Agenda reports pack
Argyll and Bute Council · 16 June 2026
Back to Argyll and Bute HSCP Audit and Risk Committee — 16 June 2026 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
9 June 2026 NOTICE OF MEETING A meeting of the ARGYLL AND BUTE HSCP AUDIT AND RISK COMMITTEE will be held BY MICROSOFT TEAMS on TUESDAY, 16 JUNE 2026 at 10:30 AM, which you are requested to attend. BUSINESS 1. APOLOGIES FOR ABSENCE 2. DECLARATIONS OF INTEREST (IF ANY) 3. MINUTES (Pages 3 - 6) Argyll and Bute HSCP Audit and Risk Committee held on 17 February 2026 4. AUDIT AND RISK COMMITTEE ANNUAL REPORT 2025-26 (Pages 7 - 14) Report by Chair of Audit and Risk Committee 5. ANNUAL AUDIT PLAN - ARGYLL AND BUTE INTEGRATION JOINT BOARD - YEAR ENDING 31 MARCH 2026 (Pages 15 - 58) Report by External Auditors, Forvis Mazars 6. UNAUDITED ANNUAL ACCOUNTS 2025/26 (Pages 59 - 98) Report by Head of Finance 7. INTERNAL AUDIT UPDATE (Pages 99 - 108) Report by Chief Internal Auditor, Argyll and Bute Council 8. HSCP 2025/26 INTERNAL AUDIT ANNUAL REPORT (Pages 109 - 126) Report by Chief Internal Auditor, Argyll and Bute Council 9. REVIEW OF CARE ASSESSMENT AND RESOURCES ALLOCATION (Pages 127 - 144) Report by Chief Internal Auditor, Argyll and Bute Council 10. STRATEGIC RISK REGISTER REVIEW (Pages 145 - 156) Report by Head of Finance 11. INTEGRATION JOINT BOARDS - FINANCE BULLETIN 2024/25 (Pages 157 - 182) Report by Head of Finance 12. AUDIT SCOTLAND: PUBLICATIONS (Pages 183 - 394) Report by Head of Finance Public Document Pack
Page 2
13. DATE OF NEXT MEETING Tuesday 22 September 2026 Argyll and Bute HSCP Audit and Risk Committee Councillor Kieron Green (Chair) Emily Austin Councillor Ross Moreland Janice Preston Contact: Hazel MacInnes, Senior Committee Officer Tel: 01546 604269
Page 3
MINUTES of MEETING of ARGYLL AND BUTE HSCP AUDIT AND RISK COMMITTEE held BY MICROSOFT TEAMS on TUESDAY, 17 FEBRUARY 2026 Present: Councillor Kieron Green (Chair) Emily Austin Councillor Ross Moreland Janice Preston Attending: Evan Beswick, Chief Officer, Argyll and Bute HSCP James Gow, Head of Finance, Argyll and Bute HSCP Paul MacAskill, Chief Internal Auditor, Argyll and Bute Council Eilidh Gallagher, Head of Primary Care, Argyll and Bute HSCP Lynsey Innis, Committee and Democratic Services Officer, Argyll and Bute Council Mhairi Weldon, Senior Audit Assistant, Argyll and Bute Council 1. APOLOGIES FOR ABSENCE There were no apologies for absence intimated. 2. DECLARATIONS OF INTEREST There were no declarations of interest intimated. 3. MINUTES The Minutes of the meeting of the Argyll and Bute HSCP Audit and Risk Committee held on 16 December 2025 were approved as a correct record. 4. INTERNAL AUDIT UPDATE The Committee gave consideration to a report providing an update on the work carried out by Argyll and Bute Council’s Internal Audit Team on audits which are of operational relevance to the Committee. Discussion took place around the ongoing delays in completing several audit actions, some of which had been delayed and rescheduled a number of times. Decision The Audit and Risk Committee – 1. reviewed and considered the progress on completion of the internal audit recommendations and 2. noted with concern the ongoing delays in completion of several of the actions. (Reference: Report by Chief Internal Auditor dated 17 February 2026, submitted) Page 3 Agenda Item 3
Page 4
5. HEALTH AND SOCIAL CARE PARTNERSHIP (HSCP) 2026/27 INTERNAL AUDIT PLAN The Committee gave consideration to a report presenting the 2026/27 HSCP Internal Audit Plan which was aligned to the HSCP’s Strategic Risk Register and which took cognisance of the HSCP Joint Strategic Plan. Decision The Audit and Risk Committee – 1. noted the Internal Audit Strategic Planning process covering 2024-2027; and 2. endorsed the 2026/27 HSCP Internal Audit Plan. (Reference: Report by Chief Internal Auditor dated 17 February 2026, submitted) 6. HSCP CULTURE AUDIT - UPDATE The Committee gave consideration to a report providing an update on progress against the Internal Audit findings relating to HSCP Culture. Decision The Audit and Risk Committee – 1. noted the progress made against the agreed audit actions; 2. agreed the closure of all actions; and 3. noted the position in relation to the Joint Partnership Forum (JPF). (Reference: Report by Deputy Director of People dated 17 February 2026, submitted) 7. STRATEGIC RISK REGISTER REVIEW The Committee gave consideration to a report providing an opportunity to review the Strategic Risk Register and consider the outcome of the Risk Appetite Development Session held in December. Discussion was had around the residual risk trends and the factors influencing each risk rating. Decision The Audit and Risk Committee – 1. noted that the Strategic Risk Register had been reviewed and changes recommended; 2. reviewed and approved the Strategic Risk Register; 3. noted the negative risk trend relating to Partnership Working, and noted that this will continue to be kept under review; Page 4
Page 5
4. noted the outcome of the Risk Appetite Workshop and agreed IJB members should be asked to re-submit responses to improve the participation rate; and 5. noted that the Strategic Risk Register would be presented to the March 2026 meeting of the IJB. (Reference: Report by Head of Finance dated 17 February 2026, submitted) 8. AUDIT SCOTLAND: PUBLICATIONS The Committee gave consideration to a report highlighting three recent Audit Scotland reports of potential interest to the Committee. Decision The Audit and Risk Committee noted the Audit Scotland publications highlighted within the submitted report. (Reference: Report by Head of Finance dated 17 February 2026, submitted) 9. GLOBAL RISKS REPORT 2026 The Committee gave consideration to a report summarising key strategic and global risks outlined within the Global Risks Report 2026, some of which were relevant at a local level and others which informed an understanding of how the future operational environment may look. Decision The Audit and Risk Committee noted the contents of The Global Risks Report 2026 published by the World Economic Forum (WEF) and considered if there were any implications for the Strategic Risk Register. (Reference: Report by Head of Finance dated 17 February 2026, submitted) 10. DATE OF NEXT MEETING The date of the next meeting was noted as Tuesday 16 June 2026. Page 5
Page 6
This page is intentionally left blank
Page 7
1 Audit & Risk Committee Date of Meeting: 16 June 2026 Title of Report: Audit & Risk Committee Annual Report 2025-26 Presented by: Councillor Kieron Green, Chair - Audit & Risk Committee The Audit & Risk Committee is asked to: • Approve the Annual Report prior to submission to the IJB 1. EXECUTIVE SUMMARY 1.1 1.2 1.3 In compliance with the principles of good governance, an Annual Report is prepared by the Audit & Risk Committee for submission to the Integration Joint Board. The purpose is to provide the IJB with assurance the Audit and Risk Committee has evaluated its activity and performance. It also provides a further opportunity for the Committee to raise any matters of concern to the Board. The Committee has met on 4 occasions with all minutes submitted to the Integration Joint Board and published within those papers. The Committee has been supported throughout the year by the Council’s Committee services team. This report provides a summary of the work of the Committee, its auditors and an evaluation by the Chair. Overall, the Committee performed well in its oversight of audit and risk and is therefore pleased to be able to provide assurance to the IJB that it has operated effectively. The financial sustainability of the IJB and the sector has been of significant concern throughout the year, as reflected in the Strategic Risk Register. The Committee has expressed some concern regarding an increase in the number of internal audit recommendations outstanding. Management have been requested to prioritise addressing these in 2026/27. 2. RECOMMENDATION 2.1 The Audit and Risk Committee are recommended to: • Review and approve the Committee Annual Report. 3. DETAIL OF REPORT 3.1 The report provides the following: Page 7 Agenda Item 4
Page 8
2 3.2 3.2.1 • Summary of the Committee Meetings • Membership and Remit • Evaluation by Chair This report is supported by the annual reports prepared by the Internal and External Auditors. Audit & Risk Committee Meetings This section summarises the items of business considered at each meeting, all were held electronically. The IJB is provided with the minutes as a matter of course, this provides members with the opportunity to raise issues or question the Chair in respect of the work of the Committee. Meeting 1 – 20 June 2025 • The internal auditor provided an update report. Specific audit reports were considered in respect of External Care Placements and Payroll Arrangements relating to the Care at Home service. The latter report was an additional piece of work commissioned by the HSCP following payroll errors identified in one location. The report provided assurance that appropriate systems and processes were in place and operating effectively but did make recommendations aimed at improving efficiency and reducing the potential for human error. The 2024/25 annual internal audit report was approved at the February 2025 meeting. • The un-audited accounts for 2024/25 were approved, noting concern that the IJB was reporting a significant overspend on adult social care services. The outturn position in the accounts was discussed alongside the management accounts which provided a more detailed analysis of the overspending and reasons for it. • The annual external audit plan and timetable were approved for the audit of the 2024/25 accounts, presented by Forvis Mazars. • The Strategic Risk Register was reviewed. • The Annual Report of the committee for 2024/25 was considered and approved prior to its submission to the IJB. Additionally the Committee Self-Assessment process was considered but due to the small number of responses received it was agreed that the exercise had not provided representative sample of the views of members. • An interim report on progress on updating the policy review planner was presented, it was noted that good progress had been made but that planner was not yet complete. • The Audit Scotland Report on IJB finances as at the end of the 2023/24 financial year was considered in some detail as this provided a helpful national context in respect of the challenges facing the sector. • Audit Scotland reports relating to the topics listed below were also discussed: -Governance in the NHS -Local Government budgets 2025/26 -Best Value – Argyll & Bute Council Page 8
Page 9
3 3.2.2 3.2.3 3.2.4 Meeting 2 – 23 September 2025 • A verbal update on progress with the audit was provided by the external auditor and the draft assurance letters from the committee to the auditor were considered and approved. • The Internal Audit update report was considered alongside reports on Governance Arrangements and Partnership Working. • Audit Scotland reports were also included on the agenda, these related to: -Delivering for the future – responding to the workforce challenge -Quality of Public Audit in Scotland -The 2023/24 Audit of Glasgow City Council The latter report highlighted governance deficiencies relating to severance arrangements for senior staff to ensure that lessons from this were highlighted. Meeting 3 – 16 December 2025 • The audited accounts for 2024/25 were considered and approved alongside the external audit report which provided an unqualified audit opinion and good assurance on accounting and financial reporting arrangements within the HSCP. • The internal auditor presented a report on Workforce Planning which made a number of recommendations for improvement. • The new incident response framework was considered and adopted, along with the plan for staff training to support its operation in practice. • A range of Audit Scotland reports highlighting a number of strategic risks were presented to the committee. These included reports prepared under section 22 pf the Public Finance and Accountability act relating to 2 NHS Boards and their financial sustainability. Others included: -NHS in Scotland 2025 -NHS Highland External Audit Report -Adult Disability Payments -Financial Sustainability and Taxes -Cyber Attack – Comhairle nan Eilean Siar Collectively these reports continue to raise concern in respect of financial and service sustainability risks in the short and longer term. Meeting 4 – 17 February 2026 • The internal audit update was discussed in some detail. Concern was expressed regarding the number of outstanding audit recommendations, particularly as some had been delayed and re- scheduled more than once. Management agreed that this would be given increased priority and more care would be given to ensuring that target completion dates were realistic. • The Internal Audit plan for 2026/27 was also approved. • A report on progress with the implementation of the internal audit Page 9
Page 10
4 recommendations relating to the culture audit was considered. This highlighted that a different approach was being taken in respect of some of these with the revised approach endorsed by the committee. Assurance was provided that the Joint Partnership Forum were supportive of the revised approach. • The Strategic Risk Register was reviewed for the second time in the year and the Committee requested that the partnership working risk be kept under review due to the issues with the Glasgow SLA and broader financial context facing the HSCP. The approach to Risk Appetite was also considered and it was agreed that greater participation in the review process would be helpful prior to making any changes. The Global Risk report published by the World Economic Forum was also provided to ensure that issues highlighted in this document were appropriately reflected in the Strategic Risk Register where relevant. • The Audit Scotland Reports considered at this meeting were: -Local Government in Scotland – Finance Bulletin -Delayed Discharges -Community health and Social Care Performance The final report provided a link to national performance management data regarding the performance of IJBs enabling stakeholders to compare performance relative to the rest of the sector. 3.3 Committee Self-Evaluation and Improvement 3.3.1 3.4 3.4.1 3.4.2 3.5 3.5.1 The outstanding improvement actions have been completed and therefore there is nothing new to report in respect of the self-evaluation process. Committee Membership and Remit Membership consists of six IJB members, the Committee Chair may not be either the Chair or the Vice-Chair of the IJB. Not all places have been filled with 4 members appointed. In addition there are 4 required attendees – the Chief Officer, Chief Financial Officer, External Auditor and the Internal Auditor. Other officers attend as required. Councillor Kieron Green has acted as Chair throughout the year. The remit was revised in January 2021 and again in January 2023 by the IJB, the Committee has ensured that its work is consistent with its remit and this enables the Committee to provide assurance to the IJB that it has fulfilled its role effectively throughout 2025/26. Evaluation by the Chair The committee met regularly throughout the year and has continued to operate effectively. It has contributed to ensuring that the management of risk and assurance has continued on behalf of the IJB. It has had appropriate access to HSCP management and the auditors. Committee members meet in private with the auditors once per year. Page 10
Page 11
5 3.5.2 3.5.3 3.5.4 3.5.5 The work of the Committee evidences the IJB’s commitment to transparency, accountability and effective scrutiny of management. The committee has comprehensively fulfilled its remit in terms of consideration of internal and external audit reports, national performance reports and review of the annual accounts and the internal control environment. Financial performance for the year ended 31 March 2025 was noted with some concern due to the scale of the adult social care overspending, although funded from resources held by the HSCP. The unplanned use of reserves not sustainable and action is required to avoid this situation recurring. It is acknowledged that the financial challenges facing the IJB and the sector more widely are severe and the outlook is deteriorating. Concerns about financial sustainability remain a very high grade strategic risk. The Committee was pleased with the level of assurance provided by the External Auditor that accounting and reporting arrangements within the finance teams are robust and appropriate. Internal Audit One of the main responsibilities of the Committee is to ensure that the internal audit programme is appropriate and delivered effectively. It is critical that agreed management actions made in response to audit recommendations are implemented. The Committee receives an update report from the Internal Auditor at each meeting. The table below provides a summary in respect of the audit work undertaken during the year: Report Name No. of recommendations No. implemented No. Outstanding Governance Arrangements Opinion - High 2 (2 Low Grade) 0 2 Partnership Working Opinion – High 3 (3 Low Grade) 0 3 Workforce Planning Opinion - Reasonable 7 (7 Medium Grade) 4 3 Payroll – Care at home Opinion - Reasonable 2 (1 Medium, 1 low grade) 2 0 Care Assessment & Resources Allocation – reported June 26 Opinion - Limited 3 (3 High Grade) 0 3 Total 17 6 11 However there are also a number of recommendations made in prior years that have not yet been implemented to the satisfaction of the auditor. These will continue to be discussed at each meeting and the reasons for delay considered carefully. During 2025/26 there were 11 recommendations fully implemented, 10 were outstanding but reported as being on course to be complete by the agreed date and a further 7 were outstanding and delayed, some of these have been rescheduled more than once. Therefore there were a total of 17 Page 11
Page 12
6 3.5.6 3.5.7 3.5.8 3.5.9 recommendations outstanding at the year end. Whilst some good progress has been made, the committee has requested that audit actions are given greater priority as this provides important assurance in respect of the internal control environment. The overall conclusion of the Internal Auditor is to provide a reasonable level of assurance on the adequacy of internal controls and governance arrangements. The Internal Audit Annual Report provides more detail on the basis for this conclusion, which is the same as the prior year. External Audit The External Auditor’s report was positive and the auditor issued an un- qualified audit opinion in respect of the accounts for 2024/25. The report indicates that the auditors are content with financial accounting and reporting and concludes that leadership, governance and arrangements for securing value for money were likewise appropriate. They noted that were no adjusted or unadjusted misstatements in the accounts and confirmed that the working papers provided to support the accounts were of a good standard. The auditor did reiterate their recommendation in respect of medium term planning and the financial sustainability challenge currently faced by the HSCP and other public bodies. The work of External Audit provides the Committee and IJB with an important source of independent assurance on financial reporting and governance and leadership. Progress has been made in respect of the Committee improvement agenda set out through the self-evaluation process, however low participation in the self-evaluation process in 2025/26 requires to be improved upon next year. There is also a requirement to fill the vacant member roles and ensure that members have access to the training and development they require to fulfil their roles effectively. I am pleased to commend the work of the Committee to the IJB and provide assurance, that in my opinion, the Committee has operated effectively throughout the year and has discharged its responsibilities with diligence. This opinion is formed on the basis of the totality of evidence considered by the Committee throughout the year. I would also like to acknowledge the role committee members, committee services, officers and auditors have played in facilitating the work of the Committee. 4. RELEVANT DATA AND INDICATORS 4.1 Minutes of Audit & Risk Committee meetings, formal audit reports and committee papers. 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 This document contributes to good governance of the Integration Joint Board and provides assurance to the IJB that the Audit & Risk Committee is operating effectively and in a manner that is consistent with its terms of reference. Page 12
Page 13
7 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – The Committee has considered a number of reports relating to the financial sustainability challenges faced by the HSCP and the public sector more widely. The Committee continued to ensure it was informed of the wider context within which the HSCP is operating whilst acknowledging concern in respect of the overspend in 2024/25 (noting that this appears to have been addressed in the 2025/26 year). 6.2 Staff Governance – The Committee continues to scrutinise progress on workforce planning and associated risk. 6.3 Clinical and Care Governance – none. 7. 7.1 8. PROFESSIONAL ADVISORY Consideration should be given to this report. EQUALITY AND DIVERSITY IMPLICATIONS 8.1 9. 9.1 None directly from this report. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE No issues arising directly from this report. 10. RISK ASSESSMENT 10.1 The Committee has commented on a number of occasions on key financial sustainability, service and workforce planning risks for the IJB. It has also reviewed and scrutinised the Strategic Risk Register. 11. PUBLIC AND USER INVOLVEMENT AND ENGAGEMENT 11.1 The report draws from findings of internal audit and external audit reports. There has been no direct public or service user involvement in respect of the work of the Committee during the year. Meetings will be held in public from 2026/27 onwards, this will further improve accountability and transparency. 12. CONCLUSIONS 12.1 The Audit & Risk Committee is asked to approve its annual report prior to its submission to the IJB. The report concludes that the Audit & Risk Committee has performed its role effectively throughout 2025/26. The Committee has operated in line with its terms of reference and has received independent assurance from Internal and External Auditors. It has scrutinised, in detail, the reports presented and has continued to seek to contribute to the development of the governance, assurance and risk frameworks. Page 13
Page 14
8 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) N/A REPORT AUTHOR AND CONTACT Councillor Kieron Green, Chair of Audit & Risk Committee: kieron.green@argyll- bute.gov.uk Page 14
Page 15
Annual Audit Plan Argyll and Bute Integration Joint Board – Year ending 31 March 2026 June 2026 Page 15 Agenda Item 5
Page 16
Annual Audit Plan Letter Members of the Audit and Risk Committee Argyll and Bute Integration Joint Board Kilmory Lochgilphead PA31 8RT 5th June 2026 Forvis Mazars The Corner, Bank Chambers 26 Mosley Street Newcastle upon Tyne NE1 1DF Dear Audit and Risk Committee Members, Annual Audit Plan – Year ending 31 March 2026 I am pleased to present our Annual Audit Plan for Argyll and Bute Integration Joint Board (the IJB) for the year ending 31 March 2026. This document will be presented at the Audit and Risk Committee meeting on 16 June 2026. If you would like to discuss any matters in more detail, please contact me on 0191 383 6339. This report provides an overview of the planned scope and timing of our audit, including the significant and enhanced audit risks we have identified. In addition, as it is a fundamental requirement that we are, and are seen to be, independent of the IJB, this report also summarises our considerations and conclusions on our independence. Two-way communication with you is key to a successful audit and is important in: • Reaching a mutual understanding of the scope of our audit and our respective responsibilities, • Sharing information to assist each of us with fulfilling our respective responsibilities, • Providing you with constructive observations arising during our audit, and Forvis Mazars LLP – 26 Mosley Street, Newcastle upon Tyne, NE1 1DF - Tel: +44 (0)191 383 6300 – www.forvismazars.com/uk Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 Page 16
Page 17
