehensive leisure assets review for Moray. The purpose of this review is to establish an evidence base to guide future strategic planning, investment decisions and management practices concerning leisure assets, including Moray Leisure Centre. The audit notes and concurs with the recommendations for a report to “be presented back to Council within 6 months detailing the findings of the asset review”. • In accordance with recommended good practice and the Council’s Financial Regulations, a formal written agreement should exist between the Council and any externally funded organisation. It was noted that a Service Level Agreement (SLA) previously existed between Moray Council and Moray Citizens Advice Bureau (CAB); however, this agreement expired in 2019. An SLA between Moray Council and Moray Leisure Ltd was established in 1993 in conjunction with the 25-year lease to operate the leisure centre. The SLA did not specify an end date. Following consultation with the Chief Governance Officer, it has been assumed that the SLA has continued on an implied basis and that the terms of the 1993 agreement remain in effect between the Council and the Moray Leisure Centre. An SLA provides a clearly defined contractual framework that should reflect current expectations for service delivery, funding arrangements and performance monitoring. Such documentation strengthens accountability for the use of public funds and provides assurance that funded organisations contribute effectively to the achievement of the Council’s strategic objectives. • A requirement of the Moray Leisure Limited’ Articles of Association is to appoint 3 elected members as directors on the Board. Moray Citizens Advice Bureau requests that 2 elected members attend Board meetings in an advisory capacity. As part of this audit review, discussions were held with the elected members on both Boards to ensure there was a clear understanding of the roles and possible limitations of their duties. Feedback from elected members noted a need for further guidance to clarify expectations and possible parameters in responsibilities as elected members representing the Council within the Boards of these Organisations. Page 42
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5 Findings/Recommendations - Following the Public Pound 2024/25 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 High As detailed within the Financial Regulations, the Council has adopted the principles of the COSLA / Accounts Commission's ‘Code of Guidance on Funding External Bodies and Following the Public Pound’. The Code sets out a framework for the Council’s relationships with external bodies through which they seek to carry out some of their functions other than on a straight-forward contractual basis. In accordance with the “Code” and as detailed within the Financial Regulations, there is a requirement for a written agreement between the Council and the external bodies. A written agreement, in the form of a Service Level Agreement (SLA), had been established between Moray Council and Moray Citizens Advice Bureau, but this expired in 2018. The Council has an SLA with Moray Leisure Ltd, established in 1993 alongside a 25‑year lease to operate the leisure centre. Although the SLA did not include an end date, and the lease has since expired, advice from the Chief Governance Officer indicates that the SLA is considered to have continued implicitly. It was noted that work has been ongoing for several years between the Council and the Moray Leisure Centre to update this SLA to reflect better current expectations for service Service Level Agreements should be agreed between the Council and the Moray Leisure Ltd and Moray Citizens Advice Bureau detailing the core activities that each Organisation is expected to deliver along with key performance indicators against which they will be measured. Page 43
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6 delivery, funding arrangements and performance monitoring. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Sport and Culture Service Manager Benefits and Money Advice Manager Yes Yes 31/12/2024 31/12/2024 A new draft Service Level Agreement was collectively drafted between management staff across Moray Council and Moray Leisure Centre in mid-2021 – this agreement was not formally signed/sanctioned at the time due to the future expansion plans, which was highlighted in the Committee reports on the MLC expansion plans. This draft agreement will be reviewed and updated by the Management teams of both organisations with input from legal advisers prior to sign-off. A review of the Service Level Agreement with Moray Citizens Advice Bureau is currently underway and a draft will be reported to the relevant committee prior to completion. Page 44
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7 Follow Up Review 1 Implementation Status Revised Implementation Date Internal Audit Review Outcome Not Implemented Not Implemented 28/02/2026 30/11/2025 Further to a meeting of the Moray Council on 24 September 2025, the Executive Director Education, Housing and Communities provided a progress update report on the Sport and Leisure transformation including future service proposals and the asset management approach for the leisure estate. A revised date to sign off the Service Level Agreement has been agreed for 28 February 2026. A draft Service Level Agreement has been prepared; however, this has yet to be agreed and signed by both the Council and the Citizens Advice Bureau Moray. A revised date has been agreed with the Service for 30 November 2025. Follow Up Review 2 Not Implemented Implemented 30/09/2026 N/A The follow-up review noted that ongoing discussions have taken place between senior management of the Council and representatives of Moray Leisure Centre regarding a revised Service Level Agreement (SLA). The revised SLA includes details of services to be delivered, expected performance standards, reporting requirements, governance arrangements and financial responsibilities. It was noted that both parties have agreed in principle to the content; however, the agreement has not yet been formally signed. An update on these matters was provided to the Council by the Executive Director of Education, Housing and Communities on 25 February 2026 (Item 12). The Sport and Culture Service Manager has advised that the revised SLA is expected to be signed by 30 September 2026. . A Service Level Agreement has now been signed by both the Council and the Citizens Advice Bureau Moray which became effective in January 2026. Page 45
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8 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 High The Moray Council entered into a 25-year lease in 1993 with Moray Leisure Ltd to operate a leisure centre from a Council owned building. The lease was extended by two, one-year extensions until July 2020. A report by the Depute Chief Executive (Education, Communities and Organisational Development) to a special meeting of Moray Council on 17 December 2019, approved a 10-year extension to the existing lease agreement. An extended lease agreement would provide Moray Leisure Ltd with additional security and greater value for money opportunities for leasing equipment and supporting better negotiation opportunities for improved energy deals. A new draft agreement has been prepared in draft format but has yet to be finalised. Currently, Moray Leisure Ltd operates on a monthly contractual agreement with the Council. It is appreciated that necessary delays have been required due to consideration and amendments needed regarding the proposed expansion scheme of the leisure centre. The audit is also aware of uncertainties regarding this proposed expansion scheme, in addition to the recent commissioning of a company called Alliance Leisure to undertake a comprehensive leisure assets review for Moray. However, there is a need to formalise current arrangements with an agreed lease agreement between the Council and Moray Leisure Ltd. Current uncertainties regarding expansion and the delivery of future leisure services are appreciated, however a lease agreement between the Council and Moray Leisure Ltd should be agreed as a matter of priority. Page 46
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9 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Head of Governance, Strategy & Performance Yes 31/12/2024 The Council’s legal advisers will co-ordinate with the agents of Moray Leisure Limited to support the completion of a lease agreement within the specified timescale. Follow Up Review 1 Implementation Status Revised Implementation Date Internal Audit Review Outcome Not Implemented 28/02/2026 A revised lease agreement has not yet been agreed with Moray Leisure Limited. It is understood that an interim arrangement exists, with a lease on a year-to-year basis. Further to the report by the Executive Director Education, Housing and Communities to the meeting of the Moray Council on 24 September 2025 referred to in Finding 1, a revised implementation date for this recommendation has been agreed for 28 February 2026. Follow Up Review 2 Implementation Status Revised Implementation Date Internal Audit Review Outcome Not Implemented 30/09/2026 As detailed in the follow-up comments under Finding 1, discussions have also taken place between senior management of the Council and representatives of Moray Leisure Centre regarding a revised Lease Agreement. The main terms and conditions of an updated long-term lease for the Moray Leisure Centre property, based on an internal repairing and insuring basis, have been agreed. However, the agreement has Page 47
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10 not yet been formally signed. An update on this matter was also included in the Executive Director of Education, Housing and Communities' report to Council on 25 February 2026 (Item 12). The Sport and Culture Service Manager has advised that the revised Lease Agreement is expected to be signed by 30 September 2026. Page 48
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11 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 3 High During the course of this audit, a Moray Sport and Leisure Asset Review report by the Depute Chief Executive (Education, Communities & Organisational Development) to the Moray Council Committee on 26 June 2024 (item 12) agreed to procure a company called Alliance Leisure to undertake a comprehensive leisure assets review for Moray. The purpose is to establish an evidence base to guide future strategic planning, investment decisions and management practices concerning leisure assets, including Moray Leisure Centre. It was noted that over the last 10 years, other reviews have been undertaken to explore future delivery options for leisure services. The internal audit undertaken agrees with the committee report recommendation to detail the findings of the asset review to the Council within the next 6 months. Internal Audit concurs with the recommendation detailed within the Moray Sport & Leisure Asset Review Report to Moray Council Committee on 26 June 2024 (item 12) that on conclusion of the external review, findings should be used “to provide further evidence base that will contribute to the design of our future leisure estate”. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Sport and Culture Service Manager Yes 31/12/2024 As stated in the Committee report in June, a report will be taken back to Committee before end of Dec 24 detailing the findings of the Alliance Leisure Review alongside other future service design evidence. Page 49
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12 Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A A report by the Depute Chief Executive (Education, Communities and Organisational Development to a Special meeting of the Council on 21 January 2025 provided an update on the findings from an externally commissioned ‘Moray Sports Facilities Review’. The review considered financial sustainability alongside the prevention agenda in relation to health and wellbeing. It was agreed that a workshop would be held for elected members to discuss rationalisation, governance and service direction. This has subsequently taken place. A further report is intended to be presented to the Council, which will consider long-term financial sustainability. Page 50
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13 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 4 Medium In accordance with Financial Regulations, the Council has a requirement for funding external organisations to establish “reporting and monitoring arrangements to ensure Council objectives are met and Best Value achieved”. It is pleasing to note that performance related information is shared with the Council by both Moray Leisure Limited and Moray Citizens Advice Bureau on a regular basis. However, no structured monitoring systems have been established to measure the performance information provided against agreed objectives. Governance arrangements also do not include a requirement of how the performance of each Organisation contributes to Council objectives, which a relevant committee could then scrutinise. Consideration should be given to establishing clear objectives supported by tailored performance indicators that are agreed with Moray Leisure Limited and Moray Citizens Advice Bureau each year. The Council should then monitor performance information provided by each Organisation against these agreed objectives and if necessary, report it to the appropriate committee for scrutiny. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Sport and Culture Service Manager Yes 30/04/2025 Footfall statistics for Moray Leisure Centre are reported as part of the Council’s Service Performance reporting however appreciate these do not align to clear objectives. Intention is to report annually on performance as per performance targets set in the new Service Level Agreement. A report will be presented to Education, Children’s and Leisure Services Committee Page 51
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14 Benefits and Money Advice Manager Yes 30/04/2025 between April-June annually which will focus on performance measures/achievement based on the previous financial year. Relevant performance objectives and performance reviews will be included in the updated SLA for the Moray Citizens Advice Bureau and will be monitored and reported as appropriate. Follow Up Review 1 Implementation Status Revised Implementation Date Internal Audit Review Outcome Part Implemented Not Implemented 28/02/2026 30/11/2025 For Moray Leisure Centre, performance indicators are currently reported to the Council on a quarterly basis. However, the intention is to further develop performance monitoring through the updated Service Level Agreement. A revised date for implementation has been agreed for 28 February 2026. Requirements relating to performance objectives for Moray Citizens Advice Bureau have been included in the draft Service Level Agreement. This is awaiting agreement. A revised date for implementation has been agreed for 30 November 2025. Page 52
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15 Follow Up Review 2 Implementation Status Revised Implementation Date Internal Audit Review Outcome Part Implemented Implemented 30/09/2026 N/A As detailed previously, performance indicators for Moray Leisure Centre are currently reported to the Council on a quarterly basis. Revised performance management arrangements are to be introduced with the signing of an updated Service Level Agreement. A new implementation date of 30 September 2026 has been agreed. Requirements relating to performance objectives for Moray Citizens Advice Bureau are included in the Service Level Agreement. The Service Level Agreement was signed in October 2025 and became effective in January 2026. Page 53
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16 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 5 Medium It was noted that a requirement of Moray Leisure Limited’ Articles of Association is for the appointment of 3 elected members as directors on the Board. Moray Citizens Advice Bureau requests that 2 elected members attend Board meetings in an advisory capacity. Elected members sitting as board members can provide important links between the Council and the funded bodies and help ensure that the organisations are being properly run and funds used effectively. However, there are disadvantages, with Audit Scotland highlighting the risk of potential conflicts of interest for elected members. As part of this audit review discussions were held with elected members representing the Council on the Boards of Moray Leisure Limited and the Moray Citizens Advice Bureau. Feedback from the elected members noted a need for improved guidance to further clarify their roles, responsibilities and parameters in their duties as elected members representing the Council on the Board of each Organisation. Further to discussions with the Head of Governance Strategy & Performance, the Council should consider and confirm whether to accept the reputational risks associated with perceived conflicts of interest where elected members sit on the boards of funded external bodies. If it is considered to continue with the current arrangement, additional guidance should be provided to elected members to further clarify the roles, duties and parameters of their responsibilities as elected members representing the Council on the board of funded external bodies. Page 54
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17 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Head of Governance, Strategy & Performance Yes 31/10/2024 Consideration will be given to the perceived risks associated with appointments to outside bodies. Guidance will be refreshed and agreed by the council as appropriate following this consideration. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A Guidance on the role of elected members in representing the Council in partnership arrangements and on outside organisations has been updated. In addition, in December 2024, training was provided to Councillors by the Council's internal and external legal advisers, which included the code of conduct in respect of appointments on outside bodies. Page 55
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18 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 56
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19 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 57
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APPENDIX 4 1 Final Internal Audit Report (Follow-up Review) Procurement and Creditor Payments March 2026 Distribution: Chief Financial Officer Service Manager Finance Operations The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 0 Priority 2 2 Priority 3 0 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 58
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Appendix 4 2 Contents Page Procurement and Creditor Payments 1. Introduction & Scope 3 2. Key Issues 3-4 Detailed Report 3. Findings/Recommendations 5-7 4. Management Response 6-7 5. Follow Up Review 6-8 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 59
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Appendix 4 3 1. Introduction and Audit Scope The Annual Audit Plan for the year 2024/25 provides for coverage of the Council’s core financial systems. A review of payments made to suppliers of goods and services has been undertaken. The purpose of the audit was to confirm compliance with Financial, Authorisation, Procurement and Creditor Payment Processing Regulations from the sample checked. This review is part of the annual continuous auditing activity of non-salary expenditure and will be used to support the Audit and Risk Manager’s annual opinion of the Council’s internal control system. Approximately £80 million was paid by the Council in the six months, October 2023 to March 2024, to suppliers of goods and services. Through the use of a data analysis software application, a random sample of individual payments with a collective total of £11.3 million was selected. The testing included a check to ensure invoices have been correctly authorised, coded and in compliance with regulations. The audit programme was developed from the Chartered Institute of Public Finance and Accountancy Systems Based Auditing Control Matrices and in consultation with the External Auditor. In addition, the data analysis software application was also used to select a sample of high-value invoices to test, and a check made of identical payment amounts made to the same supplier, which may indicate a potential duplicate payment. From the sample checked and within the scope of the review, no issues of significant concern were noted regarding the suppliers/ contractors used, sums paid, authorisation and accounting treatment. It is considered that appropriate controls are operating effectively, and the integrity of systems has been maintained. However, the review has found where further improvements are recommended to operating and administrative arrangements. The audit was carried out in accordance with Global Internal Audit Standards (GIAS). 2. Key Issues • The Council Authorisation Policy details the management and operating requirements for officers to follow when committing expenditure on behalf of the Council. This Policy allows officers to be designated as Budget Managers with the operational responsibility of actively managing services. However, within the Policy, a provision is also made for a named officer to act as an ‘In Absence Authoriser’ to allow services to function effectively in the absence of the Budget Manager. Audit testing found where an ‘In Absence Authoriser’ had authorised the majority of invoices processed within a specific budget area, with examples of authorisation of individual transactions in Page 60
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Appendix 4 4 excess of £100,000. The Authorisation Policy should be updated to clearly detail that a Budget Manager should initially authorise expenditure with an “In Absence Authoriser’ function only used on an exception basis. • This audit required reference to the Authorisation Database to evidence that the appropriate officer had authorised expenditure with budget management responsibility. The Authorisation Database is a standalone software application that requires significant manual updating of records by officers to remain operationally current. In addition, the Authorisation Database does not interface with the Financial Management System. The Authorisation Database is an important reference record to ensure the Council maintains effective budget management and monitoring arrangements. The Finance Development Team has recognised the limitations of the Authorisation Database; however, software development has been restricted due to available staff resources. Page 61
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5 Findings/Recommendations - Procurement and Creditor Payments 2024/25 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1. Medium Audit testing was undertaken on a random sample of payments to suppliers/ contractors to ensure that expenditure had been authorised in accordance with the Council’s Authorisation Policy. The Authorisation Policy provides for officers to be designated as Budget Managers with the authority to commit expenditure in the operational delivery of services. However, the Policy details a provision for a named officer to act as an ‘In Absence Authoriser’ to allow a service to function effectively in the absence of the Budget Manager. Audit testing noted where an ‘In Absence Authoriser’ had authorised the majority of invoices processed within a specific budget area, with examples of individual authorisation of individual transactions in excess of £100,000. The Authorisation Policy should be updated to provide greater clarity that the Budget Manager should initially make the authorisation of expenditure and an “In Absence Authoriser’ function only be used on an exception basis. Page 62
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6 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Chief Financial Officer Yes 31/12/2024 This will be updated at the next review date. Last review date of the authorisation policy was Sept 23. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A The Authorisation Policy was reviewed in December 2024, with the next review falling due in December 2027. The updated Authorisation Policy was approved at a Special meeting of the Council on 21 January 2025 (para 8 of the minute refers). Page 63
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium An Authorisation Database is maintained by Finance Services detailing the names and signatures of officers with budget management responsibility that can authorise expenditure within specific service areas. The Authorisation Database system is over 20 years old and requires significant manual administration to ensure it remains operationally up to date. In addition, the database does not interface with the Financial Management System. The Finance Development Team has recognised the limitations of the Authorisation Database, however development has been constrained due to available staff resources. Further development of the Authorisation Database should be undertaken to enable an interface with the Financial Management System and allow a more automated process for updating standing information. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Chief Financial Officer Yes 31/12/2025 This is part of a wider authorisation review currently with the Finance Development Group. Interdependencies will be duly considered as part of this development. Page 64
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8 Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Not Implemented N/A At the time of the follow-up audit, the Service was at the start of a process to replace the Council’s Financial Management System, as the contract expires in March 2027. The Chief Financial Officer and the Service Manager Finance Operations have advised that the procurement process is likely to take between 12 and 18 months. While consideration will be given to the further development of the Authorisation Database, this will depend on the procurement of a new financial management system. Due to the revised timescales, no further follow-up review is proposed regarding the implementation of this recommendation. However, it will be monitored by the Internal Audit Section as part of the continuous audit of creditor payments. Page 65
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9 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Sector Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 66
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10 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 67
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APPENDIX 5 1 Final Internal Audit Report (Follow Up) Housing Rent Collection & Arrears Management April 2026 Distribution: Head of Housing, Property & Communities Area Housing Managers Service Manager Housing Operations Service Manager Housing Strategy Senior Housing Officer (Policy) The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 0 Priority 2 2 Priority 3 1 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 68
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Appendix 5 2 Contents Page Housing Rent Collection & Arrears Management 1. Introduction & Scope 3 2. Key Issues 3-4 Detailed Report 3. Findings/Recommendations 5-9 4. Management Response 6-10 5. Follow Up Review 6-11 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 69
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Appendix 5 3 1. Introduction and Audit Scope The 2024/25 annual internal audit plan provides for an audit review to be undertaken of the housing rents income collection and accounting arrangements. Housing rents within Moray raises budgeted income of £25.1 million per annum, from approximately 6,380 properties. The review forms part of the yearly audit coverage of core Council systems. The audit scope was to review the key operational controls regarding rent collection and arrears management of current and former tenant rents. The aim of the audit was to look at the controls and processes existing over the administration of rent accounts, accounting fully and promptly for monies collected. The accounting interface between the Housing Rents system content and the Council's Financial Management System was also reviewed. The audit also checked the arrears management arrangements to ensure a robust system exists of rent arrears identification, escalation actions and collection. The timescale covered for audit testing undertaken was 2024/25, but reference to the full 2023/24 financial year is made when applicable. It was noted that rent arrears amounted to £926,000 as at 31st March 2024, with £749,000 relating to current tenants and £177,000 in respect of former tenancies. Analysis indicates an increasing trend in rent arrears over recent years, which may be due to external factors such as Covid recovery, cost of living, and the system of Universal Credit making payments in arrears. However, it was found Moray has continued to perform well when compared to national averages and other local authorities, with arrears of 4.7% of rent due in 23/24. It is pleasing to report that in general, the audit has confirmed well established practices to be in place in administering housing rent accounts and accounting for monies collected, with strong audit trails seen in evidencing actions taken in the continual cycle of monitoring and pursuing rent arrears. The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). 2. Key Issues • Overall, the audit found that within the scope of the review, the housing rent system is well managed. However, it was found that the Council's Rent Arrears policy has not been reviewed since its agreement by the Communities Committee in October 2013. It is appreciated that effective administrative procedures are followed in recovery of rent arrears, but the Policy should be reviewed and if required, updated to reflect activities and responsibilities involved where tenant rent accounts of both current and former tenants are in arrears. Page 70
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Appendix 5 4 • The Rent Arrears Management Guide details procedures to be undertaken to recover rent arrears through the issue of reminder letters to tenants at specific timed intervals. Audit testing of a sample of rent arrears cases has identified examples of where the rent arrears recovery approach taken by officers has involved the use of emails, texts to tenants rather than following agreed procedures in issuing formal reminder letters to tenants. It is appreciated that the Service is exploring different methods to maximise recovery of rent arrears, but from the audit testing of individual rent arrears cases, there is a lack of consistency in the following of established procedures. Page 71
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5 Findings/Recommendations - Housing Rent Collection & Arrears Management 2024/25 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Medium The Council's Rent Arrears policy was agreed by Communities Committee in October 2013. The Policy describes the broad activities and responsibilities involved where tenant rent accounts of both current and former tenants are in arrears and applies to all rented property owned or managed by the Housing Services. Detailed operational procedures have been developed to support this Policy. It was also noted that the Policy document stated that the next review was due in 2015, but from discussions with the Service, it was found this had not been undertaken due to limited staff resources and prioritisation of work. The Rent Arrears Policy is still relevant but should be reviewed and if required, updated. The Rent Arrears Policy should be reviewed and if required, updated, with communication thereafter to all relevant parties. Page 72
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6 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Housing Operations Manager Yes 31/12/2025 A review of both the Rent Arrears Policy and Evictions Policy have been scheduled in the Policy Team's work plan for 2025, to be led by a member of the Housing Management Team. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A The Rent Management Policy (previously referenced as the Rent Arrears Policy) has been reviewed and updated and was approved at Housing & Community Safety Committee on 18th November 2025 (para 12 of minute refers). Operational procedures have been developed for the new policy, and communicated to all relevant officers, with an implementation date of 1st May 2026. Page 73
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium The Rent Arrears Management Guide is a procedural document detailing a requirement to issue a sequence of reminder rent arrears letters to tenants at specific timed intervals to stimulate payment. For current tenant arrears management, this involves the issue of 4 reminder letters before a Notice of Proceedings can be requested to advance to legal action, if appropriate. Sample audit testing has identified examples of inconsistent approaches being employed across the Service whereby more informal methods of communication such as email, texts and calls have been utilised in attempting to engage tenants, rather than the issue of the formal reminder letters at the specified intervals. Whilst comprehensive audit trails have been seen in the recovery action undertaken by officers in engaging with tenants for the payment of rent arrears, examples were noted where there is a lack of consistency in the following of established procedures. The established sequence of formal reminder letters should be issued to all tenants in arrears without delay, when the appropriate circumstances pertain. Page 74
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8 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Area Housing Manager Yes 31/12/2025 The rent arrears procedure will be reviewed as part of the wider review of the Rent Arrears Policy. This will include a review of the formal reminder letters issued to tenants as part of the rent arrears escalation process. In the meantime, Area Housing Officers will be reminded by 31/01/2025 that the rent arrears escalation policy must be followed and actions completed on rent accounts each week. This will be monitored by the Area Housing Managers. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A The rent arrears escalation procedure has been reviewed and strengthened as an integral part of the new Rent Management Procedures. Additionally, rent accounts and actions are being monitored on a weekly basis by Area Housing Managers. A sample of rent accounts in arrears have been examined as part of the follow-up audit and confirmation obtained that the established sequence of formal reminder letters is being issued to tenants in arrears, when appropriate. Page 75
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9 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 3 Low The terms detailed within a housing tenancy agreement is a requirement that rent is payable by a tenant in advance on or before the Monday of each week. In the audit testing of a sample of rent accounts, a number of tenants, particularly those in receipt of Universal Credit, have been seen to be in rent arrears at some points during a month, but with the arrears being cleared on receipt of a payment towards the end of the month, then accumulating again until the next rent payment is made. Examples have been seen where no valid repayment arrangement has been agreed with the tenant to build a small credit balance to eliminate the occurrence of the rent arrears position. Whilst arrears in these cases remain at a low level due to regular rent payments, the tenancy terms are not being adhered to. A review should be undertaken to confirm repayment arrangements are being entered into with all applicable tenants, ensuring advance payment tenancy terms are adhered to. All repayment arrangements agreed should be formally documented within the NEC Housing system. Page 76
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10 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Area Housing Manager Yes 31/12/2025 The management of rent accounts in arrears, particularly for accounts where tenant/s are in receipt of Universal Credit will be included in the updated rent arrears procedure. In the meantime, Area Housing Officers will be reminded by 31/01/2025 that all rent accounts regardless of how the tenant/s rent is paid, should be paying in advance as per the Scottish Secure Tenancy Agreement. Repayment agreements (RPA) to be sought to address balances where the tenant/s is unable to clear the balance outstanding in full. RPA’s to be logged on NEC Housing system and confirmation sent to tenants. Area Housing Managers will monitor accounts for these actions being completed. Page 77
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11 Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A The procedure for managing rent accounts in arrears and establishing repayment agreements with the aim of moving to an advance rent payment basis, in line with tenancy terms, has been been strengthened within the new procedures. As referred to in recommendation 2 above, there is a weekly review of arrears management actions by the Area Housing Managers. A sample of rent accounts in arrears have been examined as part of the follow-up audit and confirmation obtained that repayment agreements are being arranged when appropriate, and logged within the Housing system. Page 78
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12 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 79
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13 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 80
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APPENDIX 6 Moray Council Internal Audit Section 1 DEPARTMENT: Economy, Enterprise & Operations SUBJECT: Pool Cars REPORT REF: 24'014 Follow Up Audit Review Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Key Control: Confirm that policies and procedures for the arrangements and administration of pool cars are in place, up to date and adequate. 5.1 All policies and procedures should be reviewed and updated on a regular schedule to ensure content remains current and valid. Thereafter, they should be promoted and included within the Council Intranet to ensure officers are aware of their Medium Yes 31/12/2024 (Revised Implementation Date 30/09/2025, further revised Part Implemented– The Service has advised that recruitment to the Fleet Officer (Pool Cars and Projects) role has not yet been successful; however, further recruitment attempts are ongoing. Due to the absence of this post, progress in updating policies and procedures has been impacted. A revised implementation Page 81
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Appendix 6 Moray Council Internal Audit Section 2 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation requirements and conditions. date 30/09/2026) date of 30 September 2026 has been agreed with the Service; however, this is dependent on the successful appointment of a Fleet Officer (Pool Cars and Projects). The Service Manager Roads and Fleet also advised that, should difficulties continue in recruiting a Fleet Officer, alternative solutions will be considered. Key Control: Effective controls in place in the management, booking and use of pool cars. 5.2 Services should be reminded that if an officer books a vehicle and is later not required, the booking must be cancelled immediately. Low Yes 30/09/2024 Implemented - The pool car booking site has been updated with a notice reminding officers that, if they book a vehicle that is later not required, the booking must be cancelled immediately. 5.3 Senior Management should be informed to remind all officers that the use of pool car vehicles must be in accordance with the Employee High Yes 30/04/2024 Implemented - A Three Minute Brief has been issued to all Heads of Services to remind officers of the need to comply with the Pool Car Scheme- Employee Guide when using a pool Page 82
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Appendix 6 Moray Council Internal Audit Section 3 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Guide. Service Managers should receive monthly reports from Fleet Services of any identified instances where the use of a pool car is not in accordance with the Employee Guide. High Yes 31/12/2024 (Revised Implementation Date 30/09/2025 further revised date 30/09/2026) car. In addition, the Council’s internal staff magazine, Connect, has been used to promote the Pool Car Scheme, which included guidance regarding frequently asked questions on acceptable use. Promotion of the scheme through Connect is ongoing. Outstanding- As detailed previously, the Service has advised that recruitment to the Fleet Officer (Pool Cars and Projects) role has not yet been successful; however, further recruitment attempts are ongoing. It is intended that, once appointed, the postholder will be responsible for developing additional monitoring reports on the use of pool cars. In the interim, where serious breaches of the Pool Car Scheme- Employee Guide are identified, these are investigated and reported Page 83
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Appendix 6 Moray Council Internal Audit Section 4 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation to management. However, resource constraints currently limit the ability to undertake routine monitoring and reporting. The Service Manager Roads and Fleet has advised that, due to difficulties in recruiting a Fleet Officer, alternative solutions are also being actively considered. A revised implementation date of 30 September 2026 has been agreed with the Service. 5.4 Fleet Service in consultation with the Accountancy Service should review the rechargeable hourly rate used for funding the pool car service. Consideration should also be given to recharging these costs to Services every month. Medium Yes 30/06/2024 (Revised Implementation Date 31/12/2026) Part Implemented– The Service, in consultation with the Accountancy Service, has reviewed pool car charges. Charges are now calculated based on the actual costs of fuel, maintenance, damage, and capital, and are allocated to individual services on a usage basis. However, it is intended that, upon appointment of a Fleet Officer (Pool Cars and Projects), the current recharging Page 84
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Appendix 6 Moray Council Internal Audit Section 5 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation arrangements will be subject to further review, again in consultation with the Accountancy Service. A revised implementation date of 31 December 2026 has been agreed. 5.5 A review of the current pool car fleet should be undertaken to determine whether there are any further value for money opportunities to increase the efficiency of the Service. Low Yes 31/12/2024 Implemented- The Service has undertaken a review to identify further value for money and efficiency opportunities and to explore options to improve the effectiveness and efficiency of the pool car scheme. This includes reducing costs, increasing customer satisfaction and supporting the Council’s net zero aspirations. This work has been led by the Service Manager Roads and Fleet through a “Project Mandate” in accordance with the Council’s Project Management Governance Policy. It has now been supported by the preparation of a more detailed business case to explore potential opportunities to deliver a more Page 85
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Appendix 6 Moray Council Internal Audit Section 6 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation efficient pool car scheme. The Service Manager Roads and Fleet has advised that the review process is ongoing, with further service delivery options to be considered during 2026/27. 5.6 Regular physical inspections of pool car vehicles should be introduced to ensure essential documentation and equipment are maintained in all pool car vehicles. Low Yes Implemented Implemented– Regular physical inspections of pool cars are now undertaken. In addition, checklists detailing the equipment held in each vehicle have been introduced. Page 86
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APPENDIX 7 1 Final Internal Audit Report (Follow Up) Treasury Management May 2026 Distribution: Chief Financial Officer Service Manager Finance Operations Service Manager Strategic Finance The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 0 Priority 2 2 Priority 3 3 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 87
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Appendix 7 2 Contents Page Treasury Management 1. Introduction & Scope 3 2. Key Issues 4 Detailed Report 3. Findings/Recommendations 5-14 4. Management Response 5-14 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 88
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Appendix 7 3 1. Introduction and Audit Scope The annual audit plan for 2024/25 provides for a review of the Council's treasury management function. Treasury management is described by the Chartered Institute of Public Finance and Accountancy (CIPFA) as the management of an organisation’s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities and the pursuit of optimum performance consistent with those risks. The overall objective of the audit was to ensure the Council has procedures and controls in place to ensure compliance with the requirements of borrowing and treasury management rules within the CIPFA Code of Practice on Treasury Management in the Public Services 2021, which defines the policies and objectives for treasury management activities and the CIPFA Prudential Code for Capital Finance in Local Authorities 2021. CIPFA’s Code of Practice for Treasury Management in the Public Services 2021 (Code) derives its legal status from the Local Government in Scotland Act 2003. The Code recommends that all public service organisations create and maintain a treasury management policy statement, stating the policies, objectives and approach to risk management of its treasury activities. Testing undertaken to meet this audit objective has been to assess the extent to which there are adequate controls and procedures in place to provide effective control over loans and investments, in particular: • Adequate procedures exist for the administration of treasury management; • Loans and borrowing comply with the Treasury Management Policy; • Adequate authorisation controls and contingency arrangements exist; • Interest calculations are accurate and appropriately recorded; • Adequate fidelity cover is provided for officers involved in loans management and accounting; • Appropriate treasury management information is made available to relevant officers/management. It was noted that as at 31 March 2024, the Council held £105 million in short term borrowing, £154 million in long term borrowing and approximately £10 million in short term investments. The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). Page 89
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Appendix 7 4 2. Key Issues • The CIPFA Code of Practice on Treasury Management in the Public Services 2021 (Code) recommends various reporting requirements regarding the Council’s treasury management policies, procedures and performance. It is pleasing to note that in accordance with the Code, an annual report on treasury management strategy, plans and performance is provided to the full Council. However, the audit review noted that the Code also details further reporting requirements of a “mid-year review” of treasury management activity to the full Council. In addition, the Code recommends that consideration should be given in reporting treasury management policies and practices to an Audit and Scrutiny Committee to allow additional scrutiny of treasury management activity as part of good governance arrangements. • In accordance with the Financial Regulations, the Council has adopted the requirements detailed within the CIPFA’s Code of Practice for Treasury Management in the Public Services. The Chief Financial Officer should create and maintain suitable Treasury Management Practices, setting how the policies and objectives contained within the Policy Statement shall be achieved and prescribing how these activities shall be managed and controlled. It is pleasing to report that the Council's Treasury Management Practices have been reviewed and updated in 2022 to reflect the requirements of the revised Code in 2021. However, on reviewing the Treasury Management Practices against the Code, it was noted that further reference to environmental, social, and governance is needed as additional investment considerations. In addition, Treasury Management Procedures should include a review date to facilitate any updates required from changes in organisational and staffing structures. Page 90
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5 Findings/Recommendations - Treasury Management 2024/25 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Low The Council details how it manages, delivers and controls its treasury management activities within a procedural document called Treasury Management Practices, which reflect the requirements of CIPFA’s Code of Practice for Treasury Management in the Public Services. In accordance with Financial Regulations, the Chief Financial Officer is responsible for creating and maintaining these Treasury Management Practices (TMP). The audit found that the TMP was reviewed and updated in 2022 to reflect the requirements of the revised CIPFA’s Code of Practice for Treasury Management in the Public Services in 2021. However, it was noted that no review date is recorded within the TMP for reviewing and if required, updating the procedures to reflect any organisational or staffing changes. Consideration should be given to setting a review date for reviewing the Treasury Management Practices to ensure they are regularly reviewed to also reflect, if required, any internal organisational or staffing changes in the management of treasury activities. Page 91
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6 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Finance Manager Yes 31/03/2026 Treasury Management Practices will be reviewed and updated to reflect the recent restructure in Financial Services. A future review date will be included in this update. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Outstanding 31/12/2026 Financial Services has recently undergone a period of restructuring and staffing changes. This has included changes to officer responsibilities relating to the treasury function, which have unfortunately delayed the implementation of this recommendation. A revised implementation date of 31 December 2026 has been agreed with the Service. Page 92
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium In accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021 (Code), the Council provides an annual report on the strategy, plan and performance of its treasury management function to the full Council. However, on reviewing the Code, it was noted there are also reporting requirements that as a minimum the full Council should also receive: • “a mid-year review” report detailing its treasury management activities; and the performance of the treasury management function. • “The board/council, or the committee to which some treasury management responsibilities are delegated, will receive regular monitoring reports on treasury management activities and risks.” This is currently not being undertaken. Quarterly treasury management performance reports were previously provided to members through the members portal, but due to staffing vacancies within the Accountancy Service, this had not been undertaken for 2024. In accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021, a 6 monthly treasury management activities and performance report should be provided to the full Council. Consideration should also be given to the full Council or a delegated Committee to receive regular monitoring reports on treasury management activities and risks. Page 93