Annual Audit Plan Letter (continued) Annual Audit Plan – Year ending 31 March 2026 (continued) • Ensuring that we gain an understanding of your attitude and views in respect of the risks facing the IJB which may affect our audit, including the likelihood of those risks materialising and how they are monitored and managed. This report, which we have prepared following our initial planning discussions with management, facilitates a discussion with you on our audit approach. We welcome any questions, concerns, or input you may have on our approach. Providing a high-quality service is extremely important to us and we strive to provide technical excellence with the highest level of service quality, together with continuous improvement to exceed your expectations. During the meeting, we would be grateful for your views/ knowledge on the following specific matters: • Whether you have identified any other risks (business, laws & regulation, fraud, going concern, etc.) that may result in material misstatements in the financial statements. • If there are any matters that you consider warrant particular attention during our audit and/ or any areas where you would like additional procedures to be undertaken. This report has been prepared in accordance with the responsibilities set out within the Audit Scotland’s Code of Audit Practice (“the Code”) and for the sole benefit of the Audit and Risk Committee. Except where required by law or regulation, it should not be used, quoted or made available to any other parties without our prior written consent. Yours faithfully, Mark Outterside Forvis Mazars LLP Forvis Mazars LLP – 26 Mosley Street, Newcastle upon Tyne, NE1 1DF - Tel: +44 (0)191 383 6300 – www.forvismazars.com/uk Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 Page 17
Page 18
4 Contents 01 Engagement and responsibilities summary 02 Your audit engagement team 03 Audit scope, approach and timeline 04 Materiality and misstatements 05 Significant risks and other key judgement areas 06 Wider scope and Best Value 07 Audit fees and other services 08 Confirmation of our independence Appendix A – Key communication points Appendix B - Current year updates, forthcoming accounting and other issues This document is to be regarded as confidential to Argyll and Bute Integration Joint Board. It has been prepared for the sole use of the Audit and Risk Committee as the appropriate sub- committee charged with governance. No responsibility is accepted to any other person in respect of the whole or part of its contents. Our written consent must first be obtained before this document, or any part of it, is disclosed to a third party. Page 18
Page 19
01Engagement and responsibilities summary Page 19
Page 20
6 Engagement and responsibilities summary We are appointed to perform the external audit of the IJB for the year to 31 March 2026. The scope of our engagement is set out in the Code of Audit Practice, issued by the Auditor General and the Accounts Commission available from the Audit Scotland website: Code of audit practice | Audit Scotland (audit-scotland.gov.uk). Our responsibilities are principally derived from the Local Government (Scotland) Act 1973 (the 1973 Act) and the Code of Audit Practice, as outlined below and overleaf. Audit opinion We are responsible for forming and expressing an opinion on whether the financial statements are prepared, in all material respects, in accordance with applicable law and UK adopted international accounting standards as interpreted and adopted by the Code of Practice on Local Authority Accounting in the United Kingdom 2025/26. Our audit does not relieve management or the Audit and Risk Committee, as Those Charged with Governance, of their responsibilities. The Chief Finance Officer is responsible for the assessment of the IJB’s ability to continue as a going concern. As auditors, we are required to obtain sufficient, appropriate audit evidence regarding, and conclude on: a) whether a material uncertainty related to going concern exists, and b) the appropriateness of the Chief Finance Officer’s use of the going concern basis of accounting in the preparation of the financial statements. Fraud The responsibility for safeguarding assets and for the prevention and detection of fraud, error, and non-compliance with law or regulations rests with both you and management. This includes establishing and maintaining internal controls over asset protection, compliance with relevant laws and regulations, and the reliability of financial reporting. As part of our audit procedures in relation to fraud, we are required to inquire of those charged with governance, including key management personnel and internal audit, on their knowledge of instances of fraud, and their views on the risks of fraud and on internal controls that mitigate those risks. In accordance with International Standards on Auditing (UK), we plan and perform our audit to obtain reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether due to fraud or error. However, our audit should not be relied upon to identify all such misstatements. Page 20
Page 21
7 Engagement and responsibilities summary (continued) Internal control Management is responsible for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. We are responsible for obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the IJB’s internal control. Wider reporting We are required to provide assurance on the Whole of Government Accounts (WGA) returns prepared by the IJB. The level of auditor assurance required depends on monetary thresholds set by HM Treasury. Wider scope and Best Value We are also responsible for reviewing and reporting on the wider scope arrangements that the IJB has in place and its arrangements to secure Best Value. We discuss our approach to wider scope and Best Value work further in the ‘Wider scope and Best Value’ section of this report. Page 21
Page 22
02Your audit engagement team Page 22
Page 23
Your audit team 9 Mark Outterside Engagement Leader mark.outterside@mazars.co.uk 07824 086 593 Peter Hawkins Engagement Manager peter.hawkins@mazars.co.uk 07580 854 210 Aaron Rowell Engagement Team Leader aaron.rowell@mazars.co.uk 07816 209 250 Page 23
Page 24
03Audit scope, approach, and timeline Page 24
Page 25
Audit scope, approach, and timeline Audit scope Our audit approach is designed to provide an audit that complies with all professional requirements. Our audit of the financial statements will be conducted in accordance with International Standards on Auditing (UK), relevant ethical and professional standards, our own audit methodology, and in accordance with the terms of our engagement. Our work is focused on those aspects of your business which we consider to have a higher risk of material misstatement, such as those impacted by management judgement and estimation, application of new accounting standards, changes of accounting policy, changes to operations, or areas found to contain material errors in the past. Audit approach Our audit approach is risk-based, and the nature, extent, and timing of our audit procedures are primarily driven by the areas of the financial statements we consider to be more susceptible to material misstatement. Following our risk assessment where we assess the inherent risk factors (subjectivity, complexity, uncertainty, change and susceptibility to misstatement due to management bias or fraud) to aid in our risk assessment, we develop our audit strategy and design audit procedures to respond to the risks we have identified. If we conclude that appropriately designed controls are in place, we may plan to test and rely on those controls. If we decide controls are not appropriately designed, or we decide that it would be more efficient to do so, we may take a wholly substantive approach to our audit testing where, in our professional judgement, substantive procedures alone will provide sufficient appropriate audit evidence. Substantive procedures are audit procedures designed to detect material misstatements at the assertion level and comprise tests of detail (of classes of transaction, account balances, and disclosures), and substantive analytical procedures. Irrespective of our assessed risks of material misstatement, which takes account of our evaluation of the operating effectiveness of controls, we are required to design and perform substantive procedures for each material class of transaction, account balance, and disclosure. Our audit has been planned and will be performed to provide reasonable assurance that the financial statements are free from material misstatement and give a true and fair view. The concept of materiality and how we define a misstatement is explained in the ‘Materiality and misstatements’ section of this report. Where appropriate our Annual Audit Plan reflects discussions with the Local Area Network. The diagram on the next page outlines the procedures we perform at the different stages of our audit. We have also provided, later in this report, a table setting out the procedures we perform for the significant financial statement areas. 11 Page 25
Page 26
Audit scope, approach, and timeline (continued) 12 Planning and risk assessment May to June 2026 • Planning our visit and developing our understanding of the entity • Documenting systems and controls and performing walkthroughs • Risk identification and assessment • Considering proposed accounting policies and accounting treatments • Developing our audit strategy and planning the audit work to be performed • Agreeing timetable and deadlines • Preliminary analytical review • Determination of materiality • Undertake planning work for our wider scope and best value responsibilities Planning and risk assessment (continued) May to June 2026 • Collate evidence to support our wider scope and best value work, including obtaining key documents and confirming our understanding of arrangements in place, including consideration of whether a significant risk exists Fieldwork July to August 2026 • Executing our strategy, starting with significant risks and other higher-risk areas • Receiving and reviewing the draft financial statements • Form a view on the adequacy of the IJB’s arrangements across the four wider scope areas and in relation to securing best value Communication Ongoing • Communicating progress and any issues arising • Clearance meeting(s) Completion September/October 2026 • Final review of financial statements, and disclosure checklist • Final partner review • Agreeing the content of the letter of representation • Preparing our auditor’s report • Reporting to the Audit and Risk Committee including wider scope/best value reporting • Subsequent events procedures • Signing our auditor’s report Page 26
Page 27
13 Audit scope, approach, and timeline (continued) Audit approach for significant financial statement areas Our audit approach on significant financial statement areas is set out below. Financial statement area Significant risk Key judgement area or enhanced risk Testing of controls Substantive procedures Gross Expenditure No No No Yes Gross Income No No No Yes Taxation and Non-Specific Grant Income No No No Yes Short Term Debtors No No No Yes Page 27
Page 28
14 Audit scope, approach, and timeline (continued) Follow up on significant deficiencies in internal control Set out below are the significant deficiencies in internal control that we identified during our prior period audit. We request that you and management provide an update on the action taken to address these deficiencies. • As part of the 23/24 external audit, we noted that the IJB depends on financial data from its partner organisations – NHS Highland, and Argyll and Bute Council. We noted that the IJB lacked documented controls to verify the accuracy and completeness of this data, and some working papers supporting the financial statement figures were insufficiently detailed. We recommended that the IJB establish data quality and internal controls to guarantee the accuracy and completeness of financial data received from the NHS and Council, and that the IJB ensure figures included in the financial statements are supported by detailed working papers and evidence, ready in time for the audit. From our 24/25 external audit, we observed improvements in the IJB’s arrangements and acknowledged the complexity arising from obtaining information from both partner organisations. We will continue to monitor this as part of the audit in 25/26 and discuss any potential improvements to processes with management. Page 28
Page 29
05Materiality and misstatements Page 29
Page 30
Materiality and misstatements 16 Definitions Materiality is an expression of the relative significance or importance of a particular matter in the context of the financial statements as a whole. Misstatements in the financial statements are considered to be material if they could, individually or in aggregate, reasonably be expected to influence the economic decisions of users based on the financial statements. Materiality We determine materiality for the financial statements as a whole (overall materiality) using a benchmark that, in our professional judgement, is most appropriate to entity. We also determine an amount less than materiality (performance materiality), which is applied when we carry out our audit procedures and is designed to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Further, we set a threshold above which all misstatements we identify during our audit (adjusted and unadjusted) will be reported to Audit and Risk Committee. Judgements on materiality are made in light of surrounding circumstances and are affected by the size and nature of a misstatement, or a combination of both. Judgements about materiality are based on a consideration of the common financial information needs of users as a group and not on specific individual users. An assessment of what is material is a matter of professional judgement and is affected by our perception of the financial information needs of the users of the financial statements. In making our assessment we assume that users: • Have a reasonable knowledge of business, economic activities, and accounts; • Have a willingness to study the information in the financial statements with reasonable diligence; • Understand that financial statements are prepared, presented, and audited to levels of materiality; • Recognise the uncertainties inherent in the measurement of amounts based on the use of estimates, judgement, and consideration of future events; and • Will make reasonable economic decisions based on the information in the financial statements. We consider overall materiality and performance materiality while planning and performing our audit based on quantitative and qualitative factors. When planning our audit, we make judgements about the size of misstatements we consider to be material. This provides a basis for our risk assessment procedures, including identifying and assessing the risks of material misstatement, and determining the nature, timing and extent of our responses to those risks. The overall materiality and performance materiality that we determine does not necessarily mean that uncorrected misstatements that are below materiality, individually or in aggregate, will be considered immaterial. We revise materiality as our audit progresses should we become aware of information that would have caused us to determine a different amount had we been aware of that information at the planning stage. Page 30
Page 31
Materiality and misstatements (continued) 17 Materiality (continued) We consider gross revenue expenditure at the surplus/deficit level to be the most relevant measure for users of the financial statements. As this reflects the overall financial performance of the IJB and its stewardship of resources, we have used this as the benchmark for setting our initial materiality levels. We expect to set a materiality threshold of 2% of gross revenue expenditure at surplus/deficit for the financial statements. As set out in the table, based on currently available information (being the prior period signed financial statements) we anticipate overall materiality for the year ended 31 March 2026 to be in the region of £8.056m (£7.610m in the prior year), and performance materiality to be in the region of £6.042m (£5.707m in the prior year). This represents 75% of headline materiality (75% in 2024/25). The choice of this percentage reflects our assessment that the IJB’s previous accounts have been of a good quality, with few errors, and no significant recurring errors/issues. We will continue to monitor materiality throughout our audit to ensure it is set at an appropriate level. IJB’s single-entity financial statements blank 2025/26 £’000s 2024/25 £’000s Overall materiality £8,056 £7,610 Performance materiality £6,042 £5,707 Clearly trivial £242 £228 Specific materiality: We assess the Remuneration Report as sensitive given users’ interest in this specific area. We are proposing to set materiality in this area at £1,000 within the Remuneration Report. £1 £1 Page 31
Page 32
Materiality and misstatements (continued) Misstatements We will accumulate misstatements identified during our audit that are above our determined clearly trivial threshold. We have set a clearly trivial threshold for individual misstatements we identify (a reporting threshold) for reporting to the Audit and Risk Committee and management that is consistent with a threshold where misstatements below that amount would not need to be accumulated because we expect that the accumulation of such amounts would not have a material effect on the financial statements. Based on our preliminary assessment of overall materiality, our proposed clearly trivial threshold is £242k, based on 3% of overall materiality. If you have any queries about this, please raise these with Mark Outterside. Each misstatement above the reporting threshold that we identify will be classified as: • Adjusted: Those misstatements that we identify and are corrected by management. • Unadjusted: Those misstatements that we identify that are not corrected by management. We will report all misstatements above the reporting threshold to management and request that they are corrected. If they are not corrected, we will report each misstatement to the Audit and Risk Committee as unadjusted misstatements and, if they remain uncorrected, we will communicate the effect that they may have individually, or in aggregate, on our audit opinion. Misstatements also cover qualitative misstatements and include quantitative and omissions relating to the notes of the financial statements. Reporting In summary, we will categorise and report misstatements above the reporting threshold to the Audit and Risk Committee as follows: • Adjusted misstatements; • Unadjusted misstatements; and • Disclosure misstatements (adjusted and unadjusted). Page 32
Page 33
04Significant risks and other key judgement areas Page 33
Page 34
Significant risks and other key judgement areas Definitions Following the risk assessment approach set out in the ‘Audit scope, approach, and timeline’ section, we have identified the risks of material misstatement in the financial statements. These risks are categorised as significant, enhanced, or standard. The definitions of these risk ratings are set out below. 20 Risk Level Definition Significant A risk that is assessed as being at or close to the upper end of the spectrum of inherent risk, based on a combination of the likelihood of a misstatement occurring and the magnitude of any potential misstatement. A fraud risk is always assessed as a significant risk (as required by auditing standards), including management override of controls and revenue recognition. Enhanced An area with an elevated risk of material misstatement at the assertion level, other than a significant risk, based on factors/ information inherent to that area. Enhanced risks require additional consideration but do not rise to the level of a significant risk. These include but are not limited to: • Key areas of management judgement and estimation uncertainty, including accounting estimates related to material classes of transaction, account balances, and disclosures but which are not considered to give rise to a significant risk of material misstatement; and • Risks relating to other assertions and arising from significant events or transactions that occurred during the period. Standard A risk related to assertions over classes of transaction, account balances, and disclosures that are relatively routine, non-complex, tend to be subject to systematic processing, and require little or no management judgement/ estimation. Although it is considered that there is a risk of material misstatement, there are no elevated or special factors related to the nature of the financial statement area, the likely magnitude of potential misstatements, or the likelihood of a risk occurring. Page 34
Page 35
Significant risks and other key judgement areas (continued) 21 Audit risks and planned responses In this section, we have set out the risks that we deem to be significant and enhanced, and our planned response. An audit is a dynamic process, and should we change our view of risk and/ or our approach to address those risks during our audit, we will report this to the Audit and Risk Committee. Significant risks Blank Risk name Fraud Error Judgement Risk description Planned response 1 Management override of controls Yes No Yes Management at various levels within an organisation are in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Due to the unpredictable way in which such override could occur there is a risk of material misstatement due to fraud on all audits. You should assess this risk as part of your oversight of the financial reporting process. In line with our methodology, we plan to address the management override of controls risk by performing audit work over: • Manual adjustments: testing the appropriateness of adjustments made in preparing the financial statements; • Significant transactions: considering and testing any significant transactions outside the normal course of business or otherwise unusual. Page 35
Page 36
Significant risks and other key judgement areas (continued) 22 Other considerations In consideration of ISA (UK) 260 Communication with Those Charged with Governance, we would like to seek the Audit and Risk Committee’s views/ knowledge of the following matters: • Did you identify any other risks (business, laws & regulation, fraud, going concern etc.) that may result in material misstatements? • Are you aware of any significant communications between the IJB and regulators? • Are there any matters that you consider warrant particular attention during the course of our audit, and any areas where you would like additional procedures to be undertaken? Page 36
Page 37
06Wider scope and Best Value Page 37
Page 38
Wider scope and Best Value 24 The framework for wider scope work The Code of Audit Practice sets out the four areas that frame the wider scope of public sector audit. We are required to form a view on the adequacy of the IJB’s arrangements in four areas: 1. Financial management 2. Financial sustainability 3. Vision, leadership, and governance 4. Use of resources to improve outcomes Financial management Financial management means having sound budgetary processes. Audited bodies require the ability to understand the financial environment and whether internal controls are operating effectively. Auditors consider whether the body has effective arrangements to secure sound financial management. Vision, leadership and governance Audited bodies must have a clear vision and strategy, and set priorities for improvement within this vision and strategy. They work together with partners and communities to improve outcomes and foster a culture of innovation. Auditors consider the clarity of plans to implement the vision, strategy and priorities adopted by the leaders of the audited body. They also consider the effectiveness of governance arrangements for delivery. Financial sustainability Financial sustainability means being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. Auditors consider the extent to which audited bodies have shown regard to financial sustainability. They look ahead to the medium term (two to five years) and longer term (over five years) to consider whether the body is planning effectively so that it can continue to deliver services. Use of resources to improve outcomes Audited bodies need to make best use of their resources to meet stated outcomes and improvement objectives, through effective planning and working with strategic partners and communities. Auditors consider the clarity of the arrangements in place to ensure that resources are deployed to improve strategic outcomes, meet the needs of service users taking account of equalities, and deliver continuous improvements in priority services. Page 38
Page 39
Wider scope and Best Value (continued) 25 Our approach Our planned audit work against the four wider scope areas is risk based and proportionate. We need to gather sufficient evidence to support our commentary on the IJB’s arrangements and to identify and report on any significant risks. We will carry out more detailed work where we identify significant risks. Where significant risks are identified we will report these to the IJB and make recommendations for improvement. In addition to local risks, we consider challenges that are affecting the public sector as a whole. Best Value Under the Code of Audit Practice, the audit of Best Value in councils is fully integrated within our annual audit work. We are required to consider the seven Best Value themes which are: 1. Vision and leadership 2. Governance and accountability 3. Effective use of resources 4. Partnerships and collaborative working 5. Working with communities 6. Sustainability 7. Fairness and equality We are required to consider the IJB’s arrangements in respect of the seven Best Value themes to identify any significant risks. Best Value at the IJB will be assessed over the period of the audit appointment. Where we identify risks or improvement areas we will plan appropriate coverage over the period of the audit appointment on a risk basis. We have not identified any significant risks planned for coverage in 2025/26. Page 39