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8 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Finance Manager Yes 30/11/2025 In accordance with the requirements of the CIPFA Code of Practice on Treasury Management in the Public Services 2021, a mid-year review of treasury management activities will be reported to the Council in the future. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Outstanding 30/09/2026 As detailed in Finding 1, Financial Services has recently undergone restructuring and staffing changes, which have also impacted the implementation of this recommendation. However, following the appointment of new officers, the implementation of the recommendation can now be progressed. The Chief Financial Officer has advised that the 2025/26 Annual Performance Report will also include mid‑year review information for 2026/27, which is intended to be reported to Council on 30 September 2026. Page 94
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9 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 3 Low Financial Regulations 8.2 details: “A Treasury Management Policy Statement, stating the policies and objectives of the Council’s Treasury Management activities shall be adopted by the Council in accordance with Section 4 of the Code.” The CIPFA Code of Practice on Treasury Management in the Public Services 2021 (Code), section 6, notes that “an organisation’s treasury management policy statement adopts” a recommended form of words “to define the policies and objectives of its treasury management activities”. A review of the wording used within the Moray Council Treasury Management Policy Statement noted it is from a previous version of the Code. The Treasury Management Policy Statement should be updated to reflect the current recommended format detailed within the CIPFA Code of Practice on Treasury Management in the Public Services 2021. In addition, Financial Regulations point 8.2 should be updated to reference Section 6 of the Code rather than “Section 4”. Page 95
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10 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Finance Manager Yes 31/05/2025 The Council's Treasury Management Policy Statement will be updated in accordance with the requirements of the CIPFA Code of Practice on Treasury Management in the Public Services 2021. Financial Regulations will also be amended to refer to Section 6 of the Code. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Implemented N/A An updated Treasury Management Policy Statement, in accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021, was included in the Treasury Management Strategy Statement and Prudential Indicators report considered by Council on 25 February 2026 (Item 6). In addition, it was noted that the Financial Regulations have been updated to make the correct reference to the aforementioned Code. Page 96
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11 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 4 Low The CIPFA Code of Practice on Treasury Management in the Public Services 2021, Treasury Management Practice 1, Credit and Counterparty Risk Management section details a need for an “organisation's credit and counterparty policies should set out its policy and practices relating to environmental, social and governance (ESG) investment considerations.” A review of the Council’s Treasury Management Practices noted no reference to ESG for any investment considerations. However, the Code details this is still a “developing area, and it is not implied that the organisation’s ESG policy will currently include ESG scoring or other real-time ESG criteria at individual investment level”. In accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021, consideration should be given to updating the Council’s Treasury Management Practices to include references to environmental, social and governance as additional factors in any investment decisions. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Finance Manager Yes 31/12/2025 Treasury Management Practices will be amended to include environmental, social and governance considerations as additional factors in investment decisions. Page 97
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12 Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Part Implemented 31/12/2026 An updated Treasury Management Policy Statement, in accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021, was included in the Treasury Management Strategy Statement and Prudential Indicators report considered by Council on 25 February 2026 (Item 6). In addition, it was noted that the Financial Regulations have been updated to make the correct reference to the aforementioned Code. Page 98
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13 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 5 Medium It was noted that the CIPFA Code of Practice on Treasury Management in the Public Services 2021 (Code)- TMP6 Reporting Requirements and Management Information Arrangements, details as a minimum requirement: “The body responsible for scrutiny, such as an audit or scrutiny committee, will have responsibility for the scrutiny of treasury management policies and practices.” It is appreciated that in accordance with the requirements of the Code an annual report on the strategy, plan and performance of the treasury management function is provided to the full Council. However, as noted above, the Code details a role for the Audit and Scrutiny Committee to undertake further scrutiny of treasury management policies and practices. For noting, it was also noted that the CIPFA's Audit Committees: Practical Guidance for Local Authorities and Police 2022 also detailed that some authorities Consideration should be given in reporting treasury management policies and practices to the Audit and Scrutiny Committee. It is appreciated that reporting of treasury management activity is already provided to the full Council; however governance arrangements could be further strengthened in scrutinising the Council‘s treasury management service at the Audit and Scrutiny Committee. Page 99
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14 have nominated a function for their audit committees to include: “Reviewing the treasury management policy and procedures to be satisfied that controls are satisfactory”. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Finance Manager Yes 31/12/2025 In accordance with the CIPFA Code of Practice on Treasury Management in the Public Services 2021, Treasury Management Policies and Practices will also be reported to the Audit and Scrutiny Committee for review by Members. Follow Up Review Implementation Status Revised Implementation Date Internal Audit Review Outcome Outstanding 29/09/2026 This recommendation has not yet been implemented; however, the Chief Financial Officer has advised that there is an intention to report the Treasury Management Annual Performance Outturn Report for 2025/26, including a mid-year review for 2026/27, to the Audit and Scrutiny Committee meeting on 29 September 2026. Page 100
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15 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 101
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16 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 102
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Review – Milnes High School 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The report advises Committee on an internal audit review completed for the period from 25 March 2026 to 18 June 2026. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 This report provides details of the internal audit review of Milnes High School; this project has been agreed for review within the Audit Plan for 2025/26. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers the contents of this report, seeks clarification on any points noted and endorses the recommendations contained within the report. Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 A review of the administrative arrangements within Milnes High School has been completed. The scope of this audit was to undertake a review of the Devolved School Management Scheme in terms of the allocation of funding and the management of these funds at the School. In addition to undertaking an overview of how the School develops, Item 6. Page 103
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monitors and controls its £3.7 million budget, the audit reviewed the management of the staffing costs involved in delivering the curriculum. The audit checked that non payroll expenditure complied with Financial Regulations and Procurement Guidelines. A review was also undertaken to ensure appropriate accounting arrangements are followed when managing school fund monies. The review found that within the audit scope, Milnes High School was well managed. The detailed findings and recommendations from this review are set out within the audit report in Appendix 1. 5. PROPOSALS 5.1 This report provides Committee with a summary of findings arising from an audit project completed during the review period. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population Page 104
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6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 105
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APPENDIX 1 1 Final Internal Audit Report Milnes High School May 2026 Distribution: Head of Education (Chief Education Officer) Head Teacher School Support Co-Ordinator The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows. Assurance Level Risk Ratings for Recommendations Substantial Priority 1 0 Priority 2 3 Priority 3 3 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 107
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Appendix 1 2 Contents Page Milnes High School 1. Introduction & Scope 3 2. Key Issues 3 Detailed Report 3. Findings/Recommendations 4-10 4. Management Response 5-10 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 108
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Appendix 1 3 1. Introduction and Audit Scope The Internal Audit plan for 2025/26 provides for a review of a secondary school within Education Services. This audit details the findings from the review undertaken of Milnes High School as part of a rolling programme of audit visits planned for secondary schools. The scope of this audit was to review the operation of the Devolved School Management Scheme in terms of funding allocation and management at the school level. Consideration was given to how budgets are affected by National, Council and School priorities. As part of the audit the arrangements for administering the School Fund were also reviewed. The audit involved an overview of the processes in place to develop, monitor and control the school’s annual devolved budget of £3.7 million, together with a review of the management of staffing costs associated with delivery of the curriculum. Testing was undertaken to confirm that non-payroll expenditure complied with Financial Regulations and Procurement Guidelines. In addition, a review was carried out to ensure that appropriate accounting arrangements are in place for the management of School Fund monies, in accordance with School Fund Regulations. This report sets out the findings from work undertaken for the 2025/26 financial year. The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). 2. Key Issues • The audit identified that a bequest of £20,000, donated by a former pupil to support students experiencing financial hardship during their studies, remains unused within the School Fund. The donation was received in January 2018; however, no eligibility criteria or administrative process for disbursing the funds has been established. The School must ensure that appropriate arrangements are put in place to implement the conditions of the bequest, enabling eligible pupils to benefit from the financial support intended by the donor. • A review of the School Fund records identified that a “miscellaneous” category is being used to record a significant proportion of income and expenditure. Testing confirmed that transactions allocated to this heading included identifiable school activities and should have been recorded against the appropriate activity‑specific categories. The use of a broad “miscellaneous” classification reduces financial transparency and weakens the audit trail, thereby impairing the School’s ability to monitor, verify and analyse School Fund transactions accurately. Page 109
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4 Findings/Recommendations - Milnes High School 2025/26 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Low A review of the financial administration of the School Fund for 2025/26 confirmed that monthly bank reconciliations are performed to verify recorded income and expenditure against bank statements. However, it was noted that a number of issued cheques remain unpresented, with some exceeding six months from the date of issue. Following consultation with the Council’s Banking Service, it is understood that banks may decline to honour cheques that are more than six months old. The continued inclusion of these expired cheques within the School Fund records increases the risk that bank reconciliations do not accurately reflect the true financial position of the fund. This may result in an understatement of available balances and reduce the reliability of financial information. Unpresented cheques should be subject to monthly review, with any remaining outstanding for more than six months investigated. Where appropriate, such cheques are cancelled or reissued if payment continues to be due. Page 110
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5 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment School Support Co- ordinator Yes Implemented All cheques older than 6 months have now been cancelled. Monthly checks will take place going forward. Page 111
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6 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium During the audit visit, it was noted that the School held a number of prepaid gift vouchers purchased from an online retailer. These vouchers formed part of a larger order and have been used as prizes for pupils under the “Milne’s Make a Difference Award,” which is issued each term. However, no control record was in place to document the purchase, distribution, or remaining balance of the vouchers. Gift vouchers purchased from the School Fund for use as pupil prizes should be subject to appropriate control and record- keeping arrangements. As cash-equivalent items, vouchers present an increased risk of loss or misuse if not supported by adequate controls. A control record for all gift vouchers purchased through the School Fund should be maintained. This record should detail the date of purchase, quantity and value of vouchers acquired, distribution to pupils (including date and purpose) and the remaining balance held. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment School Support Co- ordinator Yes Implemented A control record has now been created to record purchase and issue of gift vouchers. Page 112
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 3 Low Financial Regulations require an Inventory Record to be maintained of all movable assets valued at £500 or above. It was found that the School maintains an Inventory Record of items valued at more than £250, a figure specified in a previous version of the Financial Regulations. However, it was noted that approximately 40% of the items recorded, including information, communication, and technology equipment, did not include a financial value. Recording financial values in the Inventory List enhances accountability, facilitates audits and insurance compliance, and supports effective financial and asset management. The School should update its Inventory List of all movable assets to include an estimated financial value for each item where the value exceeds £500. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Supervisory Technician Yes Implemented The School Inventory List has been updated to include values of all items with a value of £500 or above. New items will be added as necessary when purchased. Page 113
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8 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 4 Medium The audit review of the School Fund identified a £20,000 donation bequeathed by a former pupil for the purpose of establishing an annual award to support pupils experiencing financial hardship. The bequest was received in January 2018; however, the funds have remained unused, and no mechanism has been developed to administer the award in accordance with the donor’s stated intentions. School Fund Regulations specify that large balances retained for any significant period should be transferred to an interest-bearing deposit account. This will facilitate improved financial stewardship by maximising income generated for the benefit of pupils. The School should develop and implement a formal award mechanism to ensure the bequest is used in accordance with the donor’s wishes. This should include clear eligibility criteria and a defined application and approval process to support appropriate governance arrangements. In accordance with the School Fund Regulations, the School should also transfer the bequest into an interest-bearing deposit account until such time as the funds are required. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Head Teacher/School Support Co-ordinator Yes 02/07/2026 Senior Leadership Team will review the terms of the bequest and establish a formal reward mechanism with clear criteria. Page 114
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9 Enquiries will be carried out into options for interest earning accounts. Page 115
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10 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 5 Low The review of School Fund records identified that a significant proportion of income and expenditure is being recorded under a broad “miscellaneous” category. Testing confirmed that many of the transactions allocated to this heading related to identifiable school activities and should have been recorded against the appropriate activity‑specific categories. The reliance on a wide‑ranging “miscellaneous” classification reduces financial transparency and weakens the audit trail. This limits the School’s ability to monitor, verify and analyse School Fund transactions accurately and weakens the effective financial oversight by management. An exercise should be undertaken to review School Fund transactions to ensure they are allocated to the correct activity-specific categories. A review of existing categories should also be completed to ensure they are appropriate and sufficiently detailed to reflect the range of School Fund activities. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment School Support Co- ordinator Yes 02/07/2026 Appropriate additional fund headings will be added to the School Fund accounts for next academic session. Page 116
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11 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 117
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12 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 118
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Review – Capital Plan Project Review 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The report advises Committee on an internal audit review completed for the period from 25 March 2026 to 18 June 2026. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 This report provides details of the internal audit of a Capital Plan Project, which has been agreed for review within the Audit Plan for 2025/26. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers the contents of this report, seeks clarification on any points noted and endorses the recommendations contained within the report. Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 This audit examined the governance and management arrangements for civil engineering projects within the Capital Plan managed by the Consultancy Service. The review assessed how projects are identified, evaluated and approved for inclusion in the Capital Plan. The audit scope also included selecting a project for detailed testing. This involved Item 7. Page 119
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reviewing the contract from award through to completion of the works, with particular focus on compliance with the Council’s Financial Regulations, Procurement Guidelines and Conditions of Contract. It is anticipated that future Audit Plans will incorporate similar reviews of projects delivered by other Council services. 4.2 The audit found that projects were selected for inclusion in the Capital Plan through a structured, evidence‑based process informed by asset condition assessments, strategic planning documents and affordability constraints. Within the scope of the review, audit testing confirmed that appropriate management arrangements were in place and operating effectively. However, an additional verification requirement was identified to ensure that contractors undertaking work for the Council maintain appropriate and up-to-date insurance cover throughout the duration of the contract. The audit report is included in Appendix 1. 5. PROPOSALS 5.1 This report provides Committee with a summary of findings arising from an audit project completed during the review period. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. Page 120
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b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 121
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APPENDIX 1 1 Final Internal Audit Report Capital Plan Project Review March 2026 Distribution: Head of Operations & Environment Service Manager Design Consultancy The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Full Priority 1 0 Priority 2 1 Priority 3 0 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 123
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Appendix 1 2 Contents Page Capital Plan Project Review 1. Introduction & Scope 3 2. Key Issues 4 Detailed Report 3. Findings/Recommendations 5 4. Management Response 6 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 124
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Appendix 1 3 1. Introduction and Audit Scope The Annual Audit Plan for 2025/26 includes a review of a selected project within the Capital Plan. The Capital Plan sets out how the Council intends to invest in major long-term assets that support services and communities. These assets include schools, housing, roads, bridges, public buildings and other infrastructure with a long operational life. The Capital Plan for the period 2026–2029 was approved at a meeting of the Council on 28 January 2026. The report sets out planned investment in buildings, schools, roads and other public assets over the next three years. In addition, the Capital Plan is approved annually as part of the Council’s budget process to support transparent governance and provide appropriate oversight of major investment activity. As at December 2025, the Capital Plan for 2025/26 consisted of approximately 100 projects of varying size, with a total budget in the region of £50 million. This audit reviewed civil engineering–type projects within the Capital Plan that are managed by the Consultancy Service. For 2025/26, this included 25 projects with a total budget of £2.8 million. The audit scope included an examination of the arrangements within the Consultancy Service for identifying, assessing and approving projects for inclusion in the Capital Plan. This involved evaluating how investment needs are identified, extent to which proposals are supported by asset management plans, how projects are prioritised and the degree of alignment with strategic objectives. The audit also assessed the processes for determining affordability, as well as the governance arrangements for the ongoing review and management of the capital programme. The scope of the audit also included the selection of an individual project for detailed testing. This involved reviewing the contract from award through to completion of the works, with a focus on compliance with the Council’s Financial Regulations, Procurement Guidelines and the New Engineering Contract, Conditions of Contract. The audit included a comparison of the costs within the contractor’s tender submission against the final outturn costs. Additional works instructed during the contract were examined to confirm that appropriate project-management instructions had been issued in accordance with the Contract Conditions. The audit also reviewed the Consultancy Service’s arrangements for monitoring, controlling, and reporting project costs. This included an assessment of whether expenditure is accurately recorded, routinely monitored and reported against approved budgets within the Council’s Financial Management System. This audit focused on projects within the Capital Plan that are managed by the Consultancy Service. It is anticipated that future Audit Plans will include similar reviews of projects delivered by other Council services. Page 125
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Appendix 1 4 The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). 2. Key Issues • The audit found that, within the scope of the review, projects were selected for the Capital Plan through a structured process informed by asset management planning, strategic alignment and affordability constraints. Asset-condition assessments are used to identify where investment is required to maintain approved standards and proposals are evaluated against key strategic documents including the Corporate Plan, Local Outcomes Improvement Plan and the Local Development Plan to ensure alignment with organisational objectives. Projects are prioritised based on a range of factors, including legislative requirements, efficiency benefits and essential maintenance needs. It is recognised that the current financial climate is challenging, with increased construction costs and funding uncertainty necessitating a cap on capital spending. As a result, some projects have been delayed or reduced to remain within affordability limits. All decisions are made in line with the Prudential Code to ensure affordability and long-term prudence, and the Capital Plan is approved alongside the revenue budget to manage the impact of borrowing. • From a review of the Capital Plan, a project was randomly selected and an examination was carried out of the works from contract award through to completion, with a focus on compliance with the Council’s Financial Regulations, Procurement Guidelines and the Conditions of Contract. It was found that the Council’s Civil Engineering Small Works Framework was used for the selection of contractors invited to tender for the works. The contractor’s insurance certificate was verified in 2024, when the Framework was established. A Works Framework is a pre‑procured contractual arrangement that allows the Council to commission construction related works quickly and compliantly, without the need to run a full tender exercise each time. However, the works were undertaken in 2025 and no verification had been carried out to confirm that the contractor continued to maintain valid insurance cover. Verification of contractor insurance is a key preventative control that supports effective risk management, legal compliance, and the protection of public funds. Page 126
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5 Findings/Recommendations - Capital Plan Project Review 2025/26 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Medium The audit randomly selected a project from the Capital Plan and reviewed the works from contract award through to completion, with a focus on compliance with the Council’s Financial Regulations, Procurement Guidelines, and the New Engineering Contract, Conditions of Contract. The audit found that the contract had been administered in accordance with these Regulations and Conditions. The Council’s Civil Engineering Small Works Framework was used to select the contractors invited to tender, with contractors’ annual insurance certificates verified in 2024 when the Framework was established. However, the works were undertaken in 2025 and no subsequent verification was carried out to confirm that the contractor awarded the contract continued to hold valid insurance cover. Ongoing verification of contractor insurance is an essential control that supports legal compliance, effective risk management, and the protection of public funds. The audit review has Verification should be carried out to ensure that any contractor engaged through a Framework holds appropriate insurance cover prior to the commencement of works. A copy of the contractor’s valid insurance certificate should be obtained and retained within the contract file. Page 127
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6 subsequently confirmed the contractor’s insurance cover for 2025. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Service Manager Design Consultancy Yes 31/12/26 Framework contractors’ insurance details will be checked annually on the anniversary of the Framework to make sure they are still valid. Page 128
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7 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 129
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8 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 130
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Review – Common Good Fund 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The report advises Committee on an internal audit review completed for the period from 25 March 2026 to 18 June 2026. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 This report provides details of the internal audit review of the Common Good Fund; this project has been agreed for review within the Audit Plan for 2025/26. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers the contents of this report, seeks clarification on any points noted and endorses the recommendations contained within the report. Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 A Common Good Fund consists of land, buildings, money and other assets that historically belonged to the former burghs within Moray. These assets are now owned and administered by Moray Council, but they must be managed separately from other Council funds and used solely for the benefit of the inhabitants of the relevant former burgh area. Item 8. Page 131
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Burghs were a unit of local government until the local government reorganisation in 1975, when responsibility for Common Good Funds transferred to successor local authorities. Income generated for the Common Good derives mainly from interest earned on reserve balances held, as well as property and ground rentals. 4.2 The Council is responsible for administering nine Common Good Funds covering the communities of Buckie, Cullen, Dufftown, Elgin, Findochty, Forres, Keith, Lossiemouth and Portknockie. The audit reviewed the administration of these Funds to assess compliance with legislative requirements and Council policies regarding distribution, authorisation and financial accounting. The review identified a need for some administrative improvements. The detailed findings and recommendations from this review are set out within the audit report in Appendix 1. 5. PROPOSALS 5.1 This report provides Committee with a summary of findings arising from an audit project completed during the review period. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: Page 132
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☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 133
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APPENDIX 1 1 Final Internal Audit Report Common Good Funds March 2026 Distribution: Chief Financial Officer Chief Governance Officer Head of Housing, Property & Communities Service Manager Legal Services Service Manager Property, Estates & Assets Acting Senior Accountant The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 1 Priority 2 2 Priority 3 1 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 135
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Appendix 1 2 Contents Page Common Good Funds 1. Introduction & Scope 3 2. Key Issues 4 Detailed Report 3. Findings/Recommendations 5-11 4. Management Response 5-12 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 136
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Appendix 1 3 1. Introduction and Audit Scope The Annual Audit Plan for 2025/26 provides for a review to be undertaken of the accounting arrangements and procedures in place for the management of Common Good Funds. A common good is a fund of money and assets formerly owned by a burgh and now owned and administered by a council. Burghs were a unit of local government for most established urban communities in Scotland for almost 1,000 years, until local government reorganisation in 1975, when common good funds were transferred to successor local authorities that took over the ownership and administration of the relevant areas containing those burghs. In accordance with the Local Government (Scotland) Act 1973, the Common Good Fund must be administered separately from other local authority funds for accounting purposes. The local authority decides how the funds (and assets) are used but, in doing so, must have regard to the interests of the inhabitants of the area to which the common good relates. Members act as "custodians" of the Common Good when making decisions in relation to common good fund applications, property and assets. Their role is similar to that of a trustee of a trust fund. Moray Council is responsible for the administration of nine Common Good Funds covering the separate communities of Buckie, Cullen, Dufftown, Elgin, Findochty, Forres, Keith, Lossiemouth and Portknockie. Common Good Funds form part of the Council's statutory reporting requirements and as at the 31st March 2025 year-end accounts, Common Good Fund assets amounted to £22.6 million, with £296,000 of income received during the year. Assets held under the Common Good are of varying types, including sites, agricultural land, parks, monuments and fountains and sports and leisure facilities. Income generated for the Common Good derives mainly from interest earned on reserve balances held, as well as property and ground rentals. The scope of this audit project involved a review of the arrangements for Common Good Funds to ensure that their administration is in accordance with legislative requirements and Council policies and regulations relating to distribution, authorisation and accounting. This included a review of asset recording processes, income analysis and scrutiny of the administration of applications for Common Good Funding. The adequacy of Common Good Fund activity reporting was also reviewed. The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). Page 137
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Appendix 1 4 2. Key Issues • The audit found that the administration of the Common Good Fund was generally in accordance with legislation and agreed Council policies / procedures. However, the audit found these “procedures” for the administration of Common Good Funds are contained in various Committee reports from 2001 to 2024. The consolidation of the administrative arrangements into a single reference document would constitute an improvement by clarifying practices and ensuring that the correct and consistent application of the process continues to be exercised over funds administration. • Common Good Fund applications are considered by the appropriate Ward Members, with expenditure permitted for civic activities, maintenance of common good assets, charitable donations, memorials and street decorations. Where applications rely on external funding, common good payments are released only once it is confirmed that all required funds have been secured. Audit testing found that supporting invoices or receipts had not been obtained in all sampled cases to evidence appropriate use of awards. As a result, administrative processes require to be strengthened, with Accountancy officers required to obtain documentary evidence to confirm that awards are used for their agreed purpose. • The Community Empowerment (Scotland) Act 2015 requires local authorities to establish and maintain a Register of all Common Good land, buildings and movable items. Following consultation with Legal Services, it is considered that the Council currently maintains the appropriate information required for a Common Good Register. However, the development of a consolidated Register as a single point of reference would provide greater transparency and improved access for members of the public. Page 138
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5 Findings/Recommendations – Common Good Funds 2025/26 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Medium The Community Empowerment (Scotland) Act 2015 places a statutory duty on local authorities to establish and maintain a register of all property held for the common good. The Act also requires that a Common Good Fund Asset Register be made available on a website, or by other electronic means, for members of the public. The audit review noted that, while there is currently no stand-alone Register, the Council maintains the necessary information to populate one. It was noted that work is ongoing within Legal and Estates Services to develop a Common Good Fund Asset Register. A comprehensive Common Good Fund Asset Register should continue to be developed and on conclusion, it should be made available for access by members of the public, in accordance with statutory requirements. Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Service Manager Legal Services / Service Manager Property, Estates & Assets Yes 31/03/2028 For short-term improvement in information availability, work will be undertaken with Finance & ICT Services to move existing Common Good Asset lists to a more easily Page 139
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6 identified location on the Council’s website and this will be achieved by 30th April 2026. To produce a comprehensive Common Good Fund Asset Register, Legal and Estates teams will work together on accuracy of lists and produce linked maps which is not a legal requirement but considered beneficial for Council and public interests. This requires the longer timescale of 18 – 24 months to be set due to significant staffing issues in both Legal and Estates, however if this situation improves the Services have committed to implement at an earlier date. Page 140
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium Documented operating procedures are in place for administering the Common Good Funds. However, these procedures are contained in Committee reports dating from 2001 to 2024 and cover various elements, including the policy on levels of reinvestment and distribution, the unspent balance carry-forward policy, overspend rules, and the distribution authorisation policy. There is no single document that details all these administrative arrangements in full. The lack of consolidation carries the risk that approved administrative practices may not be fully understood. This creates the potential for inconsistency in application, particularly in the event of changes to the parties involved in administering the Common Good Funds. Consideration should be given to the consolidation of the approved administrative arrangements for Common Good Funds into a single reference document to ensure clear documentation of all practices and continued consistency in application. Page 141
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8 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Acting Senior Accountant Yes 31/08/2026 A single document will be created detailing all approved administration arrangements of the Common Good Funds. Page 142
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9 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 3 High A process is in place for community applications for grant awards from the Common Good Funds. Applications are considered by local ward members. Eligible expenditure includes civic activities, maintenance of Common Good assets, charitable donations, memorials, and street decorations. A sample of funding awards were tested to confirm that they were in accordance with eligible funding categories, supported by valid applications, appropriately authorised, and that the intended use of the funds by the grant recipients had been evidenced. Audit testing confirmed that all awards were appropriate and correctly authorised. However, from a random sample of 5 relevant awards, supporting receipts had not been obtained in 3 cases. Although receipts were requested from the grant recipients, they were not submitted, and the non-submission was not pursued. Supporting evidence of the appropriate use of Common Good funding should be obtained in respect of all relevant grant awards. Any non-submission of invoices / receipts following the initial request should be pursued with the grant recipient. Page 143
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10 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Acting Senior Accountant Yes 31/03/2026 A new process will be put in place to ensure all receipts are provided by the grant recipients. This will be checked on a monthly basis by the Accountancy Service. Page 144
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11 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 4 Low The Common Good Fund policy is for one third of annual revenue income to be reinvested to maintain the fund’s value, with the remaining two thirds made available for distribution within communities. Any undistributed balances in a year can be carried forward for use in the following two years. If funds are not distributed within this period, the unspent balances are added back to the fund reserve. Analysis of the Common Good Funds over the past three years found that three funds, namely Cullen, Findochty and Portknockie have had money returned to reserves because available funding was not utilised by the communities. The annual amounts returned ranged up to just over £2,000. Although details of available funds and application forms are published on the Common Good Fund page of the Moray Council website, further promotion of this funding stream should be considered to better engage local communities. Consideration should be given to requesting members in wards where Common Good Funds are available to promote funding opportunities within their communities. Page 145
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12 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Chief Financial Officer Yes 25/08/2026 Going forward the annual report to Committee on Common Good Fund spend and forecasting will highlight any Common Good Fund which has significant carry forward at risk of being returned to reserves if not utilised. This will highlight available funding to Members and allow promotion and consideration within their communities. Page 146
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13 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 147
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14 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 148
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Review – Payroll 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The report advises Committee on an internal audit review completed for the period from 25 March 2026 to 18 June 2026. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 This report provides details of the internal audit review of the Payroll System; this project has been agreed for review within the Audit Plan for 2025/26. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers the contents of this report, seeks clarification on any points noted and endorses the recommendations contained within the report. Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 As part of the 2025/26 Annual Internal Audit Plan, a review of the Council’s payroll system was undertaken. The scope of the review was to assess the adequacy and effectiveness of key controls governing the calculation and payment of employee remuneration. As the payroll system is a core financial system, integral to the administration of staffing costs, Item 9. Page 149
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totalling approximately £162 million in 2025/26, the audit focused on determining whether appropriate arrangements are in place to ensure that salaries are processed accurately and in accordance with statutory and contractual requirements. 4.2 Audit testing involved reviewing a random sample of new starters, leavers, and continuing employees to confirm that payments made were accurate, properly authorised, and supported by appropriate documentation. The period examined covered 1 April 2025 to 31 January 2026. It is pleasing to report that, based on the testing undertaken and within the scope of this review, overall, effective arrangements were found to be in place for the management of the Council’s payroll system. Detailed findings and recommendations arising from this review are provided in the audit report in Appendix 1. 5. PROPOSALS 5.1 This report provides Committee with a summary of findings arising from an audit project completed during the review period. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy Page 150
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☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 151
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APPENDIX 1 1 Final Internal Audit Report Payroll May 2026 Distribution: Head of People, Change & Community Strategy Service Manager People Management Senior HR and Payroll Administration Adviser The Internal Audit Section provides Management with an opinion on the internal control environment and also categories risk ratings for recommendations as high, medium or low (detailed explanation provided in Appendix1). The audit recommendations for this review have been classified as follows Assurance Level Risk Ratings for Recommendations Substantial Priority 1 0 Priority 2 1 Priority 3 1 Confidentiality and Disclosure Clause This report (“Report”) was prepared by the Internal Audit Section of Moray Council. The matters raised in this Report are only those which came to our attention during our internal audit work. Whilst every care has been taken to ensure that the information provided in this Report is as accurate as possible, the Moray Council Internal Audit Section has only been able to base findings on the information and documentation provided and consequently, no complete guarantee can be given that this Report is necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. This Report was prepared solely for the use and benefit of the Moray Council, Moray Integration Joint Board or the Grampian Valuation Joint Board. Moray Council's Internal Audit Section accepts no responsibility and disclaims all liability to any third party who purports to use or rely for any reason whatsoever on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification. Accordingly, any reliance placed on the Report, its contents, conclusions, any extract, reinterpretation, amendment and/or modification by any third party is entirely at their own risk. Please refer to the Statement of Responsibility in Appendix 2 of this report for further information about responsibilities, limitations and confidentiality. Page 153
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Appendix 1 2 Contents Page Payroll 1. Introduction & Scope 3 2. Key Issues 3-4 Detailed Report 3. Findings/Recommendations 5-7 4. Management Response 6-8 Appendices 1. Audit Terms of Reference and Definitions 2. Statement of Responsibility Page 154
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Appendix 1 3 1. Introduction and Audit Scope The Internal Audit Plan for 2025/26 included a review of the Council’s payroll system, focusing on assessing the adequacy and effectiveness of the controls in place to ensure the accurate payment of salaries. The audit was undertaken by testing a randomly selected sample of starters, leavers and current employees to assess the accuracy of pay calculations and to confirm that appropriate supporting documentation was retained and approved. The sample period for the audit testing was 1 April 2025 – 31 January 2026. The scope of the audit also included a review to confirm that any deductions from salary payments were made in accordance with statutory requirements or were appropriately authorised by the employee. This review included verification of amounts deducted and remitted to third parties, including HM Revenue & Customs and the North East Scotland Pension Fund. The payroll system is a core financial system of the Council and is critical to the accurate processing of staffing costs, which in 2025/26 amounted to approximately £162 million. Since 2017, the Council has operated its payroll function using the iTrent software application. It was noted that approximately 5140 officer payslips are processed each month. The iTrent system performs a dual function in supporting both payroll and human resources activities. This design facilitates the operation of key segregation-of-duties controls by ensuring an appropriate separation between processes relating to officer appointments, terminations, and grading, and the processing and payment of salaries. The audit was carried out in accordance with the Global Internal Audit Standards (GIAS). 2. Key Issues It is pleasing to report that, based on the testing undertaken and within the scope of this review, effective arrangements were found to be in place for the management of the Council’s payroll system. However, the following areas were identified as requiring further development: • It was noted that the Payroll Section has documented Payroll Guidelines that provide administrative guidance to support the accurate processing of employee pay, ensure appropriate authorisation and promote compliance with statutory requirements, while also facilitating effective workforce management and safeguarding public funds. A review of the Payroll Guidelines found that they are appropriate and relevant to current operating practices; however, it was identified that certain reference information and supporting documentation should be updated Page 155
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Appendix 1 4 to reflect the current organisational structure and standing information. Audit testing did not identify any discrepancies in the accuracy of salary payments made to employees. However, given that payroll is a core financial system, the Payroll Guidelines should be subject to an annual review to confirm whether any further updates or changes are required. • Payroll Guidelines require services to inform the Payroll Section as soon as they become aware that an employee is terminating their contract of employment. Audit testing of a random sample of former employees found that, in the majority of cases, services notified the Payroll Section promptly. However, audit testing noted examples of delays that resulted in salary overpayments, requiring recovery through the Council’s invoicing system. It is appreciated that instances of overpayments are low; however, all services should be reminded of the requirement to notify the Payroll Section of employee contract terminations promptly, as delays may result in salary overpayments that require additional administration and the recovery of payments made in error. Page 156