Page 40
Wider scope and Best Value (continued) 26 Best Value continued We will also follow up previously reported Best Value findings to assess the pace and depth of improvement. This work will be integrated into our audit approach, including our work on the wider scope areas. We are required to undertake work on performance reporting each year. Specifically in respect of assessing the IJB’s effectiveness of performance reporting we will consider the following matters for compliance with the Direction from the Accounts Commission: • Using resources effectively; • Financial sustainability; and • timeliness. We will also conduct thematic reviews as directed by the Accounts Commission. In 2025/26 this will be on asset management. We will prepare a separate management report to document the findings of this work. At least once every five years, the Controller of Audit will report to the Accounts Commission on the IJB’s performance in meeting its Best Value duties. The IJB is not included in the second year of the programme which runs from October 2025 to August 2026. Page 40
Page 41
27 Wider scope and Best Value (continued) Wider scope risks The Code of Audit Practice requires us to consider the significant audit risks in areas defined in the Code as the wider scope audit. Although we have not fully completed our planning and risk assessment work, the table below outlines the wider scope audit risks that we have identified to date. We will report any further identified risks to the Audit and Risk Committee on completion of our planning and risk identification work. Blank Significant Risk Description Financial management Financial sustainability Vision, leadership and governance Use of resources to improve outcomes Planned procedures 1 Financial sustainability The IJB is facing a challenging economic outlook, with unfunded cost pressures and unfunded increases and demands. Public finances for IJBs remain under significant pressure, noting that the sector is not operating in a sustainable way going forward. The medium to long-term financial plan projects significant budget gaps in future years. No Yes No No As part of our audit, we will review: • the IJB’s medium to long term financial strategy; • financial position and track record in delivering planned recurrent and non-recurrent savings in 2025/26; • financial performance in 2026/27 and updates to its financial planning during the year; • regular reporting to Members on financial performance, savings plans and financial risks; • how the IJB works with stakeholders to manage its financial position; and • progress in developing plans to address future years budget gaps. Page 41
Page 42
28 Wider scope and Best Value (continued) Our work to follow-up on previous wider scope recommendations As part of our 2024/25 audit, we identified wider scope risks in the IJB’s arrangements. The table below sets out the risks identified, our previous recommendations and the work we intend to carry out as part of our 2025/26 audit. Previously identified significant risks in arrangements Relevant reporting criteria Our 2024/25 recommendations Planned procedures for 2025/26 Strategic Plan – Level 2 There is a risk that future strategic documents will be inconsistent with other related policy documents, adversely impacting the clarity of the IJBs vision and direction Vision, leadership and governance With the current strategic plan coming to an end in the coming year, we recommend that management and those charged with governance should ensure that a new plan is put in place, with any revisions made continuing the clarity of vision, and ensuring these changes are communicated effectively. We plan to: • review the updated strategic plan and understand how the IJB has aligned it to other strategic plans. Page 42
Page 43
29 Wider scope and Best Value (continued) Best Value risks The Code of Audit Practice requires us to consider the significant audit risks in areas defined in the Code as the Best Value audit. Although we have not fully completed our planning and risk assessment work, we have not identified any Best Value audit risks to date. If we identify any Best Value audit risks as our work progresses, we will report details of them to the Audit and Risk Committee on completion of our planning and risk identification work. Our work to follow-up on previous best value recommendations As part of our 2024/25 audit, we did not identify any Best Value risks in the IJB’s arrangements. Page 43
Page 44
07Audit fees and other services Page 44
Page 45
Audit fees and other services 31 Our fees (exclusive of VAT and disbursements) for the audit of the IJB’s financial statements for the year ended 31 March 2026, are outlined below. At this stage of the audit, we are not planning any divergence from the expected fees set by Audit Scotland, which is available on the Audit Scotland website: Audit Scotland expected fees for 2025/26 audits. Area of work 2025-26 Proposed Fee 2024-25 Actual Fee Auditor remuneration £38,290 £36,890 Pooled costs £1,320 £930 Contribution to PABV costs £7,130 £7,080 Sectoral cap adjustment (£11,260) (£10,900) Total fees £35,480 £34,000 Page 45
Page 46
08Confirmation of our independence Page 46
Page 47
Confirmation of our independence 33 Requirements We comply with the International Code of Ethics for Professional Accountants, including International Independence Standards issued by the International Ethics Standards Board for Accountants together with the ethical requirements that are relevant to our audit of the financial statements in the UK reflected in the ICAEW Code of Ethics and the FRC Revised Ethical Standard. Compliance We are not aware of any relationship between Forvis Mazars and the IJB that, in our professional judgement, may reasonably be thought to impair our independence. We are independent of the IJB and have fulfilled our independence and ethical responsibilities in accordance with the requirements applicable to our audit. Non-audit and Audit fees We have set out a summary of the non-audit services provided by Forvis Mazars (with related fees) to the IJB, together with our audit fees and independence assessment. We are committed to independence and confirm that we comply with the FRC’s Revised Ethical Standard. In addition, we have set out in this section any matters or relationships we believe may have a bearing on our independence or the objectivity of our audit team. Based on the information provided by you and our own internal procedures to safeguard our independence as auditors, we confirm that in our professional judgement there are no relationships between us and any of our related or subsidiary entities, and you and your related entities, that create any unacceptable threats to our independence within the regulatory or professional requirements governing us as your auditors. We have policies and procedures in place that are designed to ensure that we carry out our work with integrity, objectivity, and independence. These policies include: • All partners and staff are required to complete an annual independence declaration. • All new partners and staff are required to complete an independence confirmation and complete annual ethical training. • Rotation policies covering audit engagement partners and other key members of the audit team. • Use by managers and partners of our client and engagement acceptance system, which requires all non-audit services to be approved in advance by the audit engagement partner. We confirm, as at the date of this report, that the engagement team and others in the firm as appropriate, Forvis Mazars LLP are independent and comply with relevant ethical requirements. However, if at any time you have concerns or questions about our integrity, objectivity or independence, please discuss these with me in the first instance. Page 47
Page 48
Confirmation of our independence Prior to the provision of any non-audit services, I will undertake appropriate procedures to consider and fully assess the impact that providing the service may have on our independence as auditor. Principal threats to our independence and the associated safeguards we have identified and/ or put in place are set out in Framework Agreement issued by Audit Scotland available from the Audit Scotland website: Audit Scotland Framework Agreement (audit-scotland.gov.uk). Any emerging independence threats and associated identified safeguards will be communicated in our Annual Audit Report. Any emerging independence threats and associated safeguards we identify or put in place will be communicated to you in our Annual Audit Report. 34 Page 48
Page 49
Appendices A: Key communication points B: Current year updates, forthcoming accounting and other issues Page 49
Page 50
Appendix A: Key communication points We value communication with you, as a two-way feedback process is at the heart of our client service commitment. ISA (UK) 260 Communication with Those Charged with Governance and ISA (UK) 265 Communicating Deficiencies In Internal Control To Those Charged With Governance And Management specifically require us to communicate a number of points with you. Relevant points that need to be communicated with you at each stage of the audit are outlined below. Form, timing and content of our communications We will present the following reports: Our Annual Audit Plan in June 2026; Our Annual Audit Report in October 2026; Our independent auditor’s report in October 2026; and These documents will be discussed with management prior to being presented to yourselves and their comments will be incorporated as appropriate. Key communication points at the planning stage as included in this Annual Audit Plan Our responsibilities in relation to the audit of the financial statements; • The planned scope and timing of the audit; • Significant audit risks and areas of management judgement; • Our commitment to independence; • Responsibilities for preventing and detecting errors; • Materiality and misstatements; and • Fees for audit and other services. Key communication points at the completion stage to be included in our Annual Audit Report Significant deficiencies in internal control; Significant findings from the audit; Significant matters discussed with management; Significant difficulties, if any, encountered during the audit; Qualitative aspects of the entity’s accounting practices, including accounting policies, accounting estimates and financial statement disclosures; Our conclusions on the significant audit risks and areas of management judgement; Summary of misstatements; Management representation letter; Our proposed draft audit report; and Independence. 36 Page 50
Page 51
Appendix A: Key communication points ISA (UK) 260 Communication with Those Charged with Governance, ISA (UK) 265 Communicating Deficiencies In Internal Control To Those Charged With Governance And Management and other ISAs (UK) specifically require us to communicate the following: Required communication Where addressed Our responsibilities in relation to the financial statement audit and those of management and Those Charged with Governance. Annual Audit Plan The planned scope and timing of the audit including any limitations, specifically including with respect to significant risks. Annual Audit Plan With respect to misstatements: • Uncorrected misstatements and their effect on our audit opinion; • The effect of uncorrected misstatements related to prior periods; • A request that any uncorrected misstatement is corrected; and • In writing, corrected misstatements that are significant. Annual Audit Report With respect to fraud communications: • Inquiries with the Audit and Risk Committee to determine whether you have knowledge of any actual, suspected, or alleged fraud affecting the entity; • Any fraud that we have identified or information we have obtained that indicates that fraud may exist; and • A discussion of any other matters related to fraud. Annual Audit Report and discussion at the Audit and Risk Committee Audit planning and clearance meetings Where relevant, any issues identified with respect to authority to obtain external confirmations or inability to obtain relevant and reliable audit evidence from other procedures. Annual Audit Report 37 Page 51
Page 52
Appendix A: Key communication points (continued) Required communication Where addressed Significant matters arising during the audit in connection with the entity’s related parties including, when applicable: • Non-disclosure by management; • Inappropriate authorisation and approval of transactions; • Disagreement over disclosures; • Non-compliance with laws and regulations; and • Difficulty in identifying the party that ultimately controls the entity. Annual Audit Report Significant findings from the audit including: • Our view about the significant qualitative aspects of accounting practices including accounting policies, accounting estimates and financial statement disclosures; • Significant difficulties, if any, encountered during the audit; • Significant matters, if any, arising from the audit that were discussed with management or were the subject of correspondence with management; • Written representations that we are seeking; • Expected modifications to the audit report; and • Other matters, if any, significant to the oversight of the financial reporting process or otherwise identified in the course of the audit that we believe will be relevant to the IJB or the Audit and Risk Committee in the context of fulfilling their responsibilities. Annual Audit Report Significant deficiencies in internal controls identified during the audit. Annual Audit Report 38 Page 52
Page 53
Appendix A: Key communication points (continued) Required communication Where addressed Audit findings regarding non-compliance with laws and regulations where the non-compliance is material and believed to be intentional (subject to compliance with legislation on tipping off) and inquiry of the Audit and Risk Committee into possible instances of non-compliance with laws and regulations that may have a material effect on the financial statements that the Audit and Risk Committee may be aware of. Annual Audit Report and the Audit and Risk Committee meetings With respect to going concern, events or conditions identified that may cast significant doubt on the entity’s ability to continue as a going concern, including: • Whether the events or conditions constitute a material uncertainty; • Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements; and • The adequacy of related disclosures in the financial statements. Annual Audit Report Communication regarding our system of quality management, compliant with ISQM (UK) 1, developed to support the consistent performance of quality audit engagements. To address the requirements of ISQM (UK) 1, our firm’s system of quality management team completes, as part of an ongoing and iterative process, key steps to assess and conclude on our firm’s system of quality management, including: • Ensuring there is an appropriate assignment of responsibilities, • Establishing and reviewing quality objectives each year, ensuring our firm’s quality objectives align with our strategies and priorities, • Identifying, reviewing, and updating quality risks each quarter, taking into consideration multiple input sources (such as FRC/ ICAEW review findings, internal monitoring findings, findings from our firm’s root cause analysis and remediation functions, etc.), • Identifying, designing, and implementing responses to strengthen our firm's internal control environment and overall quality, and • Evaluating our quality responses and remediating control gaps or deficiencies. We perform an evaluation of our system of quality management on an annual basis. We publish the details of our annual evaluation, and our conclusion, in our Transparency Report, which can be accessed on our website at: https://www.forvismazars.com/uk/en/who-we- are/corporate-publications/transparency-reports. Annual Audit Plan 39 Page 53
Page 54
Appendix A: Key communication points (continued) Required communication Where addressed We are required to communicate certain matters to you which include, but are not limited to, significant difficulties, if any, that are encountered during our audit. Such difficulties may include: • Significant delays in management providing information that we require to perform our audit. • An unnecessarily brief time within which to complete our audit. • Extensive and unexpected effort to obtain sufficient, appropriate audit evidence. • Unavailability of expected information. • Restrictions imposed on us by management. • Unwillingness by management to make or extend their assessment of the entity’s ability to continue as a going concern when requested. We will highlight to you on a timely basis should we encounter any such difficulties (if our audit process is unduly impeded, this could require us to issue a modified auditor’s report). Annual Audit Report and audit clearance meetings 40 Page 54
Page 55
41 Appendix B: Current year updates, forthcoming accounting & other issues HM Treasury changes to non-investment asset valuation Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 (the “Code”) Following a thematic review of non-current asset valuations for financial reporting in the public sector, HMT has made a number of changes to its requirements for the valuation frequency, valuation methodology and classification of non-investment property assets. The changes are effective from 1 April 2025 as set out in the 2025-26 Code and include: • A change to the requirements regarding revaluation frequency. Rather than adhering to paragraph 34 of IAS 16 which requires an asset to be revalued whenever its carrying value differs materially from its fair value, entities will be required to revalue assets on a quinquennial basis, i.e. every five years, supplemented by annual indexation in the intervening years. This requirement can be adhered to either as part of a full revaluation or as part of a rolling programme. The Code requires bodies to use the best index available to them. Should management determine that there is no appropriate index to use, then the quinquennial valuation is supplemented by a valuation in the third year. • Revaluations carried out prior to 2025/26, in line with former requirements of the Code, remain valid throughout the transition period (being 1 April 2025 to the date the next revaluation is due for a given asset). During the transition period, the maximum period between revaluations must not exceed five years. • The requirement to consider indicators of impairment under IAS 36 remains, so management will still be required to undertake an annual assessment of whether there are indicators of impairment, and where these are present, it may be necessary to undertake valuations outside of the 5-yearly valuation programme. Whilst management will no longer need to consider annually whether it is necessary to revalue non-investment assets, they will need to be satisfied that they have appointed a suitably qualified valuer to undertake the valuation of assets whenever they fall due either as part of a full valuation or a rolling programme. If local indices are used, management will need to have sufficient evidence to demonstrate these indices are appropriate and relevant to the entity’s circumstances, and to provide this evidence to the auditor. Effective for accounting periods beginning on or after 1 January 2027 IFRS 18 Presentation and Disclosure in Financial Statements The standard was UK-adopted in December 2025, and the date of incorporation into the Code is not confirmed, though expected to be within the 2028/29 financial year. It is not yet confirmed what interpretations and adaptations HMT will determine are necessary for implementation in the public sector. We have provided an outline of the main changes arising from IFRS 18 as unadapted and without interpretation and will provide an update on the expected impact on the IJB as and when detail is available as to when and how the standard is incorporated into the Code. IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) is a new standard that replaces IAS 1 Presentation of Financial Statements. The new standard aims to increase the comparability, transparency and usefulness of information about companies’ financial performance. It introduces three key new requirements focusing on the presentation of information in the statement of profit or loss and enhancing certain guidance on disclosures within the financial statements. Page 55
Page 56
42 Appendix B: Current year updates, forthcoming accounting & other issues Effective for accounting periods beginning on or after 1 January 2027 (continued) IFRS 18 Presentation and Disclosure in Financial Statements • New categories and subtotals for inclusion within the statement of profit or loss • Income and expenses are to be classified into three new defined categories: operating, investing and financing, in addition to the income taxes and discontinued operations categories. • All companies are to present new defined subtotals – operating profit and loss, and profit or loss before financing and income taxes. • New reporting requirements on Management Performance Measures (MPMs) • New requirements are introduced for management-defined performance measures (MPMs), which may also be called Alternative Performance Measures (APMs). These are described as subtotals of income and expenses that an entity: (a) uses in public communications outside financial statements; (b) uses to communicate to users of financial statements management’s view of an aspect of the financial performance; and (c) are not listed within IFRS 18 or specifically required to be presented or disclosed by another IFRS Accounting Standard. • All MPMs are required to be disclosed in a single note in the financial statements setting out: • an explanation of why the MPM is reported, and • a reconciliation to a directly comparable GAAP measure within IFRS 18 or another IFRS Accounting Standard. • Enhanced requirements for aggregation & disaggregating information • Enhanced requirements are set out for the aggregation and disaggregation of items based on similar and dissimilar characteristics. Items that have dissimilar characteristics must be disaggregated when the resulting information is material. Guidance is also included on how to describe items within the financial statements, requiring an entity to label items presented or disclosed as ‘other’ only if a more informative label cannot be found. • New guidance is provided on whether information should be reported in the primary financial statements or the notes. This includes guidance on presentation and disclosure of expenses classified in the operating category, alongside introducing more prescribed requirements for an entity that classifies expenses by function as well as the requirement to disclose expenses by nature in a single note for certain amounts - depreciation, amortisation, employee benefits, impairment and write-downs of inventories Many principles and requirements have been brought forward from IAS 1 to IFRS 18 such as frequency of reporting, comparative information, offsetting, capital disclosures and the requirements for the statement of financial position and for the statement of changes in equity. Page 56
Page 57
Contact Forvis Mazars Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 © Forvis Mazars 2026. All rights reserved. Mark Outterside Director mark.outterside@mazars.co.uk Page 57
Page 58
This page is intentionally left blank
Page 59
1 Audit & Risk Committee Date of Meeting: 16 June 2026 Title of Report: Unaudited Annual Accounts 2025/26 Presented by: James Gow, Head of Finance The Audit & Risk Committee is asked to: • Review the Unaudited Annual Accounts and Report, including the Annual Governance Statement and approve them for issue, subject to any changes requested. • Note that the IJB is reporting a favourable financial outturn and an increase in its reserves. • Endorse the earmarking of reserves (note 6). • Note that the accounts are prepared on a going concern basis. 1. EXECUTIVE SUMMARY 1.1 The Integration Joint Board is required to produce a set of audited annual accounts. The Audit & Risk Committee is asked to formally review and approve the Unaudited Accounts prior to issue to the External Auditors and same being made available for public inspection by 31 June at the latest. 1.2 In respect of financial performance the accounts are presenting a favourable outturn as the HSPC operated within budget and delivered well on its savings plan. As a result of the underspend, general reserves have increased and earmarked reserves have also increased as funding has been provided by Government via NHS Highland to fund future liabilities and costs. A more detailed analysis of spend against budget was provided to the IJB at its meeting on 27 May 2026. 2. Recommendations 2.1 The Audit & Risk Committee are Recommended to: • Review the Unaudited Annual Accounts and Report, including the Annual Governance Statement and approve them for issue, subject to any changes requested. • Note that the IJB is reporting a favourable financial outturn and an increase in its reserves. • Endorse the earmarking of reserves (note 6). • Note that the accounts are prepared on a going concern basis. Page 59 Agenda Item 6
Page 60
2 3. DETAIL OF REPORT 3.1 The IJB is required to produce an audited set of annual accounts. The unaudited accounts were produced in line with the timetable. The purpose of this report is to provide the Audit & Risk Committee with an opportunity to review the un-audited accounts prior to publication. The Annual Accounts are subject to independent audit by Mazars, appointed by the Accounts Commission. Their audit plan is provided as a separate agenda item. 3.2 The accounts provide a summary of financial performance along with the governance statement, a performance summary, remuneration details for senior staff and also provide information on risks. 3.3 It is likely that there will be some amendments to the unaudited accounts as the audit progresses. In respect of financial performance, an operational underspend of £2.9m or 0.7% against budget is report. A summary of spend patterns over the past 5 years is provided below: 2021/22 2022/23 2023/24 2024/25 2025/26 £'000 £'000 £'000 £’000 £’000 Employee Costs 101,153 111,382 125,466 131,785 138,901 Premises 10,009 11,260 11,236 12,103 14,129 Supplies and Services 15,183 15,253 20,029 19,630 21,513 Transport 3,201 3,918 4,153 4,539 4,390 Third Party Payments 148,745 155,004 163,926 176,241 185,700 Income -19,104 -18,458 -21,019 -21,508 -22,118 Primary Care Services 52,930 53,137 55,287 58,098 60,766 Other 248 285 317 395 333 Total Spend 312,365 331,781 359,395 381,293 403,614 Total Funding 326,975 327,575 362,284 382,151 413,957 Increase / (Decrease) in reserves 14,610 -4,206* 2,889 868 10,343 *deficit due to recovery of covid reserves Spend increased by £22m or 5.8% against the prior year with direct staff costs accounting for 34% of net expenditure. The increases are largely due to inflationary pressure with premises costs increasing by more due to project spend such as the Campbeltown radiography and Coll key worker accommodation projects. Otherwise spend patterns appear relatively stable. 3.4 Whilst there was an underspend against the total resources allocated to the IJB of £10.3m, this is largely due to the allocation of funds to cover future payroll costs relating to agenda for change within the NHS. The underspend against the operational budget was £2.9m, as reported to the IJB and summarised on page 6 of the accounts. General reserves increased as a consequence of the underspend from £2.6m to £4.7m but remain below the 2% target (circa £8m). Spend on projects and commitments from general reserves has been more than offset by the underspend. Spend on NHS services has also continued to Page 60
Page 61
3 grow faster than spend on Social Care (6.4% NHS increase / 4.1% Social Work / Social Care increase). 3.5 The balance sheet debtor is equivalent to the reserves held by NHS Highland and Argyll and Bute Council. These have largely been earmarked for specific purposes and an analysis is included in Note 6. The high value reserves are to fund future pay related costs (agenda for change) and to support future sustainability and system flow within NHS services. 3.6 In the current national context it is welcome that the HSCP has achieved its financial performance targets and holds general reserves at the year end. The accounts also provide an overview of the governance framework and a high level summary of performance and risk. The Greater Glasgow and Clyde SLA is highlighted as a strategic financial risk. In the medium term the HSCP still has a deficit budget and is still not operating on a financially sustainable basis. This requires to be addressed and will be a particular area of external audit interest. In respect of the Going Concern judgement, the reserves held by the IJB and the plans currently in place to deliver savings mean it is appropriate to assume that the IJB remains a Going Concern as at the end of 2025/26. 4. RELEVANT DATA AND INDICATORS 4.1 Information contained within the accounts is derived from the financial systems of NHS Highland and Argyll and Bute Council. The audit of the IJB accounts is supported by the audits of both partners. 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 The annual accounts are a key statutory reporting and accountability requirement. They communicate both financial and key service delivery performance information in an accessible public document. Page 61
Page 62
4 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – The unaudited accounts present a mixed view of the HSCPs financial performance during 2025/26 and the position at the year end. 6.2 Staff Governance – None 6.3 Clinical Governance – None 7. Professional Advisory 7.1 Professional leads have had the opportunity to consider the contents of this report and the draft Annual Accounts. 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 None 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 None 10. RISK ASSESSMENT 10.1 There are no changes to the risk register arising from the contents of this report. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 The unaudited annual accounts will be publicly available for inspection and their publication advertised. 12. CONCLUSIONS 12.1 This report summarises the draft accounts for the year ended 31 March 2026 and provides an opportunity for members to comment on them prior to publication. 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board Page 62
Page 63
5 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) SLT Unaudited Annual Report and Accounts 10/06/26 TBC REPORT AUTHOR AND CONTACT James Gow, Head of Finance james.gow@argyll-bute.gov.uk APPENDIX 1: Unaudited Annual Accounts for the year ended 31 March 2026 Page 63
Page 64
This page is intentionally left blank
Page 65
ARGYLL AND BUTE INTEGRATION JOINT BOARD Commonly known as Argyll and Bute Health & Social Care Partnership UN-AUDITED ANNUAL ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2026 Page 65
Page 66
ARGYLL AND BUTE INTEGRATION JOINT BOARD ANNUAL ACCOUNTS CONTENTS Page 1 Page Management Commentary 2 Statement of Responsibilities 12 Annual Governance Statement 14 Remuneration Report 21 Financial Statements: - Comprehensive Income and Expenditure Statement - Movement in Reserves Statement - Balance Sheet 23 Notes to the Financial Statements: 1. Material Accounting Policies 2. Events After the Reporting Period 3. Taxation and Non-Specific Grant Income 4. Debtors 5. Related Party Transactions 6. Usable Reserve: General Fund 7. Critical Judgements and Uncertainty 8. Audit Fees 26 Independent Auditors Report 33 Page 66
Page 67
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 2 1. INTRODUCTION This document provides the Financial Statements of the Argyll and Bute Integration Joint Board (IJB) for the year ended 31 March 2026 and reports on performance. The main purpose is to demonstrate the stewardship of public funds entrusted to the HSCP for the delivery of its Strategic Plan. The requirements governing the format and content of the annual accounts are contained in The Code of Practice on Local Authority Accounting. These Accounts have been prepared in accordance with the Code. The Management Commentary provides an overview of the IJB’s financial position and operational performance for the year. This section also provides a summary of the risks which may impact in the future. The IJB has had a positive year from a financial perspective. It has operated within its budget, delivered savings and increased its general reserves. The delivery of the savings programme has been challenging but necessary to ensure the medium-term financial sustainability of the HSCP. The reserves held by the IJB are mostly earmarked for specific future costs, projects and investments and provide some degree of financial resilience and mitigate financial risk to partners in 2026/27. Additionally, reserves have been allocated to support the budget in 2026/27 to maintain services as far as is possible in the face of the cost and demand pressures currently challenging the Health and Care sector. This approach is not sustainable in the longer term and the HSCP continues to develop and implement its savings plans to ensure that it can remain sustainable. Current service provision is configured in a way that is not affordable, therefore service change and delivery of further efficiency savings will remain priorities in the coming years. This is consistent with longer term planning outlined by the Scottish Government in its medium-term financial strategy and public sector reform agenda. 2. THE INTEGRATION JOINT BOARD (IJB) The Argyll and Bute Health and Social Care Partnership (HSCP) is responsible for the planning and delivery of all community and acute health and social care services for adults and children. This includes services we deliver directly and a range of services which are purchased from external providers including NHS Greater Glasgow and Clyde. The Partnership is a distinct legal entity with a board of governors, the IJB which has responsibility and accountability for the planning, resourcing and oversight of the delivery of integrated services as described in its Strategic Plan. The IJB was delegated resources and responsibility for Health and Care service delivery from 1 April 2016. Membership of the IJB includes eight voting members with four Elected Members nominated by Argyll and Bute Council and four Board Members of NHS Highland. In addition, there are non-voting appointees representing other sectors and stakeholder groups, such as the Third Sector, Independent Sector, Patients and Service Users, Carers, individuals with lived experience and staff. The Scottish Government are in the process of further strengthening representation from these groups by giving them full voting rights as IJB members in 2026/27. Page 67
Page 68
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 3 Argyll and Bute is home to 86,000 people, covers an area of 690,946 hectares and is the second largest local authority by area in Scotland. It has 23 inhabited islands, with 17% of the population living on islands. Argyll and Bute provides a number of unique opportunities for those who live and work here, however we also face a number of challenges. The geography associated with dispersed communities in remote and rural areas and islands presents a challenge in delivering services within the resources available. Of the population, 69% live in “remote” or “very remote” areas and 45% live in areas in the 20% “most deprived for geographic access to services”. Argyll and Bute also has a higher proportion of older people than Scotland as a whole, with 12.4% aged 75 and over compared to 8.5% in Scotland. The costs associated with providing comprehensive services to an ageing population continue to increase and demographic change is having an impact on demand for services and our ability to recruit staff to deliver those services. 3. HEALTH AND SOCIAL CARE PARTNERSHIP STRATEGIC PLAN The HSCP vision and priorities for health and social care are outlined in its new Joint Strategic Plan (JSP) 2026-2031. The new plan has been developed throughout the year and included a period of extensive engagement to ensure that stakeholders and communities had the opportunity to influence the plan. The new plan has also had to take account of the current context which is characterised by continuing increasing demand, financial and staffing constraints. The JSP can be accessed at: https://www.nhshighland.scot.nhs.uk/about/argyll-and-bute-health-and-social-care-partnership/argyll- and-bute-hscp-publications Our Vision is that: “People in Argyll and Bute live healthy, independent lives in resilient communities. Individuals are enabled and supported to thrive and fulfil their potential through integrated, person centred health and social care that is delivered close to home, focused on prevention, and informed by the people who use it.” Page 68
Page 69
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 4 4. PERFORMANCE MANAGEMENT AND REPORTING The Integrated Performance Management Framework and dashboard has been developed to ensure performance and improvement activity is reported in an accessible way and provides a holistic overview of performance against a range of internal performance indicators and the National Health & Wellbeing Outcomes. The performance measures continue to be refined to improve their relevance and reliability which in turn helps enable improvement. The monitoring and reporting process ensures the HSCP is able to report performance against strategic priorities and provide nationally reported data on performance under the following headings: 1. National Health and Wellbeing Outcome Indicators 2. Ministerial Steering Group Performance Indicators 3. Unscheduled Care 4. Delayed Discharges 5. IPMF Performance Indicators (operational performance) The Annual Performance Report provides a detailed overview of the progress that has been made in addressing health and care priorities, this is available on the website. The process of managing COVID related backlogs of diagnosis and treatment and returning services to previous levels continues to be challenging. The situation is being exacerbated by the demographic change further driving increasing demand for services. The Scottish Government has requested all Health Boards focus upon manging down delayed discharges from hospital and waiting lists, particularly very long waits. As a consequence of our reliance on NHS Greater Glasgow and Clyde (NHS GG&C) for specialist hospital services, our planning has been Page 69
Page 70
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 5 undertaken in partnership with them. The following table summarises key performance measure regarding waiting times: Total on Waiting List @ March 25 Total on Waiting List @ March 26 Length of Wait (weeks) March 2025% > 12 Weeks March 2026% >12 Weeks Target % March 2025% > 52 Weeks March 2026% > 52 Weeks Target % Consultant Outpatient Clinics 1932 2266 49% 34% 46% 6.9% 1.8% 0% The HSCP would not wish anyone to be waiting long periods to access services, however this remains the situation that many continue to find themselves in across Scotland. Performance against targets improved in 2025/26 and the proportions of people waiting more than 12 weeks for an outpatient appointment reduced to below target and the number waiting more than 52 weeks reduced to 1.8% of those waiting or around 40 people, again a significant improvement. These waits relate to direct acute care activity and there are additionally residents awaiting treatment with other Health Boards. The overall number of people on waiting lists increased, but the numbers waiting for lengthy times has reduced. The rural and small scale nature of many services continue to present a challenge to the ability of the HCSP to increase service provision in the short term. The Annual Performance Report provides a more comprehensive overview of performance and benchmarks. The IJB is prioritising the re-mobilisation of services to reduce long waits and maintain system flow, including the management of delayed discharges from hospitals. 5. FINANCIAL PERFORMANCE 2025-26 The delivery of savings and the financial recovery plan have been critical in delivering a positive financial outturn. The HSCP operated within budget and was able to build up its general reserve slightly to improve its financial flexibility and resilience. An overall underspend against budget totalling £2.9m or 0.7% is reported and will be carried forward to help the IJB manage its finances in future years. Reserves increased as a result of additional funding received towards the end of the year and due to the underspend. These funds are earmarked and are being held largely to pay for expected future costs and to fund committed projects. These are also required to fund the budget deficit in 2026/27 and to support service sustainability. General reserves, which are available for the IJB to use at its discretion, increased from to £2.6m to £4.7m or just over 1% of annual spend. General reserves remain below the target set out in the reserves policy (2%). The overall financial resilience of the IJB has improved slightly as a consequence of the small underspend. The broader context within which the HSCP is currently operating is extremely challenging with increasing financial pressures being experienced. The HSCP has relied on Page 70
Page 71
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 6 non-recurring savings to fund its services and is spending in excess of recurring resourcing. The HSCP is going through a process of taking action to bring spend back into alignment with funding. This will take a number of years and will have an impact on services and is being planned and delivered in the context of: • on-going inflationary pressure (pay costs and commissioned service costs); • increasing demand as a consequence of demographic change and social factors; and • persistent workforce recruitment and retention challenges. Enhanced financial management processes are in place to maintain focus upon managing the situation including: • Vacancy management. • Increased controls and reporting of agency and locum spend. • Enhanced approval process for agency staffing. • Care at Home efficiency processes which restricts delivery of care to budgeted hours. • Implementation and monitoring of the ceiling of care policy. The future challenges facing health and social care services include: • Ageing demographic resulting in increasing demand for older adult services’ • cost increases relating to pay, home-care and residential care contracts continuing to exceed funding increases. • reductions in capacity in the independent sector as providers continue to withdraw citing financial viability and staffing issues. • Continued lack of availability of staff resulting in increased costs as services are supported by agency staff. The cost is exacerbated by accommodation shortages and costs. The final outturn for 2025/26 was an underspend against budget of £2.9m. This has been carried forward to fund cost pressures and the budget gap in 2026/27. The following table summarises financial performance analysed between Health and Social Work services: Service Actual £000 Budget £000 Variance £000 % Variance COUNCIL SERVICES TOTAL 100,483 100,540 57 0.1% HEALTH SERVICES TOTAL 295,698 298,555 2,857 1% GRAND TOTAL 396,181 399,095 2,914 0.7% Allocation to General Reserves - NHS 2,857 Allocation to General Reserves – Social Work 57 Year End Balance 399,095 399,095 0 0% Page 71
Page 72
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 7 Savings Delivery The budget included a savings target of £8.9m. During the year £8.0m or 90% of the target was delivered. The savings programme is managed and reported rigorously throughout the year and savings delivery contributed to the improved financial position and helps the HSCP move towards financial sustainability in the longer term. There were a small number of projects which were not delivered during the year and these remain priorities for future years. Given the longer term outlook, it is anticipated that the IJB will be required to develop further savings projects. Financial Statements Comprehensive Income and Expenditure Statement This statement shows the cost of providing services according to accepted accounting practices. There are no statutory or presentational adjustments which affect the application of the funding received from partners, therefore the movement in the General Fund is solely due to the transactions summarised in the Comprehensive Income and Expenditure statement. Reconciliation of Comprehensive Income and Expenditure Statement to Financial Outturn: The table below reconciles the surplus on the provision of services of £10,343k as noted in the Comprehensive Income and Expenditure Statement to the financial outturn: £000 £000 Surplus on Provision of Services 10,343 Less Statutory Adjustments that don’t feature in financial outturn 0 Movement in General Fund Balance 10,343 Reserves released for the delivery of services (5,643) New Earmarked Reserves 15,986 Increase in General Fund Balance 10,343 Movement in Reserves Statement This statement shows the movement on the IJB’s Reserves. It has one reserve, its General Fund, a resource backed reserve which can be used to fund future expenditure. The balance increased from £20.7m to £31.1m. These resources have generally been earmarked for specific purposes, including to fund the revenue budget in 2026/27. The IJB spent £5.6m of its reserves during the year including spend on a number of projects as detailed in note 6, including: • Children’s Acute Mental Health Services £244k. • Delivery of E Health projects £245k. • Hospital at Home £414k. • The Prevention Programme £258k. • Campbeltown Hospital / X Ray £352k. Page 72
Page 73
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 8 • Final phase of the Tiree Care Home and care service remodelling £209k to deliver a more sustainable model on the island. The Reserves Policy is that a prudent level of General Fund reserve is 2% of annual spend, this equates to £8m. As at 31 March 2026 general reserves were below this level at £4.7m. Earmarked reserves increased as a consequence of new resource allocations to fund agenda for change pay liabilities, service sustainability, system flow and primary care improvement. Note 6 provides detail on the reserves and the purposes for which they are earmarked. Balance Sheet The Balance Sheet shows the value of the IJB’s assets and liabilities as at 31 March 2026. It does not hold fixed assets or invest capital resource, these responsibilities sit with the partner bodies. There are explanatory notes which accompany the Balance Sheet. The net worth of the IJB as at 31 March 2026 is £31.1m, supported by the General Fund. The balance consists of Short Term Debtors relating to earmarked reserves for delegated services and recognises the amounts owed to the IJB by NHS Highland and Argyll and Bute Council. There are no provisions recognised on the Balance Sheet. NHS Highland made a year-end provision for annual leave of £1.3m (£1.2m in the prior year) for HSCP staff. It also made a provision of £0.1m for potential regrading costs and £0.2m for IR35 liabilities relating to medical staff. Argyll & Bute Council have made a provision for £77k for potential liabilities relating to rates increases regarding Children’s and Families care packages and £168k relating to a backlog of energy cost billing. All provisions are reflected in the outturn position. There are historic provision balances and contingent liabilities relating to services provided prior to 1 April 2016, these will be recognised as required in the partner Annual Accounts. There could be further consideration of funding requirements for the IJB where the historic funding of these provisions are insufficient and may affect future IJB funding arrangements. 6. FINANCIAL OUTLOOK, RISKS AND PLANS FOR THE FUTURE Budget 2026-27 The 2026/27 budget for was approved by the IJB in March 2026 following extensive public engagement. The budget relies upon a savings programme totalling £8m and the use of reserves. The approval of the savings programme has been particularly challenging as it has required reductions in services and constraints upon the resources allocated to third sector partners. Argyll and Bute Council allocated additional resources to the HSCP to mitigate the impact of the budget savings. It is anticipated that further savings will be required in the future and work on this is on-going. Service Transformation and the delivery of the approved savings program are key to ensuring services are delivered in sustainable way. While the budget position is extremely challenging, the HSCP has operated within the resources that have been available to it for the past six years. Page 73
Page 74