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5 Findings/Recommendations - Payroll 2025/26 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 1 Low The audit noted that established Payroll Guidelines are in place to provide operational and administrative guidance to officers within the Payroll Section and to services across the Council and its partner organisations. A review of the Payroll Guidelines confirmed that the core content remains relevant and reflects current payroll processes. However, it was identified that certain reference material and supporting documentation need to be updated within the Guidelines to reflect the Council’s current organisational structure and standing information. Audit testing of a sample of salary payments confirmed that no discrepancies were found in the accuracy of payments to employees. However, as payroll is a key financial system, it is recommended that the Payroll Guidelines be reviewed annually to ensure they remain current and reflect all procedural, structural, and legislative changes. Payroll Guidelines should be updated to ensure that all reference information and supporting documentation reflect current operating arrangements and the organisational structure. The Guidelines should then be subject to an annual review to maintain continued accuracy and compliance with statutory and organisational requirements. Page 157
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6 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Senior Payroll and HR Administration Adviser Yes 30/06/2026 Full review of guidelines to be carried out and updated version uploaded to interchange. Page 158
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7 Ref Risk Ratings for Recommendations Audit Finding Audit Recommendation 2 Medium The Payroll Guidelines require services to notify the Payroll Section promptly when an employee’s contract of employment terminates, in order to prevent salary overpayments. Audit testing of a randomly selected sample of former employees identified one instance of an overpayment, resulting from the employing service not notifying the Payroll Section of the termination on a timely basis. This overpayment has since been recovered through the Council’s invoicing system. The audit sample size was increased and additional testing was undertaken. No significant delays were identified in the majority of cases reviewed between the employee termination notification date and the Payroll Section being informed by services. However, a further instance of delayed notification was identified. Recovery of this overpayment from the former employee is being progressed through the Council’s invoicing system. All services should be reminded of the requirement for the timely notification of employee contract terminations to the Payroll Section. Page 159
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8 Management Response Responsible Officer Accepted (Yes/ No) Timescale for Implementation (Date Required) Agreed Management Action/Management Comment Senior Payroll and HR Administration Adviser Yes 30/06/2026 An email to be sent directly to all Budget Managers reminding them of the deadlines for receipt of forms. This will then be backed up by article in the June HR Bulletin. Late forms to be monitored and reminders to be sent to appropriate managers at the time. Annual reminder to be sent to all budget managers at the start of the calendar year with the list of deadlines. Page 160
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9 Appendix 1 AUDIT TERMS OF REFERENCE AND DEFINITIONS 1. Audit Objectives 1.1 The overall audit objective is to provide an objective independent opinion on the adequacy and effectiveness of controls / processes. 1.2 The audit will for each controls / process being considered: • Walkthrough the processes to consider the key controls; • Conduct sample testing of the identified key controls, and • Report on these accordingly 1.3 All audit reviews are carried out in accordance with Global Internal Audit Standards (GIAS). 2. Definitions for Auditing Opinions and Findings 2.1 In order to assist management in using our reports: The Internal Auditor will categorise audit assurance opinion according to their overall assessment of the risk management system, effectiveness of the controls in place and the level of compliance with these controls and the action being taken to remedy significant findings or weaknesses. Assurance Level System and Testing Conclusion Full The controls tested are being consistently applied Substantial There is evidence that the level of non compliance with some of the controls may put some of the system objectives at risk. Limited The level of non compliance puts the system objectives at risk. None Significant non-compliance with basic controls leaves the system open to error or abuse. 2.2 Risk ratings for each recommendation is based on the following criteria: High Fundamental control weaknesses that require immediate attention by management to action and mitigate significant exposure to risk Medium Less critically important controls absent, not being operated as designed or could be improved Low Lower level controls absent, not being operated as designed or could be improved. Page 161
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10 Appendix 2 STATEMENT OF RESPONSIBILITY The responsibility for designing and maintaining a sound system of internal control to prevent and detect fraud and other irregularities rests with management, with internal audit providing a service to management to support them to achieve this objective. The Internal Audit Section will assess the adequacy and effectiveness of the system of internal control arrangements implemented by management and perform sample testing on those controls in the period under review with a view to providing an opinion on the extent to which risks in this area are managed. The Internal Audit Section will undertake testing with the objective of detecting significant control weaknesses. However, the audit approach alone should not be relied upon to identify all strengths and weaknesses in internal controls nor to find any fraud or irregularity. Even sound systems of internal control can only provide reasonable and not absolute assurance and may not be proof against collusive fraud. The matters raised in this report are only those that came to our attention during the course of the audit review and are not necessarily a comprehensive statement of all the weaknesses that exist or all improvements that might be made. Recommendations for improvements should be assessed by management for their full impact before they are implemented. The performance of the audit review undertaken should not be taken as a substitute for management’s responsibilities for the application of sound management practices. This report must not be disclosed to any third party or reproduced in whole or in part without the written consent of the Moray Council’s Service Manager Internal Audit and Risk. Page 162
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Section Follow Up Review – Adult Social Care Commissioning 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The report advises the Committee on an internal audit follow-up review completed for the period from 25 March 2026 to 18 June 2026. 1.2 This report is submitted to Committee in terms of Section III (I) (2) and (8) of the Council’s Scheme of Administration relating to consideration of reports from the Council’s Internal Auditor and monitoring delivery of the audit service through receipt of quarterly reports on work carried out by Internal Audit. 2. SUMMARY 2.1 This report sets out the findings of a follow-up review undertaken by the Internal Audit Section to evidence the implementation of recommendations contained within an Improvement Action Plan prepared by Health and Social Care Moray. The Improvement Action Plan was developed in response to the findings of an audit of adult social care commissioning undertaken by KPMG Governance, Risk & Compliance Services (KPMG). This follow-up review was agreed as part of the 2025/26 Internal Audit Plan. 3. RECOMMENDATIONS 3.1 It is recommended that Committee note the contents of this report and seek clarification on any points noted. Dafydd Lewis Service Manager Internal Audit and Risk Item 10. Page 163
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4. BACKGROUND AND CONTEXT 4.1 An audit was undertaken by KPMG in 2022/23 of adult social care commissioning. The review was requested by the Audit, Performance and Risk Committee of the Moray Integration Joint Board (MIJB) on 31 March 2022 (para 11 of minute refers). The need for the review was highlighted due to concerns raised by senior management regarding the administrative arrangements within the Adult Social Care Commissioning Service and the findings from a peer review report in January 2022. The peer review was an audit of systems and procedures within the Adult Social Care Commissioning Service by the Strategic Procurement Manager Aberdeen City and Aberdeenshire Councils Shared Services (Commissioning), with the purpose of providing evidence and assurance that the Commissioning Service was robust, appropriate, equitable, efficient and provided value for money for the population of Moray. 4.2 However, upon receipt of the “peer review” report, the Adult Social Care Commissioning Service and a former Head of Service/Chief Social Work Officer (CSWO) raised concerns regarding its validity. These concerns relate to the sample of contracts selected for review and the assumptions drawn from the testing undertaken. Due to these misgivings, the MIJB’s Audit, Performance and Risk Committee agreed on 31 March 2022 to request an external audit review of the Adult Social Care Commissioning Service. KPMG was subsequently appointed to undertake this review. The Internal Audit Section was not involved in the procurement process, determination of the audit scope, or the review of working papers/draft report to evidence any findings or recommendations made by KPMG. However, the Internal Audit Section was subsequently asked by the former Chief Officer of the MIJB to undertake a follow-up review to provide assurance on the implementation of the recommendations contained within the audit report. 4.3 The scope for this external review detailed the following “broad purpose of the audit”: • To enable a reasonable level of assurance to be provided to the Integration Joint Board on the effectiveness of the Commissioning Service. • From the audit findings, the opportunity to highlight to the Commissioning Service any required improvements to ensure an adequate and efficient service can be delivered in meeting the needs of the Moray population. The review was completed in February 2023, and the audit report, which included recommendations for service improvements, was approved by the MIJB Audit, Performance and Risk Committee on 30 March 2023 (para 11 of the minutes refers). However, at the Committee meeting on 26 October 2023 (para 12 of the minutes refers), an Improvement Action Plan was agreed. This plan was developed from the recommendations previously detailed in the KPMG audit report. It was considered necessary to provide greater clarity regarding those recommendations and to facilitate more effective monitoring of implementation progress and reporting to committee. 4.4 In accordance with the Internal Audit Plan 2025/26, a follow-up review was undertaken to provide assurance on the implementation of the recommendations detailed in the Improvement Action Plan. This has been a challenging exercise, as the Internal Audit Section was not involved in the original review and has no evidence to support the recommendations. Nevertheless, a follow-up review was completed and the report is Page 164
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attached in Appendix 1. The majority of recommendations have been implemented; however, some have been completed through alternative arrangements that are now more closely aligned with service delivery, or there has been a need to agree on revised implementation timescales. A further follow-up review is not proposed. Instead, an audit of adult social care commissioning will be considered for inclusion in a future Internal Audit Plan. 5. PROPOSALS 5.1 This report provides Committee with a summary of findings arising from a follow up review undertaken to evidence implementation of recommendations from an audit undertaken of adult social care commissioning. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population Page 165
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6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 166
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APPENDIX 1 Moray Council Internal Audit Section 1 DEPARTMENT: Moray Integration Joint Board SUBJECT: Adult Social Care Commissioning- Follow up review (Based from an audit undertaken by KPMG) REPORT REF: 26’016 Follow Up Audit Review Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Internal Audit Report Category: Governance 1 (2.1.1a- HSCM Code) Introduce a Terms of Reference for the Managers Commissioning Meeting High Yes 31/08/2023 Implemented – Terms of reference for the Managers’ Commissioning Meeting were developed and agreed as final on 27/09/2023. However, the Head of Service later decided that a Managers’ Commissioning Meeting was no longer required, as the purpose and intended outcomes of this meeting are now Page 167
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Appendix 1 Moray Council Internal Audit Section 2 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation addressed through service specific groups including the Learning Disability Transformation Board, Care at Home Steering Group, Health & Social Care Moray (H&SCM) Mental Health Steering Group, Care Home Owners and Managers meetings and the Drug and Alcohol Partnership meetings. 2 (2.1.1b) Ensure Commissioning activities are a standing item on every agenda for Practice Governance Board and that it is discussed. High Yes 31/08/2023 Not Implemented– Agendas for the Practice Governance Board meetings were reviewed for the period May 2024 to October 2025 and commissioning activities were not detailed on any of the agendas. H&SCM has decided on alternative arrangements where commissioning activities are discussed as appropriate at Operational Management Team meetings that are held fortnightly. No further follow up required Page 168
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Appendix 1 Moray Council Internal Audit Section 3 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 3 (2.1.2a) Ensure Commissioning is represented at Practice Governance Board High Yes 29/02/2024 Not Implemented - A review of a sample period (May 2024 to October 2025) of Practice Governance Board meeting agendas and minutes noted that the Commissioning Service was not represented at the majority of the meetings. Alternative arrangements implemented, where the Commissioning Service is now represented at Operational Management Team meetings. No further follow up is planned. 4 (2.1.2b) The Terms of Reference for Managers Commissioning meetings will cover attendance and expectations for Deputes and decision making High Yes 29/02/2024 Implemented – The Terms of Reference for the Managers’ Commissioning Meetings were amended to include a requirement for attendance and expectations regarding deputisation and decision-making. However, as detailed previously (Ref: No. 1), the Head of Service decided that a Managers’ Commissioning Meeting is no longer required Page 169
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Appendix 1 Moray Council Internal Audit Section 4 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation due to Commissioning activities being discussed at more service specific meetings. 5 (2.1.3) An Agenda and Action Log will be created for Managers Commissioning meetings. High Yes 31/05/2023 Implemented – The follow-up review confirmed that agendas and action logs had been maintained until 2024 for the Managers’ Commissioning Meetings. However, as detailed previously, the Head of Service has decided that there is no longer a requirement for Managers’ Commissioning Meetings. Internal Audit Report Category: Team Structure and Roles 6 (2.2.1a) Ensure every member of staff that works in the Commissioning Team has a Job Description and it is available High Yes 31/05/25023 Implemented – Job descriptions have been provided for the following roles, which make up the Commissioning Team: Senior Commissioning Officer, Commissioning Co-ordinator, and Clerical Assistant. 7 (2.2.1b) Ensure every member of staff that works in the commissioning team has had the opportunity to discuss their High Yes 31/05/2023 Implemented – Discussions with officers from the Commissioning Service confirmed that there have been opportunities to review and Page 170
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Appendix 1 Moray Council Internal Audit Section 5 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation job description at supervision to determine understanding discuss their job descriptions during supervision meetings. Supervision meetings are held regularly and are diarised. 8 (2.2.2a) Commissioning and Procurement will meet regularly to corroborate the contract timeline High Yes 31/08/2023 Implemented – Verbal confirmation has been provided by both Commissioning and Procurement Services officers that regular meetings are taking place at which contracts and timelines are being discussed. Diary entries were observed. 9 (2.2.2b) The Commissioning Manager and Chief Finance Officer will meet every month to review block funded commissioned budgets High Yes 31/08/2023 Not Implemented– Whilst there are regular meetings diarised between Commissioning and Accountancy staff, monthly meetings between the Commissioning Manager (Service Manager) and the Chief Finance Officer to discuss block contracts are not taking place. Discussions have been held with the Chief Finance Officer, and it is now the view that monthly meetings are not required, Page 171
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Appendix 1 Moray Council Internal Audit Section 6 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation as budgets for block contracts are agreed in advance. No further follow up is planned. 10 (2.2.2c) A presentation of the remit of the Commissioning Team and future direction of the commissioning function will be created and delivered for colleagues in Health and Social Care Moray. High Yes 31/08/2023 Implemented – Two Development days have been held to date on 11 September 2024 and 14 May 2025, with another scheduled for 11 March 2026. The Development days were attended by a wide-range of staff from within Health and Social Care Moray and the sessions included a presentation by the Chief Social Work Officer. Themed group discussions were held, covering commissioning activities and processes and the broader elements of social work activity. In addition, the Strategic Delivery Plan for 2025-2028, approved in May 2025, commits to the development of a Strategic Commissioning Strategy under the responsibility of the Senior Management Page 172
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Appendix 1 Moray Council Internal Audit Section 7 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Team. The Head of Service has advised resources have been allocated to complete a Commissioning Strategy by the end of June 2026. 11 (2.2.3a) A team meeting will be held every week to discuss workload, and this will be monitored with a work tracker High Yes 29/02/2024 Implemented – The workload tracker was observed and was up to date at the time of testing for this follow-up review. Sample meeting notes were also examined to confirm that workload discussions were taking place. 12 (2.2.3b) A Contract work plan that informs the Departmental Procurement Action Plan and a Monitoring annual work plan will be created. High Yes 29/02/2024 Implemented – The Commissioning team maintains a document (separate from their Contracts Database) that highlights expiring contracts and informs the work plan. It was noted that regular meetings are also held with Procurement Officers from Financial Services to discuss work planning. The Departmental Procurement Action Plan is a proactive process. Whilst there are still a small number Page 173
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Appendix 1 Moray Council Internal Audit Section 8 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation of contracts that have expired, the majority now have clear end dates, which can be built into future planning processes for Procurement and Commissioning Services. 13 (2.2.3c) All staff will engage with supervision sessions with their line manager in accordance with policy. High Yes 29/02/2024 Implemented – Supervision sessions are regularly undertaken for all staff within the Commissioning Service. These sessions provide an opportunity for oversight and support by reviewing staff wellbeing, workload, performance, development needs, and compliance with policies and standards. Internal Audit Report Category: Training 14 (2.3.1) A training matrix will be created that clearly details intended training for all Commissioning Team staff members. Staff will be trained in core and service specific training. Medium Yes 31/08/2023 Implemented – A training matrix was introduced in 2025. Confirmation of training completed has been obtained on a sample basis for Procurement, General Data Protection Regulation, Customer Excellence and Ethical Commissioning. Page 174
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Appendix 1 Moray Council Internal Audit Section 9 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Internal Audit Report Category: Process Documentation 15 (2.4.1) A detailed Commissioning Procedure will be created with underpinning process maps and guidance. High Yes 31/08/2023 Implemented – A Commissioning Procedures document is in place and was approved by the Head of Service in September 2023. The Procedures became due for review in September 2025. At the time of the follow-up, the Service Manager advised that a review of the Procedures is underway 16 (2.4.2a) The Commissioning Procedure will be discussed at the weekly Commissioning Team Meetings and supervision. High Yes 31/08/2023 Revised Implementation Date 31/03/2026 Part Implemented – Minutes of the Commissioning Team meeting note that the Procedures were last discussed in January 2024. The Service has been reminded of the importance of ensuring regular updates to the Procedures and maintaining their consistent application. A date for finalisation has been agreed, and approval will be sought by 31 March 2026. Page 175
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Appendix 1 Moray Council Internal Audit Section 10 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 17 (2.4.2b) A library of process maps and guidance documents should be maintained and made available to staff for future reference. High Yes 31/08/2023 Implemented – A sample of guidance documents and process maps has been reviewed, which form part of a wider library of supporting documents available to Commissioning staff. 18 (2.4.3) Budget Managers will be informed through a workshop of their budgetary responsibilities. High Yes 31/08/2023 Implemented - This is carried out by the Accountancy service through Budget Manager training. Internal Audit Report Category: Contract Management 19 (2.5.1) An action plan will be put in place to ensure all contracts are current, appropriate and signed. Agreement needs to be reached with Procurement colleagues and Service Managers regarding the timeline of this. High Yes 28/02/2025 Revised Implementation Date 31/07/2026 Part Implemented- A Commissioning Service Database is maintained which details information including contract end dates and the point at which a review should begin regarding future procurement arrangements. In addition, the Procurement Section within Financial Services maintains an Action Plan (DPAP) that sets out information and timelines for all contracts. Regular meetings take place Page 176
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Appendix 1 Moray Council Internal Audit Section 11 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation between Commissioning and Procurement Officers to discuss current contract management and future service delivery requirements. A review of the Commissioning Service Database and the DPAP noted that a small number of contracts (six at the time of the audit) had expired between three and five years ago. Explanations have been sought for each of these six contracts. It has been advised that, for three of the contracts, future service delivery requirements will be determined by the end of July 2026. The remaining three contracts relating to day services require a more significant review of future delivery needs, which the service intends to complete in 2026/27. No further follow up is planned. Page 177
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Appendix 1 Moray Council Internal Audit Section 12 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 20 (2.5.2) Invoices are matched against Service Agreements within the CareFirst system, ensuring approved expenditure matches provider invoice. This is detailed within the Invoice Processing Standard Operating Procedure (SOP). High Yes 28/02/2025 Implemented– Invoices are logged in a spreadsheet and checked against the contract with the care provider, which is saved within the CareFirst system. A sample of invoices from the spreadsheet was selected for testing and was confirmed against the care provider agreements. It was noted that the invoice processing system guidance is detailed in the Standard Operating Procedures; however, these Procedures are currently under review, despite being due for review in 2024. 21 (2.5.3) Invoices are recorded and approved by Managers. Moray Council Payments Team have a further check in place to ensure all invoices have appropriate approval. This is detailed within the Invoice Processing High Yes 28/02/2025 Implemented - All invoices are uploaded to the Financial Management System via the online Accounts Payable system. Invoices are then automatically allocated to budget managers, determined by the financial codes. The budget manager is required to authorise each invoice individually (there is also a facility Page 178
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Appendix 1 Moray Council Internal Audit Section 13 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation Standard Operating Procedure (SOP). to return an invoice to the administrator where a query is evident). Following authorisation, the invoice is passed to the Payments Section for processing. At this stage, Payments can also raise a query against an invoice. 22 (2.5.4a) A robust process will be put in place that provides a clear audit trail for the authorisation of contracts and associated documentation. High Yes 28/02/2025 Implemented– A Commissioning Service Database has been developed, which records information in relation to care contracts. Detailed information is recorded regarding the contract dates and stages as part of an audit trail. There is both a current tab and a separate tab to record archived information. 23 (2.5.4b) Health and Social Care Management will put in place a peer support system and management quality check system for the Commissioning Team and Community Care Finance. High Yes 28/02/2025 Implemented - A weekly team meeting was established for Senior Commissioning Officers and the Service Manager with responsibility for Commissioning. Two development days were organised and operated on 11/9/24 and Page 179
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Appendix 1 Moray Council Internal Audit Section 14 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 14/5/25. The first focused on the roles and responsibilities of the Commissioning remit and was attended by Service Managers from both Children’s and Adult Services, and the second looked at monitoring, with another planned for March 2026. Day to day management of other Commissioning staff has been allocated to one of the three Senior Commissioners. It should be noted that the Service Manager remit has changed and Community Care Finance is now managed by the Chief Finance Officer. Internal Audit Report Category: Strategy 24 (2.6.1) The Commissioning Service will attend and be active members of the Strategic Planning and Commissioning Group. Medium Yes 29/02/2024 Implemented – A follow-up review noted from the minutes of the Strategic Planning and Commissioning Group that meetings were attended by the Service Manager with responsibility for Commissioning. However, Page 180
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Appendix 1 Moray Council Internal Audit Section 15 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation since March 2025 there have been no meetings of the Strategic Planning and Commissioning Group. At the time of the audit, the Chief Officer provided an update in that recruitment was actively being pursued for a new Head of Service post which will hold responsibility for Strategic Planning. It was advised that these meetings will resume during 2026. No further follow-up is planned. Internal Audit Report Category: Invoicing 25 (2.7.1) The Community Care Finance (CCF) team will include a process for variances (when an invoice does not match the CareFirst Service Agreement) in a Standard Operating Procedure (SOP) for the invoicing process. Medium Yes 29/02/2024 Implemented – The follow-up review noted that a process is now in place for investigating variances between invoices from care providers and the service agreements detailed in the CareFirst system. It was noted that officers from CCF query any variation with the Page 181
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Appendix 1 Moray Council Internal Audit Section 16 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation are providers and/or Social Work to verify the reason for the deviation in cost. 26 (2.7.2) The Community Care Finance Team will ensure all evidence is retained throughout the invoicing process to ensure there is an adequate audit trail for all decision making. Medium Yes 29/02/2024 Implemented – Changes to the payment-processing system require that all invoices are saved electronically as part of the system requirements. Evidence is also retained relating to any further action taken by officers in the processing of an invoice for payment. Internal Audit Report Category: Contract Register 27 (2.8.1) The Departmental Contract Database will be reviewed, brought up to date and maintained. High Yes 31/08/2024 Implemented – It was found that the Commissioning Service Database is being updated following quarterly reviews of planned and current commissioning activities undertaken by Senior Commissioning Officers. From these meetings, instructions are provided to the Clerical Assistant to update and maintain the Database. Page 182
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Appendix 1 Moray Council Internal Audit Section 17 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 28 (2.8.2a) The Departmental Contract Database will be a protected document and updated by the Commissioning Team's Clerical Assistant under instruction from Senior Commissioning Officers and Commissioning Co-ordinators. High Yes 31/08/2024 Implemented – The Commissioning Service Database is updated by the Clerical Assistant on a quarterly basis under the direction of Senior Commissioning staff. Editing of the Contracts Database is password protected. . 29 (2.8.2b) Senior Commissioning Officers will carry out quarterly checks on the Departmental Contract Database regarding the information being up to date and accurate with no gaps in data. High Yes 31/08/2024 Implemented – The process has been confirmed whereby the Clerical Assistant is responsible for updating the Database, based on updates arising from the quarterly meeting and under the direction of Senior Commissioning staff. In addition, it has been confirmed that Senior Commissioning staff will also review the Database regularly to ensure it has been updated appropriately. Page 183
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Appendix 1 Moray Council Internal Audit Section 18 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation 30 (2.8.3) The Departmental Contract Database will be saved on the Moray Council Social Care Shared Drive. High Yes 31/08/2024 Implemented– The follow up review has verified that the Database is saved within the Commissioning area of Social Care Shared Drive. Internal Audit Report Category: Performance Management System 31 (2.9.1a) A Performance Management system should be put in place. High Yes 29/02/2024 Revised Implementation Date 31/07/2026 Not Implemented– Whilst improvements have been made in relation to monitoring the progress of contract work through the use of a workload tracker, there has been no progress in developing a team-wide performance management framework. There are currently no team key performance indicators in place. Internal Audit Report Category: Contract Review 32 (2.10.1a) The Contract Management Process in place will be reviewed, standardised and strengthened with process maps. This process ensures Medium Yes 31/08/2023 Implemented – The Contract Monitoring process has been reviewed and strengthened. Process maps are in place to support process for the comments, complaints and incidents aspects of contracts. In addition, evidence has Page 184
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Appendix 1 Moray Council Internal Audit Section 19 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation monitoring of providers for suitability. This will be reflected in the contract. been noted of contract monitoring through communication with care providers to verify the quality and consistency of service delivery. In addition, a Multi-Agency Monitoring and Support Group has been established. Continuous monitoring of care providers is required to verify compliance with contract conditions. 33 (2.10.1b) A Contract Record Document will be created that will support the reviewing of contracts. Medium Yes 31/08/2023 Implemented – A Contract Record Document has been developed. This is still a relatively new process for Adult Care Commissioning Services and is being completed as contracts fall due for renewal consideration by the Service. Internal Audit Report Category: Block Contracts 34 (2.11.1) All providers are subject to an annual contract meeting and a 6 monthly budget meeting to ensure best value Low Yes 31/08/2023 Implemented - A timetable of meetings has been observed and tested, covering both annual contract meetings and budget Page 185
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Appendix 1 Moray Council Internal Audit Section 20 Risk Ratings for Recommendations High Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. No. Audit Recommendation Priority Accepted (Yes/ No) Date of Completion Status / Explanation is being achieved. This is reported to the Chief Finance Officer as required. This will be in every contract going forward. meetings with care providers. It was noted that where examples of services are being delivered without a formal contract in place, these providers were still receiving contract meetings. Reporting to the Chief Finance Officer has not been undertaken. Further discussion should take place between Commissioning and the Chief Finance Officer in order to establish if periodic updates would be beneficial. No further follow up is planned. Page 186
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: Internal Audit Annual Report – 2025/26 1. PURPOSE ☒ For Decision ☐ For Information 1.1 This report is submitted to Committee in terms of Section III (2) and (10) of the Council’s Scheme of Administration relating to the consideration of reports from the Council’s Internal Auditor and the provision of the annual assurance statement provided by Internal Audit on the Council’s control environment. 2. SUMMARY 2.1 To provide the Committee with a copy of the Internal Audit Annual Report for the year ended 31 March 2026, together with the Service Manager Internal Audit and Risk’s, opinion on the adequacy and effectiveness of the Council’s system of internal control. 3. RECOMMENDATIONS 3.1 That Committee considers and notes the contents of the annual report given as Appendix 1 to this report and seeks clarification on any matters relating thereto. Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 The purpose of this report is to present the Audit and Scrutiny Committee with the Internal Audit Annual Report for the year ended 31 March 2026. The report includes the Service Manager Internal Audit and Risk’s independent assurance opinion on the adequacy and effectiveness of the Council’s overall control environment. 4.2 The Global Internal Audit Standards (GIAS) require the Chief Audit Executive (CAE), the Council’s Service Manager Internal Audit and Risk, to provide an annual internal audit Item 11. Page 187
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opinion and report on the adequacy and effectiveness of the Council’s governance, risk management and internal control arrangements, to support the preparation of the Annual Governance Statement. 4.3 To meet the requirements of the GIAS, the Internal Audit Annual Report 2025/26 (Appendix 1) includes the annual opinion of the Service Manager Internal Audit and Risk and provides details of internal audit activity and performance during the year 5. PROPOSALS 5.1 The Internal Audit Annual Report provides a summary overview of the nature and extent of audit work carried out during the year to inform the audit opinion on the internal control environment operating within the Council. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population Page 188
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6.3 Policy and Legal No implications directly arising from this report. 6.4 Financial No implications directly arising from this report. 6.5 Risk The independent review of selected systems and procedures mitigates the risks associated with inadequate or ineffective control procedures. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 There have been no direct consultations during the preparation of this report. 8. BACKGROUND PAPERS 8.1 None Page 189
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APPENDIX 1 1 MORAY COUNCIL INTERNAL AUDIT ANNUAL REPORT 1 APRIL 2025 to 31 MARCH 2026 Page 191
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Appendix 1 2 CONTENTS Page SECTION 1 - INTRODUCTION 3 SECTION 2 - BASIS OF OPINION 3 - 4 SECTION 3 - SUMMARY AND LIMITATIONS OF WORK THAT SUPPORTS OPINION 4-16 SECTION 4 - OPINION 16 Contact Details Service Manager Internal Audit and Risk (CAE): Dafydd Lewis E-mail: dafydd.lewis@moray.gov.uk www.moray.gov.uk Page 192
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Appendix 1 3 SECTION 1 – INTRODUCTION 1.1 This report is issued in compliance with the Global Internal Audit Standards, which requires the Service Manager Internal Audit and Risk (Chief Audit Executive (CAE)) to provide an independent yearly opinion on the adequacy and effectiveness of the Council’s governance, risk management and internal control arrangements. It summarises the internal audit work undertaken during the year and offers assurance to support the authority’s wider governance reporting. 1.2 It is management’s responsibility to maintain governance, risk management and internal control systems. Internal audit is an element of the internal control framework established by management to examine, evaluate and report on accounting and other operational controls. Internal audit assists management in effectively discharging its responsibilities and functions by examining and evaluating controls. Internal audit cannot be held responsible for internal control failures. 1.3 Internal audit’s role includes assessing the adequacy of the risk management, internal controls and governance arrangements put in place by management and performing testing on a sample of transactions to ensure those controls are operating effectively for the period under review. 1.4 Global Internal Audit Standards require officers of the Internal Audit Section to communicate on a timely basis, all facts and matters that may affect their independence. I can confirm that all staff members involved in the 2025/26 internal audit reviews were independent of operational processes and their objectivity was not compromised in any way. SECTION 2- BASIS OF OPINION 2.1 This opinion is based on my knowledge of the Council’s governance, risk, control processes and on the audit work completed for the period from 1 April 2025 to 31 March 2026. There are limitations to the level of assurance that can be provided, dependent on the scope and coverage of the audit work completed. My evaluation is based on the following: Page 193
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Appendix 1 4 . SECTION 3- SUMMARY AND LIMITATIONS OF WORK THAT SUPPORTS THE OPINION 3.1 Internal audit operates independently within the Council. It helps the Council achieve its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control and governance processes. There have been no limitations imposed by management on the scope of audit work performed. The Internal Audit Opinion has been informed by the audit work completed during the year. 3.2 The Internal Audit Plan approved by the Audit and Scrutiny Committee on 12 February 2025 (Item 10) describes, in detail, the framework for developing the audit work to be undertaken. The selection of audit topics was informed by corporate planning documents, budget data, information drawn from the corporate risk register and consultation with members and senior management regarding potential areas for review. The percentage of the Internal Audit Plan completed for 2025/2026, together with a comparison to the previous year, is summarised overleaf, with a more detailed analysis of the status of each audit project also provided. Overall Opinion Assurance statements signed by Heads of Services Risks identified in the Council's Corporate Risk Register Reports issued by the External Auditor and other external review agencies Audit work undertaken by Internal Audit during the year to 31 March 2026 Follow Up Reviews to evidence implementation of audit recommendations Governance, risk management and performance monitoring arrangements Review of corporate governance arrangements Page 194
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Appendix 1 5 . . Percentage of Internal Audit Plan Completed (%) - 2025/ 26 and 2024/ 25 Status of each project included within the Internal Audit Plan 2025/26 100% 87% 0% 13% 0% 20% 40% 60% 80% 100% 120% 2025/ 26 2024/ 25 Completed Carried Forward Audit Projects Status Payroll Completed Procurement and Creditor Payments Completed Counter Fraud Review Completed Democracy and Governance Completed Banking and Reconciliation Completed Absence Management Completed National Non-Domestic Rates Completed Moray Growth Deal Follow Up Completed Levelling Up Fund Completed Page 195
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Appendix 1 6 3.3 The internal audit work has been undertaken in accordance with an established methodology that promotes quality and ensures conformance with the Global Internal Audit Standards and the approved Internal Audit Plan. Progress on the 2025/ 26 Internal Audit Plan 3.4 Progress against planned audit work for the year to 31 March 2026 can be summarised as follows: • I am pleased to report that the 2025/26 Internal Audit Plan has been completed. Several significant reviews were undertaken during the year, including an assessment of the effectiveness, transparency and statutory compliance of the Council’s democratic and governance arrangements. The review found that key constitutional policies and regulations are in place; however, improvements are required to enhance their accessibility for both members and officers. The audit also examined the governance processes for supporting committee meetings, including the preparation and publication of agendas, minutes and supporting documents. At the request of the Chief Executive, the scope of the review was expanded to consider systems and procedures relating to an instance in which a committee report omitted an Integrated Impact Assessment and feedback from a public consultation. Overall, the Council’s governance framework was found to be operating effectively within the scope of the review. Nevertheless, recommendations have been made to strengthen the accessibility of governance documentation and to improve accountability, monitoring and inter‑service communication when presenting budget‑related proposals to committee. Capital Plan Completed Education – Secondary School Completed Commercial Harbours Completed (Draft Report) Management of School Funds Completed (Draft Report) Common Good Funds Completed Adult Social Care Commissioning- Follow up Completed Transportation- Education Completed Complex and Challenging Behaviour Services Completed Procurement and Creditor Payments (MIJB) Completed Social Care (Short Breaks) Completed (Draft Report) Grampian Valuation Joint Board Completed Page 196
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Appendix 1 7 • Each year, an element of the Internal Audit Plan covers work on core financial systems, which are of key significance to the good governance of the Council. These systems receive the highest level of management control and are also reviewed on a cyclical basis by the External Auditor to obtain the assurances required for the audit of the annual accounts. This year’s work included a review of the Council’s arrangements for collecting and accounting for non‑domestic rates, as well as the verification of a sample of payroll and creditor payments. Audit testing of creditor payments confirmed that expenditure had been accurately recorded and processed through the Financial Management System (FMS); however, instances of non‑compliance with the Council’s Financial Regulations and Procurement Guidelines were identified. This issue has been raised in previous years and continues to be a concern. A range of measures has now been implemented to address these weaknesses. These include Heads of Service reinforcing officers’ awareness of the Financial Regulations and providing additional training. Monthly budget-monitoring communications now include regular reminders, with direct links to the Financial Regulations. In addition, as part of the induction training programme, newly appointed employees are informed of the Financial Regulations and the requirement for compliance.. • A review was also undertaken of the Council’s arrangements for managing sickness absence to assess whether the policies, procedures, and controls in place are adequate and are being applied effectively. The Council has developed a comprehensive framework for supporting attendance, underpinned by the Health and Work Policy and associated guidance, which collectively set out transparent processes intended to promote employee well-being and minimise disruption to service delivery. However, analysis of sickness absence data shows a sustained increase in the average number of days lost per employee in recent years. Audit testing of a random sample of employees on sick leave found that management interventions, such as timely reviews and appropriate follow-up actions, were not consistently carried out in accordance with the Health and Work Policy. Effective absence management is critically important, as it directly impacts service delivery, financial sustainability and overall organisational resilience. Management agreed to all internal audit recommendations, and it is also pleasing to note that, since the review, the Council has approved a transformation project aimed at improving employee attendance, reducing absence-related costs and delivering positive impacts for both the workforce and service delivery. • The Global Internal Audit Standards require the Service Manager Internal Audit and Risk (CAE) to consider whether the Council’s resources are being used efficiently, effectively and ethically as part of the evaluation of governance, risk management and controls. Additional monitoring has now been introduced to record instances where the audit process has identified quantifiable recoverable income, savings, or incorrect expenditure during audit reviews. As this is the first year such information is being formally recorded, some of the savings reported were originally identified during 2024/25, with follow-up work to confirm the implementation of recommendations undertaken in 2025/26. Page 197
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Appendix 1 8 Savings identified during Internal Audit Reviews SERVICE AREA FINDING SAVINGS VALUATION Leisure Services Reconciliation between the Financial Management System and the Fit Life? Leisure Services system identified additional subscription income from users. £32,000 Disabled Parking Scheme Reconciliation of disabled parking badge applications to the Financial Management System identified further invoicing requirements. £24,000 Commercial Refuse Collection The review identified additional charges associated with the sub-contracted commercial refuse collection service. £10,000 (annual) Network Support Grant Approval was secured from Transport Scotland permitting the Internal Audit Section to undertake verification of the Network Support Claim. £10,000 (annual) Network Support Grant The verification of grant claims identified further expenditure that met the eligibility criteria. £16,431 Absence Management An overpayment in amounts payable was identified as having been made to an external service provider. £2,400 Environmental Services A duplicate payment was identified through the analysis of creditor payments. £18,551 Health and Social Care Moray- Children Services A duplicate payment was identified through the analysis of creditor payments. £23,355 Health and Social Care Moray- Adult Services (Out of Area Placements) Creditor testing identified a requirement to recover an Out of Area care contribution. £20,517 Health and Social Care Moray- Children Services Testing identified a VAT accounting error requiring correction. £9,276 TOTAL £166,530 • The Internal Audit Section reports follow-up reviews to the Audit and Scrutiny Committee to evidence the implementation of recommendations. It is recognised that services face significant operational demands that can, and often do, justify delays in the timely implementation of agreed actions. It is therefore pleasing to report that, for the majority of follow-up reviews completed, most recommendations had been implemented. However, some remain outstanding, requiring further follow-up reviews, which has resulted in additional workload for the Internal Audit Section. The implementation of recommendations is a key determinant in Page 198