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 9 It has also built up a small degree of financial resilience. Operating on a financially sustainable basis is a strategic priority, significant work is required to address the underlying deficit, particularly within NHS services as Greater Glasgow and Clyde are increasing charges for services delivered to Argyll & Bute residents. The Transformation Board receives regular updates on the agreed transformation programmes and projects, funding has been set aside to fund strategic change projects. The new Joint Strategic Plan recognises this extremely challenging context. Medium to Longer Term Outlook Looking to 2027/28 and beyond, it is anticipated the Scottish public sector will continue to face financial challenge. For Health and Social Care, increasing demand driven by demographic change combined with costs driven by pay and general inflation is expected to mean that cost pressures will exceed funding increases. This context has been outlined by Audit Scotland, the Institute for Fiscal Studies and the Scottish Government in its Medium-Term Financial Strategy and its intention to drive public sector reform. The impact of inflation and reducing real terms value of public funding are likely to present a challenge when coupled with increasing demand for services, workforce shortages and an ageing demographic. The HSCP will continue to update its medium-term financial planning as the future policy direction and impact of the reform agenda becomes clear. Financial pressures will require to be managed through continuing value for money, charging for services, efficiency improvement, the implementation of new ways of working and some reductions in service delivery. NHS services are operating with an underlying deficit and there is an additional pressure in respect of the SLA with Greater Glasgow and Clyde. The situation is not sustainable and spend reduction is required. It is anticipated that cash releasing efficiency savings of 3% or around £12m per year will be required. Financial Risks The IJB has a robust approach to Risk Management and responsibility for oversight of financial risks and mitigations sit with its Finance & Policy Committee. Financial risks are considered and reported on a regular basis. Key financial risks which have an assessed value of £500k or more have been identified. The main financial risk facing the IJB (and NHS Highland) relates to the increased charging for services provided by NHS Greater Glasgow and Clyde: Identified Risk Estimated Value £000 Summary of Mitigations Increased SLA charges from NHS Greater Glasgow and Clyde. £12m in 2026/27. £16m recurring. Diligence regarding activity levels and costs. Engagement between NHS Highland, NHS Greater Glasgow and Clyde and Scottish Government. Consideration of potential actions to reduce scale of charge or make compensating changes to local services. Page 74
Page 75
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 10 Sustainability of service providers – providers reduce or close provision resulting in additional costs such as increased agency and accommodation as the HSCP is required to identify alternative ways of providing services. £750k (£0.5m- £1.5m range) On-going dialogue, monitoring and review. Engagement with partners. The Care at Home service transformation project and consideration of new ways of working in some localities Inflation – macroeconomic conditions and on-going conflicts which may result in pay and non-pay inflation exceeding budgeted allowances. £500k (£0.5m- £1.5m range) Allowance made for inflation in the budget, performance monitoring, continuous review of contract rates and pricing. Delivery of savings. Monitoring of energy cost and travel impact of increased fuel prices. Staff recruitment – inability to recruit staff across NHS and social care services results in on-going utilisation of agency staffing. £500k (£0.5m- £1.5m range) Workforce strategy, targeted recruitment action, development of improved accommodation options. Savings – failure to deliver the savings programme in full during the year contributes to a budget overspend and failure to achieve financial objectives. £500k (£0.5m- £1.5m range) Project management processes and funds held in reserve. Service Demand – Older adult service demand continues to increase driving spend above budget on residential care and care @ home £500k (£0.5m- £1.5m range) Care at home efficiency, monitoring of care home occupancy and potentially restrictions of service. The macroeconomic environment remains a risk, whilst the implications for the HSCP of higher inflation can be modelled and are understood, the impact upon some of the most vulnerable in the communities served by the HSCP is of concern. Increased poverty and impacts on health and well-being can be expected, this in turn may further increase service pressures along with the adverse impact covid lockdowns have had. The HSCP continuously seeks to consider its strategic context and is undertaking specific work to examine how it can manage the service impact of demographic change. Additionally there are a number of government policies and new legislation which will have direct and indirect financial implications for the HSCP. The process of horizon scanning and modelling the financial implications, examples include: • The Care Reform Act; • Keeping the Promise; and • The Health and Care Staffing Act. The HSCP has identified the following high grade strategic risks: • Sustainability of commissioned service providers; • Workforce recruitment and retention; • Infrastructure condition and suitability; • Long term financial sustainability; and • Socio-economic situation and cost of living crisis. Page 75
Page 76
ARGYLL AND BUTE INTEGRATION JOINT BOARD Management Commentary Page 11 7. CONCLUSION The Integration Joint Board’s final outturn position for 2025/26 was a small underspend against its budget. This is welcome and has enabled the HSCP to slightly increase its general reserve balance. The delivery of the savings programme and the recovery plan have been critical in improving the financial performance. Whilst financial targets have been achieved in 2025/26, there remains significant challenges ahead and the impact on the services that can be afforded and delivered is of concern. The IJB still has a structural deficit relating to its NHS services which requires to be addressed along with NHS Highland. The HSCP ended the year with total reserves of £31.1m including its general reserves of £4.7m, these are mostly committed to funding the 2026/27 budget gap, service sustainability and agenda for change staffing costs. The environment remains challenging as there are ongoing service pressures. The impact of inflation and cost of living crisis is resulting in people requiring increasing levels of health and social care support. The public funding environment is expected to worsen and will make it increasingly challenging to operate current services on a financially sustainable basis. The identification and delivery of efficiency savings is crucial, this will inevitably result in further reductions in the service offer. The demographic changes now being experienced will result in an incremental increase in demand for service each year, financial and staffing constraints mean that this cannot be managed without service change and a shift towards increasing preventative approaches. Making best use of the resources available is now critical to ensure that the HSCP can continue to deliver services in the best possible way for the communities it serves. 8. ACKNOWLEDGEMENTS We would take this opportunity to acknowledge the effort in producing the Annual Accounts and to record our thanks to members of the Integration Joint Board and staff for their continued hard work and support. Graham Bell Evan Beswick James Gow Chair Chief Officer Head of Finance Date TBC Date TBC Date TBC Page 76
Page 77
ARGYLL AND BUTE INTEGRATION JOINT BOARD Statement of Responsibilities Page 12 THE INTEGRATION JOINT BOARD’S RESPONSIBILITIES: The Integration Joint Board is required: - to ensure the Annual Accounts are prepared in accordance with the legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government Act 2003); - to make arrangements for the proper administration of its financial affairs and to secure that the proper officer of the board had responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). In this organisation, that officer is the Head of Finance; - to manage its affairs to secure economic, efficient and effective use of its resources and safeguard its assets; and - to approve the Annual Accounts for signature. I confirm that these Annual Accounts were approved for signature by the Argyll and Bute Integration Joint Board at its meeting on Date TBC. Signed on behalf of the Integration Joint Board: Graham Bell Chair Date TBC Page 77
Page 78
ARGYLL AND BUTE INTEGRATION JOINT BOARD Statement of Responsibilities Page 13 THE CHIEF FINANCIAL OFFICER’S RESPONSIBILITIES: The Chief Financial Officer (Head of Finance) is responsible for the preparation of the Integration Joint Board’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing the annual accounts the Chief Financial Officer is responsible for: - selecting suitable accounting policies and applying them consistently; - making judgements and estimates on a reasonable basis; - complying with legislation; - complying with the Local Authority Code of Practice (in so far as it is compatible with legislation). The Chief Financial Officer is also required to: - keep proper accounting records which are up to date; and - take reasonable steps to ensure the propriety and regularity of the finances of the Integration Joint Board. I certify that the financial statements give a true and fair view of the financial position of the Argyll and Bute Integration Joint Board as at 31 March 2026, and its income and expenditure for the year then ended. James Gow Head of Finance 16 June 2026 Page 78
Page 79
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 14 INTRODUCTION The Annual Governance Statement explains Argyll and Bute Integration Joint Board’s (IJB) governance arrangements and reports on the effectiveness of its system of internal control. SCOPE OF RESPONSIBILITY The IJB is responsible for ensuring that its business is conducted in accordance with the law and appropriate standards, that public money is safeguarded, properly accounted for and used economically, efficiently and effectively. In discharging these responsibilities, the IJB has put in place arrangements for governance of its affairs which includes a system of internal control. This is based on an ongoing process designed to identify, prioritise and manage risk. The system aims to manage risks effectively and proportionately to deliver the IJB’s objectives. The IJB places reliance on the NHS Highland and Argyll and Bute Council systems of internal control. These support compliance with both organisations’ policies and promote achievement of their aims and objectives, as well as those of the IJB. The system can only provide reasonable and not absolute assurance of effectiveness. GOVERNANCE FRAMEWORK The IJB is an independent legal entity from both Argyll and Bute Council and NHS Highland, with a separate governance framework. The IJB comprises eight voting members with four Elected Members nominated by Argyll and Bute Council and four Board members of NHS Highland. In addition there are a number of non-voting appointees representing other stakeholder groups, such as the Third Sector, Independent Sector, Patients and Service Users, Carers and Staff. The arrangements for the operation, remit and governance of the IJB are set out in the Integration Scheme which has been prepared and approved by Argyll and Bute Council and NHS Highland. The IJB, via a process of delegation from the Health Board and Local Authority has responsibility for the planning, resourcing and operational delivery of all integrated health and social care services within Argyll and Bute. The scheme of integration was revised, as required by legislation, and was approved by Scottish Government on 23 March 2026. It is published on the Council and NHS Highland websites. The funding available to the IJB is dependent on the funding made available to and by Argyll and Bute Council and NHS Highland. The IJB is therefore reliant on both partners for the resources to deliver health and social care services. The main features of the governance framework in place during 2025-26 were: • The Integration Scheme outlines the scope and functions of services that are delegated, the clinical and care governance, strategic planning, financial and operational management arrangements. Page 79
Page 80
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 15 • The IJB operates within an established procedural framework. The roles and responsibilities of Board members and officers are defined within Standing Orders, the Integration Scheme, Financial Regulations and Standing Financial Instructions; all subject to regular review. • The strategic vision, mission and values of the IJB are set out in the Strategic Plan and are aligned to the health priorities outlined by the Scottish Government in the Population Health Framework. • Effective partnership working with the Council and NHS Highland ensures delivery of the Strategic Objectives, through information sharing and clear lines of responsibility. • Members of the IJB subscribe to, and comply with, the Standing Orders and Code of Conduct. The Standards Officer is responsible for advising and guiding members of the Board on issues of conduct and propriety. A register of interests is held for Board members and senior officers. • Appropriate training, development and induction is provided for all new IJB members. Performance Development and Review schemes are in place for all staff through each partner agency, the aim of which is to focus on their individual performance and development and contribution to meeting service objectives. • Four Locality Planning Groups have been established and meet quarterly, they aim to provide an effective mechanism for local leadership of service planning and a way for localities to influence how resources are allocated in their area and allow them to contribute to the development and delivery of the Strategic Plan. • Effective scrutiny and decision making is supported by the formal submission of reports, findings and recommendations by Audit Scotland, Inspectorates and the Internal Audit service. • The decision making structure whereby the committees of the IJB have agreed Terms of Reference. These include the Clinical and Care Governance Committee, Audit and Risk Committee, Finance & Policy Committee, Strategic Planning Group and Locality Planning Groups. Terms of reference and the annual reporting framework are formally approved by the IJB and are reviewed regularly. • The output from committees is publicly available and reported through minutes being considered by the IJB. All committees self-assess their performance and provide an annual report to the IJB. • The Integrated Performance Management Framework focusses on embedding a performance management culture throughout the organisation with regular reporting to the IJB. The IJB prepares an Annual Performance Report, this is submitted to Scottish Government and is publicly available. • Reliance on the procedures, processes, policies and operational systems of Argyll and Bute Council and NHS Highland where these are not operationally delegated. The IJB key governance documents are subject to periodic review. • The legislative framework requires the Chief Officer to be a single point of overall strategic and operational advice to the IJB and to be a member of the Senior Management Teams of Argyll and Bute Council and NHS Highland. • Robust Risk Management processes are in place and the IJB have set their risk appetite to ensure management actions align risk management priorities. IJB meetings take place on a hybrid basis with in-person attendance encouraged, most committee meetings continue to take place by remote conferencing. This continues to be an efficient way of Page 80
Page 81
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 16 conducting business considering the geography of Argyll & Bute. Members of press and public were enabled to attend IJB meetings, and the recording of each meeting was subsequently published alongside the minutes. THE SYSTEM OF INTERNAL FINANCIAL CONTROL The governance arrangements described operate on the basis of a system of internal controls. This is based on a framework of regular management and financial information, financial regulations, administrative procedures, management supervision and a system of delegation and accountability. Development and maintenance of the system is undertaken by managers within the IJB. During 2025-26 this included the following: - Financial Regulations and guidance relating to financial processes and procedures, these were updated in May 2024. - Formalised budget setting process, a three-year budget outlook and identification of new savings projects. - Regular review of detailed financial performance reports. - Formal programme and project management discipline. - Regular Finance and Policy Committee meetings to provide scrutiny of the financial position and progress with savings and service transformation. - An effective and independent Internal Audit function. - Integrated financial reporting and financial risk management. - An extensive public engagement process to inform the development of the 2026/27 budget. The system of internal financial control can provide reasonable and not absolute assurance and is designed to manage risk to a reasonable level. Responsibility for maintaining and operating an effective system of internal financial control rests with the Head of Finance. The IJB’s financial management arrangements conform to the governance requirements of the CIPFA statement: ‘The Role of the Chief Financial Officer in Local Government (2016)’. In relation to managing the risk of fraud and corruption the IJB relies upon the financial regulations, processes and procedures put in place and operated by both partners. Its Audit & Risk committee review arrangements for managing fraud risk, including through the work of its internal and external auditors. These arrangements are considered to provide adequate assurance on the management of fraud risk and are considered to be compliant with CIPFA’s Code of Practice on Managing the Risk of Fraud and Corruption. UPDATE ON GOVERNANCE IMPROVEMENT ACTIONS A number of areas for development in respect of governance have been progressed and this has resulted in a marked improvement in the way in which the IJB operates and is governed. The action plan is now fully implemented, highlights included the development of the Workforce plan, the roll out and on-going development of the Integrated Performance Management System, the development of the engagement strategy and training and development for IJB members. Page 81
Page 82
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 17 DATA PROTECTION The HSCP is committed to the highest standards of Data Protection and has put in place arrangements to ensure compliance with the General Data Protection Regulations with NHS Highland and Argyll & Bute Council. There were no notifiable data breaches in 2025/26 and one data breach in the prior year which was resolved, and upon investigation, no personal data had been disclosed. INTERNAL AUDIT The IJB is required to put in place adequate and proportionate internal audit arrangements to provide independent assurance on risk management, corporate governance and system of internal control. Following a competitive tendering process, Argyll and Bute Council Internal Audit Service were contracted as internal auditors for the IJB from 1 April 2021. This contract was extended for a further period of three years from 1 April 2024. The IJB complies with “The Role of the Head of Internal Audit in Public Organisations” (CIPFA) and operates in accordance with “Public Sector Internal Audit Standards” (CIPFA). The Chief Internal Auditor reports directly to the IJB Audit and Risk Committee with the right of access to the Head of Finance, Chief Officer and Chair of the IJB Audit and Risk Committee on any matter. The annual programme of internal audit work is based on a strategic risk assessment and is approved by the IJB Audit and Risk Committee. The role of the Audit and Risk Committee is to provide the IJB with independent assurance on the adequacy of the risk management framework, the internal control environment and the integrity of the financial reporting and annual governance processes. Membership of the Audit and Risk Committee includes six members of the IJB. Professional advisors, the internal auditor and external auditor support the committee and attend where appropriate. The approved Audit Plan for 2025/26 included reviews of: • IJB Governance Arrangements • Partnership Governance • Workforce Planning • Payroll procedures for Care at Home • Care Assessment and Resources Allocation – Adult Care In addition, the Committee considered a wide range of reports including several published by Audit Scotland. It also reviews performance in implementing audit recommendations. As at the end of the year the HSCP had implemented 11 of its outstanding recommendations with a total of 17 outstanding at the year end. The implementation of the outstanding recommendations is a priority for the management team. The Chief Internal Auditor provides the Audit Committee with an annual report on audit activity for the Integration Joint Board. The annual report includes an independent opinion on the adequacy and effectiveness of the systems of governance and internal control. For financial year Page 82
Page 83
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 18 2025/26 the overall conclusion of the Internal Auditor is to provide a reasonable level of assurance on the adequacy of internal controls and governance arrangements within the IJB. The Chief Internal Auditor also summarised concerns about the financial challenges facing the HSCP in the longer term which will require both savings to be identified and effective delivery of these savings in order to maintain financial sustainability and minimise the financial risk to both parent bodies. The Annual Internal Audit Report also notes that financial sustainability continues to be an issue throughout the Health and Social Sector as reported on several occasions by Audit Scotland. BEST VALUE The IJB has a statutory duty to provide best value as a designated body under section 106 of the Local Government (Scotland) Act 1973. The Annual Performance Report sets out how the IJB fulfilled its obligations for best value in that year. The Annual Performance Report is publicly available. A short summary against the 8 best value themes is given below: Vision and Leadership The IJB and Senior Leadership team set clear direction and strategy as expressed in the Strategic Plan and Commissioning Strategy. There are strong mechanisms for contributions from the Locality Planning Groups and the Strategic Planning Group into these documents. The IJB approved its new joint strategic plan and its budget and savings plan for the 2026/27 financial year. Governance and Accountability The IJB has an open and transparent governance system in place. It seeks to continually develop and improve in response to emerging good practice and independent audit review. Support for the system of governance is provided by Argyll and Bute Council, this ensures that it is properly administered. Comprehensive and clear Board minutes and papers continue to be published and meetings are open to the public. The IJB has agreed to make sub-committee meetings open for public attendance to further improve its open and transparent approach to governance. Effective use of resources The Finance & Policy Committee meet regularly to scrutinise performance against budget, the delivery of savings and the Transformation Programme. Improving financial management and governance has been a priority for a number of years, steps taken have contributed to the improved financial performance and resilience. It continues to seek to identify ways of improving efficiency and has been able to invest in longer term service transformation. The financial and demographic challenges facing the health and social care sector are resulting in increasing pressure on finances service and its staff. There is an ongoing focus on efficiency, savings and service reductions as a consequence. Partnership and Collaborative Working Page 83
Page 84
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 19 Effective partnership working is a core element of the way in which the IJB has been established. The IJB works closely with NHS Highland and Argyll and Bute Council. The Chief Officer is a member of both Strategic Management Teams. In addition the HSCP works closely with third sector partners and its commissioned service providers by holding regular meetings with strategic partners and stakeholders. This has continued throughout 2025/26 and illustrates an ethos of partnership working and co-production. Examples of effective partnership working during include the purchase of the Kintyre Care Centre, the remodelling of care services and the care home on Tiree, the outcomes from the Coll Collaborative Group, the establishment of the Prevention Programme and participation in several place-based programmes. However, it is acknowledged that partnership working has become more challenging as a consequence of the budget decisions which have had to be made by the IJB, these have had an adverse impact on the resourcing provided to 3rd sector partners. Community Responsiveness The Locality Planning Groups ensure that local concerns are considered and feed into the Strategic Plan. The Engagement Strategy ensures that consultation and engagement is carried out before policy changes are agreed. Most recently this has been demonstrated in the high levels of public engagement in the budget engagement process and in the development of the new Joint Strategic Plan. A commitment to co-production is an underlying theme and work is now underway to develop new models of service delivery with community based partners. Fairness and Equality A commitment to fairness and equality is at the core of the IJBs purpose, strategy and vision. The HSCP provides a wide range of essential and critical services to the most vulnerable in society. Equality Impact Assessments on new projects plans and strategies include an assessment of socio-economic impacts and islands impacts. Sustainability & Carbon Reduction Carbon reduction remains an important objective for all public bodies. There are a number of strands to the approach including: • Remote provision of services and remote working to reduce travel for staff and service users. There has been extensive use of Near Me for remote consultations where appropriate, and continued utilisation of Microsoft Teams; • The use of drones for transporting items such as laboratory samples from islands and remote areas; • Increasing electric vehicle charging infrastructure and investment in the electrification of the fleet; • Securing of funding to roll out installation of LED lighting; • Investing in management capacity to develop a strategic approach to the HSCP estate to develop capital schemes to reduce carbon emissions; • The commissioning of consultancy services to identify opportunities for carbon reduction across the estate; Page 84
Page 85
ARGYLL AND BUTE INTEGRATION JOINT BOARD Annual Governance Statement Page 20 • Identification of property backlog maintenance and improvement issues to enable a fabric first approach to energy reduction; and • The rationalisation of the estate through improved co-location arrangements. Performance, Outcomes & Improvement The HSCP reports performance in a holistic way and it has implemented its Integrated Performance Management Framework, this remains subject to further improvement and development. The HSCP continues to work to increase activity levels and address the backlog of treatment and diagnosis and long waits in particular. A further priority remains the management of delayed discharges from the acute sector, within Argyll & Bute and from Greater Glasgow & Clyde. REVIEW OF EFFECTIVENESS The IJB has responsibility for conducting, at least annually, a review of the effectiveness of the governance arrangements including the system of internal financial control. This is informed by: - The work of officers within the IJB. - The work of Internal and External Audit. - External review and inspection reports. - The compliance with statutory guidance issued for the integration of services. - Recommendations from the Audit Committee. CONCLUSION AND OPINION ON ASSURANCE Appropriate governance arrangements are in place and operated effectively throughout 2025/26. Continuous improvement and development is ongoing to ensure that the Partnership is able to deliver on its strategic objectives and operate on a financially sustainable basis. The annual report and accounts outline the financial challenge and risk, common to the health and care sector nationally at present. The HSCP has been able to fund its activity and has managed the financial challenges facing it relatively well. It has also been able to improve its general reserve position to provide some degree of financial contingency and resilience for future years. Addressing the longer-term financial sustainability of the HSCP remains a priority. The Annual Governance Statement outlines a number of key evidence sources which support the view that reasonable assurance can be placed upon the adequacy and effectiveness of the IJB’s systems of governance. Graham Bell Evan Beswick Chair Chief Officer Date TBC Date TBC Page 85
Page 86
ARGYLL AND BUTE INTEGRATION JOINT BOARD Remuneration Report Page 21 1. INTRODUCTION The Local Authority Accounts (Scotland) Amendment Regulations 2014 (SSI No.2014/200) require local authorities and IJBs to prepare a Remuneration Report within the annual accounts. The information disclosed in the Remuneration Report is subject to external audit and the text is reviewed by external audit to ensure its consistency with the Financial Statements. 2. INTEGRATION JOINT BOARD The IJB comprises eight voting members appointed in equal numbers by the Health Board and Council. The partners appoint a Chair and Vice Chair in accordance with the Integration Scheme and the Public Bodies (Joint Working) (Integration Joint Boards) (Scotland) Order 2014. Article 4 of the Order provides for the Chair to be appointed by NHS Highland or Argyll and Bute Council from among the voting members nominated by NHS Highland and the Council. The Vice Chair is appointed by the constituent authority who did not appoint the Chair. The NHS Board and the Council have responsibility for these appointments on an alternating basis and the NHS Board and the Council may change the person appointed by them as Chair or Vice Chair during an appointing period. NHS Highland Appointed Mr Graham Bell as Chair from 1 April 2025. Argyll and Bute Council appointed Cllr Dougie McFadzean as Vice Chair from 1 April 2025. In addition there are professional advisors and stakeholder members who are non-voting members of the Integration Joint Board. The IJB does not provide any additional remuneration to the Chair, Vice Chair or any other board members relating to their role. The IJB does not reimburse the relevant partner organisations for any voting board members costs. Travel and subsistence costs for all Board Members are re- imbursed in line with the policies of the Council and Health Board. The IJB does not have responsibilities, either in the current or future years, for funding any pension entitlements of voting IJB members. Therefore no pension rights or disclosures are provided for the Chair or Vice Chair. 3. OFFICERS OF THE IJB The IJB does not employ staff in its own right, however specific post-holding officers are non- voting members of the Board. Under Section 10 of the Public Bodies (Joint Working) (Scotland) Act 2014 a Chief Officer for the IJB has to be appointed and the employing partner has to formally second the officer to the IJB. The Chief Officer is regarded as an employee of the IJB although the contract of employment is with NHS Highland. No other staff are appointed by the IJB under a similar legal regime. Other non-voting board members who meet the criteria for disclosure are included below. The following table sets out the remuneration disclosures for 2025-26 for senior officers: Page 86
Page 87
ARGYLL AND BUTE INTEGRATION JOINT BOARD Remuneration Report Page 22 Total 2024-25 £ Senior Officer Salary (Inc Fees and Allowances) £ Taxable Expenses £ Total 2025-26 £ 100,151 Chief Officer – Evan Beswick 102,368 102,368 94,854 Head of Finance – James Gow 98,446 967 99,413 195,005 Total 200,814 967 201,781 4. PENSION BENEFITS In respect of officers’ pension benefits the statutory responsibility for any future contributions rests with the employing partner organisation. Therefore there is no pension liability reflected on the IJB balance sheet for its officers. The IJB has a responsibility for funding the employer cash contributions each year. The Chief Officer is a member of the NHS Pension Scheme, costs for the pension scheme contributions and accrued pension entitlements are shown in the table below: 2024-25 2025-26 In-year Pension Contributions £ Accrued Pension Benefits £ In-year Pension Contributions £ Accrued Pension Benefits £ 21,821 Pension 22,000 Lump Sum 0 Chief Officer – Evan Beswick 23,033 Pension 26,000 Lump Sum 0 6,486 Pension 8,000 Lump Sum 0 Head of Finance James Gow 6,399 Pension 11,000 Lump Sum 0 5. DISCLOSURE BY PAY BANDS Pay band information is not separately provided as all staff pay information is disclosed above. 6. EXIT PACKAGES There were no exit packages agreed for senior officers during 2025/26 and none in the prior year. Graham Bell Evan Beswick Chair Chief Officer Date TBC Date TBC Page 87
Page 88
ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 23 COMPREHENSIVE INCOME AND EXPENDITURE STATEMENT The statement below shows the cost of providing services for the year according to accepted accounting practices. CIES 2025-26 2025-26 Gross Expenditure £000 Gross Income £000 Net Expenditure £000 Services Provided by NHS Highland 313,005 (10,140) 302,865 Services Provided by Argyll & Bute Council 112,725 (11,976) 100,749 Cost of Services 425,730 (22,116) 403,614 Taxation and Non-Specific Grant Income (note 3) (413,957) (Surplus) or Deficit on Provision of Services (10,343) Total Comprehensive (Income) and Expenditure (10,343) The movement in the General Fund balance is solely due to the transactions shown in the Comprehensive Income and Expenditure Statement. Consequently an Expenditure and Funding Analysis is not provided in these accounts. CIES 2024-25 2024-25 Gross Expenditure £000 Gross Income £000 Net Expenditure £000 Services Provided by NHS Highland 294,530 (10,001) 284,529 Services Provided by Argyll & Bute Council 108,261 (11,507) 96,754 Cost of Services 402,791 (21,508) 381,283 Taxation and Non-Specific Grant Income (note 3) (382,151) (Surplus) or Deficit on Provision of Services (868) Total Comprehensive (Income) and Expenditure (868) Page 88
Page 89
ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 24 MOVEMENT IN RESERVES STATEMENT This statement shows the movement on the IJB reserves. The movements which arise due to statutory adjustments which affect the General Fund balance are separately identified from the movements due to accounting practices. Movements in Reserves During 2025-26: General Fund Balance £000 Total Reserves £000 Opening Balance at 31 March 2025 (20,747) (20,747) (Surplus) / Deficit on Provision of Services (10,343) (10,343) (Increase) / Decrease in Year 2025-26 (10,343) (10,343) Closing Balance at 31 March 2026 (31,090) (31,090) Movements in Reserves During 2024-25: General Fund Balance £000 Total Reserves £000 Opening Balance at 31 March 2024 (19,879) (19,879) (Surplus) / Deficit on Provision of Services (868) (868) (Increase) / Decrease in Year 2024-25 (868) (868) Closing Balance at 31 March 2025 (20,747) (20,747) Page 89
Page 90
ARGYLL AND BUTE INTEGRATION JOINT BOARD Financial Statements Page 25 BALANCE SHEET The Balance Sheet shows the value of the IJB’s assets and liabilities as at the balance sheet date. The net assets of the IJB are matched by the reserves held by the IJB. 31 March 2025 Note 31 March 2026 £’000 £’000 20,747 Current Assets: Short Term Debtors 4 31,090 20,747 Net Assets 31,090 20,747 Usable Reserve: General Fund 6 31,090 20,747 Total Reserves 31,090 James Gow Head of Finance 16 May 2026 Page 90
Page 91
Page 26 1. MATERIAL ACCOUNTING POLICIES 1.1 General Principles The Financial Statements summarise the transactions of the Integration Joint Board for the 2025/26 financial year and its position as at 31 March 2026. The Integration Joint Board was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. The Financial Statements are therefore prepared in compliance with the Code of Practice on Local Authorities Accounting in the United Kingdom 2025-26, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes the Integration Joint Board will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. 1.2 Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular: - Expenditure is recognised when goods or services are received and their benefits are used by the IJB. - Income is recognised when the IJB has a right to the income, for instance by meeting any terms and conditions required to earn income, and receipt of the income is probable. - Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet. - Where debts may not be received, the balance of debtors is written down. For the IJB annual accounts a debtor and/or creditor will be recorded where the partner contributions differ from the actual net expenditure in year, this allows any surplus or deficit on the provision of services to be transferred to the reserves held by the IJB. Where any in-year overspend exceeds reserves available the partners will make additional in-year payments, in this instance a creditor will not be recognised as future funding would be adjusted to reflect any future repayment. 1.3 Offsetting of Debtors and Creditors The IJB does not hold cash and cash equivalents. Instead the funding partners utilise, as directed by the Integration Joint Board, the amount of funding due to the Integration Joint Board to pay for services. The Integration Joint Board and the funding partners have confirmed that there is a ‘right of offset’, and that there is an intention to allow settlement of balances to be undertaken on a net basis. On this basis the Integration Joint Board’s financial statements present the balances due to and from the funding partners on a net basis rather than as separate creditors and debtors. 1.4 Funding Page 91
Page 92
Page 27 The Integration Joint Board is primarily funded by funding contributions from the statutory partners, Argyll and Bute Council and NHS Highland. Expenditure is incurred as the Integration Joint Board commissions specified health and social care services from the funding partners for the benefit of service recipients in Argyll and Bute. 1.5 Cash and Cash Equivalents The Integration Joint Board does not operate a bank account or hold cash. Transactions are settled on behalf of the Integration Joint Board by the funding partners. Consequently the Integration Joint Board does not present a ‘Cash and Cash Equivalent’ figure on the balance sheet. The funding balance due to or from each partner at 31 March is represented as a debtor or creditor on the Integration Joint Board’s Balance Sheet. 1.6 Employee Benefits The Integration Joint Board does not directly employ staff. Staff are formally employed by the funding partners who retain the liability for pension benefits payable in the future. The Integration Joint Board therefore does not present a Pensions Liability on its Balance Sheet. The Integration Joint Board has a legal responsibility to appoint a Chief Officer. Details on the arrangements are provided in the Remuneration Report. The charges from the employing partner are treated as employee costs. Where material the Chief Officer’s absence entitlement at 31 March is accrued, for example in relation to annual leave earned but not taken. 1.7 Provisions Provisions are liabilities of uncertain timing or amount. A provision is recognised as a liability on the balance sheet when there is an obligation as at 31 March due to a past event; settlement of the obligation is probable; and a reliable estimate of the amount can be made. Recognition of a provision will result in expenditure being charged to the Comprehensive Income and Expenditure Statement and will normally be a charge to the General Fund. Where NHS Highland or Argyll and Bute Council recognise provisions in relation to services included in the Integration Scheme these are disclosed in the IJB’s Annual Accounts. 1.8 Reserves The Integration Joint Board has a Reserves Policy in place which details the nature and use of reserves. The Integration Joint Board’s only Usable Reserve is the General Fund. The balance of the General Fund as at 31 March shows the extent of resources which the Integration Joint Board can use in future years. 1.9 Indemnity Insurance The Integration Joint Board has indemnity insurance for costs relating primarily to potential claim liabilities regarding Board member and officer responsibilities. NHS Page 92
Page 93
Page 28 Highland and Argyll and Bute Council have responsibility for claims in respect of the services that they are statutorily responsible for and that they provide. Unlike NHS Boards, the Integration Joint Board does not have any ‘shared risk’ exposure from participation in the Clinical Negligence and Other Risks Indemnity Scheme (CNORIS). The Integration Joint Board’s participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material the overall expected value of known claims taking probability of settlement into consideration, is provided for in the Integration Joint Board’s Balance Sheet. The likelihood of receipt of an insurance settlement to cover any claims is separately assessed and, where material, presented as either a debtor or disclosed as a contingent asset. 1.10 VAT Status The IJB is a non-taxable person and does not charge or recover VAT on its functions. 2. EVENTS AFTER THE REPORTING PERIOD The Annual Accounts were authorised for issue on [date TBC]. Events taking place after this date are not reflected in the financial statements or notes. Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified: • Those that provide evidence of conditions that existed at the end of the reporting period, the Annual Accounts are adjusted to reflect such events. • Those that are indicative of conditions that arose after the reporting period – The Annual Accounts are not adjusted to reflect such events, but where a category of events would have a material impact disclosure is made in the notes of the nature of the events and their estimated financial effect. There are no events to report after the reporting period end. 3. TAXATION AND NON-SPECIFIC GRANT INCOME The following taxation and non-specific grant income was recognised in the Comprehensive Income and Expenditure Statement: 31 March 2025 31 March 2026 £’000 £’000 Page 93
Page 94
Page 29 80,875 Funding Contribution from Argyll and Bute Council 85,494 301,276 Funding Contribution from NHS Highland 328,463 382,151 Taxation and Non-specific Grant Income 413,957 The funding contributions from the partners above excludes any funding which is ring- fenced for the provision of specific services. Such funding is presented as income in the Cost of Services in the Comprehensive Income and Expenditure Statement. 4. DEBTORS 31 March 2025 31 March 2026 £’000 £’000 18,500 NHS Highland 28,850 2,247 Argyll and Bute Council 2,240 20,747 Total Debtors 31,090 Amounts owed by the partners are stated on a net basis. Debtor and Creditor balances recognised by the funding partners but not yet settled in cash terms are offset against the funds they are holding on behalf of the IJB. 5. RELATED PARTY TRANSACTIONS The Integration Joint Board has related party relationships with NHS Highland and Argyll and Bute Council. In particular, the nature of the partnership means that the IJB may influence, and be influenced by, its partners. The following transactions and balances included in the Integration Joint Board’s accounts provide additional information on the relationships. Transactions with NHS Highland: 2024-25 £000 2025-26 £000 (301,276) Funding Contributions received from NHS Highland (328,463) 284,529 Expenditure on Services Provided by NHS Highland 302,865 (16,747) Net Transactions with NHS Highland (25,598) There are key management personnel employed by NHS Highland, these costs are included in the expenditure on services provided. The non-voting Board members employed by NHS Highland include the Lead Nurse, Clinical Director for Argyll and Bute, Public Health Specialist, Lead Allied Health Professional, Lead Pharmacist, Staff Representative and representatives from primary care and medical services. Details of remuneration, where required, is provided in the Remuneration Report. Transactions with Argyll and Bute Council 2024-25 £000 2025-26 £000 Page 94
Page 95
Page 30 (80,875) Funding Contributions received from Argyll and Bute Council (85,494) 96,754 Expenditure on Services Provided by Argyll and Bute Council 100,749 15,879 Net Transactions with Argyll and Bute Council 15,255 There are key management personnel employed by Argyll and Bute Council, these costs are included in the expenditure on services provided. The non-voting Board members employed by Argyll and Bute Council include the Chief Financial Officer (Head of Finance), Chief Social Work Officer and a Staff Representative. Details of remuneration, where required, is provided in the Remuneration Report. Support services, such as human resources, financial services, information technology and accommodation are not included in the delegations from Argyll and Bute Council. These are provided free of charge as ‘services in kind’ and not included in the expenditure of the IJB. 6. USABLE RESERVE: GENERAL FUND The IJB holds a balance on the General Fund which will normally comprise of three elements: 1. Funds that are earmarked or set aside for specific purposes. In Scotland, under Local Government rules, earmarked reserves are accounted for separately but remain legally part of the General Fund. The identification of earmarked reserves may include: • future use of funds for a specific purpose, as agreed by the Integration Joint Board; or • reserves for unspent revenue grants or contributions which were allocated for a defined purpose. 2. Funds which are not earmarked for specific purposes, but are set aside to deal with unexpected events; and 3. Funds held in excess of the target level of reserves and identified earmarked sums. Such reserves can be spent or earmarked at the discretion of the Integration Joint Board. The following table details the movements on the General Fund: 2024-25 2025-26 Balance at 31 March 2025 Transfers Out Transfers In Balance at 31 March 2026 £000 £000 £000 £000 18 Technology Enabled Care 0 0 18 Page 95
Page 96
Page 31 407 Alcohol & Drugs Partnership 242 201 366 105 Best start maternity services 0 8 113 178 Supporting improvements to GP premises 113 0 65 30 Scotgem funding 0 0 30 0 Long COVID Service 0 298 298 491 Primary Care Improvement Funding 125 602 968 37 Trauma Network 0 0 37 167 PFG School Nursing 0 0 167 90 District Nurse Posts 0 0 90 429 E-health Strategy Funding 245 145 329 14 Perinatal MH Funding 14 0 0 28 Mental Health Officer Training 0 0 28 37 Type 2 Diabetes Framework 37 0 0 79 Trauma Training Programme 0 18 97 145 Oban Accommodation Funding 0 0 145 250 Primary Care Education Fund 0 0 250 468 Additional Band 2-4 Staffing 39 0 429 229 Nursing Support for Care Homes Funding 17 0 212 165 Mental Health Facilities Funding 0 0 165 190 Waiting Times Funding and Improving Flow 190 1,145 1,145 55 Medical Assisted Treatment Standards 0 0 55 56 Psychological Therapies 56 0 0 159 Dementia Post Diagnostic Support 11 0 148 0 Community Glaucoma Service 0 39 39 19 Mental Health Recovery Services 19 0 0 495 Whole Family Wellbeing Fund 0 126 621 50 SARCS Programme 0 0 50 44 Multi Disciplinary Teams Funding 0 150 194 622 Children’s Mental Health Services (CAHMS) 244 0 378 11 Children’s Oral and Dental Health 0 0 11 21 Criminal Justice Fund 0 0 21 76 Health Checks – Learning Disability 0 0 76 39 Social Work Workforce 0 0 39 414 Hospital at Home Project 414 1,263 1,263 192 Public Dental Service 0 0 192 39 Digital Therapies 15 0 24 7,181 Agenda for change reserve 2,861 8,977 13,297 4,697 Sustainability & Value 0 100 4,797 2,576 General Reserves – Earmarked for Service Transformation & Budget Gap 743 2,914 4,747 Page 96
Page 97
Page 32 444 General Reserves – Earmarked for Prevention Programme 258 0 186 20,747 General Fund 5,643 15,986 31,090 7. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY In preparing the 2025/26 Annual Accounts, the IJB may have to make certain judgements about complex transactions or those involving uncertainty about future events. There are no critical judgements or material estimation uncertainties included within the Annual Accounts for 2025/26. 8. AUDIT FEES The fee payable in respect of the external audit of the accounts for the year ended 31 March 2026 was £36k (£34k in respect of the 2024/25 audit). Forvis Mazars did not receive any fees for non-audit work. Page 97
Page 98
This page is intentionally left blank
Page 99
Audit and Risk Committee Date of Meeting: 16 June 2026 Title of Report: Internal Audit Update Presented by: Paul MacAskill, Chief Internal Auditor The Committee is asked to: • review and consider the progress on completion of the internal audit recommendations. 1. EXECUTIVE SUMMARY 1.1 This report updates the Audit and Risk Committee (the Committee) on the work carried out by Argyll and Bute Council’s (the Council) Internal Audit Team on audits which are of operational relevance to the Committee. 1.2 One audit has been completed since the last meeting of the Committee on 17 February 2026. 1.3 In addition, this paper provides an update on the actions from audit reports already presented to the Committee which were still open as at 31 March 2026. 2. DETAIL 2.1 The Council’s internal audit team are the appointed internal auditors for the HSCP and also, as part of delivering the Council’s annual internal audit plan, carry out operational audits on services delivered by the social care element of the HSCP. Audits relating to the HSCP internal audit plan are reported to the HSCP Audit and Risk Committee. Social care audits delivered as part of the Council’s internal audit plan are reported to both the HSCP Audit and Risk Committee and the Council’s Audit and Scrutiny Committee. Similarly audits delivered as part of the HSCP Audit Plan are reported to the Council’s Audit and Scrutiny Committee for information. 2.2 Internal audit reports include an action plan with a management response which establish the agreed action, timescale and responsible Page 99 Agenda Item 7
Page 100