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Appendix 1 9 assessing the adequacy and effectiveness of the Council’s internal control system. Where recommendations are not implemented in a timely manner, weaknesses in control and governance frameworks remain unresolved. Senior management has acknowledged these issues and has introduced enhanced monitoring to support services in implementing audit recommendations within the agreed timescales. • The audit role for the Moray Integration Joint Board (MIJB) involves providing assurance that governance and financial arrangements have been developed and are operating in accordance with policies and that selected systems and processes are suitably controlled. It is acknowledged that the MIJB is a separate statutory body; however, the Council makes a significant ongoing funding contribution to functions delegated to the MIJB. The MIJB Audit Plan for 2025/26 included audit reviews of Complex and Challenging Behaviour Services, non-payroll expenditure and Social Care (Short Breaks)- Contributing to Your Care. Follow-up reviews undertaken to evidence the implementation of recommendations have again been a particularly time-consuming commitment for the Internal Audit Section. It is anticipated that this requirement will continue in 2026/27. However, senior management has introduced a new administrative system, in consultation with the Internal Audit Section, to facilitate improved monitoring arrangements for services implementing recommendations within the agreed timescales. • The audit review of MIJB non-payroll expenditure found that expenditure was recorded accurately in the Financial Management System. However, examples were noted of payments made in advance without the required approval, VAT processing errors and a significant duplicate payment arising from an administrative error. In addition, testing identified a case where action is required to recover personal financial contributions for care home fees. The audit review of Social Care (Short Breaks) noted that there is scope to consider the development of a charging policy for accommodated respite short breaks. This reflects findings from another audit review, which also suggested exploring charging arrangements for non-residential care services. The current financial environment is recognised, alongside the need to consider income generation opportunities where appropriate. In addition to the projects detailed within the Annual Audit Plan, a follow-up audit was undertaken to evidence the implementation of recommendations arising from a review of adult social care commissioning. This audit had been outsourced to a private firm; however, the Internal Audit Section was responsible for undertaking the follow-up review. The majority of recommendations have been implemented. However, some have been addressed through alternative arrangements that are now more closely aligned with service delivery, or revised implementation timescales have been agreed. Page 199
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Appendix 1 10 • It is encouraging to note that a replacement for the current social work and social care case management system has been agreed, with the new system planned for implementation by March 2027. This system is of significant importance, as it will be the primary social work recording database, containing highly sensitive information and will also support the administrative and financial requirements associated with the management of social care packages. I also note that the risk category regarding the MIJB's ability to deliver services within available resources and achieve agreed savings targets has increased from high to very high. This reflects increased financial pressures, including delays in achieving planned savings, rising demand and high-cost care packages. As the Service Manager Internal Audit and Risk (CAE), I am concerned about the potential risks to which the Council may be exposed. I note the Chief Financial Officer’s report to the Council on 25 February 2026, “2026/27 Budget and 2026–29 Financial Plan”, which identifies that “the Council no longer holds non-earmarked reserves (outside its £6 million free general reserve) reducing the capacity the Council has to absorb unexpected or unplanned costs.” Accountability for the Moray Integration Joint Board’s overspend rests jointly with the Council and NHS Grampian, consistent with the financial governance provisions set out within the Health and Social Care Integration Scheme. • The Internal Audit Section also provides internal audit services to the Grampian Valuation Joint Board. The main financial systems of the Assessor’s Service replicate those of Moray Council; therefore, the audit assurance obtained in respect of the controls within the Council’s systems can be relied upon as also applying to the financial systems of the Assessor’s Service. However, there remains a requirement to test transactions specific to the Assessor’s Service on an annual basis. This is necessary to provide the Treasurer with an opinion on the adequacy and effectiveness of the internal control systems and procedures. This work includes confirming the administrative processes for reporting revisions to the council tax and non-domestic rating lists by the Assessor to the constituent authorities. Based on the internal audit work completed on the Assessor’s Service for the financial year ended 31 March 2025, no significant concerns were identified. Page 200
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Appendix 1 11 3.5 The total number of recommendations from the audit reviews undertaken during 2025/26 are set out in the following table: Report Risk Ratings for Recommendations System/ Testing Assessment 2025/26 Audit Plan High Medium Low Payroll 0 1 1 Substantial Procurement and Creditor Payments 1 3 1 Substantial Counter Fraud Review 0 3 4 Substantial Democracy and Governance 4 6 2 Substantial Banking and Reconciliation 0 0 2 Full Absence Management 2 8 1 Limited National Non-Domestic Rates 0 2 2 Full Moray Growth Deal Follow Up 2 3 2 Substantial Levelling Up Fund 0 0 2 Full Capital Plan 0 1 0 Full Education – Secondary School 0 3 3 Substantial Commercial Harbours 1 2 4 Substantial Management of School Funds 2 3 1 Limited Common Good Funds 1 2 1 Substantial Adult Social Care Commissioning- Follow up - - - N/A Follow up Review Transportation- Education 1 4 2 Substantial Complex and Challenging Behaviour Services 1 6 5 Substantial Procurement and Creditor Payments (MIJB) 2 1 2 Substantial Social Care (Short Breaks) 2 1 1 Substantial Grampian Valuation Joint Board 0 0 0 Full Page 201
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Appendix 1 12 3.6 The following performance measures for the Internal Audit Section for 2025/ 26 are set out below. Performance targets have been determined through a review of other local authority internal audit services and meeting these targets is intended to be challenging. Measure Description Target Actual 2024/25 Actual 2025/26 Final Report Percentage of Auditee(s) responding within 20 days of receiving the draft report. 100% 100% 84% Final Report Percentage of final audit reports issued within 10 days of agreeing the draft report 100% 100% 100% Audit Plan Delivery Percentage of audits completed v planned. 85% 87% 100% Audit Budget Percentage of audits completed within budgeted days. 80% 77% 84% Audit Recommendations Percentage of audit recommendations agreed. 90% 100% 100% Customer Feedback Percentage of respondents who rated that the audit added value and provided meaningful results. 100% 95% 94% Follow Up Reviews Percentage of Follow Up Reviews completed v planned 100% 94% 87% • I am pleased to report that all planned projects in the audit plan have been completed. The Annual Internal Audit Plan is designed as a challenging programme, taking into account available staff resources and the Internal Audit Section’s additional duties and responsibilities. Following approval of the Annual Internal Audit Plan by the Audit and Scrutiny Committee, all Heads of Service are informed of the projects scheduled for review in the forthcoming financial year. Heads of Service are asked to remind staff that, during an audit review, they should respond promptly to information requests and address audit recommendations within the appropriate timescales, namely, 5 working days for information requests and 20 working days for audit recommendations. Last year, delays were noted in services responding to audit enquiries and recommendations. This affected the timely completion of reviews and, consequently, the reporting to the Audit and Scrutiny Committee. To address this, the Council’s Financial Regulations have been updated to formalise the requirement for officers to respond promptly to audit enquiries and recommendations. Page 202
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Appendix 1 13 • All reports were issued as final within 10 days of agreement on the draft report. Officers agreed to all recommendations; however, to ensure transparency, a recommendation that users of the Moray Community Equipment Service should include issued equipment in their personal insurance cover was later amended to “not agreed” during the follow-up review. Timescales for completing follow-up reviews are affected where revised completion dates for recommendations are required. Feedback from officers has also been positive regarding the value of participating in the audit review process. 3.7 Governance – In relation to the preparation of the Council’s Annual Governance Statement, it is considered that sufficient information has been obtained to conclude that the Council generally complies with the latest good governance practices issued by CIPFA/SOLACE, and that the Corporate Leadership Team and Heads of Service have a strong awareness of the challenges facing the Council in the coming period. Written assurances from Heads of Service have also been considered in assessing governance practices within individual service areas. 3.8 Key governance and internal control arrangements have been maintained, albeit capacity issues have required resources to be prioritised towards essential services and the delivery of the Council’s strategic priorities. Progress has been made in several key priority areas, including the review and update of first-tier governance documents. In addition, the remit of the Audit and Scrutiny Committee has been reviewed, with further development of its scrutiny functions to include additional areas of responsibility. A “Change Plan – Corporate Leadership Team Restructure Proposal” from the Chief Executive, intended to “provide the Council with a more clearly defined and sustainable leadership structure for the foreseeable future” in addressing operational and strategic challenges, was approved, with Phase 1 commencing in September 2025. The revised staffing structure formally recognises the role of Service Manager Internal Audit and Risk, as the Chief Audit Executive (CAE), in accordance with the Global Internal Audit Standards. The role includes direct administrative reporting to the Chief Governance Officer, as well as access to the Chief Executive, Chair of the Audit and Scrutiny Committee and the Council Leader. This arrangement supports the independence and objectivity of the Council’s Internal Audit Service. 3.9 The Service Manager Internal Audit and Risk (CAE) facilitated a workshop with Members of the Audit and Scrutiny Committee to carry out self-assessments of compliance using the Good Practice Principles Checklist and the Evaluation of Effectiveness Toolkit from the Chartered Institute of Public Finance and Accountancy (CIPFA) publication Audit Committees – Practical Guidance for Local Authorities and Police (2022 Edition). This CIPFA publication provides guidance on the functions and operations of audit committees in local authorities and police bodies and represents CIPFA’s view of best practice for audit committees across the UK. Following the exercise undertaken in 2025, it is pleasing to report that the results of the self-assessment and evaluation demonstrated significant compliance with good practice principles and a high degree of effectiveness. Page 203
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Appendix 1 14 3.10 Counter Fraud - While the prevention of fraud and error rests with management through the design and operation of suitable control systems, this process is supported by an annual audit of the Council’s counter-fraud framework. The review assessed governance arrangements, fraud risk identification, staff awareness, internal controls, reporting procedures and collaboration with external bodies, in line with best practice as set out in CIPFA’s Code of Practice on Managing the Risk of Fraud and Corruption. The scope of the review also considered exposure to fraud arising from both internal and external threats and incorporated learning from fraud cases reported across the public sector, including themes highlighted in Audit Scotland technical bulletins. 3.11 While no audit can provide complete assurance regarding the absence of fraud or irregularities within an organisation, the findings of the counter-fraud framework review concluded that the Council has established a robust framework supported by key policies. These include the Policy to Combat Fraud, Theft, Bribery and Corruption, Whistleblowing Policy and the Code of Conduct. However, areas for improvement were identified, including the need for enhanced counter-fraud training for staff, formalising notification procedures for suspected irregularities between services and the Internal Audit Section and continuing to refine National Fraud Initiative (NFI) processes. 3.12 Internal Audit co-ordinates the Council’s participation in the NFI, a data-matching exercise involving a range of public sector bodies. This activity complements other audit work and supports Internal Audit in assessing the potential for fraud and related risks. The findings of the NFI 2024/25 data-matching exercise have been reported separately to this Committee. No fraud was identified; however, the exercise generally highlighted information that was out of date or reflected timing differences. For example, if an individual changes jobs or address around the time the data is submitted for matching, both old and new information may appear as a match; however, this can be quickly discounted upon review. 3.13 Risk Management – procedures have been developed with a risk management policy in place and risk registers maintained at both corporate and service levels. The Business Continuity and Risk Management Officer supports further implementation and development of risk management arrangements, including the creation of a “Risk Appetite Statement.” A Risk Appetite Statement outlines the Council’s willingness to accept various levels of risk in pursuit of its objectives and serves as a reference point when considering risk as part of the decision-making processes of the Council and its committees. Page 204
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Appendix 1 15 3.14 It was noted that the full Corporate Risk Register was reported to the Corporate Committee for review and consideration at its meeting on 4 November 2025. Financial, staffing, information, communication and technology risks remain ongoing challenges for the Council. These represent key risk areas, encompassing how the Council discharges its functions in terms of good governance, manages its financial affairs and supports its workforce and utilises technology, which is essential to delivering most, if not all, services. It is recognised that these are high-risk categories arising not only from internal circumstances but also from the broader economic and social challenges faced by all local authorities. Statement on Conformance with the Global Internal Audit Standards 3.15 The Local Authority Accounts (Scotland) Regulations 2014 require that “a local authority must operate a professional and objective internal auditing service in accordance with recognised standards and practices in relation to internal auditing.” The recognised standards adopted by all Scottish councils are the Global Internal Audit Standards, developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Chartered Institute of Internal Auditors (CIIA). 3.16 The Global Internal Audit Standards came into effect on 1 April 2025, replacing the Public Sector Internal Audit Standards. All Scottish local authorities are required to undergo an External Quality Assessment (EQA) every five years. As part of the Council’s membership of the Scottish Local Authorities Chief Internal Auditors’ Group, it was agreed that this requirement would be met through a reciprocal arrangement, whereby each internal audit service reviews another council and, in turn, receives a review. An EQA of the Council’s Internal Audit Section was completed by the Chief Internal Auditor of Perth and Kinross Council, and the findings were reported to the Audit and Scrutiny Committee on 11 September 2024. The overall conclusion of the external assessment was that the Council’s Internal Audit Section fully conforms to the Public Sector Internal Audit Standards. 3.17 In addition to an EQA, an annual internal assessment is required to ensure compliance with the Global Internal Audit Standards (GIAS). An ongoing compliance review was undertaken during 2025/26, resulting in updates to the internal audit reporting format, project scoping documents and internal operating procedures. The Internal Audit Charter has also been reviewed and updated and was reported to the Audit and Scrutiny Committee for approval on 19 November 2025 (Item 11). Included within the Audit Plan for 2026/27 is a formal assessment that will involve reviewing the Internal Audit Section’s procedures and processes against the GIAS to identify areas for improvement and to inform a Quality Assurance and Improvement Plan (QAIP). Page 205
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Appendix 1 16 3.18 The Global Internal Audit Standards requires the Service Manager Internal Audit and Risk (CAE), to assess whether internal audit staffing resources are sufficient to meet the Council’s and partner organisations audit needs. Where it is believed that resource levels may adversely impact the delivery of the Annual Internal Audit Opinion, this must be brought to the attention of this Committee. While the current financial climate is acknowledged, demands on the Internal Audit Service have increased over the years and staffing resources have previously been raised as a concern with members and senior management. However, with the appointment of a temporary part-time officer, current staffing levels are considered sufficient to meet the auditing needs of the Council and its partner organisations. 3.19 When evaluating the adequacy of audit coverage, note that accountability for designing, implementing and maintaining an effective system of internal control rests with management, rather than with Internal Audit Service. SECTION 4- OPINION 4.1 Any system of control can only ever provide reasonable, not absolute, assurances that control weaknesses or irregularities do not exist or that there is no risk of error, fraud, or breaches of laws or regulations. Furthermore, it is the responsibility of management to establish an appropriate sound system of internal control and monitor its effectiveness. It is the responsibility of the Service Manager Internal Audit and Risk (CAE) to provide an annual assessment of the robustness of the internal control systems. 4.2 It is my opinion that, having given due consideration to the issues set out in this report, and based on the audit work undertaken and other sources of assurance, reasonable assurance may be placed on the adequacy and effectiveness of the Council’s system of internal control for the year ended 31 March 2026. Dafydd Lewis Service Manager Internal Audit and Risk (Chief Audit Executive) 3 May 2026 Page 206
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Service Manager Internal Audit and Risk Author: Dafydd Lewis Contact Email: dafydd.lewis@moray.gov.uk Subject: National Fraud Initiative 2024/25 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to inform the Committee of the outcomes from the Council’s participation in the National Fraud Initiative for 2024/25. 1.2 This report is submitted to Committee in terms of Section III (I) (5) of the Council’s Scheme of Administration relating to considering reports from the Council’s Internal Auditor. 2. SUMMARY 2.1 The National Fraud Initiative (NFI) is a data-matching exercise undertaken by the Cabinet Office on behalf of Audit Scotland every two years. It involves matching data from various Council systems with information provided by other councils and external organisations. Participation in the NFI is mandatory for public bodies, including local authorities. The agreed approach within the Council for the NFI 2024/25 exercise was for services to review and document the reasons for data matches, while the Internal Audit Section investigates potential fraud, monitors progress and reports on outcomes. 2.2 Findings from participation in the 2024/25 NFI exercise have not identified any fraud but have highlighted issues relating to data cleansing or valid reasons for matches, for example where officers are employed in more than one post or where there are timing differences in when information has been updated across different databases. However, participation in the NFI supports the Council’s counter-fraud arrangements by providing assurance that fraud prevention controls are effective. 3. RECOMMENDATIONS 3.1 It is recommended that Committee considers Committee is asked to consider the contents of this report; seek clarification on any points noted and otherwise note the report. Item 12. Page 207
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Dafydd Lewis Service Manager Internal Audit and Risk 4. BACKGROUND AND CONTEXT 4.1 The National Fraud Initiative (NFI) is a data-matching project undertaken by the Cabinet Office on behalf of Audit Scotland. Public bodies, including local authorities, are mandatory participants in this process. Each body is required to submit data it holds regarding individuals and businesses that receive public funds, either as paid employees or suppliers of goods, works, or services, or in the form of benefits and rates relief. Information is also provided on individuals with housing tenancies and housing waiting lists, as well as on recipients of Blue Badges. 4.2 The matching process identifies data “matches” for each participant that are considered worthy of investigation. There is no presumption of fraud; a match simply comprises two or more records where there appears to be an anomaly that merits further review. For example, if an individual is on Moray Council’s house waiting list from an address in Dundee but is receiving Council Tax Reduction at an address in Aberdeen, this will be recorded as a match. In most cases, the issue is that the information is out of date, such as when the individual has relocated to Aberdeen. Similarly, an individual employed as a teacher may appear on two payroll records with different authorities. This will also appear as a match but is not irregular if the individual is legitimately employed part-time by each council. 4.3 A further common reason for matches occurring is timing differences. For example, if an individual changes jobs or address around the time the data is submitted for matching, both the old and new information may appear as a match. In such cases, the match can usually be quickly discounted once the records have been checked. 4.4 The 2024/25 matching process for Moray Council at the time of drafting this report disclosed 3,350 matches across ten data themes as follows: • Creditors (Payments to Suppliers) 1914 • Council Tax Reduction Scheme 491 • Council Housing Waiting List 258 • Blue Badges 190 • Housing Tenancies 372 • Procurement 21 • Housing Benefits 24 • Adult Social Care 28 • Payroll 52 3,350 4.5 While the volume of matches is significant, experience from previous exercises has shown that the incidence of fraud is low. Accordingly, following consultation with Audit Scotland, a proportionate approach to testing has been taken. This has involved a high-level scan of all matched data, supplemented by more detailed testing of a sample of items to confirm that the outcomes are as expected. Further details are provided below, which conclude that the principal benefits of participating in the exercise are twofold: Page 208
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• It provides assurance that the control systems designed to prevent fraud are operating effective. • It offers an opportunity to undertake data-cleansing activity to improve the currency and accuracy of information held within Council systems. 4.6 An additional area included within the 2024/25 data-matching exercise concerned adult social care data. This was a new dataset covering residential care homes and personal budgets; however, due to legislative requirements, the information was not uploaded until late 2025, which has delayed reporting on the outcomes of this exercise. Participation in the NFI is an ongoing statutory requirement for all Scottish local authorities as part of every biennial data-matching cycle. Planning for the 2026/27 data‑matching exercise has already begun and will involve the same data themes, but will also include business rates relief awards. Outcomes 4.7 Creditor Payments matches consider payee names, addresses, bank account details, VAT calculations, and related information, primarily to identify duplicate or erroneous payments. While a high volume of matches was generated, it should be noted that the Council routinely makes legitimate payments of the same amount to a single supplier. Typical examples include monthly school transport invoices where a contracted daily rate applies, purchases by Fleet Services of more than one vehicle with identical specifications, and payments for monthly care packages for an individual. 4.8 Testing of the matches found no instances of fraud or irregularity; rather, there were legitimate reasons for the match or minor data cleansing issues, e.g. where the same supplier had two creditor records (the second having been set up in error). These issues have now been addressed. 4.9 4.10 Council Tax Reduction Scheme (CTRS) entitles qualifying households to a reduction in the amount of council tax they pay. The level of reduction depends on individual circumstances. CTRS awards are cross‑referenced with other CTRS claims, public sector payroll and pension records, taxi licensing data, housing tenancy information and Department for Work and Pensions (DWP) records of deceased persons. These data matches are designed to ensure that claim forms have been accurately completed and that relevant information, e.g., income, which can affect the level of award, has been properly disclosed. In most cases, the correct disclosures had been made. However, a small number of cases require further investigation. It should be noted that where an individual is also in receipt of other benefits, the NFI system requires the match to be referred to the DWP. The DWP determines any investigation work required and the Council receives no feedback on the outcomes of these referrals. Council Housing Waiting List applicants are cross-referenced against other councils' waiting lists, housing tenancy records, housing benefit claimants, and Department for Work and Pensions (DWP) records of deceased persons. The investigation of these datasets found no instances of fraud, only legitimate and explainable circumstances. Examples included individuals with multiple local authority housing applications or valid reasons for certain matches, such as the contact details of a social worker who assisted applicants in completing their applications. However, the most significant reason for the Page 209
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4.11 4.12 4.13 4.14 4.15 matches was that applicants had remained on the waiting list for many years, during which their circumstances had changed, for example, a change of address or rehousing elsewhere in the interim. At the time of submitting data to the NFI, the Housing Service was undertaking a data-cleansing exercise to improve the accuracy of the Council’s Housing Waiting List. The NFI data matches supported this process by enabling officers to review all matches and verify the completeness of the exercise. It is therefore expected that the next NFI data-matching exercise will result in significantly fewer matches within these datasets. Blue Badge parking permits are compared with permits issued by other councils and with DWP records of deceased persons. A review of the matches found that, for the majority, the Service had already updated records to reflect changes in circumstances, or that discrepancies were due to timing differences between notifications and the reports used for the data-matching exercise. In addition, testing identified legitimate reasons for some of the matches. However, a small number of badges had to be cancelled where the Service had not been informed of a change in a recipient’s eligibility for a Blue Badge. This was particularly evident in cases where the UK Government’s Tell Us Once service for reporting a death had not been used. Housing tenancy records are cross-referenced with other councils’ tenancy records, housing benefit claims, housing waiting lists and DWP records of deceased persons, all for the purpose of validating the accuracy of the information the Council holds on the occupancy of its housing stock. Testing noted that there were legitimate reasons for the matches, such as recent moves or changes in family circumstances, with detailed information available to evidence why the matches had been generated. As noted previously, at the time of submitting data to the NFI, the Housing Service was undertaking a data-cleansing exercise, which included a review of tenancy records. This review identified a need to update standing information arising from earlier notifications of changes in circumstances. This will have contributed to the number of matches identified; however, it is expected that the next NFI data-matching exercise will result in significantly fewer matches within these datasets. Procurement matches compare the Council’s payroll records with supplier records, including company director information held by Companies House. These matches are intended to identify potential conflicts of interest in the award of Council contracts; however, no undisclosed conflicts were identified. The matches that were highlighted related to known and legitimate situations (for example, Councillors who also serve as Directors of Moray Leisure) and were not considered irregular. Housing Benefit matches are cross‑referenced with housing tenancy records, taxi licensing information, housing waiting lists, recipients of Council Tax Reduction and DWP records of deceased persons. These matches are designed to ensure that claim forms are completed accurately and that all relevant information, such as income, which may affect the level of Housing Benefit awarded, has been properly disclosed. The number of matches in this category continues to decrease as more claimants transfer to Universal Credit. Testing found no instances of fraud or irregularity. Adult Social Care. This is a new category in which payments made to individuals in receipt of a personal budget or residing in residential care homes are matched to DWP records of deceased persons. Due to legislative considerations, the NFI advised local Page 210
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4.16 authorities to delay submitting this information until late 2025. Testing of individual matches found no instances of fraud or irregularity; rather, the matches were attributable to timing differences between the notification of changes in circumstances and the processing of payments. One instance was noted where a match related to an identical name; however, further investigation confirmed that these were separate individuals and that correct accounting and administrative arrangements had been followed. Payroll matches compare the Council’s payroll records with data from other public bodies to identify potential indicators of fraud, error, or irregularity. The purpose of the exercise is to ensure that only legitimate employees are being paid, that salary payments are accurate and that no individual is unlawfully receiving income from multiple public sector organisations. The investigation found no instances of fraud or irregularity, but rather legitimate reasons for the data matches. For example, one match related to a supply teacher who had worked both for Moray Council and for a neighbouring local authority. Other matches arose due to timing delays in updating employee information. In addition, some individuals were found to be working part-time for the Council while also employed by another organisation. These cases were reviewed and no issues were identified, as appropriate separate working arrangements were in place. 5. PROPOSALS 5.1 This report provides the Committee with a summary of the key findings arising from the Council’s participation in the 2024/25 NFI exercise. The exercise identified a number of data-cleansing issues, some of which were already in the process of being addressed. The primary benefit of participation continues to be the assurance gained in support of the Council’s counter-fraud framework. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Information Communications Technology/Digital × Equalities. Social Inclusion and Economic Impact × Climate Change and Biodiversity Impact × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. Page 211
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a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☐ Tackle Poverty and Inequality. ☐ Build Stronger Greener Vibrant Economy. ☐ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal Participation in the NFI is mandatory for all Scottish councils, however this has advantages in that national protocols have been developed and agreed for data management and security. 6.4 Financial No implications directly arising from this report. However, there are costs for staff time associated with organising and submitting the data and reviewing the returned matches. These can be set against ‘notional’ savings e.g. a cancelled blue badge is valued by NFI at £794, but these savings are indirect at best and more likely the benefits from participation are in improving the accuracy of the systems from which data is derived. 6.5 Risk The risk of not adequately reviewing returned matches is that a significant fraud may go undetected, potentially resulting in substantial financial loss. However, as no such fraud has been identified through the Council’s participation in the NFI data-matching exercise, a proportionate approach to reviewing matches is considered the most prudent and efficient course of action. 6.6 Staffing There are no direct implications arising from this report. Work associated with the NFI is carried out as part of the day-to-day duties of data owners within services. Time is also allocated within the Internal Audit plan to coordinate and oversee the exercise. 6.7 Best Value and Transformation Internal audit work supports good governance and the delivery of efficient services. 6.8 Property No implications directly arising from this report. 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. Page 212
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6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 The Chief Financial Officer as the NFI Senior Responsible Officer has been consulted with the content of this report. 8. BACKGROUND PAPERS 8.1 None Page 213
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Executive Director Finance, Strategy and Transformation Author: Jamie Fraser Contact Email: jamie.fraser@moray.gov.uk Subject: Best Value Thematic 2025/26 – Asset Management 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to inform the Committee of the outcomes from the Best Value Thematic 2025/26 – Asset Management review and invite consideration of the findings and actions to respond to them. 1.2 This report is submitted to Committee in terms of Section III (I) (9) of the Council’s Scheme of Administration relating to considering reports produced by the Council’s External Auditor. 2. SUMMARY 2.1 The outcomes from the Best Value thematic review on asset management carried out by Grant Thornton, the Council’s external auditor, is reported to Committee for review and consideration. The outcome report is attached at Appendix 1. 2.2 Officers welcome the findings of Grant Thornton’s review and consider them to provide a balanced and credible assessment of the Council’s approach to asset management in delivering its corporate objectives, whilst balancing the challenges of financial sustainability and climate change. The report highlights several good practices across the Council’s asset management approach, including the use of a community asset transfer case study. The review provides proportionate and constructive recommendations to support continued improvement in achieving Best Value, which officers agree and have proposed clear, timely and owned actions against. 2.3 Committee is invited to consider the key messages and highlight any points to be taken into account in the development and progress of the relevant actions. 3. RECOMMENDATIONS Item 13. Page 215
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3.1 It is recommended that the Committee review and consider the findings of the Best Value Thematic Review and highlight any points to be taken into consideration in the delivery of the relevant actions. Jamie Fraser Chief Financial Officer 4. BACKGROUND AND CONTEXT 4.1 Councils in Scotland have a statutory duty to demonstrate Best Value, introduced in the Local Government (Scotland) Act 2003. Statutory Guidance defines Best Value as: “ensuring that there is good governance and effective management of resources, with a focus on continuous improvement, to deliver the best possible outcomes for the public.” 4.2 In March 2020 the Scottish Government published refreshed Best Value guidance requiring councils to demonstrate a focus on continuous improvement in performance around seven themes below. i) Vision and leadership ii) Governance and accountability iii) Effective use of resources iv) Partnerships and collaborative working v) Working with communities vi) Sustainability vii) Fairness and equality 4.3 In 2023 a new thematic element was added to the Best Value audit regime. As part of the annual Best Value audit requirements, in addition to well established financial auditing and a cycle of best value auditing a sample of 32 councils, each year the Accounts Commission now also directs local government external auditors across Scotland to report on how local government is responding in relation to a particular theme. This is referred to as a thematic review and the same theme is applied across all 32 councils in a single year. For 2023 the theme was Leadership, for 2024 the theme was Workforce Innovation and for 2025 it was Transformation. The theme for 2026 is Asset Management. 4.4 The Asset Management thematic review is to report on how the Council is managing its assets to achieve its corporate objectives and respond to challenges around financial sustainability and climate change. The review was carried out through a self-assessment process where the council gave written responses to a set of questions along with supporting evidence. In producing the report, Grant Thornton applied the Audit Scotland Thematic toolkit and considered the following questions posed by the guidance. 1. To what extent does the council have a clear asset management strategy and plans that are affordable, align with its corporate objectives, the changing needs of its population, and net zero commitments? 2. To what extent do the council’s governance and accountability arrangements support effective asset management? Page 216
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3. To what extent does the council have a robust approach to working with partners and communities in managing its assets? 4.5 The report considers available information up until the end of April 2026. Any significant progress to the recommendations made in the report will be included within the Annual Audit Report which is scheduled to be presented to Full Council on 29 September 2026. 5. PROPOSALS 5.1 It is proposed that the Committee review and scrutinise the outcome of the thematic review undertaken by the external auditors and consider the actions proposed to address these and highlight any further points to be taken into account in responding to the findings of the audit. 5.2 The findings of the report for question one recognise the work that is being carried out regarding asset management planning and strategy with specific reference to the Corporate Asset Management Plan, which has been compiled in accordance with the CIPFA Guide to Asset Management and Capital Planning. The report also noted clear evidence of delivery of most planned actions within the plan alongside references made to the application of the cap on capital as a mechanism for affordability, linkages to the Medium to Long Term Financial Strategy and transformation. Officers welcome the recommendation to update the Corporate Asset Management Plan, with an updated plan to be presented to members for approval in August 2026. A holistic review of strategic asset management is to be conducted by the new Section 95 Officer over the next twelve- eighteen months. 5.3 The findings of the report for question two recognise the governance and accountability arrangements in place to support effective asset management. Specific mention is made to the multiple layers of governance to asset management and the subsequent Capital Plan allowing for scrutiny at appropriate levels. The report notes the continued capital slippage but also recognises the work done in 2025/26 to address this, including the introduction of a rolling three-year Capital Plan and completion of a pilot to incorporate capital monitoring within the council’s financial management system, improving reporting and providing better detail to budget managers. Recognition is also made that capital slippage, at times, is outside the control of the Council, particularly when a reliance is placed on external partners to deliver. 5.4 The findings of the report for question three recognises the work the council does in regard to partnership working and community engagement. Particular reference is made to the strong and proactive approach the Council has in working with communities and how that work feeds into decision-making on asset management. A case study on Lesser Borough Briggs (the Gleaner Areana) was provided as evidence. A recommendation to update the Community Asset Transfer Policy and has been agreed by officers. 5.5 Management welcomes the findings of Grant Thornton and considers them to provide a balanced and credible assessment of the Council’s approach to asset management in delivering its corporate objectives, whilst responding to the challenges of financial sustainability and climate change. The report does not highlight any material weaknesses; rather, it provides proportionate and constructive recommendations to support continued improvement in achieving Best Value. Page 217
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6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) √ Policy and Legal √ Financial √ Risk √ Staffing √ Best Value and Transformation Property √ Information Communications Technology/Digital Equalities. Social Inclusion and Economic Impact √ Climate Change and Biodiversity Impact √ 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☒ Tackle Poverty and Inequality. ☒ Build Stronger Greener Vibrant Economy. ☒ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following local Outcomes Improvement Plan priorities: ☒ Developing a diverse, inclusive, and sustainable economy ☒ Building a better future for our children and young people in Moray. ☒ Empowering and connecting communities. ☒ Improving wellbeing of our population 6.3 Policy and Legal The are no policy and legal implications arising from this report. 6.4 Financial There are no direct financial implications arising from this report. Effective asset management is a key contributor toward financial sustainability. 6.5 Risk There are no risk implications arising from this report. 6.6 Staffing There are no direct financial implications arising from this report. Page 218
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6.7 Best Value and Transformation The audit covers aspects of Best Value. 6.8 Property None arising directly from this report. 6.9 Information Communications/Technology/Digital None arising directly from this report 6.10 Equalities, Social Inclusion and Economic Impact None arising directly from this report. 6.11 Climate Change and Biodiversity Impacts None arising directly from this report. 7. CONSULTATION 7.1 This report has been prepared in consultation with the Corporate Leadership Team. 8. BACKGROUND PAPERS 8.1 Held within Accountancy section. Page 219
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Asset Management – How well are councils managing their assets to achieve their corporate objectives and respond to challenges around financial sustainability and climate change? Best Value Thematic 2025/26 Moray Council Prepared for those Charged with Governance and the Controller of Audit 12 May 2026 APPENDIX 1 Page 221
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow GUIDANCE NOTES: Table of contents does not update automatically • Please delete or factor in any instruction slides at the start of the deck before pagination • Please populate the page numbers manually before distributing Table of contents 2 01 Scope of the audit 3 02 Executive summary 5 03 Asset management planning 6 04 Governance and performance 12 05 Partnership working and community engagement 19 Appendices 25 A Improvement action plan 26 Tip – Select View/Outline View, Right click and select "Collapse" and copy slide titles then paste into your table of conents Don’t forget to change the footer The contents of this report relate only to the matters which have come to our attention, which we believe need to be reported to you as part of our external audit process. It is not a comprehensive record of all the relevant matters, which may be subject to change, and in particular we cannot be held responsible to you for reporting all of the risks which may affect Moray Council or all weaknesses in your internal controls. This report has been prepared solely for your benefit and Audit Scotland (under the Audit Scotland Code of Audit Practice 2021). We do not accept any responsibility for any loss occasioned to any third part acting, or refraining from acting on the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose. Page 222
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow 01 Scope of the audit Asset management directly impacts how councils provide services and achieve their own corporate priorities and longer-term financial sustainability. Limited capital budgets make it challenging for councils to maintain their existing assets and estates, invest in new assets and achieve net zero targets. This report sets out how well the Council is managing their assets to achieve their corporate objectives and respond to challenges around financial sustainability and climate change. The Accounts Commission’s Strategy (2021- 2026) sets out its priorities to focus on inequalities, funding, communities and recovery. The Code of Audit Practice sets out the Best Value work required to report on these priorities. Code of Audit Practice 2020 – Best Value reporting requirements The Accounts Commission’s approach to Best Value involves reporting on individual local government bodies and thematically across the local government sector through performance reports. This is set out in the 2020 Code of Practice, issues by Audit Scotland: As part of their integrated wider scope annual audit work, appointed auditors use a risk- based approach to assess and report whether the audited body has made proper arrangements for securing Best Value and is complying with its community planning duties, including reporting progress against previous Best Value findings and recommendations. The Accounts Commission also requires the Controller of Audit to report to the Accounts Commission on each council or Integrated Joint Board at least once over the five-year audit appointment on the body’s performance on its Best Value duty. This enables the Accounts Commission to make findings for improvement where appropriate. The Accounts Commission reports nationally on thematic aspects of local government bodies’ approaches to, and performance in, meeting their Best Value and community planning duties. Local government appointed auditors report locally on any such Best Value thematic work prescribed by the Accounts Commission 3 Page 223
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow 01 Scope of the audit - continued This report covers the thematic aspect of the Best Value audit requirements. The Accounts Commission has directed auditors to report on how well councils are managing their assets. In producing this report, we have applied the Audit Scotland Thematic toolkit and considered the following questions posed by the guidance: • To what extent does the council have a clear asset management strategy and plans that are affordable, align with its corporate objectives, the changing needs of its population, and net zero commitments? • To what extent do the council’s governance and accountability arrangements support effective asset management? • To what extent does the council have a robust approach to working with partners and communities in managing its assets? An improvement plan is included at Appendix A of this report. This sets out our audit recommendations in key areas, and the council’s planned response including responsible offices and dates for implementation. The coverage of the work is in line with the expectations for council’s arrangements for the seven Best Value themes in the Local Government in Scotland Act 2023, Best Value Statutory Guidance 2020. We would like to thank the Corporate Leadership Team for their engagement in the Best Value Thematic process and for the detailed supporting evidence provided to the audit team to assist us forming our conclusions, in line with the agreed timescales. This report is scheduled to be presented to the Audit and Scrutiny Committee in June 2026. Any significant progress to the recommendations made in this report will be included within the Annual Audit Report which is scheduled to be presented to Full Council on 29 September 2026. 4 Page 224
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow 02 Executive summary 5 Question Conclusion To what extent does the council have a clear asset management strategy and plans that are affordable, align with its corporate objectives, the changing needs of its population, and net zero commitments? The Council have a Corporate Asset Management Plan (CAMP), which was last updated in December 2024, and included actions which covered 2024/25. Whilst the plan aligns with the Council’s priorities and the changing needs of its population, it is now considered to be out of date. The Council must ensure that the CAMP is refreshed and that the arrangements in place for asset management are up-to-date. The Council have applied the CIPFA “cap” confirming that their Capital Plans are affordable. The Council has noted that due to many years of below-inflationary funding, current plans are not sufficient to deliver the level of investment required across the estate, which means the Council is required to continually prioritise and rationalise its asset base. The Council should ensure that actions detailed in the plan are followed up and that existing governance arrangements are accurately reflected in the CAMP. The Council have approved a ten-year Capital Plan which confirms a borrowing requirement of £253 million over the period. The Council have a range of documents which highlight net zero considerations, including a route map to net zero. To what extent do the council’s governance and accountability arrangements support effective asset management? The Council’s governance and accountability arrangements provide a clear framework that supports effective asset management and provide assurance that asset management decisions are transparent and aligned with the Council’s priorities. The Council has changed to a three-year planning approach for capital due to significant levels of slippage in recent years. The Council’s LGBF performance for asset management is below the Scottish average, and significant investment has been made by the Council in these areas. The investment is having an impact and performance trends are improving from a low base. To what extent does the council have a robust approach to working with partners and communities in managing its assets? The Council works well with its partners and communities in the management of its assets; however arrangements could be strengthened by setting out how this works in practice in a policy document. The Council has mechanisms in place to engage with stakeholders, support community involvement, and work collaboratively with partners to maximise asset use and value. The council has a clear and transparent approach to supporting and assessing community asset transfer requests. We have raised a number of recommendations for improvement which can be found at Appendix 1 of this report.Page 225
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Asset management planning To what extent does the council have a clear asset management strategy and plans that are affordable, align with its corporate objectives, the changing needs of its population, and net zero commitments? The Council have a Corporate Asset Management Plan (CAMP), which was last updated in December 2024, and included actions which covered 2024/25. Whilst the plan aligns with the Council’s priorities and the changing needs of its population, it is now considered to be out of date. The Council must ensure that the CAMP is refreshed and that the arrangements in place for asset management are up-to-date. The Council have applied the CIPFA “cap” confirming that their Capital Plans are affordable. The Council has noted that due to many years of below-inflationary funding, current plans are not sufficient to deliver the level of investment required across the estate, which means the Council is required to continually prioritise and rationalise its asset base. The Council should ensure that actions detailed in the plan are followed up and that existing governance arrangements are accurately reflected in the CAMP. The Council have approved a ten-year Capital Plan which confirms a borrowing requirement of £253 million over the period. The Council have a range of documents which highlight net zero considerations, including a route map to net zero. Council’s capital programmes are a necessary component of modernising services to improve outcomes for local communities. Doing this successfully requires good strategic medium-to long-term asset management and planning. The Accounts Commission’s Local government budgets 2025/26 briefing reported that capital funding for 2025/26 had increased but remained lower than in 2023/24 and that investing in new buildings and assets is increasingly expensive. Councils are relying on borrowing as the main source of funding for capital projects. In 2025/26, councils intend to borrow £3.13 billion, an increase from £2.67 billion in 2024/25. The Council have a Corporate Asset Management Plan (CAMP) which was last updated in December 2024 and approved by Full Council. The CAMP sets out the asset objectives and asset standards for each asset class. The CAMP describes the arrangements that the Council has made for asset management planning and aims to link the asset management planning process to the Council’s corporate priorities. It makes explicit links to financial, environmental and economic sustainability. The latest version of the CAMP confirmed seven actions planned for asset management in 2024/25. No updates were made to the CAMP for financial year 2025/26 and therefore it is out of date. The Council are aware of the need to update the CAMP, but the update has been deferred until the transition of the Section 95 officer role. The previous Section 95 officer retired in March 2026, and an updated version of the CAMP will be completed once the new Section 95 Officer (the Executive Director of Finance, Strategy and Transformation) has had the opportunity to review the overall asset management strategy of the Council. Recommendation 1. The current version of the CAMP contains limited detail on longer term asset management. It is important that the CAMP takes a longer-term view to ensure that investment decisions are sustainable, strategically aligned, and resilient to future demands. By considering the longer-term condition, the Council can plan proactively rather than reactively, reducing costs and ensuring best value. Recommendation 1. The Council see Asset Management as an iterative process, driven by a range of considerations, including asset condition and suitability. Asset Management is also recognised in the Council’s Medium to Long Term Financial Strategy as one of the main vehicles which the Council will use to make strategic shifts in expenditure to achieve financial sustainability. 7 Page 227
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Asset management planning (2) The Council considers the need for its asset base to reflect and support its priorities, and the affordability of asset plans is recognised in the Council’s asset management process as a pivotal requirement. The Council has noted that due to many years of below-inflationary funding, couple with an ageing asset base, current plans are not sufficient to deliver the level of investment required across the estate, which means the Council to continually required to prioritise and rationalise its asset base. The CAMP recognises six drivers which impacts on affordability; condition, suitability, sufficiency, revenue costs, accessibility and value. As well as affordability, the Council’s asset management process aims to achieve efficiency in terms of use of assets, and maximisation of value in terms of asset disposal. The Council have an overarching aim to reduce the asset base, as there is recognition that the number of assets currently held is over and above the level required to deliver Council services. Reducing the asset base will also lower the overall cost to the Council. The existing version of the CAMP was prepared according to the guidelines set out in the CIPFA Guide to Asset Management and Capital Planning (CIPFA Guide). The CIPFA Guide identifies six main categories of asset for asset management planning, and all are reflected in the CAMP. The Council sub- divided one of the categories into two parts, to reflect their local priorities. All categories of assets defined in the CAMP are subject to their own asset management approach, with individual services responsible for the management of assets within their area. As an example, the draft Local Housing Strategy 2025-2030 was presented to the Housing and Community Safety Committee in September 2025. Following a period of consultation with the public and external stakeholders, the final version of the strategy was approved by members in March 2026. An asset management plan should provide an overview of the current performance of the estate. Our review of the existing CAMP confirmed that there was minimal detail on the performance of the Council’s existing estate and no information around the current condition of assets or occupancy rates of buildings. Furthermore, whilst there is some evidence and examples of the Council looking at how it can transform its asset base to meet future needs (see following page). There could be more consideration in the CAMP around how the Council, its services and the community is changing (e.g. trend in school population versus places available). This is data the Council have readily available and we recommend that the Council include this level of detail in the CAMP or refer to where this detail can be found. Recommendation 1. The CAMP details seven planned actions for 2024/25. There is clear evidence that the Council’s have responded to the actions, with follow up reports/reviews being presented to various Committees during 2025. As an example, the Depot and Stores action resulted in the approval of the full business case at the Full Council meeting in June 2025. One planned action within the CAMP, relating to the development of a programme of updates for service level asset management plans was not actioned and we have considered this in further detail on page 9. We have noted there was no centralised response where all the actions were brought into once overarching document to confirm the response to each action. It is important that the Council follow up the actions identified in plans, and we recommend that all actions identified for asset management should be included in an Action Plan, complete with an action owner and timeframe for completion. Recommendation 1. 8 Page 228
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Asset management planning (3) Transformation There is evidence that the CAMP has taken account of new ways of working, the evolving needs of its population, and the increasing demand for services. The plan reflects a shift toward more flexible and efficient use of assets (e.g. Learning Estate rationalisation), supporting hybrid working models (e.g. Smarter Working programme) and modern service delivery approaches. As an example, the Council have developed an Additional Support Needs (ASN) forecasting tool which tracks trends and patterns within ASN, is able to anticipate future need and can guide resource allocation. The tool has informed the funding methodology for the ASN budget allocation for 2026/27 and will be used to steer plans for the Learning Estate. Asset-related transformation is a key part of the Council achieving long-term financial sustainability. The Smarter Working programme is now in its third phase and is reducing the size and running costs of the Council’s office estate. The Depot Review has progressed to Full Business Case approval and implementation and is intended to modernise and consolidate operational depots, improving efficiency and reducing the cost of maintaining multiple sites. Planned changes to service provision or building usage which have implications for asset management are factored into the capital planning process. The Asset Management Working Group acts as a project gateway if appropriate, and impacts arising from Transformation projects are reported to the Transformation Board for oversight. Service Asset Management Planning The Council maintain Service Level Asset Management Plans (SLAMP) for ten service areas, which set out the plans in place for managing assets within that operational service. Collectively, these plans underpin and support the overarching CAMP and aim to translate the Council’s strategic objectives into service-specific asset management approaches. Together, they aim to align the day-to-day asset management activities with the Council’s long-term corporate priorities. The Asset Management Working Group maintain a summary of all SLAMPs which includes a grading score for: - the level of baseline information available for each service (such as condition, suitability, revenue cost) - if performance targets have been set - whether the SLAMP for a service is up-to-date Of the ten services where a SLAMP should be prepared, the Council consider three as fully up-to-date, whilst six services have partial SLAMPs in place that are considered somewhat dated and in need of review. There is no agreed SLAMP in place for the Parks and Open spaces service. It is important that services have up-to-date asset management plans to ensure that the assets which fall under that services remit are understood and managed effectively, therefore reducing the risk of failure and unexpected costs. The Council should carry out a review of all service level asset management plans and ensure that they are up-to-date and fit for purpose. Recommendation 2. 9 Page 229
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Asset management planning (4) Climate Approach The CAMP clearly indicates how the Council intends to meet its net zero commitments and refers directly to the strategies in place. The Council approved the draft Climate Change Strategy 2025 – 2035 at the meeting held on 24 September 2025. The strategy sets out how the Council will respond to its statutory duties to reduce carbon emissions, adapt to the impacts of climate change, and embed sustainable principles within the Council. To support the Climate Change Strategy, the Council prepare a Climate Change Plan and Route Map to Net Zero, which was approved by the Council on 27 August 2025. The plan provides an overview of the approach the Council is taking to support the achievement of its net zero commitments. A governance structure for climate action is included within the Climate Change Strategy. The Climate Change Board meets quarterly to review actions, and progress is reported annually to the Council through the Climate Change Plan and Route Map to Net Zero. As an example of the type of works underway, during 2025, the Council was successful in its bid for Salix funding to enable retrofit works at Cullen Primary School. This included the replacement of existing oil boilers for new air source heat pumps with new controls and heating distribution. The approach to the Learning Estate going forward is “fabric first”. Capital Strategy and Planning The Council prepare a Capital Strategy which identifies the Council’s approach to long-term capital planning and investment. The most recent version was approved by members at the Full Council meeting in December 2024. The Capital Strategy sets out the principles underlying the capital planning process and describes how asset management planning and capital planning inter- relate. The CAMP links with the Council’s Capital Strategy to set out at both a corporate and strategic level how the Council’s capital investment plans agree with the Council’s policies and priorities. Asset Management is recognised as a key driver for the Capital Strategy. It is also seen as an important lever in the Medium to Long Term Financial Strategy, with reduction in the asset base of the Council, primarily its buildings, an enabler for financial sustainability. From 2025/26 onwards, the Council changed to a three-year planning approach for capital. Alongside the three-year plan, the Council prepare an indicative ten-year Capital Plan which serves as a tool to identify spending trends, plans for the future and address affordability issues. As part of its capital planning, the Council is required to establish the affordability of its Capital Plan in accordance with the CIPFA Prudential Code. The Council approved a methodology for keeping capital expenditure within affordable limits (known as the cap) at the Special Council meeting held on 22 October 2024. 10 Page 230
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Asset management planning (5) In line with CIPFA guidance, The Council established an affordability ceiling of 10%, measured as a ratio of financing costs to net revenue stream. The Council considered the cap in producing its Capital Plan, with the cap being spread across the three-year period, smoothing out the cap. This will be a feature of capital planning going forward and ensures the Council has considered whether expenditure on capital activities will be affordable in future years. Shortage of capital funding for local authorities is widely recognised to be an issue and formed part of COSLA’s pre-budget campaign “Strong Councils Strong Communities”. Whilst the affordability ceiling has been set, which ensures the Council’s capital plans remain affordable, the Council acknowledge that their current level of funding is lower than required and will limit the type of transformative work the Council would like to carry out. The Council approved its 2026/27 Capital Plan at the Council meeting held on 28 January 2026. Total expenditure over the ten-year period to 2035/36 is anticipated to be £427.600 million, which will primarily be funded through the general capital grant, Moray Growth Deal funding and borrowing. The total borrowing requirement over the ten-year period to 2035/26 is projected to be £253.380 million. Capital investment is one of the main factors driving the Council’s financial pressure over the long term. To keep borrowing costs affordable, the Council are aiming to reduce the size of its capital programme and continue to rationalise its estate. This will mean reviewing how services are delivered in future so that they can operate effectively from a smaller, more efficient asset base. The council has taken a proactive approach to managing and mitigating significant building safety risks and undertakes condition surveys of its buildings to identify work which may be required. The Council is developing a risk-based investment assessment of properties to help inform and target investment. This will initially be rolled out across educational properties, before being implemented across the wider corporate estate, primarily to assess risk of building closure. As part of the Local Government Benchmarking Framework, 96% of the Council’s operational buildings have been assessed as suitable for their current use. Following guidance issued by the UK Government in relation to Reinforced Autoclaved Aerated Concrete (RAAC), the Council conducted desktop reviews of its entire building estate, including 54 schools. This progressed to a physical investigation of several buildings over the summer of 2023, which confirmed Forres Academy as having RAAC in its flat roof structure. A review of the school was commissioned, which identified all areas within the school where RAAC was present. A plan for remediation and repurposing works was developed and agreed by the joint team representing Property, Education, Learning Estates, the Forres Academy Head Teacher and Senior Leadership Team. The total construction costs to the Council was estimated to be in the region of £0.556 million across three phases of planned works. 11 Page 231
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance To what extent do the council’s governance and accountability arrangements support effective asset management? The Council’s governance and accountability arrangements provide a clear framework that supports effective asset management and provide assurance that asset management decisions are transparent and aligned with the Council’s priorities. The Council has changed to a three-year planning approach for capital due to significant levels of slippage in recent years. The Council’s LGBF performance for asset management is below the Scottish average, and significant investment has been made by the Council in these areas. The investment is having an impact and performance trends are improving from a low base. It is essential that the council has effective governance arrangements in place to enable transparency, oversight and scrutiny of progress with implementing its capital programme and asset management strategy. This enables better- informed decision making and corrective action where needed. At a corporate level, the CAMP is developed, overseen and scrutinised in the first instance by the Asset Management Working Group. The Asset Management Working Group, chaired by the Executive Director of Finance, Strategy and Transformation, is tasked with corporate responsibility for asset management and has responsibility for ensuring systems are in place to develop and update asset management plans (AMPs). The Asset Management Working Group aims to ensure that AMPs are robust and challenges the assumptions included within AMPs. Members of the Corporate Leadership Team receive copies of all reports taken to the Asset Management Working Group and notes from all meetings. In parallel to this process, several projects in the Council’s Transformation Strategy are reviewing the requirements for the asset base, including the Smarter Working, Depot and Stores and Learning Estate reviews. These all feed into the asset management planning process. In its current form, the CAMP does not include detail on the current governance arrangements for asset management and how progress towards actions in the CAMP are monitored. We recommend that the revised CAMP makes reference to the oversight processes in place at the Council and clearly sets out the arrangements in place for monitoring progress and year end reporting on the outcomes of the CAMP. Recommendation 1. Progress on the CAMP is generally reported on an annual basis, to either the Corporate Committee or Full Council, with the report providing an update on the progress of actions within the CAMP for the previous year. However, as previously noted, there has been no year end reporting on the 2024/25 version of the CAMP. Recommendation 1. Capital Strategy and Planning The council’s reporting and monitoring arrangements enable good scrutiny and oversight towards implementing the capital programme. The Capital Strategy identifies the Council’s approach to long-term capital planning and investment. The investment needed to ensure that assets meet the Council approved standard for the asset type is ascertained through the asset management planning process. The Capital Strategy links that process to the Council’s Capital Plan. The vehicle for delivery of the council’s corporate asset management strategy is the capital programme. The Capital Plan embodies the delivery of projects on the General Services fund and monitoring reports are reported quarterly to either the Corporate Committee or Full Council. Quarterly monitoring reports are also presented to service committees which detail the financial performance for that individual service. During 2025/26, the quarter one and quarter three monitoring reports were presented to the Corporate Committee, whilst the quarter two report was presented to Full Council. 13 Page 233
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance (2) The reason for the change in reporting is due to the fact the Corporate Committee does not have delegated authority to approve amendments to the Capital Plan and can consider estimated outturns only. Therefore, any changes to the capital budget for the year must be presented to Council for approval. The Council include significant detail within the capital monitoring reports presented for scrutiny including: • detailed reasoning for areas of overspend/underspend • revised year end forecasts for the capital outturn position • amendments made to the in-year capital budget alongside reasoning for the change made • impact of delays to projects and/or slippage and the corrective action being taken. • update on the affordability indicator for each year of the capital plan Reporting of the overall capital programme occurs at a reasonable frequency and provides clear information about the Council’s progress towards implementing asset management plans. The reporting is at an appropriate level and ensures there is appropriate oversight and scrutiny from members. The governance structure enables a high-level overview of the asset management plans, via the Asset Management Working Group and Full Council/Corporate Committee but also allows for in depth discussion of key issues within individual projects at Service Committees. All capital reports are presented to the Corporate Leadership Team for overarching scrutiny prior to reporting to members. The Council keep arrangements under review to ensure they remain appropriate. Historically, the Council has consistently underspent against its approved capital budget, resulting in significant levels of slippage within the programme. This pattern reflects ongoing challenges in delivering planned projects within the intended financial year, often due to delays in procurement, capacity constraints, and dependencies on external partners or contractors. This has impacted the Council’s ability to achieve the pace of capital investment originally set out in its plans and resulted in the re-profiling of expenditure to future years. As a result of the continued slippage in the capital budget, the Council changed its approach to capital planning, and from 2025/26 onwards have prepared a three-year capital budget. This followed feedback from budget managers that a single year capital plan was too restrictive and created a reluctance to commit to preliminary spend. The change to three-year planning aimed to provide more certainty to budget managers in terms of multi-year funding, and more realistic spend profiles. Following the approval of the capital budget for 2025/26, the Council approved amendments to be made due to carry forwards from 2024/25. This resulted in the capital budget for 2025/26 increasing to £73.336 million. The capital monitoring position has been reported to members on three separate occasions during 2025/26 to date. The position reported to members is reflected in Table 1 below: Table 1: Capital Plan – Projected Outturn 14 Initial Budget June 2025 September 2025 December 2025 Capital Plan – Planned Expenditure £73.336m £51.030m £46.995m £37.730m Page 234
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance (3) The capital budget was revised in August 2025 due to a significant re-profile of expenditure relating to the Moray Growth Deal and the Levelling-Up Fund. This resulted in an amendment of £22.280 million to the budget, which was approved by members at the Corporate Committee in August 2025. Since this amendment, the Council has continued to project underspends against the budget, and at the date of last reporting, the capital plan shows an estimated underspend against budget of £12.834 million at December 2025. Significant underspends against budget were noted within Moray Growth Deal, Levelling- Up Fund and the Learning Estate. As reflected in Table 1, the Council is not on track to deliver all the commitments set out in the capital programme, and there will be significant slippage in the 2025/26 capital outturn. Underspends have primarily arisen due to delays in the delivery of planned projects, alongside an element of optimism within the original estimates. The Council have noted some delays to projects are due to decisions by external partners. In one instance, two projects (included within the Moray Growth Deal and Levelling Up Fund) were impacted due to a key partner retracting their commitment. In several cases, project timelines have been extended, resulting in the planned expenditure being re-profiled into future years. These above factors have contributed to the recurring underspends and highlight the need for more realistic profiling to support more accurate forecasting. The projected year end outturn for capital is not unexpected, and we have previously reported that the Council has a history of underspending against its budget. Issues with capital slippage was reported in the Controller of Audit Report approved in April 2024. In our 2024/25 Annual Audit Report, we raised an audit recommendation outlining that the Council must ensure that the capital budget set in advance of the financial year is realistic, reducing the need for significant budget amendments in the first months of the financial year. The efficiency of capital programme delivery has been a focus for the Council during 2025/26. The format of the quarterly monitoring reports has been revised during the year to give a greater focus on actual programme delivery at an asset class level compared to planned delivery. The council recognise that capital plans are prone to slippage which has driven the change in focus of the report. A major component of the capital programme is the Learning Estate and detailed reports on factors impacting the Learning Estate are taken to the Education, Children’s and Leisure Services Committee. Reports focus on both individual components and the overall Learning Estate Strategy. Outwith the main capital planning approach, the Council also maintain the Housing Investment Programme, which is approved by Full Council as part of the Housing Revenue Account budget on an annual basis. The programme for 2025/26 was approved at the Council meeting in February 2025 and confirmed a total budget of £36.443 million. The Plan reflects the investment priorities which tenants identified within surveys, alongside other regulatory requirements. Progress on the programme is reported quarterly to Housing and Community Safety Committee. The most recent update was reported to the Committee in March 2026, which confirmed the projected year end outturn for the programme is £34.412 million, which would result in an overall underspend position of £2.031 million. 15 Page 235
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance (4) Performance – Local Government Benchmarking Framework The Council particates in the Local Government Benchmarking Framework (LGBF). The LGBF provides evidence of trends in how resources are allocated, performance of services and levels of customer satisfaction. The last available data covers financial year 2024/25. There are four indicators within the LGBF data which relate to asset management and the Councils performance for these indicators has been considered in Table 2 and Table 3 below: Table 2: Performance compared to Family Group / Scotland average Indicator Council Family Group Scotland CORP-ASSET 1: Proportion of operational buildings that are suitable for their current use 96.1% 90.5% 85.7% CORP-ASSET 2: Proportion of internal floor area of operational buildings in satisfactory condition. 55.4% 88.4% 91% HSN3: Percentage of council dwellings meeting Scottish Housing Standards 43.7% 70.8% 82.9% HSN5: Percentage of council dwellings that are energy efficient. 60.4% 81.3% 87.6% 16 Table 3: Ten-year performance trend As can be seen from both tables, the Council perform above the Family Group/Scotland average for one indicator, however performance for the remaining three indicators is below average. The Moray Learning Estate is a significant contributory factor to the operational building condition indicator. Many of the buildings used are ageing and as such, approximately 50% of the Council’s 54 schools have scored a grade C (or lower) where condition surveys have been completed within the last five years. Following a change in technical guidance in 2022, the Council has been significantly below the Scottish Housing Standards, mainly due to electrical certification (EICR). The Council have experienced difficulties in tendering for works to be completed, however have now completed works across approximately 90% of the housing stock. The Council are in the process of resolving the remainder, including by forced entry where tenants have not granted access. Furthermore, the type of property available in Moray makes it more difficult to become energy efficient. A large proportion of properties are older, sandstone type properties, which are not suitable to newer energy technology. Indicator 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 CORP ASSET1 95% 95% 95% 98% 98% 98% 98% 98% 97% 96% CORP ASSET2 41% 41% 53% 54% 54% 67% 55% 56% 56% 55% HSN3 96% 96% 96% 93% 91% 94% 6% 16% 23% 44% HSN5 50% 53% 55% 57% 55% 57% 60% N/A N/A N/A Page 236
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance (5) The Council have undertaken significant investment in order to improve performance within these indicators. Approximately £6 million has been invested on improvement measures to improve the energy efficiency of dwellings, including insulation and upgrading heating systems. However, due to the time lag in updating certification and method of reporting, no interim figures are currently available that highlight expected improvement in the Council’s performance. Local Performance Indicators The Council have a range of local key performance indicators in relation to housing and property. Performance is monitored quarterly and is reported to the Housing and Community Safety Committee twice yearly. Furthermore, the Council prepare a year end Housing and Property Annual Performance Report which is published on the Council website. A broad range of indicators are included within this report and examples are detailed in Table 4 below: Table 4: Local Performance Indicators 17 Performance Indicator Target Prior 2024/25 Scotland Avg. % of tenants satisfied with the overall service provided by their landlord 90% 83% 82% 87% % of tenants satisfied with the quality of their home 90% 83% 81% 85% % of properties meeting the Scottish Housing Quality Standard (SHQS) 100% 23% 44% 90% Average time taken to complete emergency repairs 4hrs 2hrs 12mins 2hrs 24mins 3hrs 7mins % rent lost through properties becoming vacant 0.63% 0.74% 0.72% 0.81% Performance across the local indicators is mixed. For example, the Council report performance below both their target levels and the Scotland average for the majority of landlord satisfaction indicators. However, the Council perform well across repairs and maintenance indicators, outperforming both their own target levels and the Scotland average. The performance report notes the reason for areas of under performance and the plans the Council have implemented to drive improvement. It also identifies where challenges have arisen and the steps that need to be taken to address these challenges in the future. The biggest challenge the Council face regarding its assets is affordability. The Council are aware that the Learning Estate overall is in poor condition and the cost of upgrading and/or replacing schools is unaffordable. As a result of these factors, there will be requirement to extend programmes of work and explore asset rationalisation, with the Council prioritising funding to areas with the greatest need. The Leisure estate has similar challenges and also requires significant investment. The lack of funding available makes it difficult for the Council to make improvements to existing assets. Page 237
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Governance and performance (6) Roads Network and Bridges The Council’s roads infrastructure is in relatively good condition when compared to the national average. The Council are currently rated as the fifth best performing local authority in Scotland based on the Scottish Road Maintenance Condition Survey. As a result, the Council made a decision to allow some deterioration across the roads network, with an expectation that performance will lower to the mid-point of Scottish local authorities. This is the asset standard set in the Capital Strategy, approved by the Council in December 2024 and enables finances to be used on other capital investment areas. Whilst the conditions of road are suitable, there is a significant backlog of identified road works and works on bridges. The Scottish Collaboration of Transport Specialists (SCOTS) publish a Backlog Report which estimated the Council’s backlog figure for roads maintenance was £46.5 million (most recently reported in 2023). The Council’s Road Maintenance Capital Programme is overseen by the Economic Development and Infrastructure Services Committee. The approved 2026/27 Budget includes £2.3 million of funding for roads maintenance, significantly below the backlog figure previously reported. All works for bridge maintenance are prioritised in line with the Bridge Maintenance Prioritisation Policy, which was approved by the Economic Development and Infrastructure Services Committee in March 2023. The Council maintain a prioritisation list to ensure bridges most at need of repair are reviewed first. As part of 2026/27 Flood Risk Management and Bridges Budget, the Council approved £0.600 million of investment for bridge maintenance. 18 Digital and ICT The Council’s ICT estate includes a number of ageing systems and assets and maintaining the current level of digital operations, resilience and security requires ongoing replacement of hardware and upgrades to software platforms. The Council’s Capital Plan confirms that £1.465 million has been allocated for ICT over the next three years, supporting a prioritised programme of baseline refresh activity across server and network infrastructure, end user devices and essential software. The Council note that this funding is sufficient to manage baseline ICT refresh requirements across much of the Council’s corporate estate, addressing priority lifecycle and risk-based replacement needs. However, the schools ICT estate operates at a significantly different scale and demand profile, with a larger, older device base and a higher dependency on reliable digital access to support learning, assessment and inclusion. As a result, baseline capital funding alone is not sufficient to address the current and emerging pressures within Education or to enable digitally enabled learning and teaching at the level required. The Council has an aspiration to reduce reliance on on-premise server infrastructure by transitioning appropriate systems to off site or cloud based services. This would reduce pressure on the Capital Plan but introduce corresponding revenue costs. A business systems review is currently underway to assess the benefits, risks and revenue implications of this approach. Any significant digital modernisation or transformation activity, including large scale education digital enablement or server estate migration, would require additional funding over and above the current Capital Plan. Options under consideration include additional capital capacity, use of the Council’s transformation reserve, and external transformation funding such as Scottish Government programmes.Page 238
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Partnership working and community engagement 05 Page 239
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Partnership working and community engagement To what extent does the council have a robust approach to working with partners and communities in managing its assets? The Council works well with its partners and communities in the management of its assets; however arrangements could be strengthened by setting out how this works in practice. The Council has mechanisms in place to engage with stakeholders, support community involvement, and work collaboratively with partners to maximise asset use and value. Asset management decisions are informed by local needs, support the Council’s priorities, and contribute to positive outcomes for communities. It is essential that councils consider how they can collaborate across services and with other public and third sector organisations to manage assets. This has the potential to achieve savings, better align service provision and create opportunities for joint working. Councils should also have transparent and robust processes in place for supporting and assessing community asset transfer requests and engaging with their communities on asset management plans and priorities. The Council demonstrates a strong and proactive approach to partnership working and community engagement in the management of its assets. The Council manages assets through strategic partnerships and community engagement, focusing on sustainable, long-term use through their Community Asset Transfer policy. The Council partner with local groups to transfer ownership, empowering communities to manage facilities. The Asset Management Working Group oversees property, infrastructure, and ICT assets with partners to ensure efficiency. Communities are involved in decision making in ways specific to the asset class. There are some permanent channels of engagement, for example Harbour User Groups and the Tenants’ Forum (housing), however most engagement is in response to particular circumstances or proposals. Recent examples include consultations on the learning estate, sports and leisure facilities and libraries. The Council works alongside partners and its communities in the management of assets, and there is clear evidence that this works well in practice. However, we have noted that there is no overarching document which sets out how the Council works with its partners in the ongoing management of assets. The Council should set out a clear approach on how it will work alongside its partners and communities to deliver effective management of the Council’s assets. It is important that the roles and responsibilities of both the Council and its partners are clearly defined, which will ensure there is transparency in the overall approach. Recommendation 1. The council can demonstrate how outcomes of engagement with community’s feeds into decision-making. As an example, the Council are currently undertaking a review of the learning estate, which will propose a future direction for the learning estate strategy. The new strategy will set out how the Council will manage investment in the learning estate over the next ten years to deliver the overall strategic vision. An Associated School Groups by Associated School Groups (ASG) level engagement completed in June 2025. As part of this review, the Council engaged with stakeholders and the local community by: • hosting briefings and Q&A sessions with elected members, community groups and representatives and school staff • drop-in community information events • online surveys and stakeholder workshops. The results of the Learning Estate review is anticipated to report in June 2026 to the Education, Children’s and Leisure Services Committee. 20 Page 240
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Development and delivery of transformation plans (2) The Council are using a Masterplanning approach to develop an asset management strategy for the Buckie harbour development. The masterplan has been developed in consultation with stakeholders and Buckie community representatives, through direct contact around the plans, questionnaires and discussion at the Harbour User Group. A report approving the northern expansion of the harbour was approved by the Council on 25 February 2026, with the report noting that the majority of stakeholders who participated in the consultation of the masterplan expressed support for the northern expansion of the harbour. Community Asset Transfers The council has a clear and transparent approach to supporting and assessing community asset transfer requests. The Council recognise that ownership or control of land and buildings is a powerful tool for communities to drive change and provide stability and sustainability for the community organisations. There is a well-established process in place for asset transfers, with a dedicated website address and direct support to groups provided by the Community Support Unit and officers within Property Services. A cross-service officers group meets to assess applications, provide feedback to groups who have applied and subsequently report to the Corporate Committee on the receipt of formal applications. Groups are encouraged to submit expressions of interest prior to formal applications so that officers can support them to make a strong and well-evidenced application. The Council have a Community Asset Transfer Policy, which was approved by the Policy and Resources Committee in May 2014. The policy was subject to review during 2017, however there is limited evidence of the review taken place. The Council are currently undertaking a review over all existing policy documents, to ensure they are updated at an appropriate frequency. As part of this, the Council should ensure that the Community Asset Transfer Policy continues to be fit for purpose. Recommendation 3. The current Community Asset Transfer Policy sets out the four stages to the asset transfer programme as follows; expression of interest, formal application, business case (only for certain cases) and implementation. This sets the framework used by officers assessing potential transfers and ensures those involved are aware of their roles and responsibilities. Most applicants to the scheme are looking for either a discounted or nil value asset transfer and the Community Asset Transfer team work with groups to ensure they comply with the requirements of the Disposal of Land by Local Authorities (Scotland) Regulations 2010. The council assesses requests against criteria including community benefit, sustainability and the impact on council services. As an example, the most recent Community Asset Transfer involved the disposal of land at Clovenside Cemetery, which was approved at the Corporate Committee meeting held in November 2025. As the land was part of the Forres Common Good, a public consultation was conducted, with 84% of the 106 respondents supporting the sale of the land. Proceeds from the sale were credited to the Forres Common Good Account, which will be distributed within the local community over time. The outcomes from the community engagement exercise were a significant factor in the final decision to sell the land. The Council has previously provided seedcorn financial support to community groups as part of the Community Asset Transfer process, in particular to the community groups who participated in the transfer of the Council’s town halls in 2019. 21 Page 241
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Development and delivery of transformation plans (3) Section 95 of the Community Empowerment (Scotland) Act 2015 requires every local authority to publish an asset transfer report by the end of June each year. The Council presented their annual report to the Corporate Committee in June 2025, with the report covering the period 1 April 2024 to 31 March 2025. The report confirmed the Council had no asset transfer requests during the year. Officers responded to five expressions of interest during the period, all of which remained live at the year end (one of these being the Forres Common Good asset which was subsequently transferred). A case study example of a Community Asset Transfer is shown on the following page. 22 Page 242
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Development and delivery of transformation plans (4) 23 Below is detail of a community asset transfer processed by the Council. Case Study: Lesser Borough Briggs (the Gleaner Arena) Council Priority: Build thriving, resilient, empowered communities In May 2017, the Council were approach by a community group expressing an interest in land at Lesser Borough Briggs. This land was owned by the Elgin Common Good. The group were seeking to transfer ownership to enable community sports facilities to be developed. The group were in the process of becoming a Scottish Charitable Incorporated Organisation (SCIO). The group commenced through the Council Community Asset Transfer (CAT) process; however, the process stalled. In this time, OSCR had confirmed charitable status in December 2017, and the group confirmed its name as Elgin Sports Community Trust (ESCT). ESCT re-contacted the Council, this time with a view to exploring a lease of the site. ESCT were supported in the process by the council and garnered outside support from various community groups. A revised pre application for ownership was submitted in January 2018. Feedback was provided to ESCT members to enable them to strengthen their business case prior to submitting a formal application. An application for a CAT in the form of a long lease was submitted by ESCT in January 2019 along with a revised business case. The application was reported to the Policy and Resources Committee in April 2019. The committee did not approve the transfer but did approve public consultation on disposal of the site. Prior to public consultation, ESCT submitted a further application for CAT under the Community Empowerment Act, supported by a revised business case, which was approved by the Emergency Cabinet in June 2020. The approval from Councillors at the Emergency Cabinet was ‘to approve the request to grant a 99-year ground leases over the site.’ Permission from the Sheriff Court to dispose of the Elgin Common Good land was granted on 14 August 2020. A planning application for Multi-Use Games Area (MUGA) was approved by the Council at its Emergency Cabinet meeting on 13 August 2020 and The Gleaner Arena officially opened on 14 August 2021. A further planning application was approved on 14 November 2023 for the erection of a pavilion at the site. The Pavillion was officially opened on 11 January 2025. Outcome: By January 2025, ESCT had successfully constructed three 3G playing surfaces at the site, as well as a pavilion. ESCT has engaged with local businesses, securing a sponsorship for the site with Gleaner and funding support from Robertson Construction Group, Elliot Office Equipment and Designed. The site aims to promote a healthier lifestyle by providing better sports facilities that are available to all, regardless of age, gender or ability. The Council has noted the following from the CAT process: • Highlights that a community group was supported by the Council to successfully transfer ownership of land • Worked in partnership to garner both community and financial support for the project • Resulted in a new sports facility for the people of Moray. Page 243
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Development and delivery of transformation plans (5) Partnership Working Partnership engagement in the management of assets varies across asset groups. The Local Housing Strategy is developed by the Housing Market Partnership, which includes various Council services, NHS Grampian and registered social landlords active in Moray. The Council works collaboratively with several of its partners to manage assets as a collective resource. As an example, the Council works alongside NHS Grampian on the delivery of vaccinations at the vaccination centre in Brumley Brae. This is a council property currently used by NHS Grampian as part of the approach within the Moray Integration Joint Board to deliver the winter vaccination programme. The Council has also worked in partnership with Moray Leisure Centre (an Arms Length Organisation of the Council) on the management of the leisure centre property. The Council are currently in the process of formalising a Service Level Agreement which would include property management arrangements of the leisure centre. There continues to be a significant level of partnership working with the community group involved in the running of the Elgin Town Hall. This will help to ensure continuation of their activities during the redevelopment of the Town Hall as part of the Moray Growth Deal, with the group using a Council building (the former Elgin Community Centre) for this purpose. 24 Page 244
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow A. Improvement action plan 26 We have set our below, based on our audit work undertaken on the transformation thematic, the key recommendations arising from our work: Issue / risk Recommendation Agreed management response 1. Corporate Asset Management Plan (CAMP) The CAMP has not been reviewed since December 2024 and is out of date. The current version of the CAMP only covers a single year and does not consider the longer term. Furthermore, the Council have not reported on the outcomes of the existing CAMP and therefore it is unclear what actions were achieved. Our review of the existing CAMP confirmed that there was minimal detail on the performance of the Council’s estate and no information around the current condition of assets or occupancy rates. We also identified that there was limited consideration around how the Council, its services and the community is changing. The current version of the CAMP does not include any detail around the governance arrangements and how progress towards actions identified will be monitored, nor how outcomes will be reported on conclusion. The Council works alongside partners and its communities in the management of assets, and there is clear evidence that this works well in practice. However, we have noted that the arrangements for partnership working are not set out. It is important that the roles and responsibilities of both the Council and its partners are clearly defined, which will ensure there is transparency in the overall approach. The Council should update the Corporate Asset Management Plan and present the final version to members for approval. The Corporate Asset Management Plan should confirm how the Council’s plan to manage its assets over the longer term. In updating the Corporate Asset Management Plan, we recommend the following is considered: • the Council include key information on the performance of its estate, including consideration on how service delivery and its communities are changing • confirm how progress towards the actions identified within the plan will be monitored • actions identified are included within an Action Plan, complete with an action owner and timeframe for completion. • set out a clear approach on how the Council will work alongside its partners and communities to deliver effective management of the Council’s assets. The Council should ensure that the outcomes from the CAMP are reported annually. The Corporate Asset Management Plan will be updated to reflect the current year (2026/27) and structural changes since it was last reviewed in December 2024. This will be presented to members for approval in August 2026 at Corporate Committee. A holistic review of the strategic asset management will be conducted by the new Section 95 Officer and that is planned over the next 12-18 months, with the outturn of that exercise being incorporated into the updated Corporate Asset Management Plan. This review will also incorporate the recommendations of this Best Value Thematic. Action Owner: Executive Director Finance Strategy and Transformation Timescale for implementation: 30 November 2027 Page 246