officer. Internal Audit record these in a database and, on a quarterly basis, follow them up to ensure they are being progressed. Internal Audit will only complete actions where evidence can be provided that the agreed action has been fulfilled appropriately. Table 1: H&SCP (IJB) Summary of Audit Actions as at 31 March 2026 Service Complete On Track Delayed Total H&SCP (IJB) – Chief Finance Officer 2 0 0 2 H&SCP (IJB) – Adult Services (Hospital & Community Services) 1 0 0 1 H&SCP (IJB) – Strategic Planning, Performance & Technology 3 7 3 13 Total 6 7 3 16 Table 2: H&SCP (SW) Summary of Audit Actions as at 31 March 2026 Service Complete On Track Delayed Total H&SCP (SW) – Adult Services (Complex Care & Registered Services 0 0 1 1 H&SCP (SW) – Children and Families and Justice 3 0 4 7 H&SCP (SW) – Strategic Planning, Performance & Technology 1 0 0 1 H&SCP (SW) – Adult Services (Hospital & Community Services) 0 3 0 3 H&SCP (SW) – Chief Finance Officer 1 0 0 1 Total 5 3 5 13 2.4 Work in progress / Future work The approved 2025/26 Internal Audit Plan is now complete and all elements reported to the Committee. The approved plan for 2026/27 has three planned internal audit reviews, specifically, Financial Management Arrangements, Stakeholder Engagement and Risk Management. Work has commenced to progress these reviews. 3.0 RELEVANT DATA AND INDICATORS – NONE 4.0 CONTRIBUTION TO STRATEGIC PRIORITIES 4.1 Audit reports include agreed actions to strengthen internal control. Page 100
Page 101
5.0 GOVERNANCE IMPLICATIONS 5.1 Financial Impact - None 5.2 Staff Governance - None 5.3 Clinical Governance - None 6.0 EQUALITY & DIVERSITY IMPLICATIONS - NONE 7.0 GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 7.1 This report in itself does not raise any GDPR issues however consideration of GDPR will feature in audits where appropriate. 8.0 RISK ASSESSMENT 8.1 The audit planning approach is a risk based one and individual audit reports provide an overall assessment on the management of risk. 9.0 PUBLIC & USER INVOLVEMENT & ENGAGEMENT - NONE 10.0 CONCLUSIONS 10.1 Satisfactory progress is being made implementing audit actions 11.0 DIRECTIONS 11.1 Directions required to Council, NHS Board or both. Directions to: Tick No Directions Required X Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board REPORT AUTHOR AND CONTACT Author: Paul MacAskill Email: Paul.Macaskill@argyll-bute.gov.uk Appendix 1 – Visual representations of progress in addressing agreed actions Appendix 2 – Action Plan Points Delayed and Rescheduled Page 101
Page 102
Appendix 1 – Visual representations of progress in addressing agreed actions as at 31 March 2026 Internal Audit Actions Status Q4 2025-26 Page 102
Page 103
Service Performance in Implementing Internal Audit Actions Q4 2023-24 to Q4 2025-26 Page 103
Page 104
Appendix 2 – Action Plan Points Delayed and Rescheduled Service, Report, Plan no. & finding Agreed Action Original and Revised Dates Comment Responsible Officer Medium ADULT SERVICES (COMPLEX CARE & REGISTERED SERVICES) - Learning & Physical Disability Care Packages Case Notes Case notes are maintained on Eclipse, the replacement client database for Carefirst. It was noted that case notes were not always maintained and up to date. Record keeping session (s) to be delivered by professional lead. Senior Managers to implement case note audit within their respective services – this should be linked to individual practitioner supervision. 30/06/2024 31/12/2024 31/03/2025 30/09/2025 31/01/2026 30 Jun 2026 In progress - reassigned to another Professional Team Lead. Delayed and Rescheduled Senior Managers (Adult Services) Medium CHILDREN AND FAMILIES AND JUSTICE – EXTERNAL PLACEMENTS Options Appraisal Meeting Practice Guidance The Options Appraisal Meeting Practice Guidance document does not outline the complete process or responsibilities in terms of identifying placement information, contracting, sharing information with providers and the review follow up processes. A simplified pathway schematic will be drawn. 31/03/2026 30 Jun 2026 Seeking clarity over supporting documents provided. Delayed and Rescheduled Head of Children Families and Justice Medium CHILDREN AND FAMILIES AND JUSTICE – EXTERNAL PLACEMENTS There requires to be a fundamental review of the models of care within A&B encompassing the use of 31/03/2026 30 Jun 2026 Seeking clarity over supporting documents provided. Head of Children Families and Justice Page 104
Page 105
Service, Report, Plan no. & finding Agreed Action Original and Revised Dates Comment Responsible Officer Destinations It was unclear whether there were robust procedures and monitoring in place for young people leaving care with many returning to their previous locations and no clear pathway for the future. external placements. The child’s journey within placement and discharge planning requires as much focus as admission. Delayed and Rescheduled Medium CHILDREN AND FAMILIES AND JUSTICE – EXTERNAL PLACEMENTS Model of Care and Costs The increasing demands within the Council is resulting in significant budget overspends and the demand for services is projected to increase in the coming years. In many cases there are no internal resources available to meet the needs of the young person, resulting in the only option being looking for external placements. Continue to explore options to develop internal resources for the education and care of Argyll and Bute's children within its existing asset base - specifically in line with Education's work on the development of Secondary Wellbeing Hubs and the development of the work of Children's Houses. As in finding 5 there is no need for a fundamental review of the models of care. 31/03/2026 30 Jun 2026 Seeking clarity over supporting documents provided. Delayed and Rescheduled Head of Children Families and Justice Medium CHILDREN AND FAMILIES AND JUSTICE – EXTERNAL PLACEMENTS Sharing of Costs Clear costings are given from the providers, they are available to see in advance of contacting them to discuss any prospective placement, and these are available through the Scotland Excel procurement service website. The breakdown of all care and education Providers are expected to provide a more detailed breakdown of costs, particularly extra costs to inform consideration and decision making at service level. There will need to be a focus on data trends. 31/03/2026 30 Jun 2026 Seeking clarity over supporting documents provided. Delayed and Rescheduled Head of Children Families and Justice Page 105
Page 106
Service, Report, Plan no. & finding Agreed Action Original and Revised Dates Comment Responsible Officer placements is 38% education and 62% care with the placements agreed jointly by Heads of Service for both care and education. It is unclear whether Education are provided with a copy of the costs of the provision of the education in order that they can review best value for the service provided. Low STRATEGIC PLANNING, PERFORMANCE & TECHNOLOGY – H&SCP – PARTERNSHIP WORKING Performance Monitoring and Reporting The HSCP should continue to develop the existing workforce performance monitoring arrangements so that KPIs and RAG assessments remain clearly linked to strategic objectives and risks, and reporting continues to provide meaningful assurance to the IJB developed in partnership with both employing bodies. HSCP will further develop its performance dashboard or scorecard that visually aligns key performance indicators (KPIs) and RAG statuses with the HSCP’s strategic objectives and risks. 30/04/2026 30 Jun 2026 Some progress to review performance monitoring was made in FQ3 and will continue in FQ4 2025/26. This will align to the planned 2026/27 review and redesign of the IPMF, including the development of a revised suite of KPIs across HSCP services, with closer alignment to JSP Implementation Plans, HoS service and strategic objectives and risks, and NHS Highland OIP. Process will be endorsed by SLT, and scorecard will offer visual dashboard reflecting performance trajectory, and then reported to assure progress towards objective Business Improvement Manager Page 106
Page 107
Service, Report, Plan no. & finding Agreed Action Original and Revised Dates Comment Responsible Officer to IJB and other committees, and on a quarterly basis. Delayed and Rescheduled Medium STRATEGIC PLANNING, PERFORMANCE & TECHNOLOGY - H&SCP – JOINT STRATEGIC PLANNING Alignment of JSP to Workforce Plan In order to support the delivery of the JSP it is important that a corresponding workforce plan is in place that is aligned with priorities and objectives of the JSP and that it supports the attraction, recruitment, development and retention of the workforce required to deliver the JSP. A review of the workforce plan noted that there was no evidence of a direct alignment between the current workforce planning document and the priorities and objectives set forth in the Joint Strategic Plan. HSCP will look to develop the next workforce plan to ensure direct alignment with the priorities and objectives outlined in the Joint Strategic Plan (JSP) for 2022-2025. 31/03/2025 31/12/2025 30/04/2026 30 Nov 2026 The HSCPs new JSP for 2026 to 2031 is being finalised and is scheduled for publication, after Purdah. An updated workforce plan will be in place by Q3 2026/27. There is a workforce planning workshop planned for 12 May 2026 to take the workforce planning approach forward. Delayed and Rescheduled Head of Strategic Planning, Performance and Technology Medium STRATEGIC PLANNING, PERFORMANCE & TECHNOLOGY – H&SCP – WORKFORCE PLANNING Annual Workforce Plan refresh The Plan commits to an annual refresh; however, as at September 2025 no standalone 2024 refresh/consolidated progress paper was A standalone Workforce Plan progress and refresh paper will be prepared annually, summarising delivery against the Strategic Workforce Plan 2022–2025 (and its successor) and aligning to Scottish Government guidance DL 30/04/2026 30 Sep 2026 A workshop is planned for the 12 May 2026, to progress the HSCP’s workforce plan. Delayed and Rescheduled People Partner: HSCP Page 107
Page 108
Service, Report, Plan no. & finding Agreed Action Original and Revised Dates Comment Responsible Officer identified. Workforce updates appear within routine reports rather than a single progress report. Future refreshes should align to updated SG guidance DL (2024) 33 (Dec 2024). (2024) 33. The paper will be presented to the IJB for approval each autumn to maintain visibility and assurance. Page 108
Page 109
Audit and Risk Committee: Date of Meeting: 16 June 2026 Title of Report: HSCP 2025/26 Internal Audit Annual Report Presented by: Paul Macaskill, Chief Internal Auditor The Committee is asked to: • endorse the 2025/26 HSCP Internal Audit Annual Report. 1. EXECUTIVE SUMMARY 1.1 This report presents the final 2025/26 A&B HSCP Internal Audit Annual Report to the Audit and Risk Committee (the Committee) and provides a formal opinion for 2025/26 based on our completed work. 2. RECOMMENDATIONS 2.1 The Committee is asked to endorse the 2025/26 HSCP Internal Audit Annual Report. 3. DETAIL OF REPORT 3.1 The Global Internal Audit Standards (GIAS) stipulate that the appointed internal audit provider must deliver an annual opinion based on the work undertaken during that period in which the internal audit plan covered. This opinion must be provided to those charged with governance, specifically this Committee. This annual opinion informs the Annual Governance Statement. 3.2 In assessing the level of assurance to be given, we have based our opinion primarily on the five internal audit reviews undertaken and not the wider financial management and governance arrangements in place during the year. 3.3 In coming to our opinion we have considered: • the reviews undertaken as part of the 2025/26 internal audit plan • any additional work where that has been requested • the internal audit coverage achieved to date Page 109 Agenda Item 8
Page 110
• any scope limitations imposed by management • matters arising from previous reviews and the extent of follow-up action taken including in year audits • expectations of senior management, the Audit & Risk Committee and other stakeholders • the extent to which internal controls address the client’s risk management /control framework. 3.4 Internal audit activity is planned to enable an independent annual opinion to be given by the CIA on the adequacy and effectiveness of internal controls within the IJB, including the systems that achieve the corporate objectives of the IJB and those that manage the material risks faced by the IJB. It should be noted, however, that the presence of an effective internal audit function contributes toward, but is not a substitute for, effective control and it is primarily the responsibility of line management to establish internal controls so that the IJB's activities are conducted in an efficient manner, to ensure that management policies and directives are adhered to and that assets and records are safeguarded. 4. RELEVANT DATA AND INDICATORS - NONE 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 Audit reports, plans and annual opinions may include agreed actions to strengthen internal control and delivery of an effective internal audit function and should help reduce the HSCP’s risk exposure. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact - None 6.2 Staff Governance - None 6.3 Clinical and Care Governance - None 7. PROFESSIONAL ADVISORY - NONE 8. EQUALITY & DIVERSITY IMPLICATIONS - NONE 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 This report in itself does not raise any GDPR issues. 10. RISK ASSESSMENT 10.1 The annual audit report may provide an overall opinion on the management of risk in relations to our findings which have arisen from our work. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT - NONE 12. CONCLUSIONS Page 110
Page 111
12.1 We are able to provide a reasonable level of assurance on the adequacy of internal controls and governance arrangements within the IJB arising only from the results of internal audit reviews we have completed during the period in accordance with the programme of Internal Audit work approved by the Committee. 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: Tick No Directions Required X Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) N/A N/A N/A N/A REPORT AUTHOR AND CONTACT Author: Paul Macaskill Email: paul.macaskill@argyll-bute.gov.uk Appendix 1 – 2025/26 Internal Audit Annual Report Page 111
Page 112
This page is intentionally left blank
Page 113
Argyll and Bute Integration Joint Board Internal Audit Annual Report 2025/26 Page 113
Page 114
Contents Introduction ............................................................................................................................................ 1 Conformance with Global Internal Audit Standards ............................................................................. 2 Overall internal audit opinion................................................................................................................ 3 National Reports and Associated Points of Interest ............................................................................. 5 Areas of Concern, Observation and Risk to the HSCP ........................................................................... 7 Appendix 1 – Summary of Findings 2025/26 Internal Audit Plan ........................................................ 9 Appendix 2 – Planned v Actual Audit Days 2025/26 ........................................................................... 10 Appendix 3 – Recommendations Actioned and Outstanding ............................................................. 11 Contact Details Chief Internal Auditor: Paul Macaskill Telephone: 01436 604108 E-mail: paul.macaskill@argyll-bute.gov.uk Page 114
Page 115
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 1 Introduction 1. The Global Internal Audit Standards (GIAS) state that: “The Chief Audit Executive must create an internal audit plan that supports the achievement of the organisation’s objectives” and deliver an annual internal audit opinion and report that can be used by the organisation to inform its governance statement. The annual internal audit opinion must conclude on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control. 2. The purpose of this report is to advise the Audit and Risk Committee (the Committee) of the work undertaken by Internal Audit in respect of the Annual Audit Plan 2025/26 and advise the Committee of the contents of the Chief Internal Auditor’s (CIA) independent annual opinion on the effectiveness of the Integrated Joint Board’s (IJB) risk management, internal control and corporate governance processes. 3. Corporate governance is the system by which the IJB directs and controls their functions and relate to their communities. The three fundamental principles of corporate governance are openness, integrity and accountability. A sound system of internal control must be maintained to support the IJB in operating effective corporate governance arrangements. 4. Good governance practice and internal control suggests that: • IJB Members should set appropriate policies on internal control and seek regular assurance that the system of internal control is functioning effectively • management should implement the IJB policies on internal control and design, and implement and monitor suitable systems • a well-established and effective Audit and Scrutiny function should be in place within the IJB • Internal Audit should provide an independent assessment of the adequacy of the system of internal control. 5. The production of the Governance Statement is being led by the IJB’s Chief Officer. To support the governance statement the IJB will need to carry out a review of the effectiveness of internal control, deriving evidence from a variety of sources including Internal Audit, Senior Managers within the IJB with responsibility for developing and maintaining internal control and cognisance of external/internal audit recommendations along with recommendations of other regulatory bodies. 6. This report provides internal audit information in support of the assurance statements and covers the period from 1 April 2025 to 31 March 2026. The risk based audits contained within the 2025/26 Internal Audit Plan are shown in the table included at Appendix 1. This shows the overall audit opinion for each audit and the number and significance of agreed actions. 7. Our annual internal audit plan is designed to provide the Committee with assurance that Argyll & Bute IJB internal control system is effective in managing the key risks. The plans are therefore informed by Argyll & Bute IJB risk management system and linked to the risk register. 8. Internal Audit reports its outputs regularly throughout the year to management and to the Committee. The Committee also approves Internal Audit’s annual plan and monitors the performance of the function. The Internal Audit Plan was approved by the Committee in February 2025. Page 115
Page 116
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 2 9. In addition, the Internal Audit team present audit reports to the Committee which have been delivered as part of Argyll and Bute Council’s Internal Audit plan which the CIA, in agreement with the Chief Finance Officer, feel are pertinent to the remit of the Committee. Primarily these will focus on audits relating to the delivery of social work services. Similarly, IJB audit reports are presented to Argyll & Bute Council’s Audit and Scrutiny Committee for information. 10. The 2025/26 Internal Audit Plan comprised 50 days of planned audit work, including management and administration time. We were able to fulfil the agreed plan and report our findings to the Audit & Risk Committee. 11. Our planned and approved work for 2025/26 has been completed in full and a comparison of actual coverage against the 2025/26 plan is attached at Appendix 2. In addition, we have undertaken a further two reviews at the request of Senior Management within the HSCP. Conformance with Global Internal Audit Standards 12. Internal auditing strengthens the organisation’s ability to create, protect, and sustain value by providing the board and management with independent, risk-based, and objective assurance, advice, insight, and foresight. Internal auditing enhances the organization’s: • Successful achievement of its objectives. • Governance, risk management, and control processes. • Decision-making and oversight. • Reputation and credibility with its stakeholders. • Ability to serve the public interest. Internal auditing is most effective when: • It is performed by competent professionals in conformance with the Global Internal Audit Standards, which are set in the public interest. • The internal audit function is independently positioned with direct accountability to the board. • Internal auditors are free from undue influence and committed to making objective assessments. 13. CIPFA has issued a statement that sets out the role of the Head of Internal Audit in the public sector. A further revised document has been issued in April 2019. The purpose of this statement is to outline the core activities and behaviours that belong to the role of Head of Internal Audit and how these should influence and champion good governance, risk management and internal control. 14. CIPFA and the Institute of Internal Auditors (IIA) have reviewed the guidance and made amendments in order to have a common set of standards across the whole public sector. These changes are primarily based on the International Professional Practices Framework (IPPF). The new standards termed Global Internal Audit Standards (GIAS) which became effective in April 2025 and instil a number of additional requirements on Internal Audit functions and management within the public sector and those Boards or Committees charged with governance. 15. A key requirement of the GIAS is that Internal Audit sections are required to state whether or not they conform to these standards as part of their annual reporting. In addition, they should Page 116
Page 117
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 3 outline the results of the quality assurance and improvement programme together with progress against any improvements identified during this assessment. 16. The Council’s Internal Audit Section operates in accordance with the GIAS which have been agreed to be adopted from 1 April 2025 by the relevant public sector Internal Audit Standard setters. 17. GIAS requires that a Quality Assurance and Improvement Programme (QAIP) is developed in order to provide assurance that internal audit activity: • is conducted in accordance with an Internal Audit Charter • operates in an efficient and effective manner • is perceived to be adding value and improving operations • GIAS also requires, as outlined in the “QAIP”, that: “External assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organisation. External assessments can be in the form of a full external assessment or a self-assessment with independent external validation” 18. To meet this requirement, a reciprocal arrangement to complete a programme of inspections has been developed by the Scottish Local Authorities Chief Internal Auditors Group (SLACIAG). This process identified East Dunbartonshire Council as the body to undertake the independent review of the Council’s Internal Audit function’s level of compliance with the then Public Sector Internal Audit Standards (PSIAS). This output of this review was presented to the Audit and Scrutiny Committee in March 2023. It concluded that the internal audit service demonstrates full compliance with PSIAS and identified many areas of strong practice including sound governance, robust self-assessment, good engagement and clear reporting lines and clear evidence of supervision and audit follow up. Further annual self-assessments are undertaken and reported to Argyll & Bute Council Audit and Scrutiny Committee each September which provides further assurance of Internal Audit’s compliance with the new GIAS. Overall internal audit opinion 19. As the Internal Auditor of Argyll & Bute IJB, we are required to provide the Committee with assurance on the system of internal control. In giving our opinion, it should be noted that assurance can never be absolute. The most that the internal audit service can provide is reasonable assurance that there are no major weaknesses in the whole system of internal control. 20. In assessing the level of assurance to be given, we have based our opinion primarily on the three planned and two additional internal audit reviews undertaken and not the wider financial management and governance arrangements in place during the year. We considered: • the reviews undertaken as part of the 2025/26 internal audit plan • the two additional reviews undertaken at the request of senior management • the internal audit coverage achieved to date • any scope limitations imposed by management • matters arising from previous reviews and the extent of follow-up action taken including in year audits Page 117
Page 118