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|© 2026 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow A. Improvement action plan 27 Issue / risk Recommendation Agreed management response 2. Service Asset Management Plans The Council maintain Service Level Asset Management Plans (SLAMP) for ten service areas, which set out the plans in place for managing assets within that operational service. Of the ten services where a SLAMP should be prepared, the Council consider three as fully up-to-date, six in need of review and one service where there is no SLAMP in place. It is important that services have up-to-date asset management plans to ensure that the assets which fall under that services remit are understood and managed effectively, therefore reducing the risk of failure and unexpected costs. The Council should carry out a review of all service level asset management plans and ensure that they are up- to-date and fit for purpose. Service Level Asset Management Plans (SLAMP) will be updated to compliment the revised Corporate Asset Management Plan. The SLAMPs will reflect the requirement for the Council to effectively manage the decline of its asset base due to unsustainable funding to maintain its entire estate. Action Owner: Each Head of Service Timescale for implementation: 30 November 2027 3. Community Asset Transfer Policy The Council maintain a Community Asset Transfer Policy, which was last approved by the Policy and Resources Committee in May 2014. Due to the length of time that has passed since the policy was last reviewed, the Council should confirm it remains fit for purpose. The Council should review the Community Asset Transfer Policy and confirm it remains fit for purpose. The Community Asset Transfer Policy will be reviewed to confirm it remains fit for purpose Action Owner: Executive Director Finance, Strategy and Transformation Timescale for implementation: 30 November 2027 Page 247
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Executive Director Finance, Strategy and Transformation Author: Louise Marshall Contact Email: performance@moray.gov.uk Subject: Local Government Benchmarking Framework 2024-25 Results 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to present a corporate overview of benchmarking performance data for the period 2024-25. This report was also presented to the Corporate Committee on 26 May 2026. 1.2 This report is submitted to Committee in terms of Section III A (4) of the Council’s Scheme of Administration relating to monitoring performance in accordance with the Council’s performance management framework. 2. SUMMARY 2.1 The Local Government Benchmarking Framework (LGBF) provides evidence of trends in how resources are allocated, performance of services and levels of customer satisfaction. 2.2 At the time of reporting, results have been published for 95 indicators. Two indicators are no longer collected locally and five have yet to be published. 2.3 An assessment of relative performance in recent years can be inferred to an extent, with the pandemic having a significant impact on performance and direct comparison with previous years’ data; generally an improving trend is evident up to 2021/22, followed by a drop off in 2022/23, thereafter the pace of recovery has slowed from that of previous years as presented in the charts below. Item 14. Page 249
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2.4 Assuming no significant change in rankings for the 5 indicators yet to be published, overall, the position in terms of relative performance will remain stable and like that of 2023/24. 2023/24 vs 2024/25 No change 3 indicators Results improved Result worsened Not yet published 50 indicators 42 indicators 5 (5%) indicators 3. RECOMMENDATIONS 28% 28% 18% 23% 23% 24% 19% 24% 34% 22% 21% 19% 24% 27% 24% 28% 26% 24% 29% 20% 24% 27% 30% 28% 0% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 LGBF relative performance -national 1st quartile 2nd quartile 3rd quartile 4th quartile N/A 30% 34% 22% 23% 25% 23% 10% 18% 32% 21% 18% 19% 22% 18% 18% 29% 27% 29% 39% 30% 28% 27% 30% 24% 0% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 LGBF relative performance -family 1st quartile 2nd quartile 3rd quartile 4th quartile N/A N/A Page 250
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3.1 It is recommended that Committee scrutinise and note the Council’s performance in terms of a corporate overview of benchmarking results. Louise Marshall Strategy and Performance Manager 4. BACKGROUND AND CONTEXT 4.1 Local Government Benchmarking Framework (LGBF) data is refreshed throughout the year with the final data published around June each year. The results inform the National Benchmarking Overview Report. The Improvement Service collate data from national sources following annual submissions that is subjected to extensive validation processes, a contributory factor to the time-lag in publication and reporting. A small number of results are supplied directly by local authorities. The full suite of benchmarking data can be viewed using the Improvement Service LGBF Dashboard. 4.2 Family Groups of councils were developed around the type of population that they service (e.g. relative deprivation and affluence) and the type of area in which they serve them (e.g. urban, semi-rural, and rural) to allow improvements to be identified and good practice shared through a programme of events arranged and facilitated by the Improvement Service. People Services Other Services Includes education, social work and housing. The benchmarking clubs are based on the average social context of the local authority population (using data from SIMD). Includes environmental services and culture/leisure services. The benchmarking clubs are based on the dispersion of the local authority population (using data for the Grant- Aided Expenditure indicator for population dispersion). Angus Argyll & Bute East Lothian Highland Midlothian Moray Scottish Borders Stirling East Ayrshire East Lothian Fife Moray North Ayrshire Perth & Kinross Stirling South Ayrshire 4.3 Results and commentary on benchmarking performance are included in Quarter 4 performance reports submitted to service committees in line with the Council’s performance management framework. 5. NATIONAL PERSPECTIVE 5.1 This, the fourteenth annual report, evidence that despite significant innovation, service redesign and partnership working, councils are operating under sustained financial, Page 251
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workforce and demand pressures that are reaching the limits of what can be delivered within existing resources. 5.2 Financial Pressures: structural strain • Funding failing to keep pace with inflation, demand growth and expanding national commitments. • Forward spending plans indicate further pressure on council budgets, with funding projected to fall by 2.0% in 2027/28 and 3.8% in 2028/29 against a predicted overall Scottish spending rise over the same period of 4.68% • Statutory services, primary education and social care absorb over 70% of expenditure, leaving limited scope for discretionary or preventative investment. • Infrastructure continues to deteriorate faster than repairs can be funded. • Addressing these challenges; councils explore wider transformation, whole-system redesign, shared services, digital modernisation, automation, better use of data and strong partnership working 5.3 Workforce challenges: capacity, recruitment, demographics • Workforce pressures, recruitment and retention challenges are acute in social care, social work, planning and environmental health and increased absence rates. • An ageing workforce presents succession risks, under representation of minority ethnic and disable employees. • Service specific workforce pressures in care sector, specialist teacher shortages in STEM and rural areas. • Addressing these challenges; strengthened national and local workforce planning, improved data use and modernised employment practices. 5.4 Health and social care: rising demand, limited capacity • Demand for adult social care continues due to ageing population and increasing complexity. • Provider fragility constraining system capacity despite rising need. • Addressing these challenges; collaboration on digital tools, staff wellbeing and joint resource planning. 5.5 Education: recovery amid rising complexity • Signs of recovery in Education services, growing complexity and workforce pressures continue. • Rise in real time spending by around 20% since base year of 2010/11 to reflect national policy commitments. Substantial growth in Additional Support Needs (ASN), now affecting over 40% of pupils with specialist ASN teacher numbers continuing to fall. • Primary attainment above pre-pandemic levels, narrowing of poverty related gaps. • Attendance remains lower than expected, with non-attendance linked to anxiety and complex ASN for a small yet growing cohort. • Early years developmental outcomes of 27-30 month health reviews improving, quality of provision remains high. The mixed provider model increases reliance on Page 252
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private and voluntary settings that adds to pressures around stability and quality assurance. • Addressing these challenges; continued progress in strengthening collaboration on ASN, equity and curriculum development. 5.6 Tackling poverty: persistent structural pressures • Households facing high housing and energy costs, limited income growth and labour market inequalities. • Child poverty above 2014/15 levels. • Rent arrears falling and Council Tax collection stable but demand for crisis support remains high. • Addressing these challenges; strengthened strategic approaches to poverty through improved data, spatial analysis and whole system initiatives. 6. MORAY RESULTS 6.1 The national context presents a similar picture to that of Moray in the efforts and achievements delivered against an increasingly challenging backdrop and how sustained financial and workforce pressures have disrupted performance and efficiency improvements gained in previous years. 6.2 Despite challenges, good or improving performance is recognised in school attendance, 16–19-year-olds participation rates, gender balance in senior posts, crisis and community care grant decision timescales, hospital re-admission rates, hospital delayed discharge, road condition, waste recycling rates, financial outturn and CO2 emissions for electricity and natural gas. Generally, cost indicator results across service areas are low in comparison to other local authorities; however, this should be considered alongside performance and customer results. 6.3 Of the 95 results published, 29 results are placed in the lowest quartile (ranked 25th to 32nd), these are scrutinised in relation to improvement by the relevant Service Committee as part of 2024-25 Quarter 4 Performance Reports submitted to the June cycle of meetings. Commentary on these indicators and an additional four indicators relating to school attendance for looked after children, gross value added per capita and carbon emissions in scope of local authority, being the latest results for 2023-24 that were not published at the time of reporting to this committee last year are included at Appendix 1. 6.4 Lowest quartile performance was reviewed by the senior management team to ensure planned work will secure improvement, particularly in the following Corporate Plan priority areas of Poverty, Climate Change. For ease of reference, throughout, indicators measuring Corporate Plan performance are emboldened. • Improving attainment for all, a focus within the tackling poverty and inequality priority is being progressed through the development and implementation of the following strategy areas that will directly contribute to improved performance results; National Improvement Framework self-evaluation and Raising Achievement of our Learners, Our Moray Standard: Learning and Teaching Strategy and Supporting all Learners Page 253
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Strategy, Moray and Northern Alliance Progressions of Literacy and Numeracy, Achievement of Curriculum for Excellence Levels Assessment and Moderation Guidelines, Quality Assurance and Moderation support, Tracking and Monitoring Guidelines and Moray Quality Improvement Framework. Devolved school budgets and wider funding of Scottish Attainment Challenge, Pupil Equity and Strategic Equity Funding ensure schools continue to work to close identified attainment gaps. Full scrutiny of Initial Analysis of Secondary School Attainment – Session 2024-25 and Initial Analysis of Achievement of Curriculum for Excellence Levels – Session 2024-25 was undertaken by Education, Children’s and Leisure Services Committee on 25 November 2025 (para 24 of minute refers) and 3 March 2026 (para 11 of draft minute refers) respectively. The service continues to tackle the challenges around issues impacting on attainment that include staff absence, inability to recruit teachers in key subject areas and ongoing ICT issues locally leading to reduced learning time. • Tackling the affordability of the school estate whilst meeting climate requirements contributes to Building Thriving, Resilient, Empowered Communities is addressed with the development of the Learning Estate Strategy, delayed due to the delivery of additional supporting information to inform the Learning Estate Review, including an independent review of the school roll forecasting methodology, together with the diversion of team resource to support Future Forres Academy and Future Buckie High School projects but is scheduled to be reported to committee. The draft update of the Climate Change Strategy 2025-2035 and Routemap to Net Zero, developed through an officer/member working group, sets out how the Council will respond to its statutory duties to reduce carbon emissions, adapt to the impacts of climate change, and to embed sustainable principles within the Council, was approved, subject to public consultation by Council in September 2025 and will be presented for final approval from Council in June 2026. The Biodiversity Strategy gained final approval from Council in May 2026. • Corporate Plan Strategic Framework and improving indicator results rests on the delivery of the Medium to Long Term Financial Strategy and the Workforce and Organisational Development Strategy. 6.5 Results that have improved / worsened by 5% from previous year are highlighted at Appendix 2 and a table of results split by theme is presented at Appendix 3. 7. SUMMARY OF IMPLICATIONS 7.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) X Policy and Legal Financial Risk Page 254
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Staffing Best Value and Transformation Property Information Communications Technology/Digital Equalities. Social Inclusion and Economic Impact Climate Change and Biodiversity Impact 7.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☒ Tackle Poverty and Inequality. ☒ Build Stronger Greener Vibrant Economy. ☒ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following local Outcomes Improvement Plan priorities: ☒ Developing a diverse, inclusive, and sustainable economy ☒ Building a better future for our children and young people in Moray. ☒ Empowering and connecting communities. ☒ Improving wellbeing of our population 7.3 Policy and Legal The Council has a statutory requirement to publish a range of information that will demonstrate that it is a securing best value and assist in comparing performance both over time and between authorities where appropriate. 7.4 Financial None arising from this report. 7.5 Risk None arising from this report although effective performance management assists in the management of risk. 7.6 Staffing None arising from this report. 7.7 Best Value and Transformation How councils plan for, manage and report on performance is a key area of focus in external audit work, particularly on best value. 7.8 Property None arising from this report. Page 255
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7.9 Information Communications/Technology/Digital None arising from this report. 7.10 Equalities, Social Inclusion and Economic Impact None arising from this report. 7.11 Climate Change and Biodiversity Impacts None arising from this report. 8. CONSULTATION 8.1 This report has been prepared in consultation with Head of Governance, Strategy and Performance and senior managers, any comments made have been incorporated into the report. 9. BACKGROUND PAPERS 9.1 LGBF Dashboards National Benchmarking Overview Report 2024/25 Elected Member Guidance: Understanding and Using the LGBF LGBF Indicators – Pentana backing tables Page 256
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APPENDIX 1 The Local Government Benchmarking Framework (LGBF) data provides evidence of trends in how resources are allocated, performance of services and levels of customer satisfaction. This year’s results introduce available data for 2024/25 as well as data for 4 indicators relating to 2023/24 that were not available at the time of annual reporting last year. Since base year (2010-11), changes in expenditure evidence the most significant increases in Economic Development, Adult Social Care, Education, Looked After Children and planning and reductions in Roads, Support Services, Environmental Service and Culture & Leisure. Positive performance in top quartile rankings is evident in individual indicators across most headings but more notably in Adult Social Care and Environmental Services. Exceptions based on 32 local authorities; areas of service delivery ranked in the lowest quartile are presented below as Notes to Benchmarking Results. Care should be taken when making comparison over time and with others due to the complexities around altered delivery and operating landscapes during the reporting period. The National Benchmarking Overview Report is available here. Page 257
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No Challenges Actions to improve to present time Outcome Children’s Services 1 Proportion of children looked after in a community setting increased to 78%, improving the ranking to 28th, but below the national average (88.8%). Performance has featured in the lowest quartile since 2010-11. Latest data relates to 2023-24. The Carer Recruitment Campaign continues to focus on the recruitment of foster carers and supported lodgings carers, increasing capacity. Looked after children in Moray in approved Kinship Care with family members is in line with family average, work continues to strengthen practice, ensuring children at the point of allocation, have a holistic extended family map produced on Kinship care options in the event short breaks or alternative care may be necessary. 95.5% of brothers and sisters in Foster Care and Kinship Care remain together with at least one sibling above the national average of 79%. Maintaining Relationships Project is developing an approach and policy to ensure brothers and sisters remain together where this is their assessed needs, albeit more challenging when need to accommodation 3 or more children due to resource limitations. (Source: Quarter 2 Performance Report for Children and Families and Justice Social Work, IJB 26 February 2026) Improving outcomes for Looked After and Care Experienced Children and Young People (Children Services Plan 2023- 26) 2 Percentage of pupils entering positive destinations results and rankings have dropped year on year since 2021-22, to 93.5% against largely consistent comparator results. Positive destinations include higher/further education, employment, training, personal skills development and voluntary work. In 2024-25 there were 1,086 leavers with 1,015 progressing to positive destinations, key results: 34.6% to higher and 23.8% to further education, 30.1% to employment. 6.5% (71 young people) were recorded as unemployed seeking, unemployed not seeking or unknown. • Getting it right for every child so that we continue to improve attainment for all Key actions for raising attainment are progressing at school and system levels for Senior Phase; Secondary school improvement visits are complete with moderated reports identifying strengths and areas for improvement. Secondary school targets are monitored at key milestones. Depute Headteacher Tracking and Monitoring Network developed to support collaboration, meeting in terms 3 and 4. Moray schools continue to work with key partners including Skills Development Scotland, Moray Pathways, Moray College UHI and wider employability partners to ensure pupils are supported to positive onward destinations. It should be noted that health factors may impact on future pathways and routes to success for young people where our schools continue to monitor this through early intervention approaches. (Sources: 2023-24 Analysis of Secondary School Leaver Attainment 2023-24 / Q3 Performance updates) Improved attainment at both Broad General and Senior Phase identified through ACEL and LGBF measures Page 258
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3 4 5 6 7 Average tariff points for each unit or course are calculated from the latest and best achievement of pupils based on the SCQF level of the award and grade achieved (for graded courses S4-S6). The Scottish Index of Multiple Deprivation (SIMD) identifies small area concentrations of multiple deprivation showing the difference between young people living in the most and least deprived areas. Overall average total tariff improved slightly to 829 but remains below national and family averages, similar slight improvements are recorded for SIMD quintiles 2 and 5 but slightly worsened in SIMD quintiles 3 and 4, all remain ranked in the lowest quartile. • Getting it right for every child so that we continue to improve attainment for all Following initial attainment meetings, separate group sessions with all Secondary Head and Depute Head Teachers were held to explore core issues in relation to low attainment in Senior Phase in relation to benchmarking data and effects/symptoms, root causes and possible solutions. Ten summary priorities have been developed to raise attainment. These sessions have further developed into school-based actions and system wide actions making use of existing and newly created DHT networks supported and led by secondary HTs and the Quality Improvement Manager. Moray Secondary Schools have benefitted from over £500k additional funding under the theme of tackling poverty and inequality to improve education attainment in the form of an Intervention Fund for each school to target areas for improvement. Secondary Schools continue to progress work on key priorities framed by School Improvement Plans set out annually. (Source: Initial Analysis of Secondary Attainment – Session 2024-2025) Improved attainment at both Broad General and Senior Phase identified through ACEL and LGBF measures 8 The percentage of P1, P4 and P7 pupils combined achieving expected CFE Levels in Numeracy made slight improvement to 76.9%, achieving the Stretch Aim target of 73-77% • Early intervention addressing whole family well-being to ensure that children can reach their full potential Strengthening Achievement of Curriculum for Excellence levels across the Broad General Education being taken forward through actions across strategy and support materials, professional learning and moderation, tracking and monitoring and support and challenge. Key areas of work as a wider schools and central education system continues to progress. Progress across Moray schools and centrally to address identified attainment gaps and barriers to learning and achievement also continues through ongoing monitoring of data throughout each school session as part of Moray Quality Improvement Framework (MQIF), across Associated Schools Groups (ASGs) and Family Improvement Groups (FIG) collegiate session. Moray Numeracy Strategy is being developed in partnership with Education Scotland. Schools Improved attainment at both Broad General and Senior Phase identifies through ACEL and LGBF measures Page 259
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are involved in STEM spatial skills in Maths with Glasgow University. Stretch Aim for Primary numeracy (P1, P4, P7 combined) for 2026 has been set at 78%. (Source: Initial Analysis of Achievement of Curriculum for Excellence levels: Session 2024-2025) 9 Funded early years provision which is graded good/better fell slightly to 84.0%, below national and family averages, which were also subject to slight result decreases. A new national Shared Quality Framework launched in September 2025, aimed at enhancing outcomes for children in ELC settings that provide high-quality, equitable and responsive experiences. The framework will be used as an evaluation tool, key to this process will be ELC settings evidencing robust self- evaluation processes to support improvement and the Care Inspectorate and HMiE in their inspections and evaluations. ELC settings will be supported by the central officer team, and through a variety of hybrid training opportunities, to develop their knowledge and understanding of the framework. Officers are building a Quality Improvement Framework akin to the schools one and are supporting services to develop improvement plans and associated self-evaluation processes. As a result, the number of settings not meeting the nation standard is reducing. (Source: Shared Quality Improvement Framework for Early Learning and Childcare settings ECLS 25 Nov 2025) Improve self- evaluation for self- improvement across ELC settings shared understanding of new improvement areas 10 Latest published data for School attendance rates (per 100 ‘looked after pupils’) was 82% in 2023-24, below national and family averages and on a decreasing trend since 2020-21. Education Attendance Policy, scheduled to be agreed by ECLS Committee in June 2026, has been updated and toolkits (‘Attend to Achieve’) have been developed to strengthen consistency across school settings in supporting positive pupil attendance and providing supportive guidance where necessary. Schools will use the policy and toolkit for ongoing monitoring and address levels for individual pupils, groups and cohorts that are causing concern through single agency approaches or multi-agency intervention. Parental engagement and the importance of reinforcing positive school attendance for maximum learner attainment, achievement and post-school opportunities is ongoing across schools. (Source: Shared Quality Improvement Framework for Early Learning and Childcare settings ECLS 25 Nov 2025) Improved attainment at both Broad General and Senior Phase identifies through ACEL and LGBF measures Page 260
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10.1 Slight improvement in the proportion of Child Protection re-registrations within 18 months to 10.3%, below that of national and family averages (6.8%) and remaining in the lowest quartile. The safety and wellbeing of children is ensured through timely, proportionate, and effective support, repeat registrations indicate risks have re-emerged or were not sufficiently reduced following previous support. To address this, the partnership considers the staged closure of families to social work and the move to child planning for families where children have required a protection plan. Learning from repeat registrations identifies systemic gaps and improved practices. (Source: Quarter 2 Performance Report for Children and Families and Justice Social Work, IJB 26 February 2026) Family: Keeping Children and Young People safe Corporate Services 11 Gender pay gap at 4% is above the national average of 1.4%, with average hourly rate of pay for males at £19.66 above that of females, £18.87. A high number of employees (around 40%) are employed in service areas such as catering, cleaning, care at home and schools support staff, areas populated predominantly by a high number of part time female employees; often who may hold more than one part time position across these services. It is not always possible to apply comparisons in terms of the service delivered and the composition of the workforce as not all councils deliver the same services. The implementation and embedding of the Smarter Working Project have supported the workforce in continuing to undertake a range of flexible working options, making the workplace more accessible for office-based staff which may have positively impacted the reduction in the pay gap. The commitment to continue to improve recruitment packages which support accessibility to work for all genders through more creative ways of working and that support the journey to sustainability continues. The long-term impact on the pay structure arising from the living wage and other pay related issues are monitored to have in place fair and competitive pay and conditions recognised as such and are free of bias. Some progress was made in gathering workforce data but remains an ongoing action to increase engagement to improve the workforce personal data capture and therefore more accurate reporting. Gender Pay Gap and equality issues are assessed and mitigating actions put in place if required Page 261
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12 Teacher absence levels increased in 2024/25 to 10.8 days per teacher, the highest recorded since benchmarking began, ranked lowest nationally. High levels of workforce absence present several challenges for schools, including increased reliance on supply cover, additional pressure on school leadership teams and need to manage operational continuity within already demanding environments. Improving Attendance Project report was presented to Council on 3 December 2025 (item 7 of the Agenda refers) detailing additional targeted support to assist in the maximisation of teaching staff attendance at work, reducing absence costs and reducing service impact on children and young people as part of a spend to save transformation project, agreeing funding of £89k as an initial pilot of one year support. Progress will be reported at 6 months following implementation against defined targets. The project is focused on strengthening absence management arrangements, consistent application of council policies and supporting service managers in their responsibilities, including reinforcing the supportive elements of the Health at Work Policy to promote staff wellbeing, provide consistent and fair management of absence and support sustainable returns to work alongside improved attendance levels. (Source: Improving Attendance Project, ECLS 3 March 2026) Improved attendance at work, reducing absence related costs and strengthen the consistent application of absence management processes 13 Percentage of invoices sampled that were paid within 30 days remained relatively unchanged at 89.5%. Of the 55k invoices sampled, 49k invoices were paid within 30 days, resulting in the indicator remaining in the lowest quartile. Early mapping work completed to increase efficiency and availability of digital processes for Accounts. Replacement of the finance management system is in the early stages with system operational anticipated by April 2028. Market research completed as expected and tender process underway. Services are reminded to process invoices promptly. (Source: Q3 Performance updates) Investigate workflow for authorisation database 14 Scottish Welfare Fund awarded £392k of the £657 budget (59.6%), below family and national averages. Scoping of centralised means testing has progressed and demonstrates that support can be provided towards the recovery of outstanding social care cost debts. Improvement in key areas could be gained by aligning some of the processes within social care financial assessments with the benefits and money advice Determine whether a staffing efficiency and maximisation of council resources is achievable. Page 262
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service to perhaps identify where additional support can be provided. (Source: Q3 Performance updates) Assets 15 There has been a slight decrease in 55.4% in the percentage of internal floor area of operational buildings in satisfactory condition. 119k m2 of 215k m2 was of satisfactory condition. The Moray Learning Estate is a significant contributory factor to the operational building condition indicator and with over half of the 52 schools having condition surveys of less than B condition, the indicator ranking remains in the lowest quartile. • Tackle the affordability and standard of our learning estate to ensure sustainability while meeting climate requirements Design and construction – Elgin High School extension build Design and construction – future Forres Academy operational Design and construction – Future Buckie High School operational Engagement and consultation – ASG Level Options Development – long term investment strategy Strategic Planning – Learning Estate Review Report Engagement and consultation – effective stakeholder engagement on Learning Estate sustainability options Estate Rationalisation – future of Crossroads PS agreed Design and construction – options developed to manage for Elgin South and North primary school capacity requirements Design and construction – schools BB upgrade programme delivering minimum 3 B condition/suitability school upgrades per year (Source: Corporate Plan Q3 2025-26) Moray has high performing schools that are fit for the future and financially and environmentally sustainable. Adult Social Work 16 73.8% of care services were graded ‘good’ or better in Care Inspectorate inspections, below family and national averages. External inspection results and commentary are included in the Annual Performance Report. Services are assessed by the Care Inspectorate to ensure that services provided meet the required standards and peoples’ outcomes are being met. People who use health and social care services have positive experiences of those services, and Page 263
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Much focus is placed on learning from complaints and feedback to continually improve the quality and safety of services as well as feedback received directly via surveys conducted as part of monitoring and service redesign. (Source: Annual Performance Report 2025/25, Moray Integration Joint Board Audit, Performance and Risk Committee, 19 June 2025) have their dignity respected. Culture & Leisure 17 The cost per library visit decreased to £5.23 due to an increase in the number of library visits against a small reduction to net expenditure. In 2024-25, net expenditure totalled £2.4m, with 459k visits to library services. Across Scotland, results range, suggesting there are variations in calculation methods which has been acknowledged nationally with clarity added to the definition. • Transform our Sport & Leisure, Libraries, Learning Centres & Heritage, Music Instruction & Performance service provision to ensure a sustainable council for the future A report was submitted to Council on 3 December 2025 to update on the transformation journey of Libraries, Learning Centres and Heritage Service, proposing a tiered operating model to provide a more standardised and efficient model for future based on evidence and need. Extensive engagement with newly established library user groups in all 11 branches across Moray was held over three meetings with groups, that were supported by local members. Q3 update (93% complete) – The Change Management Plan has been partially implemented. With approval of the proposal, implementation of Change Management Plans continue. (Source: Libraries, Learning Centres and Heritage Service Transformation, Q3 performance updates) Create a sustainable future for our services by: Engaging new users to access our service to be active and ensure prevention/early intervention improves their long-term health and wellbeing prospects. Engaging new users to access digital and physical resources and support to improve their lifelong learning experiences. Creative arts participation and pathways are further developed enhancing lifelong learning experiences. Page 264
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18 The percentage of adults satisfied with Museums and Galleries (rolling 4 years) fell to 45%, below national and family averages, remaining in the lowest quartile. Due to budgetary constraints, operation of the Moray Museum Service ceased on 1st April 2020. The Falconer Museum with Store is closed until an alternative service model is established. The collection continues to be monitored and buildings maintained. N/A Environmental Services 19 The percentage of adults satisfied with refuse collection (rolling 4 years) remained at 76%. Indicator has dropped back into the lowest quartile. Taken from the Scottish Household Survey where around 10,500 households were interviewed with lower-than-expected response rates inferring the sample size may be small. This should be set against positive performance in terms of the level of recycling, costs of waste collection and disposal. A review of complaints has resulted in some procedural changes relating to Household Collections. (Source: Q3 performance updates) N/A Housing Services 20 In 2024-25, 2,799 of 6,410 (43.7%) of properties within scope met the Scottish Housing Quality Standards (SQHS). Performance has improved in recent years; however, meeting energy efficiency elements is a significant part of SHQS and results for this element have not been published since 2021-22 due to Scottish Government review of EESSH2. Indicator remains in the lowest quartile. • Continue to reduce the carbon impact arising from Housing and Property Services In 2024-25, there was significant investment to improve energy efficiency of housing stock by upgrading heating systems, building insulation and solar panel installation. Progress has stifled by resource issues relating to tenant agreement to works, contractor availability and time lag with certifications to confirm improvements. Contracts in place to continue to deliver Phased improvement of energy efficiency within corporate buildings and housing stock. Page 265
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improvements in energy efficiency within the Council’s housing stock. Scottish Housing Regulator confirmed provisional data indicated as of September 2025 EESSH compliance increased to 73.3%, the expectation for the year ending 31 March 2026 is for 80% compliance, which will positively impact on the council dwelling meeting SHQS. (Source: Q3 performance updates) Economic Development 21 The percentage of unemployed people that were assisted into work from Council operated / funded employability programmes improved to 10.4%. Of the 135 people supported into work, 79% sustained work for over 13 weeks. The Local Employability Partnership, Moray Pathways continues to support individuals into fair and sustainable jobs. Overall, over 300 people were supported, 285 are participating in vocational skills programme; Sector based Work Academy Programme (SWAP). 65 people have gone onto further or higher education. Support has also been provided through; Barrier Removal activities (involving 205 service users), Creative Skills Network activities (112 service users), CLD personal development (56 service users) and Counselling (47 service users), 29 others are currently in the engagement phase. Moray Pathways Local Employability Partnership Annual Report was submitted to the Economic Development and Infrastructure Services Committee on 17 June 2025. Moray Pathways Workforce North Event took place in December 2025 with 100 attendees and a total of 50 local employers from the energy sector, training providers and key stakeholders from the public sector. The Moray Workforce Group are working on a roadmap / action plan to progress. (Source: Q3 performance updates) Increase the number of individuals who are participating in learning, training and employment opportunities 22 Cost per planning and building standards application increased to £9,931 due to a 19% reduction in the number of applications decided to 362 and a 16% increase in gross expenditure to £3.595m. Result is above that of national and family averages. Despite the increase in cost, the average processing time per business and industry planning application at 8.5 weeks remains in the top quartile performance results. Additional expenditure for the Levelling Up project within the Planning policy service – Town Centre Development project Improved performance in line with pillars set out in the template with local case Page 266
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commenced during 2024-25 from the UK Levelling Up fund. £700k of funding provided to property owners to undertake work in Elgin Town Centre. studies and performance data 23 Slight increase in investment in Economic Development & Tourism per 1,000 population to £89,085, with a total gross expenditure in economic development and tourism of £8.5m. Economic Development – increase in spend and income for Growth Deal, Shared Prosperity and Regeneration Capital grant initiatives during 2024-25. The Council is progressing an updated Tourism Strategy for Moray which is currently under consultation with final approval anticipated in June. Meantime work on the Cultural Quarter project intended to grow tourism in the area as part of Moray Growth Deal also continues. Maximise the economic, social and cultural benefits of tourism to Moray and spread the benefits across all sectors of the community. 24 According to the Annual Survey of Hours and Earnings (ASHE), based on a 1% sample of the Pay As You Earn (PAYE). As of March 2025, in Moray 16.2% of employees (18+ workplace based) earned less than the real living wage. The increasing cost of doing business and consequential impacts on pay levels is felt particularly acutely in Moray given the existing low wage economy. The Community Wealth Building Strategy and Action Plan 2024 was approved by the Economic Development and Infrastructure Committee in April 2024. Delivery of the Strategy and actions has been restricted due to initial resourcing difficulties. Meantime further initiatives designed to improve pay levels continue including Moray Growth Deal and the emerging Skills Routemap following the Skills Summit in December 2025. These will take time to have an impact. Ensure wealth stays within our local communities. Page 267
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(Source: Q3 performance updates) Financial Sustainability 25 Total useable reserves as a percentage of council annual budgeted revenue pertains to the movement in reserves statement data providing an indication on the level of how a Council is placed to meet unforeseen events. As at March 2025, useable reserves represent 13.8% of the council annual budgeted revenue, below that of national and family averages. The Budget and Financial Plan are agreed by Council in February each year. The Council’s updated reserves policy was approved by Council in September 2024. The Council was able to set a balanced budget for 2026/27 despite ongoing cost pressure for growing demand on services and upward price inflation, acerbated by below inflationary revenue grant awards from Scottish Government. It is expected that the national average will reduce towards Moray’s level as councils are using reserves to balance their budgets (£158m used for 2026/27). The Council’s reserves include allocation for transformational projects, which seek to improve the effectiveness and efficiency of its services. (Source: Budget and Financial Plan, Full Council, annually in February) Ensure a financially sustainable future. 26 Financing Costs to Net Revenue Stream is an indicator of affordability, it highlights the revenue implications of existing and proposed capital expenditure by identifying the proportion of the revenue budget required to meet financing costs, net of investment income. Moray reported a ratio of 10.8. Indicator remains in the lowest quartile. Prudential Indicators are reported to Council and reflective the ongoing general requirement to increase borrowing to fund capital expenditure in the capital plan, particularly in the Learning Estate, Libraries and Leisure Estate and the Moray Growth Deal. The breach of 10% was because of the introduction of the accounting standard IFRS 16 Leases from April 2024 whereby additional costs previously treated as service expenditure. This indicator is factored into the Council’s financial planning and is used as a tool for assessing affordability of the capital plan, A review of the long-term financing strategy is planned for 2026. Ensure a financially sustainable future. Page 268
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(Source: Budget and Financial Plan, Treasure Management Prudential Indicators, Full Council, annually in February) Climate Change 27 Latest data published in July 2025 relates to the 2023-24 period, recording 6.54 tonnes per capita of CO2 emissions area wide for emissions within the scope of influence of the Council, ranked lowest across all authorities. The data is taken from the UK Government UK local authority and regional carbon dioxide emissions national statistics publication. 2023-24 update to the Climate Change Plan and Routemap to Net Zero, giving insight into current performance, identifying key barriers to progress and outlining next steps to keep the Council on a viable pathway to net zero was reported to Council in August 2025. Although emissions have reduced, emissions arising from the Council’s fleet and property are proving difficult to reduce at pace. Based on the pace and level of investment, the Council’s previous target of being net zero by 2030 was recognised as not being achievable. The Council agreed to amend the target to 2045 with an update to the Council’s Climate Change Strategy presented to Council in September 2025, providing an opportunity to reflect on existing commitments and reprioritise efforts to ensure that work aligns with local needs, opportunities, and the evolving statutory landscape, before making ready for extensive consultation. The Climate Change and Biodiversity strategies following public consultation will be presented to Full Council on 30 June and 7 May 2026 respectively. (Source: Climate Change Plan and Routemap to Net Zero Update, Full Council, August 2025, Climate Change Strategy 2025-2035, Full Council, September 2025) The Council adapts to the changing climate and acts sustainably 28 As at March 2025, there were 40.92 tonnes of CO2 emissions from Transport per 1000 population, above national and family averages and remaining in the lowest quartile. The data is obtained from the Sustainable Scotland Network Annual Report. The Council’s Zero Emission Fleet Replacement Strategy details the Council’s plans to decarbonise the remainder of the fleet in line with Scottish Government’s net zero targets, however these plans are challenging in the setting of required budget savings. The Council adapts to the changing climate and acts sustainably Page 269
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Being a rural authority, this brings unique challenges due to the high dependence on private cars and the lack of public transport infrastructure. The Council are playing a crucial role in decarbonising transport by encouraging active travel, implementing interventions such as providing electric vehicle charging points, improving bus services and promoting shared mobility options. (Source: Climate Change Plan and Routemap to Net Zero Update, Full Council, August 2025) Page 270
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Moray appears in the following Benchmarking Family Groups – Table Legend Relative Change Short Term Trend Rank 2024/25 2023/24 to 2024/25 Result to Previous Year Local Authorities (32) Family Group (8) Result improving by 5% or more improved 1st quartile 1st quartile Result worsened by 5% or more worsened 2nd quartile 2nd quartile no change 3rd quartile 3rd quartile 4th quartile 4th quartile People Services (A) Other Services (B) Includes education, social work and housing. The benchmarking clubs are based on the average social context of the local authority population (using data from SIMD 2012). Includes environmental services and culture/leisure services. The benchmarking clubs are based on the dispersion of the local authority population (using data for the Grant-Aided Expenditure indicator for population dispersion). Angus Argyll & Bute East Lothian Highland Midlothian Moray Scottish Borders Stirling East Ayrshire East Lothian Fife Moray North Ayrshire Perth & Kinross Stirling South Ayrshire Page 271
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APPENDIX 2 Results improved / worsened (for results published since last reported) Results that improved by 5% or > • Gross cost of looked after children in a community setting per child per week reduced from £488 to £460 • Improvement in the percentage of pupils living in the 20% most deprived areas gaining 5+ awards at Level 6 • Tariff score in SIMD Quintile 1 nearly doubled to 720, as a result ranking has moved from the lowest to top quartile. • School exclusion rates per 1,000 pupils improved to 17.1 improving ranked position by 3 places to 18th. • Slight improvement in homecare costs per hour for people aged 65 or over to £30.90 due to decreases in homecare expenditure of 7.6% and in care hours per year of 2.3%. • Significant improvement to become the lowest rate nationally for readmissions to hospital within 28 days per 1,000 discharges. • The number of bed days people (75+) spend in hospital when ready to be discharged fell for a second consecutive year, against a slight increase in population (+75) leading to an improved delayed discharge rate. • Increased attendance and reduced net expenditure resulted in a reduced cost per attendance at sports facilities, maintaining top quartile performance over the last 6 years. • Increase in number of library visits against a slight decrease in net expenditure has resulted in a reduction in the cost per library visit. Result remains above the national average and in the lowest quartile. • Cost of parks and open spaces per 1,000 population reduced due to a decrease in net expenditure. • Net cost per waste collection per premise holds top quartile ranking for a decade due to a reduction in net expenditure. • Reduced cost of street cleaning due to decrease in net expenditure against a slight increase in estimated population maintaining a top quartile ranking since measurement commenced in 2010/11. • 10% reduction in gross expenditure in roads and winter maintenance resulted in an improvement in the cost per kilometre, maintaining a top quartile ranking. • Slight decrease in gross expenditure in Trading Standards, Money Advice and Citizens Advice resulted in a decrease in cost per 1,000 population. • Significant improvement in proportion of council dwellings meeting SHQS, despite improvement, the ranked position remains unchanged and in the lowest quartile for last 4 years. • Number of unemployed people assisted into work from council operated / funded employability programme double to 135 improving the percentage result and ranking to 25th. • Slight increase in gross expenditure resulted in improvement in the investment in economic development and tourism per 1,000 population, albeit result remains well below the national average and within the lowest quartile. • Modest improvement in the proportion of properties receiving superfast broadband • Slight decrease in emissions from natural gas per capita, remaining below national and family averages and ranking in the top quartile. Results that worsened by 5% or > • Percentage of pupils living in the 20% most deprived areas achieving 5 or more awards at level 5 decreased significantly, dropping into the lowest quartile. • Decrease in the percentage of adults satisfied with local schools over a rolling 4 years. Sample size from Scottish Household Survey will be a contributory factor. • A 15% increase in the overall cost for collecting council tax resulted in an increased cost per dwelling. • Sickness absence days per teacher dropped to 10.8 days, above the national average and ranked lowest nationally. • Sickness absence days per employee (non-teacher) dropped to 15.7 days, above the national average and falling to a ranked position of 23rd. • £392k of Scottish Welfare Fund budget was spend, 59.6% of budget. • Decrease in the proportion of adult care services graded good or better to below that of the national average. • Satisfaction rates in both adults satisfied with libraries and adults satisfied with Museums and Galleries. Scottish Household Survey sample size likely a contributory factor. • Average number of days to complete non-emergency repairs increased to 6.3 days, below the national average of 10.1 days, maintaining a lowest quartile ranking. • Cost of Planning & Building Standards per planning application increased significantly due to increased gross expenditure and a decrease in planning applications decided, dropping into the lowest quartile. • Average time per business and industry planning application (weeks) increased slightly but result remains within the top quartile. • Five percentage point decrease in the percentage of immediate available employment land of total land allocated for employment purposes, improving ranked position by one place to 19th. • Total usable reserves as a percentage of annual budgeted revenue dropped to 13.8% but maintaining ranked position of just outside lowest quartile. • Ratio of Financing Costs to Net Revenue Stream for Housing Revenue Account increased to 30.1%, above the national average, remaining in the third quartile. 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APPENDIX 3 Overview of Local Government Benchmarking Framework Indicator Results Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) Children’s Services (A) Cost per primary school pupil (£) 6,358 6,876 7,163 7,178 7,252 7,606 7,780 1.0 7 2 Cost per secondary school pupil (£) 8,656 8,947 9,131 9,250 9,211 9,338 9,533 -0.4 14 4 Cost per pre-school education place (£) 8,906 11,081 11,270 10,197 10,410 12,055 12,174 2.1 4 2 % of secondary pupils achieving 5 or more awards at Level 5 66 63 62 62 64 69 66 2.2 22 5 % of secondary pupils achieving 5 or more awards at Level 6 34 30 28 30 31 41 37 1.1 23 5 % of pupils living in the 20% most deprived areas Gaining 5+ awards at Level 5 41 42 52 31 45 53 44 -7.1 21 4 % of pupils living in the 20% most deprived areas Gaining 5+ awards at Level 6 19 19 12 N/A2 21 24 17 9.5 14 2 Gross Cost of “Children Looked After” in Residential Based Services per child per week (£) 5,595 4,827 3,263 3,831 3,736 5,267 4,786 -2.5 5 3 Gross Cost of “Children Looked After” in a Community Setting per child per week (£) 478 520 475 488 460 480 429 -5.6 16 6 1 % of children being looked after in the community 82.2 80.6 75.3 78.0 77.6 88.3 83.6 -0.4 26 7 % of adults satisfied with local schools (rolling 4 years) 64.5 72.7 77.2 76.1 67.3 69.0 69.5 -8.7 23 6 2 % of pupils entering positive destinations 94.1 96.2 95.1 93.8 93.5 95.7 95.3 -0.3 30 7 3 Overall average total tariff 876 882 834 826 829 922 869 0.4 26 6 Overall average total tariff SIMD Quintile 1 887 735 571 378 720 655 543 90.5 5 1 4 Overall average total tariff SIMD Quintile 2 635 637 581 625 639 772 685 2.2 27 6 Page 273
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) 5 Overall average total tariff SIMD Quintile 3 868 868 820 780 768 895 833 -1.5 30 8 6 Overall average total tariff SIMD Quintile 4 954 944 921 917 902 1,049 991 -1.6 29 6 7 Overall average total tariff SIMD Quintile 5 959 1,005 977 970 993 1,269 1,131 2.4 28 7 % P1, P4 & P7 pupils combined achieving expected CFE Level in Literacy 63.9 65.1 67.9 70.6 72.7 74.5 74.2 2.1 21 6 8 % P1, P4 & P7 pupils combined achieving expected CFE Level in Numeracy 67.8 71.8 75.5 76.5 76.9 80.3 79.4 0.4 27 7 Literacy Attainment Gap (P1,4,7 combined) – percentage point gap between the least and most deprived pupils 19.8 26.3 32.1 N/A2 N/A2 Numeracy Attainment Gap (P1,4,7 combined) – percentage point gap between the least and most deprived pupils 17.5 24.7 26.6 N/A2 N/A2 % of children meeting developmental milestones 96.0 84.9 87.4 83.4 81.7 83.5 85.1 -1.7 24 7 9 % of funded early years provision which is graded good/better 85.2 86.9 87.5 84.1 84.0 89.0 89.1 -0.1 27 7 School attendance (%) 93.8 N/A1 91.2 90.8 91.2 91.0 91.5 0.4 16 6 10 School attendance rates (LAC, %) 89.4 83.4 82.0 N/A3 (Aug 2026) 83.7 85.2 -1.4 26 7 School exclusion rates per 1,000 pupils 14.2 20.2 17.1 15.2 15.2 -15.5 18 4 School exclusion rates per 1,000 looked after children 125.0 156.0 N/A3 (Dec 2026) % participation for 16-19 year-olds 91.8 91.6 94.5 93.1 94.3 93.3 94.3 1.2 12 6 10.1 % of child protection re-registrations within 18 months 2.3 9.8 0.0 7.0 8.8 6.8 6.8 -0.2 25 5 % LAC with more than 1 placement in the last year (Aug-July) 14.9 15.9 11.8 14.7 10.9 16.5 19.5 -3.8 4 1 % of children living in poverty (after housing costs) 21.3 24.1 23.9 14.9 15.1 14.8 13.7 -0.3 22 7 Page 274
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) Corporate Services (B) Support Services as a % of Total Gross Expenditure 4.1 3.9 3.8 3.7 3.7 4.0 3.7 0.1 14 5 % of the highest paid 5% employees who are women 61.1 62.7 59.5 61.2 62.3 60.3 59.7 1.1 8 3 11 The gender pay gap (%) 6.2 7.0 5.3 4.6 4.0 1.4 0.7 -0.6 29 7 Cost of collecting Council Tax per dwelling 9.55 9.17 8.23 7.12 8.12 5.98 8.07 14.0 22 6 12 Sickness Absence days per Teacher 4.5 6.0 7.9 9.6 10.8 7.8 8.4 12.8 32 8 Sickness Absence days per Employee (non-teacher) 8.7 11.1 12.8 14.0 15.7 14.5 14.9 12.2 23 5 % of income due from Council Tax received by the end of the year 95.8 96.7 96.7 96.2 96.2 95.5 96.1 -0.0 14 4 13 % of invoices sampled that were paid within 30 days 84.0 85.5 89.4 89.4 89.5 93.1 88.7 0.0 27 5 % of Crisis Grant Decisions within 1 day 98.5 98.0 97.8 97.9 99.5 96.0 97.6 1.6 9 2 % of CCG Grant Decisions within 15 days 90.8 95.5 89.3 98.1 99.2 90.7 95.1 1.1 8 4 14 Proportion of SWF Budget Spent 64.3 99.0 123.9 111.5 59.6 82.9 77.2 -51.9 28 7 Proportion of DHP Funding Spent 90.6 75.6 79.8 90.0 89.0 99.0 89.6 -1.0 24 5 Assets (B) % of operational buildings that are suitable for their current use 98.2 97.6 97.5 97.4 96.1 85.7 90.5 -1.3 3 2 15 % of internal floor area of operational buildings in satisfactory condition 66.9 54.9 56.3 56.3 55.4 91.0 88.4 -0.9 31 8 Adult Social W ork (A) Home Care costs per hour for people aged 65 or over (£) 33.36 24.37 26.13 32.67 30.90 32.37 34.46 -5.4 14 4 Self-Directed Support spend on people aged 18 or over as a % of total Social Work spend on adults 5.0 3.6 4.6 4.8 6.7 9.4 7.4 2.0 17 5 % of people aged 65 or over with long term care needs receiving personal care at home 63.4 61.3 59.8 60.3 61.6 62.3 59.8 1.3 22 4 Page 275
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) % of adults supported at home who agree that their services and support had an impact in improving or maintaining their quality of life (rolling 4 years) 73.3 69.3 % of adults supported at home who agree that they are supported to live as independently as possible 79.3 71.9 % of adults supported at home who agree that they had a say in how their help, care or support was provided 70.2 59.5 % of carers who feel supported in their caring role 31.6 28.2 Residential costs per week per resident for people aged 65 or over (£) 600 526 696 561 573 725 724 2.1 8 1 Rate of readmission to hospital within 28 days per 1,000 discharges (%) 100.9 85.9 80.6 76.5 61.0 102.8 102.3 -20.3 1 1 16 Proportion of care services graded ‘good’ (4) or better in Care Inspectorate inspections (%) 79.8 80.0 74.0 81.1 73.8 81.9 79.8 -7.3 28 7 Number of days people spend in hospital when they are ready to be discharged, per 1,000 population (75+) 506 778 1057 950 820 899 939 -13.7 15 3 Culture & Leisure (B) Gross cost per attendance at Sports facilities (£) 22.46 3.11 2.66 1.87 1.63 3.77 4.40 -12.7 3 1 17 Cost per Library visit (£) 3.53 3.21 7.15 5.64 5.23 2.72 4.84 -7.3 28 5 Cost of Museums per visit (£) N/A1 N/A1 N/A1 N/A1 N/A1 Cost of Parks & Open Spaces (£) per 1,000 population 14,539 17,848 17,353 18,652 16,882 21,998 25,647 -9.5 8 2 % of adults satisfied with Libraries (rolling 4 years) 82.9 82.3 79.3 78.0 68.3 65.3 69.5 -9.7 14 5 % of adults satisfied with Parks and Open Spaces (rolling 4 years) 85.1 85.7 86.3 85.3 82.3 83.7 84.7 -3.0 22 6 18 % of adults satisfied with Museums and Galleries (rolling 4 years) 64.1 62.3 58.3 57.0 45.0 67.0 62.9 -12.0 28 8 % of adults satisfied with Leisure Facilities (rolling 4 years) 72.4 74.7 71.3 69.7 65.0 65.0 68.5 -4.7 18 6 Page 276
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) Environmental Services (B) Net cost per Waste collection per premises (£) 41.75 39.57 42.29 41.45 35.10 77.26 76.78 -15.3 2 1 Net cost per Waste disposal per premises (£) 122.43 119.27 107.92 105.58 102.53 104.45 103.26 -2.9 15 5 Net Cost of Street Cleaning (£) per 1,000 population 8,874 9,531 9,805 8,675 8,083 17,869 15,451 -6.8 3 1 Street Cleanliness Score N/A1 N/A1 N/A1 N/A1 N/A1 Cost of Maintenance per Kilometre of Roads (£) 5,162 6,038 7,034 7,608 6,827 13,629 13,954 -10.3 5 1 % of A Class roads that should be considered for maintenance treatment (rolling 2 years) 26.6 23.2 24.1 26.8 27.0 30.6 28.3 0.2 14 4 % of B Class roads that should be considered for maintenance treatment (rolling 2 years) 22.3 18.3 18.4 21.0 20.5 34.6 29.6 -0.4 2 1 % of C Class roads that should be considered for maintenance treatment (rolling 2 years) 21.3 19.3 20.6 22.7 24.7 34.2 32.3 1.9 5 1 % of unclassified roads that should be considered for maintenance treatment (rolling 2 years) 35.0 32.0 30.3 29.3 32.0 36.2 35.7 2.7 11 2 Cost of trading standards and environmental health (£) per 1,000 population 22,927 28,184 25,607 24,352 23,313 21,671 19,761 -4.3 20 7 Cost trading standards, money advice & citizens advice (£) per 1,000 population 5,729 5,800 6,460 5,918 5,547 7,203 5,887 -6.3 10 3 Cost of environmental health (£) per 1,000 population 17,199 22,384 19,148 18,434 17,767 14,469 13,874 -3.6 23 7 % of total household waste arising that is recycled 54.9 52.2 57.8 56.2 56.7 44.3 52.0 0.5 2 1 19 % of adults satisfied with refuse collection (rolling 4 years) 69.8 71.7 76.0 75.7 75.3 78.3 79.0 -0.3 25 7 % of adults satisfied with street cleaning (rolling 4 years) 58.3 58.7 62.7 57.7 55.0 57.0 63.5 -2.7 22 8 Housing Services (A) Gross rent arrears (all tenants) as at year end as a % of rent due for the reporting year Note: Ranking relates to 26 Local Authorities 3.2 3.8 4.5 4.7 3.3 8.6 7.4 -1.4 1 1 % of rent due in the year that was lost due to voids Note: Ranking relates to 26 Local Authorities 1.2 1.2 1.0 0.7 0.7 1.7 1.4 -0.0 4 1 Page 277
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) 20 % of council dwellings meeting Scottish Housing Quality Standard Note: Ranking relates to 26 Local Authorities 93.8 6.3 15.5 22.6 43.7 82.9 70.8 21.0 26 6 Average number of days to complete non-emergency repairs Note: Ranking relates to 26 Local Authorities 6.1 8.0 5.7 5.7 6.3 10.1 14.2 10.9 4 1 % of council dwellings that are energy efficient Note: Ranking relates to 26 Local Authorities 57.4 60.4 N/A3 N/A3 N/A3 Economic Development (B) 21 % Unemployed People Assisted into work from Council operated / funded Employability Programmes 5.3 5.9 10.8 5.0 10.4 14.2 12.6 5.4 25 6 22 Cost per Planning Application 5,379 5,949 6,930 6,913 9,931 6,938 9,024 43.7 27 5 Average time (Weeks) per Planning Application 6.7 6.2 6.3 7.2 8.5 14.3 10.0 17.2 8 4 % of procurement spent on local small / medium enterprises 23.6 25.2 24.8 23.6 26.8 31.5 26.7 3.2 18 4 No of business gateway start-ups per 10,000 population 9.6 12.7 11.3 11.0 11.4 12.3 13.8 3.6 21 5 23 Investment in Economic Development & Tourism per 1,000 population (£) 41,775 52,031 89,857 80,561 89,085 138,745 181,001 10.6 26 8 24 Proportion of people earning less than the living wage (%) 21.5 19.4 13.8 14.4 16.2 11.3 13.2 1.8 25 7 Proportion of properties receiving superfast broadband (%) 85.7 85.6 87.2 87.8 93.0 97.1 96.7 5.2 24 7 Town Vacancy Rates (%) 10.9 10.6 10.6 14.1 14.0 11.4 13.2 -0.1 21 5 Immediately available employment land as a % of total land allocated for employment purposes in the local development plan 34.8 14.9 14.9 14.9 9.7 21.3 17.4 -5.2 19 3 Gross Value Added (GVA) per capita (£) 24,619 26,594 28,144 28,220 N/A3 (Apr 2026) 30,581 23,811 0.3 9 2 Claimant count as a % of working age population (%) 5.3 3.0 2.5 2.3 2.4 3.1 2.6 0.1 11 4 Page 278
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Note Indicator Description Moray National Average Family Group Average Relative Change Since previous year Rank Latest result 2020/21 2021/22 2022/23 2023/24 2024/25 Latest result Latest result % change Short Term Trend Nat (32) FG (8) Claimant count as a % of 16-24 population (%) 7.7 3.3 3.0 2.7 2.9 3.3 3.2 0.2 12 3 Financial Sustainability (B) 25 Total useable reserves as a % of council annual budgeted net revenue 25.1 26.3 24.8 19.0 13.8 20.5 18.1 -5.3 25 6 Uncommitted General fund Balance as a % of council annual budgeted net revenue 7.2 2.2 2.1 2.3 2.1 2.0 2.3 -0.2 12 4 26 Ratio of Financing Costs to Net Revenue Stream 8.0 8.3 8.7 8.7 10.8 6.0 6.3 2.0 31 8 Ratio of Financing Costs to Net Revenue Stream – Housing Revenue Account 21.6 20.7 22.0 23.6 30.1 20.7 24.5 6.5 18 7 Actual outturn as a % of budgeted expenditure 89.6 91.1 93.4 97.1 100.4 100.1 100.1 3.2 9 1 Reliance on Reserves as a % of net expenditure 4.0 1.2 0.0 0.6 0.8 -1.2 1 1 Climate Change (B) CO2 emissions area wide per capita 4.13 4.72 4.37 4.10 N/A3 (Jul 2026) 4.59 5.18 -6.2 17 4 27 CO2 emissions area wide: emissions within scope of LA per capita 6.44 7.30 6.80 6.54 N/A3 (Jul 2026) 4.04 4.9 -3.9 32 8 28 CO2 emissions from Transport per capita 29.6 36.12 44.79 38.59 40.92 29.38 26.67 4.5 29 8 CO2 emissions from Electricity per capita 30.65 33.6 30.91 32.57 32.92 45.6 39.11 1.1 5 3 CO2 emissions from Natural Gas per capita 45.97 50.10 45.83 44.15 41.72 55.52 47.88 -5.5 5 2 N/A1 Data no longer collected nationally / locally. N/A2 Result below 5; not published to protect confidentiality. N/A3 Data not yet published. Page 279
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Executive Director Finance, Strategy and Transformation Author: Alasdair McEachan Contact Email: Alasdair.mceachan@moray.gov.uk Subject: Guidance on Agenda Items 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to approve guidance for the identification of ad-hoc agenda items for the Committee. 1.2 This report is submitted to Committee in terms of paragraph 1 (11) of the Council’s Scheme of Administration relating to scrutiny functions of the committee. 2. SUMMARY 2.1 Following changes to the remit of the Council’s Audit and Scrutiny Committee, adding ad hoc/thematic reviews as Agenda Items, the Council agreed that guidance would be prepared to assist in identifying areas for review. 2.2 This report proposes guidance for identification of such Agenda Items. 3. RECOMMENDATIONS 3.1 It is recommended that Committee approve the Guidance for Agenda Item Submissions document attached as Appendix 1 to this report. Alasdair McEachan Chief Governance Officer 4. BACKGROUND AND CONTEXT 4.1 The Council meeting on 28 January 2026 approved amendments to the Audit and Scrutiny remit within the Council Scheme of Administration (para 12 of minute refers). Item 15. Page 281
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4.2 These amendments included the following: New remit Rationale To scrutinise overarching improvement themes relevant to the Council's policy and regulatory landscape (which are not subject to scrutiny through a particular service committee) and to make recommendations in relation to these themes. There are some improvement themes (for example poverty) which do not fall neatly within existing corporate and service performance reports. It is proposed that such improvement themes can be considered by the Audit and Scrutiny Committee with guidance developed on how such issues are identified for consideration by the committee. 4.3 This report proposes guidance for identification of improvement themes in line with the revised remit, as highlighted in bold in the previous paragraph. 5. PROPOSALS 5.1 It is proposed that the Committee approve the Guidance on Agenda Item Submissions document attached as Appendix 1 to this report. 5.2 The guidance document summarises the different governance documents which the Audit and Scrutiny Committee can expect to see, including the new section on Ad hoc/thematic items. 5.3 Paragraph 3 of the Guidance documents proposes a mechanism for identification of Ad hoc/thematic items as follows: • Items should be related to strategic issues covered in the Council’s Corporate Plan. • Audit and Scrutiny Committee members can suggest issues at their periodic meetings with the Internal Audit Manager, the Chair or direct to CLT. • CLT screening to check no other current council consideration of the issue. • CLT to decide who the most appropriate officer is for report preparation and suitable timecscale. • Important to have regard to priority of issue and capacity of officers. It is anticipated that the numbers of such reports around 3 in any given year. 5.4 The Guidance document also provides for an annual review of the effectiveness of the revised remit and guidance as part of the Annual review of the constitutional documents which takes place around the turn of the calendar year. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) x Page 282
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Policy and Legal x Financial x Risk x Staffing x Best Value and Transformation x Property x Information Communications Technology/Digital x Equalities. Social Inclusion and Economic Impact x Climate Change and Biodiversity Impact x 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Effective scrutiny will better enable the Council to fulfil the ambitions set out in its strategic plans. 6.3 Policy and Legal The Guidance proposed sits as a policy document beneath the Council Scheme of Administration. 6.4 Financial There are no financial implications 6.5 Risk Additional scrutiny in thematic areas has the potential to help manage risk. 6.6 Staffing The capacity of officers to produce additional reports to the committee is a consideration with the Guidance. 6.7 Best Value and Transformation Additional scrutiny has potential to improve monitoring of strategic priorities and to contribute towards continuous improvement. 6.8 Property None. 6.9 Information Communications/Technology/Digital None 6.10 Equalities, Social Inclusion and Economic Impact None. 6.11 Climate Change and Biodiversity Impacts No direct implications. 7. CONSULTATION 7.1 The Guidance has been prepared in consultation with the Central Leadership Team and the Strategic Leadership forum. Comments made have been incorporated into the guidance. Page 283
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8. BACKGROUND PAPERS 8.1 Report to Moray Council on remit of Audit and Scrutiny Committee , 28 January 2026. Page 284
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APPENDIX 1 Audit & Scrutiny Committee Officer Guidelines on Agenda Item Submissions 1. Introduction 1.1 The Audit and Scrutiny Committee provides independent assurance on the effectiveness of the Council’s governance, internal control environment, financial reporting arrangements and risk management framework. Through its oversight role, the Committee supports constructive and transparent scrutiny of strategic risks and key decision-making processes, helping to ensure accountability, integrity and well-informed governance across the Council. 1.2 The Committee reviews reports from internal and external auditors, monitors the management of risks and internal controls, scrutinises areas of policy, service delivery and performance where improvement may be required. Overall, it acts as a non-political source of assurance, supporting effective governance and ensuring that public funds are used lawfully, properly and efficiently. 1.3 The Moray Council's Scheme of Administration for the Audit and Scrutiny Committee outlines the Committee's functions and responsibilities. These include: • Ensuring that the highest standards of probity, transparency, and public accountability are upheld across the organisation. • Considering and reviewing reports from the internal and external auditors relating to Council functions and activities. • Examining and scrutinising areas of policy, service delivery or organisational performance that have been identified as requiring improvement, providing challenge and oversight to support better outcomes. 2. Audit and Scrutiny Committee Reporting Topics 2.1 As an aid to officers, the following areas have been identified for reporting to ensure that the Council meets the functions of the Audit and Scrutiny Committee: Page 285
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Standing Items Objectives Internal Audit update reports An Internal Audit update report provides the Committee with regular assurance on progress against the approved Internal Audit Plan. It highlights completed work, work in progress, changes to the plan, resource issues and any emerging risks or concerns. This enables the Committee to monitor the performance of the internal audit function in accordance with the Global Internal Audit Standards. Internal Audit reports Individual internal audit reports provide the Committee with detailed findings from completed audits, including assurance levels, control weaknesses and agreed management actions. Reviewing these reports helps the members understand specific risks or non-compliance, challenge management on progress, ensure actions are implemented to strengthen governance, risk management and internal control. External Audit update reports External Audit updates provide the Committee with independent assurance on the Council’s financial management, governance and value-for-money arrangements. Periodic or Annual Items Objective Internal Audit Annual Report The Internal Audit Annual Report provides the Committee with an overall independent opinion on the effectiveness of the Council’s governance, risk management and internal controls. It summarises key audit findings, assurance levels and outstanding actions, enabling the Committee to identify areas of weakness, monitor improvements and ensure robust oversight of organisational performance and controls. Internal Audit Annual Plan This provides the Committee with oversight of planned audit activity for the forthcoming year. It ensures that internal audit resources are targeted at the Council’s key risks and gives members the opportunity to challenge priorities, request amendments and gain assurance that the internal audit function is robust and risk-based. Draft Annual Accounts This allows the Committee to review and scrutinise the financial statements before they are finalised. It includes assessing whether the accounts present a true and fair view, understanding significant judgements and identifying any areas requiring further explanation or assurance prior to approval by the Council. Page 286
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Annual Governance Statement This enables the Committee to consider the effectiveness of the Council’s governance framework. The statement outlines how governance arrangements operated during the year, highlights any weaknesses and sets out planned improvements. The Committee’s role is to challenge, seek evidence and ensure transparency. External Audit Annual Plan The External Audit Annual Plan sets out the planned scope, approach and timetable for the external auditor’s work for the year. It enables the Committee to understand upcoming audit activity, key areas of audit focus and any significant risks. This ensures appropriate oversight of the external audit process and allows members to challenge and comment on the proposed work before it proceeds. External Audit Annual Report The External Audit Annual Report provides the Committee with independent assurance on the accuracy of the financial statements, the effectiveness of governance and financial management and any significant risks or areas requiring improvement. It enables the Committee to scrutinise external audit findings, monitor agreed actions and ensure strong accountability and stewardship of public funds. Treasury Management Annual Report This informs the Committee about the Council’s treasury activities over the year, including borrowing, investment performance, risks and compliance with the treasury strategy and prudential indicators. The Committee’s role is to scrutinise performance, ensure responsible stewardship of public funds and understand any associated financial or risk implications. Key performance reporting Overarching issues arising from service performance reports should be presented to the Audit and Scrutiny Committee to highlight cross-service risks, trends or weaknesses that may affect overall governance and organisational effectiveness. This enables the Committee to maintain strategic oversight, identify systemic issues and ensure that appropriate improvement actions are being taken across the Council. Ad-hoc / Thematic Items Objective Major project audit reviews Reporting of major project reviews provides the Committee with assurance on the governance and delivery of significant projects, highlights key risks or weaknesses and ensures that projects are managed and delivered in line with the agreed programme. Page 287
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Compliance with statutory requirements Reporting of compliance with statutory requirements informs the Committee about how well the Council is meeting its legal duties. Reporting should highlight any gaps, risks, or areas requiring improvement, enabling the Committee to oversee and ensure that the Council operates lawfully and in accordance with the required standards. Cross cutting themes identified by members Cross-cutting strategic themes identified by members for review enable the Committee to examine wider organisational issues that span multiple services. These reviews highlight systemic risks or improvement opportunities, enabling the Committee to oversee stronger governance and improved performance across the whole Council. Thematic reports from recognised best practice organisations Providing reports from statutory bodies and recognised best-practice organisations relating to governance, financial management and performance in local government supports the Committee’s oversight role. These reports keep members informed of key issues and help maintain transparency and awareness of matters that may be relevant to the Council’s own arrangements. Page 288
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2.2 The Audit & Scrutiny Committee is not a service performance committee. Officers should avoid submitting operational or day-to-day service issues e.g. • Routine service performance matters • Operational complaints • HR/staffing issues • Service-level KPIs not linked to governance or risk 3. Guidance for selection of Ad hoc/thematic items • Items should be related to strategic issues covered in the Council’s Corporate Plan. • Audit and Scrutiny Committee members can suggest issues at their periodic meetings with the Internal Audit Manager, the Chair or direct to CLT. • CLT screening to check no other current council consideration of the issue. • CLT to decide who the most appropriate officer is for report prep and suitable timecscale. • Important to have regard to priority of issue and capacity of officers. • Anticipated that numbers of such reports around 3 in any given year. • Opportunity to review effectiveness at annual review of constitutional documents. Page 289
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Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Executive Director Finance, Strategy and Transformation Author: Jamie Fraser Contact Email: jamie.fraser@moray.gov.uk Subject: Grant Thornton – Audit progress report and sector updates 1. PURPOSE ☒ For Decision ☐ For Information 1.1 The purpose of this report is to inform the Committee of the progress of the Council’s External Auditor on delivering their responsibilities. 1.2 This report is submitted to Committee in terms of Section III (I) (9) of the Council’s Scheme of Administration relating to considering reports produced by the Council’s External Auditor. 2. SUMMARY 2.1 Grant Thornton, the Council’s External Auditor, has provided an audit progress report and a local government sector update (Appendix 1). The report outlines progress against their audit responsibilities and highlights a number of emerging sector issues for the Committee’s consideration. 3. RECOMMENDATIONS 3.1 It is recommended that the Committee review and note the audit progress report and sector updates. Jamie Fraser Chief Financial Officer 4. BACKGROUND AND CONTEXT 4.1 Grant Thornton has produced an audit progress and local government sector update report. The report outlines progress to date on the 2025/26 audit deliverables, with all planned work to date being complete. This includes both the issuing of the Audit Plan and the completion of the Thematic Review. Item 16. Page 291
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4.2 Sector updates include an up-to-date summary of emerging national issues and developments. 5. PROPOSALS 5.1 It is proposed that the Committee review and note the audit progress report report and sector updates. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) √ Policy and Legal √ Financial √ Risk √ Staffing √ Best Value and Transformation √ Property √ Information Communications Technology/Digital √ Equalities. Social Inclusion and Economic Impact √ Climate Change and Biodiversity Impact √ 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Improved Collaborative Leadership, as part of continuous improvement through Best Value, will better enable the Council to fulfil the ambitions set out in its strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☒ Tackle Poverty and Inequality. ☒ Build Stronger Greener Vibrant Economy. ☒ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following local Outcomes Improvement Plan priorities: ☒ Developing a diverse, inclusive, and sustainable economy ☒ Building a better future for our children and young people in Moray. ☒ Empowering and connecting communities. ☒ Improving wellbeing of our population 6.3 Policy and Legal None arising directly from this report. 6.4 Financial Page 292
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Whilst the details of the auditor update relate to key financial processes, there are no financial impacts arising directly from this report. 6.5 Risk None arising directly from this report. 6.6 Staffing None arising directly from this report. 6.7 Best Value and Transformation None arising directly from this report. 6.8 Property None arising directly from this report. 6.9 Information Communications/Technology/Digital None arising directly from this report 6.10 Equalities, Social Inclusion and Economic Impact None arising directly from this report. 6.11 Climate Change and Biodiversity Impacts None arising directly from this report. 7. CONSULTATION 7.1 This report has been prepared in consultation with the Corporate Leadership Team. 8. BACKGROUND PAPERS 8.1 Held within Accountancy section. Page 293
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GUIDANCE NOTES: To add a background image, please: • Download the required image from BrandCentral • Right-Click the background image on this slide and choose Format Background > Picture or texture fill, under Picture Source, click insert and navigate to the new image you downloaded. Moray Council Audit progress report and sector updates 22 May 2026 APPENDIX 1 Page 295
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow https://grantthorntonuk.s harepoint.com/sites/Digit alHubproject/SitePages/P owerPoint-Tips-and- Tricks.aspx#agenda-s- and-table-of-contents GUIDANCE NOTES: Table of contents does not update automatically • Please delete or factor in any instruction slides at the start of the deck before pagination • Please populate the page numbers manually before distributing • For tips and tricks to make this easy see: https://grantthorntonuk.s harepoint.com/sites/Digit alHubproject/SitePages/P owerPoint-Tips-and- Tricks.aspx#agenda-s- and-table-of-contents Content 1 Introduction 03 2 Progress as at May 2026 04 3 Audit deliverables 05 4 Sector updates 06 Audit Progress & Sector Updates 2 Page 296
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Introduction Angela Pieri Engagement Leader T: 0141 223 0887 E: Angela.L.Pieri@uk.gt.com Andrew Wallace Senior Manager T: 0141 223 2671 E: Andrew.D.Wallace@uk.gt.com This paper provides the Audit and Scrutiny Committee with a report on progress in delivering our responsibilities as your external auditors. The paper also includes a series of sector updates in respect of emerging issues which the Committee may wish to consider. Members of the Audit and Scrutiny Committee can find further useful material on our website, where we have a section dedicated to our work in the public sector. Here you can download copies of our publications: Local government | Grant Thornton If you would like further information on any items in this briefing or would like to register with Grant Thornton to receive regular email updates on issues that are of interest to you, please contact either your Engagement Lead or Engagement Manager. Audit Progress & Sector Updates 3 Page 297
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Progress as at May 2026 Financial Statements Audit We undertook our initial planning for the 2025/26 audit in February and March and presented our audit plan to the Audit and Scrutiny Committee in March 2026. We have shared our initial year-end audit request list with management, and early engagement has been sought with management around timescales for return. Our audit fieldwork is scheduled to commence at the end of June 2026. We aim to complete our testing of in-year transactions and closing balances by the end of August 2026, with reporting to the full Council scheduled in September 2026. As outlined in our audit plan, the risks requiring special audit consideration and procedures to address the likelihood of a material financial statement error have been identified as management override of control, the valuation of land; buildings and council dwellings; and the valuation of defined benefit pension scheme. We have rebutted the presumed significant risks relating to fraud in expenditure and revenue recognition. At this stage, there are no other financial statement audit matters to bring to your attention. Thematic Review and Best Value Reports Best Value Thematic for 2025/26 is on Asset Management. The engagement team met the Council in early January to discuss the thematic and asked the Council to complete the evidence gathering documents prepared by Audit Scotland. A response was subsequently provided in mid-February, and the engagement team completed the work in March 2026. In April, the engagement team met with management to discuss our findings and a draft report was shared with the Council. Following comment, the report has been finalised and is included with the agenda for the Audit and Scrutiny Committee in June 2026. Meetings Since commencement of our work in respect of the audit year 2025/26, we have met with the Chief Executive and Corporate Leadership Team. Regular meetings have been held with the Chief Financial Officer, and we will continue to do during the financial statements audit. We have also met with the Executive Director of Finance, Strategy and Transformation as well as the Monitoring Officer and Internal Audit. Lastly, regular meetings have been held between the engagement team and finance personnel. Audit Fees Audit Scotland published their expected fees for 2025/26: Audit appointments | Audit Scotland and Expected Fees 2025/26. Our estimate of the audit fees we will charge for the entity, as set out within our annual audit plan, presented to the Audit and Scrutiny Committee in March 2026 is £326,310. Events We also recently held two Local Government Accounts webinars for preparers of accounts on 5th and 11th February 2026, where we discussed a range of topics for preparing the 2025/26 statements of accounts. We also invite you to attend a webinar on local government audit committee effectiveness on 2 July as set out on page 9. Audit Progress & Sector Updates 4 Page 298
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Progress & Sector Updates 5 Audit Deliverables Below are some of the audit deliverables planned for 2025/26 2025/26 Deliverables Planned Date Status Audit Plan We are required to issue a detailed audit plan to the Audit and Scrutiny Committee setting out our proposed approach in order to give an opinion on the body’s 2025/26 financial statements. This was included as an agenda item at the March 2026 Audit and Scrutiny Committee. March 2026 Complete Thematic Review The 2025/26 thematic review subject is asset management. This is included as an agenda item at the June 2026 Audit and Scrutiny Committee June 2026 Complete Annual Audit (ISA 260) Report The Annual Audit Report will be reported to the Audit and Scrutiny Committee in September 2026. This report communicates the key outputs of the audit, including our findings and conclusions in relation to the financial statement audit and in relation to our work on wider scope and best value. September 2026 Not Yet Due Auditor’s Report This includes the opinion on your financial statements. September 2026 Not Yet Due Non-Domestic Rates Certification This is the assurance review we conduct of statutory returns to the Scottish Government based on agreed upon procedures to confirm accuracy, completeness and compliance. October 2026 Not Yet Due Housing Benefit Subsidy This is the report we submit to the Department or Work and Pensions based upon the mandated agreed upon procedures we are required to perform. November 2026 Not Yet Due Page 299
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Sector Update The pandemic has brought the biggest challenges in a generation to the public sector. Getting the insight and strategic support you need will be vital. Government and public services need to deliver change – without sacrificing service quality and while saving costs. Priorities like spreading economic growth more evenly takes both sophisticated and localised insight. Delivering the infrastructure to tackle climate change calls for deeper relationships between experts and government. And more unified approaches may be needed to improve outcomes across the sector. Our sector update provides you with an up-to-date summary of emerging national issues and developments to support you. We cover areas which may have an impact on your organisation, and the public sector as a whole. Links are provided to the detailed report/briefing to allow you to delve further and find out more. Our public sector team at Grant Thornton also undertake research on service and technical issues. We will bring you the latest research publications in this update. We also include areas of potential interest to start conversations within the organisation and with Audit and Scrutiny Committee members, as well as any accounting and regulatory updates. More information and insight can be found on the dedicated Public Sector sections of the Grant Thornton website: Audit Progress & Sector Updates 7 • Grant Thornton publications • Insights from sector specialists • Accounting and regulatory updates Public Sector Public Sector Page 301
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Public Sector Finance Leaders’ Barometer Audit and Scrutiny Committee members can obtain new analysis of the issues public sector finance leaders across the UK most prioritise, and how it might affect their organisation here: The Public Sector Finance Leaders Barometer | Grant Thornton Note: We acknowledge that the data collation for the output is focussed on local government in England. Nonetheless, the key priorities and themes identified are relevant to Scotland also. Background: Grant Thornton’s 2026 Public Sector Finance Leader’s Barometer draws on the views of 100 s151 officers across local government in England to identify the top three strategic priorities, operational pressures and in-demand skills for public sector finance this year. 84% of those interviewed were confident that their medium-term financial strategies will hold, but there was consensus that the biggest risks those strategies face are largely outside the s151 officer’s control: Growth in demand for statutory services; unfunded policy changes; and failure to deliver change programmes. These risks highlight the need for better demand modelling, earlier horizon scanning, and disciplined delivery of change programmes. However, workforce shortages, recruitment challenges, and increasing complexity, mean there’s simply not enough capacity to deliver transformation at the required pace. Audit Progress & Sector Updates 8 Page 302
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Webinar: Effective audit committees in local government Key information Effective audit committees in local government – Webinar Date: 02 July 2026 Time: 4.00PM – 5:30 PM BST Speakers: Paul Dosset, Partner & Head of Local Government Audit To register your place, following the link: Effective audit committees in local government | Grant Thornton 9 Supporting high-quality 2025/26 accounts We are delighted to invite members to our webinar focusing on what makes an Audit Committee and its members, effective. Audit Committees play a pivotal role in safeguarding governance in the local government sector. The May 2026 election results mean that many Committees will now require a change in membership. Further, the scale or risk that Audit Committees oversee, and their likely future remit, is also changing. An effective Audit Committee can be the gatekeeper for standards and compliance; and the guard against weakness in arrangements. Beyond compliance, the Committee also holds an important role in promoting and developing an effective corporate culture – on matters such as risk management; financial management; and on an authority’s wider commitments to good governance. Audit Committee members need to continually distil, and independently challenge, information from internal and external auditors; the monitoring officer; senior leaders; service lines; and sometimes other third parties. Our webinar will examine the roles and responsibilities of the Audit Committee Chair and members; the systems, structures and behaviours they need to perform as an effective Committee; the importance of self-assessment; and the resources available for support. Audit Progress & Sector Updates Page 303
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Readiness Training Key Benefits Build lasting capability Equip teams with the skills and confidence to manage audits effectively, now and in the future. Share knowledge, not just answers Designed to transfer expertise so teams understands the ‘why’ behind best practice. Upskill your people Helps every team member grow their technical understanding and strengthen collaboration. Flexible learning that fits any schedule Access training when it works for users, making it easy to build into existing workloads. Improve outcomes and efficiency Reduce audit queries, avoid delays, and strengthen relationships through proactive preparation. 10 Supporting high-quality 2025/26 accounts We’ve developed CPD-accredited online training to support audit teams in applying evolving standards in practice — strengthening technical confidence, improving audit documentation, and supporting more predictable and transparent audit delivery for Audit Committees. What’s included? The Audit Readiness training is delivered through a 90-minute online training session built around seven learning modules; • Foundations of Audit • Planning for Audit Success • Data and Documentation Management • Complex areas of the audit • Internal Controls & Risk Management • Communication & Collaboration • Hot Topics Each module includes a knowledge test assessment, key takeaways and where applicable downloadable resources to support ongoing learning. Audit Progress & Sector Updates Page 304
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow CIPFA Code changes to the accounting for non- investment assets Changes introduced in the 2025/26 Code: The 2025/26 CIPFA Code introduces substantial changes arising from the HM Treasury Thematic Review on Non-investment assets, and the requirement to keep the valuations of certain assets up to date: ❖ The introduction of a valuation expedient requiring valuations once every five years or on a five-year rolling basis, in each case supported by indexation in intervening years; and ❖ The Code requires the use of the best available indices and, where no index is available, a desktop valuation is undertaken in year three. The following asset classes are affected by the change: ❖ Other land and buildings; ❖ Vehicles, plant, furniture and equipment (where carried at current value); ❖ Surplus assets; and ❖ Right of use assets measured at current value Assets which are not in scope of the changes include council dwellings; vehicles; plant and equipment carried at depreciated historical cost as a proxy for current value; infrastructure; assets under construction; heritage assets; assets held for sale; intangible assets; and community assets carried at cost. Why Indexation is important: Indexation is a new requirement in the Code, intended to provide a reasonable estimate of how market values have changed, rather than an exact valuation. A range of indices are available, and authorities will need to exercise and be prepared to explain their judgements on which indices are the most appropriate to apply across their asset base. Authorities may apply indexation to 31st March 2025 carrying values, providing the assumption that existing carrying values are true and fair is valid. Where valuations are required, they must be undertaken at least once every five-years or when there are indicators of impairment. Audit and Scrutiny Committee can help by asking: ❖ Have we sought advice from an expert valuer on which indices are most appropriate for our various assets within scope of indexation? ❖ Have we documented our rationale regarding why we select/reject or deem there to be no indices? ❖ How has indexation been calculated/ applied in underlying records/ asset systems? ❖ Have we ensured that asset records distinguish between revaluation versus indexation, so that we have a clear record of when valuations are due and when valuations were last carried out? Audit Progress & Sector Updates 11 Page 305
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Local government funding and spending review Key information for Audit and Scrutiny Committee to be aware of: On 14 January 2026, the Scottish Government issued Local Government Finance Circular 01/2026, setting out the provisional 2026/27 revenue and capital funding settlement for councils. These provisional total funding allocations form the basis of the annual consultation between the Scottish Government and COSLA ahead of the Local Government Finance (Scotland) Order 2026 being presented to the Scottish Parliament. Subsequently, in March 2026, the Scottish Ministers approved the Local Government Finance (Scotland) Order 2026 which confirmed the levels of Revenue Support Grant and Non-Domestic Rate income allocated to each local authority. The levels of each allocated to Moray Council have been noted in the adjacent table. Audit and Scrutiny Committee can help by asking: What does the finance settlement mean for the entity? How are we mitigating any losses? How are we planning for best value from gains? The 2026/27 allocations made by the Scottish Government to Moray Council, alongside the previous two financial years is outlined below: *Revenue Support Grant is as stated in the Local Government Finance (Scotland) Order 2026. The Scottish Spending Review 2026 (January 2026): Alongside the 2026/27 Draft Budget, the Scottish Government published the Scottish Spending Review 2026, which sets out indicative multi-year funding plans for revenue expenditure to 2028/29 and capital expenditure to 2029/30. The Review outlines projected funding trajectories for local government alongside other portfolios; however, it does not provide council-level allocations and should be viewed as a high-level planning framework rather than a final funding settlement. The Review indicates that all core elements of Scottish Government funding to local authorities are expected to decline in real terms over the spending review period. Both revenue and capital funding are projected to reduce between 2026/27 and 2028/29, compounding existing cost pressures and increasing the medium-term financial risk faced by councils. This outlook reinforces the challenge for local authorities in maintaining service delivery and financial sustainability, particularly in the context of rising demand, inflationary pressures, and limited local fiscal flexibility. The Scottish Spending Review 2026 Audit Progress & Sector Updates 12 2025/26* 2026/27 Revenue Support Grant £179.8m £177.1m Non-Domestic Rates Income £58.0 £66.4m Total £237.8m £243.5m Page 306
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Accounts Commission – Report Publications Delivering for the future – Transformation: How councils are redesigning and delivering more efficient services (May 2026): Since 2022, auditors have undertaken Best Value audit work alongside annual audit work at Scottish Councils. Local transformation was the theme audited alongside the 2024/25 annual audit work and the findings were set out in a management report to each council. The report draws on the findings of the 22 management reports available at the time of drafting. Ultimately, Scotland’s councils need greater ambition to redesign services, with financial pressures growing and demand continuing to rise. Although Councils have been changing the way they work and deliver services for years, making significant savings. Now the scale and pace of change must shift to match the challenges ahead, helping to secure financial sustainability and meet increasing demand. The report assesses the progress across local authorities with prioritising and progressing the delivery of their local transformation ambitions, as well as their engagement in sector-led transformation activity. Overall, the report finds that progress across the sector has been mixed and asks Councils to reflect on messages in the 2024 report, ‘Transformation in Councils’ and ensure they have effective arrangements in place. Delivering for the future – Transformation: How councils are redesigning and delivering more efficient services Local government in Scotland: Financial bulletin 2024/25 (January 2026): In its latest update on council finances, the Accounts Commission report that councils face a budget gap of nearly £1 billion by 2027. In 2024/25, councils met 90 per cent of their savings targets. But for the first time in six years, reported a collective overspend on the costs of delivering services. Debt levels are increasing. Many are relying on reserves. Whilst councils are increasing the amount of money they raise through fees and charges, income generated isn’t keeping pace with rising costs and inflation. With Scottish Government funding to deliver capital projects falling, councils are also taking on more debt to deliver local infrastructure projects such as building schools and housing. Included within the financial bulletin is the reintroduction of a checklist for elected members. It is increasingly important that elected members understand the financial pressures facing their own councils, and the impact these may have on future priorities and service delivery. The checklist includes a range of questions to consider that are linked to the content of this report. It is designed to support elected members in scrutinising and understanding how well their council is working, exploring how well the council collaborates with other councils, communities and wider partners to change the way it delivers services within a very challenging financial context. Local government in Scotland: Financial bulletin 2024/25 Checklist for elected members Audit Progress & Sector Updates 13 Page 307
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Commission – Report Publications (2) The Scottish Budget 2026/27: Supplement to the Financial bulletin 2024/25 (February 2026) This supplement to Local government in Scotland: Financial bulletin 2024/25 sets out an analysis of the recently published 2026/27 Scottish Budget and the draft financial settlement for local government. At the point of issue, both were subject to parliamentary scrutiny as part of the budget process. Fundamentally, despite a funding increase in 2026/27, councils will continue to face significant challenges in remaining financially sustainable over the medium term as demands rise and costs increase. Furthermore, funding from the Scottish Government to 2028/29 is projected to fall in real terms, challenging councils to consider and implement the measures necessary to ensure the ongoing delivery of services. Supplement to the Financial bulletin 2024/25: The 2026/27 Scottish budget Integration Joint Boards: Finance bulletin 2024/25 (February 2026) Integration Joint Boards (IJBs), together with their NHS and council partners, must urgently take decisions on where to redesign, reduce or discontinue services. Funding to Scotland’s 30 IJBs increased by over two per cent in 2024/25 to more than £12 billion. But this was insufficient to meet rising costs and demands, with many IJBs using dwindling reserves to help meet the almost £450 million gap between demand and available funding. This is not sustainable. Increasing demand, rising costs and a growing number of people with long-term complex needs are placing mounting financial pressures on IJBs. The boards have reached a critical point, with a significant risk they will become financially unsustainable within the next 12 to 24 months. Alongside savings and using reserves, IJBs have been relying on substantial additional funding from their partners in the NHS and councils. IJBs need to plan their finances more realistically to reduce this reliance, as health boards and councils face their own significant financial pressures. Integration Joint Boards: Financial bulletin 2024/25 Audit Progress & Sector Updates 14 Page 308
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Scotland and Accounts Commission – Report Publications Annual Assurance and Risk Reports (March 2026): The Annual Assurance and Risks Report is an annual report by the Controller of Audit to the Accounts Commission, made public for the first time since 2021. It brings together a wealth of evidence from annual audit reporting. This report highlights recurring themes across 2024/25 audits, helping support individual bodies and the wider sector plan and deliver improvements. Alongside wider audit intelligence, it also helps inform the Accounts Commission’s selection of a Best Value theme for 2026/27. Previous themes covered how councils are responding to workforce challenges, why leadership matters and a report on how councils are redesigning and delivering more efficient services will be published in spring/summer 2026. Annual Assurance and Risks Report: A review of 2024/25 local government audits in Scotland Audit Progress & Sector Updates 15 Page 309
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Scotland – Report Publications Public audit in Scotland: Interim evaluation (December 2025): Public audit in Scotland is the shared statement of purpose between the Auditor General, the Accounts Commission and Audit Scotland. Published in 2023, it sets out the vision and mission, and the outcomes intended to be achieved for Scotland’s people. We are at the halfway point of Public audit in Scotland’s five-year lifespan. This mid-term evaluation looks at progress so far in achieving the intended outcomes, and in driving the mission and vision. It also considers how well performance is recorded and monitored, and areas for improvement. The evaluation is supported with case studies throughout. The interim evaluation sets out recommendations for Audit Scotland to improve both its audit work and its evaluation approach. In 2027, a final evaluation will be carried out of progress which will be reported publicly. Public audit in Scotland: Interim evaluation Transforming the approach to climate change: Lessons from public audit (March 2026): Independent public audit has an important function in assuring people about how the Scottish public sector is responding to the climate emergency and how public money is being used to help achieve Scotland’s climate change ambitions. This latest report brings together learning from across four years of reporting on climate change. Transforming the approach to climate change: Lessons from public audit Audit Progress & Sector Updates 16 Page 310
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Scotland – Best Value Reports Best Value Reports Best Value is about ensuring that there is good governance and effective management of resources, with a focus on improvement, to deliver the best possible outcomes for the public. The duty of Best Value applies to all public bodies in Scotland. It is a statutory duty for local authorities, such as councils. It is a formal duty for the Scottish Police Authority and Chief Constable, the Scottish Fire & Rescue Authority and Chief Fire Officer and in the rest of the public sector it is a formal duty on Accountable Officers, such as the chief executives of NHS bodies or of further education colleges. In 2023, Audit Scotland began a new approach to auditing Best Value in Scottish councils. The new approach continues to audit against the statutory duty but is now fully integrated with the annual audit at each Council. It also includes detailed work each year, focusing on a theme across all of the councils, which will be collated into a national report. A number of best value reports have been released during 2026 which may be of interest to members, as outlined below: Best Value: North Lanarkshire Council – January 2026 Best Value: Shetland Islands Council – March 2026 Best Value: Aberdeenshire Council – March 2026 Audit Progress & Sector Updates 17 Page 311
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit Scotland – Draft Code of Audit Practice Draft Code of Audit Practice Audit Scotland launched a consultation on the draft new Code of Audit Practice, inviting views from the public, audit providers, public bodies and other interested parties. The consultation, undertaken on behalf of the Auditor General for Scotland and the Accounts Commission, ran until Friday 27 March. We engaged with the consultation process and submitted a formal response, providing considered comments on the proposals set out in the draft Code. The new Code will apply from the 2027/28 financial year. Consultation on Code of Audit Practice 2026 | Audit Scotland Audit Progress & Sector Updates 18 Draft Code of Audit Practice Consultation on new Code of Audit Practice Page 312
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Commercial in Confidence |© 2026 Grant Thornton UK LLP Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Audit and Scrutiny Committee resources Grant Thornton learning on procurement and contract management: Local government procurement and contract management Audit Committee and organisational effectiveness in local authorities (CIPFA): https://www.cipfa.org/services/support-for-audit-committees/local-authority- audit-committees CIPFA Application Note: Global Internal Audit Standards in the UK Public Sector Global Internal Audit Standards in the UK Public Sector | CIPFA CIPFA Good Governance Delivering Good Governance in Local Government Addendum The Three Lines of Defence Model (IAA) https://www.theiia.org/globalassets/documents/resources/the-iias-three-lines- model-an-update-of-the-three-lines-of-defense-july-2020/three-lines-model- updated-english.pdf Risk Management Guidance / The Orange Book (UK Government): https://www.gov.uk/government/publications/orange-book Audit Progress & Sector Updates 19 Page 313
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2 0 © 2026 Grant Thornton UK LLP. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. Page 314
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1 Report to: Audit and Scrutiny Committee Meeting Date: 18 June 2026 Report by: Chief Executive Report No: Author: Atholl Scott Contact Email: atholl.scott@moray.gov.uk Subject: Annual Governance Statement 1. PURPOSE ☒ For Decision ☐ For Information 1.1 This report provides Committee with a copy of the Council’s Annual Governance Statement for 2025/26 for review and approval. 1.2 This report is submitted to Committee in terms of Section III (I) (5) of the Council’s Scheme of Administration relating to supporting the Council’s governance arrangements through review of the Annual Governance Statement. 2. SUMMARY 2.1 The Annual Governance Statement is a mandatory requirement for local government bodies and is published by the Council alongside its annual accounts. This report includes a copy of the draft Annual Governance Statement and is presented to the Committee for scrutiny before the document is finalised for inclusion in the audited annual accounts. 3. RECOMMENDATIONS 3.1 It is recommended that Committee scrutinise the draft Annual Governance Statement provided as Appendix 1. Atholl Scott Business Continuity & Risk Management Officer 4. BACKGROUND AND CONTEXT Item 17. Page 315
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2 4.1 The function of good governance in the public sector ensures that entities act in the public interest at all times. Governance comprises the arrangements put in place to ensure intended outcomes are defined and achieved. 4.2 The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE), building on work undertaken by the International Federation of Accountants, have published a guidance framework on ‘Delivering Good Governance in Local Government’. 4.3 The Local Authority Accounts (Scotland) Regulations 2014 requires the Council to publish an Annual Governance Statement with its annual accounts. The Statement is based on the guidance and summarises practice across the seven principles identified within the framework, considers the roles of those who oversee the development and operation of such practice, and provides an overall assessment of the effectiveness of governance arrangements. The statement includes the annual opinion provided by the Service Manager - Internal Audit and Risk in line with Global Internal Audit Standards. 4.4 Good governance practice involves both elected members and officers and this is reflected in the requirement for the statement to be certified by both the Leader of the Council and the Chief Executive as Head of Paid Service. 4.5 The statement is subject to review by external audit, where the external auditor is required to report on anything believed to be inconsistent with any other findings disclosed from the audit work completed. There has been nothing to report in this regard in previous annual audits. 5. PROPOSALS 5.1 This report provides Committee with a copy of the draft 2025/26 Annual Governance Statement, which has been produced following completion of the annual review of the Council’s governance arrangements and system of internal control. 6. SUMMARY OF IMPLICATIONS 6.1 The table below shows whether risks and implications apply if the recommendations are agreed: SUBJECT YES NO Corporate Plan and 10 Year Plan (Local Outcome Improvement Plan) × Policy and Legal × Financial × Risk × Staffing × Best Value and Transformation × Property × Page 316
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3 Information Communications Technology/Digital × Equalities, Social Inclusion and Economic Impact × Climate Change, Biodiversity and Sustainability × 6.2 Corporate Plan and 10 Year Plan (Local Outcomes Improvement Plan (LOIP)) Governance refers to how organisations are managed and controlled. Effective governance is key to the delivery of the strategic priorities promoted in Community and Council strategic plans. a) Links to Council Corporate Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following Council Plan strategic priorities: ☒ Tackle Poverty and Inequality. ☒ Build Stronger Greener Vibrant Economy. ☒ Build Thriving, resilient, empowered Communities. b) Links to Local Outcomes Improvement Plan – The proposals in this report support and contribute to improved outcomes for communities as outlined in the following local Outcomes Improvement Plan priorities: ☐ Developing a diverse, inclusive, and sustainable economy ☐ Building a better future for our children and young people in Moray. ☐ Empowering and connecting communities. ☐ Improving wellbeing of our population 6.3 Policy and Legal The Annual Governance Statement forms part of the annual accounts the Council is required to prepare under statute. 6.4 Financial No implications directly arising from this report. 6.5 Risk Good governance includes the effective management of risk, as evidenced in this ‘risk implications’ paragraph in all reports that come before the Council and its committees, and in the Council’s corporate risk register that is kept under review by Senior Management and reported at agreed intervals to the Corporate Committee. 6.6 Staffing No implications directly arising from this report. 6.7 Best Value and Transformation The Council’s Annual Governance Statement is prepared in accordance with the CIPFA/SOLACE ‘Delivering Good Governance in Local Government’ Framework and is key to ensuring the delivery of the council’s strategic priorities. 6.8 Property No implications directly arising from this report. Page 317
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4 6.9 Information Communications/Technology/Digital No implications directly arising from this report. 6.10 Equalities, Social Inclusion and Economic Impact No implications directly arising from this report. 6.11 Climate Change and Biodiversity Impacts No implications directly arising from this report. 7. CONSULTATION 7.1 The Corporate Leadership Team, Heads of Services and the Service Manager – Internal Audit and Risk have been consulted and contributed to the content of the Annual Governance Statement. 8. BACKGROUND PAPERS 8.1 None Page 318
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APPENDIX 1 1 Moray Council Annual Governance Statement 2025/26 Page 319
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2 Table of Contents 1. Scope of Responsibility 2. Framework for Good Governance 3. Review of the Adequacy and Effectiveness of the Council’s Governance Arrangements 4. Overall Assessment of the Effectiveness of Governance Arrangements 5. Significant governance issues 6. Concluding Remarks Page 320
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3 1. Scope of Responsibility The council is responsible for ensuring its business is conducted in accordance with the law and proper standards, and that public money is safeguarded, properly accounted for, and used economically, efficiently and effectively. The council has a statutory duty to make arrangements to secure Best Value under the Local Government in Scotland Act 2003. In discharging these responsibilities, elected members and the corporate leadership teams are responsible for putting in place proper arrangements for the governance of the council’s affairs and for facilitating the effective exercise of its functions. In delivering these functions, there is a requirement to maintain effective partnership working with others, principally with NHS Grampian and the Moray Integration Joint Board, Grampian Valuation Joint Board, tsi Moray, and the Moray Leisure Centre, as well as with other bodies involved in Community Planning and in the delivery of projects forming part of the Moray Growth Deal. This annual governance statement, which covers the period from 1 April 2025 through to the date of signing of these annual accounts, explains how the council has used the CIPFA/SOLACE 2016 Framework ‘Delivering Good Governance in Local Government’ as a basis for considering the effectiveness of its own governance arrangements. 2. Framework for Good Governance The overall aim of the ‘Delivering Good Governance in Local Government’ Framework is to ensure that: resources are directed in accordance with agreed policy and according to priorities; there is sound and inclusive decision making; and there is clear accountability for the use of those resources in order to achieve desired outcomes for service users and communities. The key elements of the council’s governance arrangements are described in terms of the seven principles defined in the Framework, summarised as follows: 2.1 Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law; The roles and responsibilities of elected members and senior officers and the processes to govern the conduct of the council’s business are defined in procedural Standing Orders, a Scheme of Administration, a Scheme of Delegation, and Financial Regulations. These are updated annually following consideration and review of changes necessary for the effective functioning of the council’s affairs. These changes are prompted by new legislative requirements, organisational change, audit recommendations, and incorporate identified revisions necessary to improve governance practice. Page 321
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4 Supplementary (second tier) documents providing additional guidance on specific constitutional matters are also maintained and are subject to periodic review and updating as appropriate. Codes of Conduct for both elected members and officers are in place, and these define the ethical values and standards of behaviour expected. The Codes draw on the ‘Standards in Public Life’ covering issues including leadership, fairness and integrity. Refresher training on the Code of Conduct for elected members was delivered in conjunction with the Improvement Service. No referrals in respect of inappropriate conduct were made to the Standards Commission during the year. The council’s Chief Governance Officer is the designated Monitoring Officer responsible for ensuring that agreed procedures are followed and that all applicable statutes and regulations are complied with. 2.2 Ensuring openness and comprehensive stakeholder engagement; Meetings of the council and its committees are delivered using a hybrid format that enables attendance in person or via web link. These are live streamed and available for public viewing, with matters discussed and determined in confidence relating only to those deemed confidential in terms of Part 1 of Schedule 7A of the Local Government (Scotland) Act 1973. The rationale for all decisions proposed and taken is fully set out in committee reports. Stakeholder engagement is central to the council’s work at a strategic level, notably informing the preparation of the annual budget, and on multiple issues including climate, planning, housing, education, and transportation. A new engagement portal has been commissioned – Moray Engage – and work is underway to develop an Engagement and Consultation Strategy, including guidance developed by young people on how best to engage with young people. Once approved, the strategy will provide additional tools and training to help ensure Moray's citizens are appropriately involved in decision-making processes. A programme of employee engagement is also ongoing to support organisational change ensuring staff have opportunities to influence future service delivery models and contribute to the development of organisational priorities. Constructive engagement continues with recognised Trades unions including work to develop a refreshed partnership agreement that supports meaningful consultation and collaborative working on workforce and organisational matters. The council also seeks and obtains feedback on delivery of its services having adopted a comprehensive complaints procedure based on a model scheme developed by the Office of the Scottish Public Services Ombudsman. All Page 322
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5 complaints are responded to as appropriate and inform improvements to service delivery. A comprehensive report on complaints handling is prepared and presented annually to a council committee. 2.3 Defining outcomes in terms of sustainable economic, social, and environmental benefits; The creation and implementation of a vision for the local area, including expected outcomes for the community, is encompassed in the Local Outcomes Improvement Plan (LOIP). The overarching aim and purpose of this 10-year Plan is ‘to raise aspirations by creating an enabling environment where our residents can achieve expanded choices, improved livelihoods and wellbeing”. In particular, the LOIP recognises the importance of and benefits from reducing inequalities and poverty, with outcomes focused on the need for a growing, diverse and sustainable economy, building a better future for our children and young people in Moray, empowering and connecting communities, and improving the wellbeing of our population. The LOIP is a partnership plan, and its strategic delivery is overseen by a Community Planning Board, which meets quarterly. The Board comprises representatives from a broad range of organisations as reflected in agenda items considered during the year. These included reports on School Age Childcare, Poverty, Digital Engagement, Economic Development and Health and Transportation Plans. The Board also received an annual report on progress on delivery of the multi-agency Children’s Services Plan. Currently the LOIP sits alongside the Corporate Plan Moray 2024-2029, the latter setting out the vision and priorities of the council for a five year period. The council plan details council priorities focussing on three key themes: tackling poverty and inequality, building a stronger greener vibrant economy, and seeking to build thriving, resilient, empowered communities. The plan sets targets for outcomes consistent with maintaining a sustainable council that provides valued services to its communities. An annual report detailing progress achieved is prepared and presented to a meeting of the council and a delivery framework has also been prepared to support implementation and monitoring of the plan through to its conclusion. The period also saw the council implement measures aligned to its Sustainable Development Statement, reporting on progress achieved and planned in a 2026 update of its Climate Change Strategy and Route Map to Net Zero. 2.4 Determining the interventions necessary to optimise the achievement of the intended outcomes; Page 323
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6 The strategic partnership and corporate plans are translated into service plans prepared within each council service area. These facilitate delivery of agreed outcomes and assist in securing continuous improvement. Service plans are reported to a meeting of the council or appropriate service committee for consideration and approval, in reports that provide information on planned activity. More generally, all committee reports contain a ‘Summary of Implications’ section that links report content to strategic plans, legal and policy issues; financial implications, risk, staffing and property matters; equalities; social impact; and climate change and biodiversity considerations. The format of these reports, recently updated based on advice from the Improvement Service, remains under review to ensure optimal levels of information are available to decision makers. A particular focus continues to be given to financial implications of any proposals given the current economic climate. The council is fully aware of the financial challenges it faces, and elected members are provided with an extensive volume of information on both the availability of resources and options for future service delivery. This has been made available during workshops for elected members; in reports to the council on budget setting, including projections for the medium to longer term; and in regular budget monitoring reports covering both capital and revenue expenditure submitted to service committees. A formal budget protocol sets a framework of engagement and consultation to support the process, including engagement with Trade Union Members through the Joint Consultative Forum. A balanced budget was again achieved for 2026/27 through a combination of an improved financial settlement from Scottish Government, an increase in Council Tax, and savings delivered in line with the council’s short to medium term financial strategy. A number of unknowns including impacts of inflation and geopolitical events were highlighted during the budget setting process, as were continued pressures in respect of the council’s funding obligations to the Moray Integration Joint Board. Longer term financial planning projections note that further council tax rises and additional savings will be required going forward, and progressing the approved transformation strategy remains key to delivery of these savings. Regular reports on transformation projects progressed have been presented to the council during the period covered by this statement. The achievement of agreed outcomes is monitored through an established Performance Management Framework that calls for frequent reporting on key performance measures developed for each service. In addition, the council participates in the Local Government Benchmarking Framework which compares a range of established performance measures with those of other Scottish local authorities. Service Committees are provided with reports to review, scrutinise and note actions undertaken by services to meet performance objectives. An illustrated annual Public Performance Report is prepared and published to demonstrate the outcomes and achievements of the council during the year. Page 324
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7 2.5 Developing the entity’s capacity, including the capability of its leadership and the individuals within it; Senior management capacity was reviewed during 2024/25, and the council approved a revised senior management structure in April 2025. The revised structure was designed to strengthen leadership capacity, with the appointment of an additional Executive Director and consequential reallocation of duties and responsibilities for other Directors in post. Roles of Heads of Services were also reviewed and, in some instances, revised, to optimise service direction and oversight. Actions required from this review process included the recruitment to a number of vacant posts within the new structure. This work was progressed during the period, and all senior management posts have now been filled. More broadly, leadership capacity is supported through the promotion of a Leadership Forum, which brings together senior managers from all services to provide a wider perspective to the consideration of issues facing the council. Forum meetings ensure consistent messaging is available from senior management to managers. Organisational Development continues to review and refine workforce development opportunities, including on leadership development, and training opportunities are available for all staff, online and in- person, on corporate issues including data protection and cyber security. As the council moves to phase 2 in the restructuring process, external support will aid council-wide engagement to develop a set of employment values, and engagement has begun to determine the form and content of future management training and leadership programmes. Workforce planning activity is being undertaken to ensure the Council has the capacity, skills and workforce profile required to deliver future service priorities. This includes succession planning, recruitment and retention initiatives, workforce data analysis and consideration of future workforce requirements arising from service transformation. The council has an agreed elected members’ development strategy that includes an on-going training programme of learning, development and briefings. Members appointed to certain committees also receive specific training related to the responsibilities of these committees. A Strategic Leadership Forum involving both elected members and senior officers facilitates collaborative cross-party discussions on the future direction of council services. Senior Officers also meet regularly with Chairs of the council and its committees. In addition, elected members represent the council on a range of outside bodies, including on boards of other Community Planning partners, across partnership bodies such as the Moray Economic Partnership, various national Page 325
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8 bodies such as COSLA and its themed Boards, and a broad range of charitable and third sector organisations. This representation provides valuable learning and networking opportunities for those members. 2.6 Managing risks and performance through robust internal control and strong public financial management; The council has a risk management policy designed to support the identification, evaluation and mitigation of risks that may impact on its ability to meet its objectives. A Corporate Risk Register is maintained providing summary information on issues the Corporate Leadership Team considers are the principal risks facing the council. The register describes how these risks are managed and controlled. Risk implications are detailed in all committee reports to inform decision-making processes. The council has also developed and approved a risk appetite statement -informed by a workshop involving elected members and senior management – as a further aid to guide decision making. The council’s system of internal control is based on a framework of financial regulations, regular management information, administrative procedures, management supervision and a scheme of delegation that defines accountabilities of senior officers. An Audit and Scrutiny Committee, through its consideration of reports by internal and external auditors, monitors the effectiveness of the system of internal control. Strong financial management is secured through the work of the statutory officer appointed in terms of Section 95 of the Local Government (Scotland) Act 1973. This role now sits with the Executive Director (Finance, Strategy and Transformation) appointed as part of the senior management restructuring, with the Chief Financial Officer now designated as the Depute Section 95 Officer. . The Section 95 officer advises the Council on all financial matters and ensures the timely production and reporting of budget estimates, budget monitoring reports and annual accounts. Draft and audited Annual Accounts are published on the council website. 2.7 Implementing good practices in transparency, reporting, and audit to deliver effective accountability; Council business is conducted through an established cycle of webcast committee meetings. Webcasts remain available for viewing for 12 months following a meeting. Meeting dates are published in advance, and agenda papers are made available at least one week before meetings take place. Minutes of meetings are prepared, and important decisions are publicised on the council website and through social media. Page 326
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9 The council’s website provides a platform from which to disseminate a wide range of information including news items on policy decisions, guidance on council services, and on service disruptions/interruptions arising from weather events or similar. The website is being updated and a new Customer Relationship Management system implemented to improve accessibility of services, and aid consultations. The communications team has been expanded to support the increased volume of information dissemination and consultations taking place. The council responds to the findings and recommendations of Internal Audit, External Audit, and other Scrutiny and Inspection bodies by developing improvement Action Plans. The Audit and Scrutiny Committee is integral to overseeing independent and objective assurance processes that make recommendations for improvements to the system of internal control. The Service Manager - Internal Audit and Risk facilitated a workshop with members of the Committee to affirm compliance with good practice guidance for audit committees published by the Chartered Institute of Public Finance and Accountancy (CIPFA). A continuing focus in the period was the council’s response to the Accounts Commission Best Value review report published in 2024. The action plan developed in response to the Commission’s findings covering issues including the council’s vision, leadership, effective use of resources and sustainable development, has been progressed with regular reporting to the council’s Corporate Committee. Ongoing monitoring continues, with all recommended actions either well advanced or completed. The council responds to requests for information under Freedom of Information legislation having processed some 1500 such requests during the period covered by this statement. 3. Review of the Adequacy and Effectiveness of the Council’s Governance Framework 3.1 In assessing the effectiveness of the governance framework, including the system of internal control, it is necessary to consider the role of the functions and individuals who contribute to it, as follows: • Elected Members Governance arrangements at a political level emanate from the council, its committees and from other roles that elected members fulfil. These include participation in the Community Planning Board and associated groups for multi- agency issues. Elected members also have substantive roles on the Moray Integration Joint Board for Health and Social Care, the Grampian Valuation Joint Board, and the Moray Leisure Arm’s Length External Organisation (ALEO), each of Page 327
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10 which has its own governance arrangements. In addition, elected members have membership and represent Moray Council interests in partnerships that contribute to meeting council aims and objectives, notably in the development and delivery of projects forming part of the Moray Growth Deal or being progressed using other ring fenced funding. Acknowledging political difference, elected members have been encouraged to strengthen collegiate working where possible. This has been evident during the period with improved opportunities for informal discussion and engagement on development of policy proposals. A follow up survey of elected members and chief officers on collaborative leadership and working relationships identified some positive aspects as well as opportunities to consolidate practice as the new management structure beds in. • Audit and Scrutiny Committee The council has an Audit and Scrutiny Committee where elected members consider reports on audit matters. These reports provide assurances on the adequacy and effectiveness of the system of internal controls including those relative to the delivery of plans, compliance with laws and regulations, accuracy of information and safeguarding of assets. Two external members sit on the committee to provide an independent perspective on issues under consideration. This committee is a key component of good governance, distinguished from other committees by the role elected members are required to fulfil, not in setting policy or considering service matters, but by providing independent oversight and challenge in support of the council’s duty to secure continuous improvement. These functions are delivered independently from the supervisory oversight roles of the Leadership Teams. • The Corporate Leadership Team The Chief Executive is responsible and accountable to the council for all aspects of management including promoting sound governance, providing quality information/support to inform decision making and scrutiny, supporting other statutory officers, and building relationships with all elected members. The Corporate Leadership Team (CLT) has overarching operational responsibility for good governance arrangements. The team was restructured during the period and now comprises the Chief Executive, three Executive Directors, the Chief Officer (Health and Social Care Moray), the Monitoring Officer and the Chief Financial Officer. As reported above, the roles and responsibilities of officers within the team have been revised and, in some cases, redesignated to strengthen strategic leadership arrangements. Page 328
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11 • The Corporate Leadership Team / Extended Corporate Leadership Team This is an extended management team comprising the CLT and Heads of Services. The role and remit of this group is to support the formulation and implementation of policies, strategies and plans to achieve local and national outcomes, to share and promote good practice from an inter-service perspective, to act with the wider objectives of the council in mind to ensure the resources are effectively deployed, and to assist CLT in keeping the governance of the council and its services under review. Individual Heads of Service, including the Chief Financial Officer and Monitoring Officer, have considered the effectiveness of governance arrangements within their respective services by reference to the principal risks identified in the council’s Corporate Risk Register and provided assurance statements for use in the preparation of this corporate statement. This affirms the broad ownership of good governance and recognition of its importance within the senior leadership of the council. Overall, the assurance statements confirm that governance arrangements within services are working as intended, and in support commentary has been given on elevated risks and on mitigating actions taken in response. The main issues raised in these returns are: • Staffing shortages and vacancies, and their impact on capacity to deliver change at pace in a number of service areas. • Continuing risk of data breaches, and the response being taken by services to mitigate these through provision of training on data security and reminder on data security considerations when using email. • A need to strengthen the approach to electronic document and records management across all services. • Ongoing obligations on the Housing Service to monitor homelessness data and progress electrical safety improvements in council houses in support of national initiatives directed by the Scottish Housing Regulator. • A need for continued focus on Health and Safety requirements thereby protecting the workforce and minimising the number of reportable incidents. • Further work to review revised governance arrangements around delivery of Additional Support Needs in Education, and to ensure these align effectively with Children’s Services Governance Groups. • Progressing an absence management project with the aim of reducing teacher absence and encouraging teaching staff to relocate to Moray. • A need to ensure consideration is given to equalities impacts in all cases where persons or groups potentially affected have protected characteristics. Page 329
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12 • The Chief Governance Officer (Monitoring Officer) / Chief Financial Officer In discharging their respective responsibilities the Chief Financial Officer complies with the governance requirements of the CIPFA Statement on the role of the Chief Financial Officer, and the Chief Governance Officer provides an annual information report on discharging the duties of a Monitoring Officer to a meeting of the council. • The Chief Social Work Officer The Head of Service, (Children and Justice Services) fulfils the statutory role of Chief Social Work Officer (CSWO) as part of the duties of the post. The latest available CSWO annual report for the year to 31 March 2025 provides a comprehensive overview of the work of the service, describing governance and accountability arrangements, service quality and performance, resources and workforce, and a section on forward planning. The report notes that Social Work services continue to face significant pressures from multiple factors including an ageing population, increased service demand and ongoing workforce shortage and recruitment challenges, concluding that high quality services continue to be delivered as a result of the commitment and diligence of the dedicated social work and social care workforce. The report was the first annual report prepared by an interim appointee to the post of CSWO, an arrangement that has had effect since June 2024 and continued for most of the period covered by this statement. A permanent appointment has been made to the CSWO post recently, with the successful applicant taking up the role in August 2026. • Internal Audit The Internal Audit activity adds value to the Council by considering strategies, objectives, and risks; offering ways to enhance governance, risk management and control processes; and objectively providing relevant assurances. The Service Manager - Internal Audit and Risk is accountable on a day-to-day basis to the Chief Governance Officer and to the Audit and Scrutiny Committee. Internal Audit applies mandatory Global Internal Audit Standards (GIAS) in delivering the Internal Audit Service. An internal quality assessment of the service during the year confirmed on going compliance with the GIAS. The Council has a system of internal control designed to manage risk to a reasonable level. Internal controls cannot eliminate the risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. Page 330
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13 The internal audit plan for each year includes a range of audit projects covering main financial systems, other systems operating within services and several ad- hoc/unplanned projects. The outcomes from these projects, together with any recommendations to enhance the control environment, are reported to management and to the Audit and Scrutiny Committee. This Committee is chaired by an elected member who is not part of the council Administration. All planned reviews detailed within the Annual Internal Audit Plan for 2025/26 were completed as scheduled. GIAS requires an internal audit opinion to be provided annually. From the planned audit work completed and based on this work and other knowledge of the organisation and its control systems, it is the opinion of the Service Manager – Internal Audit and Risk that reasonable assurance can be placed upon the adequacy and effectiveness of the internal control environment which operated in the council during the year. • Health & Social Care Partnership The council, as a key partner of Health and Social Care Moray, has an interest in the governance arrangements of the Moray Integration Joint Board (MIJB). This interest relates to its financial exposure as a principal funder and its statutory responsibilities for Social Work services and associated duties of the Chief Social Work Officer. The Chief Officer (Health and Social Care Moray) is part of the Corporate Leadership Team and provides regular reports on the work of the MIJB to meetings of the council. Audit arrangements for the MIJB are provided jointly by the council’s Internal Audit Service and NHS Grampian’s Internal Auditors. The council’s Service Manager – Internal Audit and Risk (in the role of Chief Internal Auditor for the MIJB) provides assurance over social care services, and oversight of the MIJB governance arrangements. Relevant findings from NHS Internal audit reports are also considered by the MIJB. From audit work completed in this role, the Chief Internal Auditor has provided an opinion of only limited assurance that the Moray Integration Joint Board has adequate systems of governance and internal control for the year ended 31st March 2026. A continuing governance consideration for the council is the financial sustainability of the MIJB, with any overspend against budget requiring to be met by NHS Grampian and the council, pro-rata in line with an approved funding agreement. For 2025/26, the council’s funding contribution to the MIJB was contained within approved expenditure limits. The council continues to work closely with NHS Grampian and in conjunction with Aberdeenshire and Aberdeen City Councils to provide effective oversight of the management and control of the costs of services delivered through the IJB. Page 331
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14 • External Agencies In addition to the various internal review processes and the external audit of the Annual Accounts, aspects of the council’s governance arrangements are considered in various inspection reports produced by the external auditor and other inspectorates. The council welcomes and responds positively to these reports. 4. Overall Assessment of the Effectiveness of Governance Arrangements 4.1 Having regard to the information provided in the preceding paragraphs, it is considered that established systems and processes are consistent with the seven principles identified in the ‘CIPFA/SOLACE’ Framework ‘Delivering Good Governance in Local Government.’ Implementation of the Best Value Action Plan has further strengthened these arrangements, and work will continue as outlined below to optimise governance arrangements that deliver Best Value for Moray. 5. Significant Governance Issues 5.1 Issues reported as requiring attention in the Annual Governance Statement for the prior year (2024/25) were aligned to the Best Value report, and to reports prepared by external advisers who provided consultancy support to the Council. These reports informed a Best Value self-assessment exercise completed by council managers which included the following priority areas for improvement: • Continue work to establish a clear shared vision for Moray that supports delivery of sustainable public services. • Maintain current activity to ensure leadership is effective and there is good collaboration between elected members and senior officers. • Increase the pace of transformation and identify savings with the intention of securing longer term financial sustainability. • Revisit governance arrangements covering partnerships; principally for Health and Social Care Moray in respect of performance and early identification of any significant financial and service risks. 5.2 While substantial progress has been made on all of these areas, the plan for improvement is a three-year plan and will need further refinement as the council responds to change both internally and in response to emerging issues impacting on local government. 5.3 Specifically: Page 332
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15 • Collaborating with partners to inform the engagement plan for the next iteration of the Moray Local Outcomes Improvement Plan, thereby ensuring resources available are fully aligned with identified partnership priorities. • Progressing multiple improvement initiatives across all services, including the management and oversight of substantial external funding streams including those for the Moray Growth Deal, Just Transition and Levelling Up Programmes. • Concluding work being undertaken to review and revise governance arrangements between the council and Moray Leisure. • Pursuing transformation opportunities at pace aimed at securing service improvements and efficiencies. • Demonstrating financial sustainability, secured short-term through delivery of a balanced budget for 2026/27, and with medium to longer term financial plans updated to evidence a continuing commitment to sound financial management. • Progressing work to develop e a shared set of organisational values and behaviours, supporting a positive workplace culture, effective leadership and employee engagement as part of the council’s wider transformation and improvement agenda. 5.4 Looking forward, key governance challenges relate to: • supporting elected members to sustain the benefits derived from collaborative working, while recognising and respecting political difference; • continuing to explore transformation opportunities where these are likely to generate improved, modern and sustainable ways of working. • monitoring closely capital and revenue spend, including allocations to partner bodies, to ensure the ongoing financial sustainability of the council. • completion of training for elected members on scrutiny arrangements, and preparation for induction of elected members following the May 2027 local government election. • progressing the review of other staffing structures to create capacity necessary to deliver agreed priorities; Phase 1 of the senior management restructuring has been completed, and work is underway with Heads of Service to assess service requirements and inform the corporate planning of Phase 2 organisational reviews. 5.5 Work is also being progressed to develop a Local Code of Governance that describes the council’s governance structures and functions; having such a Code in place will enable an abridged version of this Annual Governance Statement to be prepared for inclusion with the Annual Accounts in future years. Page 333
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16 6. Concluding Remarks 6.1 A number of key governance issues have been addressed during 2025/26, notably the successful recruitment of a number of chief officers to the council’s Corporate Leadership Team, reassignment of duties and responsibilities of the officers within that team, and progress with delivery of improvements identified in the Best Value Action Plan. These changes and actions alongside other developments referenced throughout this governance statement reflect the determination of both members and officers to improve governance practice, all against a backdrop of ongoing challenges relating to transformation of services and ensuring financial sustainability. 6.2 Notwithstanding these challenges we remain committed in our respective roles as Council Leader and Chief Executive to the promotion and application of good governance practice in the delivery of Best Value services to the citizens and communities of Moray. Kathleen Robertson Karen Greaves BEM Leader of the Council Chief Executive xx September 2026 Page 334