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 4 • expectations of senior management, the Audit & Risk Committee and other stakeholders • the extent to which internal controls address the client’s risk management /control framework. 21. Internal audit activity is planned to enable an independent annual opinion to be given by the CIA on the adequacy and effectiveness of internal controls within the IJB, including the systems that achieve the corporate objectives of the IJB and those that manage the material risks faced by the IJB. It should be noted, however, that the presence of an effective internal audit function contributes toward, but is not a substitute for, effective control and it is primarily the responsibility of line management to establish internal controls so that the IJB's activities are conducted in an efficient manner, to ensure that management policies and directives are adhered to and that assets and records are safeguarded. 22. We are able to provide a reasonable level of assurance on the adequacy of internal controls risk management and governance arrangements within the IJB arising only from the results of internal audit reviews we have completed during the period in accordance with the programme of Internal Audit work approved by the Committee and additional reviews requested by senior management. In this context, it is important to note that: • it is management’s responsibility to maintain internal control and good governance arrangements on an ongoing basis • the Internal Audit function forms part of the overall internal control and governance structure of the organisation • while we have planned our work so that we have a reasonable expectation of detecting significant control and governance weakness, internal audit procedures alone do not prevent the possibility of poor judgement in decision making, human error, control processes being deliberately circumvented by employees and others, management overriding controls and the occurrence of unforeseeable circumstances • a sound system of corporate governance and internal control provides reasonable but not absolute assurance that the IJB will not be hindered in achieving its objectives or in the orderly and legitimate conduct of its business by circumstances which may reasonably be foreseen. However, a system of corporate governance and internal control cannot provide protection with certainty against any organisation failing to meet its objectives or all material errors, losses, fraud or breaches of laws or regulations • it is the responsibility of Internal Audit to assess the adequacy of the internal control and governance processes as far as it is reasonably possible by reviewing arrangements put in place by management and to perform testing to confirm whether those controls were operating for the period under review • reasonable expectations of Senior Management, the Committee and other stakeholders have been taken into account in terms of our duty to report all matters which come to our attention for the period under review • it is the responsibility of each of the parent bodies Internal Audit Service to assess, identify and report findings as they arise to the relevant officers and committees. 23. During work undertaken in 2025/26 we received appropriate responses to the recommendations made in our reports and, if actioned, should provide management with Page 118
Page 119
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 5 additional comfort that the system of control operates as intended. This opinion is based on our limited coverage and information available to us at the time of preparing this report and should be considered alongside any other information that may be available to the IJB. 24. Summaries of the issues arising in relation to each system or activity covered by the internal audit work in 2025/26 have been reported to management and the Committee throughout the year. We do not, therefore, propose to repeat the matters in this report. There have been no significant issues which have come to our attention that have not been reported to management. 25. Audit reports will include an action plan with a management response establishing the agreed action, timescale and responsible officer. Internal Audit record these in a database and, on a quarterly basis, follow them up to ensure they are being progressed. This progress is reported to the Committee including reasons for any delays implementing agreed actions. 26. Follow up internal audit work has been and will continue to be undertaken to establish if the more significant recommendations made in those reports have been implemented as agreed. Management have continued to make good progress in implementing agreed actions from internal audit reports. Appendix 3 provides a summary of agreed audit actions and their implementation progress to date. 27. Internal Audit operated without any restriction and had unfettered access to all staff and documents both electronic and paper to allow full and effective assessment of the work during 2025-26. We are therefore pleased to note and in accordance with the GIAS, that there are no matters which require to be drawn to the Audit and Scrutiny Committee’s attention or wider senior management contained within this report regarding the independence of the Internal Audit service during 2025- 26, either in terms of restriction, attempts to restrict or inhibit in any way our independence. National Reports and Associated Points of Interest 28. The Accounts Commission issued a report in February 2026 relating to financial bulletin for 2024/25 on IJBs in Scotland. This report highlighted a number of key messages which provides an independent situational position and ‘spotlight’ of IJBs and which, in our opinion, remain currently topical, relevant and applicable and which included: • Despite a real-terms increase in funding, Scotland’s Integration Joint Boards (IJBs) are in a critical financial position. With increasing cost pressures and the total level of reserves now lower than the budget gap forecast, IJBs need to take decisive action and make difficult decisions about services. Despite a real-terms increase in funding between 2023/24 and 2024/25 of 2.3 per cent, the financial position of IJBs has become increasingly concerning. Financial pressures and demands on services continue to grow, outstripping increased funding and savings made, raising concerns around IJBs’ financial sustainability. IJBs must make difficult decisions about how services are delivered, determine the appropriate level of services, and decide where to redesign, reduce or discontinue services. They must be transparent with service users and the public about the potential impact of these changes on service performance and outcomes. • Total reserve levels continue to fall across IJBs. Almost half of IJBs no longer hold any contingency reserves. The total level of reserves held by IJBs is now lower than the budget gap forecast for the year ahead. Page 119
Page 120
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 6 • The majority of IJBs reported operational overspends in-year, continuing the trend from previous years. While unplanned use of reserves decreased in 2024/25, as expected given the significant reduction in reserve levels in recent years, this was offset by a large increase in additional contributions from partners. The partners, NHS boards and councils, also face significant financial challenges and will find it increasingly difficult to allocate further funding to IJBs during the year. • The funding gap in 2025/26 remains significant at £449 million, a slight decrease from £457 million in 2024/25. IJBs must work closely with partners to ensure budgets and savings plans are realistic and to identify solutions that will ensure services remain financially sustainable over the medium to long term. • Although the majority of planned savings were achieved in 2024/25, it is unclear what proportion of these savings are recurring. There continues to be a lack of transparency and detail in public reporting on savings performance. The bulletin made a number of recommendations in which it stated that “Over the next year, IJBs and their partner council and NHS boards need to work more collaboratively to: • set realistic budgets before the start of the financial year that minimise the need for additional in-year contributions. • consult and communicate with service users, carers and the wider public on plans for changes to services and ensure appropriate impact assessments are undertaken. • set out in strategic plans how services will be made financially sustainable and how future demand can be managed through investment in prevention in the medium and long term, including consideration, for example, what services are delivered, how and to whom those services are delivered, and charges for services. • Over the next year, IJBs should: improve the clarity and comprehensiveness of their public reporting on savings performance, including comparisons to targets agreed during budget-setting, and whether savings made were recurring or non-recurring. A full copy of the report and findings can be found using the following link: Integration Joint Boards: Financial bulletin 2024/25 Financial bulletin 2024/25 29. The Auditor General in the report ‘NHS Scotland 2025’ published in December 2025 which covers the financial and operational performance of Scotland’s NHS and again, in our opinion, remain currently topical, relevant and applicable and we believe that this is noted in the following key messages: • Every day the NHS provides vital services to thousands of people across Scotland. Health spending in 2024/25 totalled £20.6 billion, equivalent to 37.5 per cent of the overall Scottish budget. Even with increased funding, the NHS in Scotland is not in a financially sustainable position. NHS boards did achieve unprecedented levels of savings. But boards are still struggling to break even, with seven territorial boards requiring Scottish Government loans. Health spending is projected to continue to grow over the medium term but this will put pressure on other vital public services. The delivery of efficiencies and reform within the health and care system will play an important role in both the NHS’s and Scotland’s overall medium-term financial sustainability. • In 2024/25, the NHS in Scotland employed over 160,000 whole-time equivalent staff and performed 1.3 million hospital procedures. But, despite more money (+£3 billion since 2019) and more staff (+20,000 since 2019), NHS Scotland’s performance has not Page 120
Page 121
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 7 improved in line with commitments made by the Scottish Government. There is demand pressure across the system. Activity in secondary care has increased in the last year but it remains below pre-pandemic levels. Waiting lists and waiting times are starting to fall but it remains to be seen if this progress can be sustained. Improvements in productivity and reform of the health and care system are essential if health outcomes are to get better, health inequalities are to be reduced and service delivery to improve. • The publication of the Operational Improvement Plan, Health and Social Care Service Renewal Framework and the Population Health Framework are welcome steps forward in setting out the key principles for delivering reform. But some of the ambitions within these documents are long-standing and have yet to be delivered, for example, shifting the balance of care to the community. This persistent implementation gap, between policy ambitions and delivery on the ground needs to be addressed. Scottish Government and health and care leaders need to take the opportunity to drive forward the necessary change in direction for health and social care this time round. And with it, the long-term health of Scotland’s citizens. A full copy of the report and findings can be found using the following link: NHS in Scotland 2025: Finance and performance Areas of Concern, Observation and Risk to the HSCP 30. At the time of producing this report the anticipated financial outturn for 2025/26 is a small underspend in the region of £2.9M or 0.7% of annual spend. This situation improved towards the end of the year as actions taken by the HSCP to reduce spend started to have an impact and some additional NHS funding allocations were confirmed. Given that in previous years the need to use reserves has occurred, the improved position is welcome as it provides some degree of additional financial resilience going forward. General reserves do however remain below the target set by the IJB of 2% of annual spend. While the short term position has improved, the longer term outlook remains a significant risk. 31. In terms of ongoing financial risk and viability, the IJB has advised us that it was able to set a balanced budget for 2026/27, however, this relies upon the delivery of £8M in savings and use of £5M of reserves. There is an anticipated funding gap in the region of £3.2M for social care services and £8m for NHS Services. In addition, the gap is expected to widen in subsequent financial years and current projections suggest £22M for 2028/29 and £35M for 2029/30. Demand for services, in part due to demographic change and inflation are expected to exceed funding increases. 32. In addition, we are aware of the proposed changes to the Service level Agreement (SLA) with NHS Greater Glasgow and Clyde, this would represent a potential additional risk of circa £16M which at the time of writing this report remains unresolved. In the event of such an increase to materialise, this would have a significant financial impact on the HSCP. It is important that this outstanding matter is resolved and where applicable determine any residual financial impact which will need to be outlined to the HSCP and also a financial plan to address any funding gap should additional monies or support not materialise centrally. 33. The ongoing use of reserves to meet financial pressures and deficits is well documented but leaves the HSCP with limited usable reserves. This creates significant concerns over the financial sustainability of the HSCP should it not deliver savings arising from any restructuring, service Page 121
Page 122
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 8 redesign and service withdrawal to align funding and financial gaps. It is therefore imperative that a financial recovery plan and where linked to savings and service redesign must be kept on track, risk assessed and robustly monitored in order that any deviation is escalated and alternative savings are identified to meet financial targets. 34. The financial and service delivery challenges affecting the HSCP are complex, not least in part because of the vast geographical dispersion but also from the aging population which tend to have more diverse health and care needs. This is further augmented with a difficulty in recruiting staff needed to deliver such services which is resulting in unmet care need, and mitigating arrangements to deal with such staffing gaps can be both costly and inconsistent in terms of ongoing availability, for example the use of agency staff. It should be noted that other IJB’s with similar complexities are also trying to manage the same challenges. 35. It is important now for the HSCP to consider these challenges and determine a way forward which will undoubtedly require the need for sizable savings to be identified and delivery of services to be redesigned taking cognisance of associated risks. The implications of such levels of cuts may require services being withdrawn and/or down-scaled, services redesigned and alternative approaches having to be considered which may come with higher operational risk. We understand that appropriate impact assessments will need to be undertaken in the event of such changes and considered by the IJB Board. This challenge needs to be a key focus of senior management to ensure that such savings are delivered and managed appropriately to maintain financial sustainability and minimise the risk of financial support from both parent bodies, which are also trying to contain their own financial challenges. 36. Management capacity within the HSCP can be stretched and this may be in part due to the clear challenges between urgent operational matters and staffing gaps. Furthermore, this becomes more acute when there are senior staff vacancies and/or turnover of key staff. Notwithstanding, this can reduce the time resources available to deal with the planning and implementation of strategic change which is now required to meet the challenges placed before the HSCP. 37. There is concern regarding the challenges and risks associated with the backlog in capital works that are required to the estate portfolio within the remit of the HSCP. It has been identified that this could be in the region of £15m which may well be a conservative estimate. It is important that the risks associated with an aging estate and capital works required to maintain these are appropriately monitored and a plan to address these on a risk needs basis should be at the centre of any capital plan. 38. It should be noted that there is now a significant risk of financial implications for both parent bodies should these savings not be delivered or materialised in full from within the IJB which may result in the need for financial assistance. The extent of any assistance, should that be required, will also have pressures within each of the parent bodies as they try and balance their own financial challenges and pressures. Indeed, Audit Scotland in its Annual Audit report of NHS Highland has outlined significant concerns about financial sustainability. 39. Finally, we would like to highlight our appreciation to the HSCP Audit & Risk Committee for their strong support and the co-operation of Officers within the HSCP. Page 122
Page 123
Appendix 1 – Summary of Findings 2025/26 Internal Audit Plan Summary of 2025/26 Internal Audit Plan & Additional Audits No. of Recommendations made in 2025/26 Report Title Overall Opinion High Medium Low VFM Governance Arrangements High 0 0 2 0 Partnership Working High 0 0 3 0 Workforce Planning Reasonable 0 7 0 0 Payroll Procedures for HSCP Care at Home Reasonable 0 1 1 0 Care Assessment and Resources Allocation – Adult Care Limited 3 0 0 0 Page 123
Page 124
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 10 Appendix 2 – Planned v Actual Audit Days 2025/26 Audit Planned Days Actual Days Governance Arrangements 12 12.1 Partnership Governance 17 16.4 Workforce Planning 16 17.3 Management and Admin Time (plus Annual Report and Audit Opinion) 5 5 Total 50 50.8* *The HSCP is not charged for any time which exceeds the 50 days service level agreement. Audit Planned Days Actual Days Payroll Procedures for HSCP Care at Home 15 15 Care Assessment and Resources Allocation – Adult Care 15 15 *These additional reviews were charged in addition to the service level agreement. Page 124
Page 125
Argyll and Bute Health and Social Care Partnership – Internal Audit 2025/26 Annual Report Page | 11 Appendix 3 – Recommendations Actioned and Outstanding Report Name Date No. of recommendations No. implemented No. Outstanding Care Programme Approach 31 October 2021 4 4 0 Complaints Handling 30 April 2022 4 4 0 Performance Management 30 September 2022 1 1 0 Directions 30 November 2022 3 3 0 Commissioning 05 December 2022 0 0 0 Risk Management 31 July 2023 4 3 1 Financial Management 31 August 2023 1 1 0 Adult Support and Protection 2 April 2024 1 1 0 Joint Strategic Plan 30 June 2024 3 2 1 Information Governance 31 August 2024 3 3 0 Culture 31 October 2024 5 5 0 Governance Arrangements 30 September 2025 2 0 2 Partnership Arrangements 31 August 2025 3 0 3 Workforce Planning 28 November 2025 7 3 4 Payroll Procedures for HSCP Care at Home 30 June 2025 2 2 0 Care Assessment and Resources Allocation – Adult Care 30 April 2026 3 0 3 Page 125
Page 126
This page is intentionally left blank
Page 127
1 Audit and Risk Committee Date of Meeting: 16 June 2026 Title of Report: Review of Care Assessment and Resource Allocation Presented by: Paul Macaskill, Chief Internal Auditor The Committee is asked to: ▪ Review and endorse the Internal Audit report on Care Assessment and Resource Allocation 1. EXECUTIVE SUMMARY 1.1 An audit report focused on Care Assessment and Resource Allocation is being reported to the Audit and Risk Committee (the Committee). 1.2 Internal Audit provides a level of assurance upon completion of audit work. A definition for each assurance level is documented in each audit report. The table below provides a summary of the audit conclusions and the full report is included as an appendix to this report. 2. RECOMMENDATIONS 2.1 The committee is asked to consider, discuss and approve the contents of the attached report. 3. DETAIL OF REPORT 3.1 The scope of the audit was to assess whether there are policies and procedures in place for the assessment and allocation for resources for adult care packages. as outlined in the Terms of Reference agreed with the Head of Adults, Hospital & Community Services on 12 December 2025. 3.2 Three control objectives were assessed during the audit, these were: Control Objective CO1 Care Assessment policies and procedures are in place. No of Actions Audit Name Assurance High Medium Low VFM Care Assessment and Resource Allocation Limited 3 0 0 0 Page 127 Agenda Item 9
Page 128
2 Control Objective CO2 Policies and procedures are being applied consistently across all the Council areas. CO3 Resources are allocated in accordance with policies and procedures and reviewed on a regular basis. 3.3 Our overall audit opinion for this audit is that we can take a limited level of assurance. This means that internal control, governance and the management of risk are displaying a general trend of unacceptable residual risk above an acceptable level and placing system objectives are at risk. Weakness must be addressed with a reasonable timescale with management allocating appropriate resources to the issues raised. The report highlights the following strengths and areas for improvement: Strengths • A Resource Allocation framework is in place based on a prioritisation of needs with supporting procedure documentation. Workforce planning responsibilities are well embedded within the Integration Scheme and committee Terms of Reference. • We were provided with a staff Induction policy: Social Work Team Manager. This is dated September 2024. This induction covers both the requirement to complete the Council’s corporate induction process and the service specific induction process”. This document focusses very much on high level Council information and HSCP information. • A suite of procedures is available on Eclipse, the HSCP client management system, this includes guides for Eclipse and details of responsibilities at various access levels and tasks within Eclipse. The documents specifically relate to the management of client cases on Eclipse and do not outline the process for the assessment and allocation of resources or case management. • A Terms of reference for the Area Resource Group was reviewed. It also features a draft process map for Priority 1 and Priority 2 cases. The purpose of this document is to describe the role, function and remit of the Area Resources Group. Areas for Improvement • There are various documents in circulation, however, there is not an up-to-date document that outlines the whole process from referral to resource allocation and review of case. • The lack of a comprehensive procedural documents made it challenging to assess whether procedures are being applied consistently in each of the Council areas and in line with agreed procedures. There is broad agreement across all areas on what the process is, however, these have been developed within the areas with slight differences. • There are inconsistencies in practice between Social Work and NHS staff within the HSCP in respect of the care and assessment Page 128
Page 129
3 processes, this includes suggested inefficiencies in practice. In addition, there are inconsistencies in practice where clients are transferring from one Local Authority into Argyll & Bute. • The lack of comprehensive procedures and induction of new staff has led to new staff members, including at management level placing reliance of longer serving members of staff advising of processes or adapting best practice from the Local Authority they had previously worked for or developing their own area process maps. • There are inconsistencies across the Council areas in terms of the level of reviews that are being undertaken due to staffing shortages or the high number of referrals being received, resulting in reviews not being undertaken unless there was a change requested to the package. 4. RELEVANT DATA AND INDICATORS - NONE 5. CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 Internal audit reports include agreed actions to strengthen internal controls. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact - None 6.2 Staff Governance - None 6.3 Clinical and Care Governance - None 7. PROFESSIONAL ADVISORY - NONE 8. EQUALITY & DIVERSITY IMPLICATIONS – NONE 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 This report does not raise any GDPR issues however consideration of GDPR will feature in audits where appropriate. 10. RISK ASSESSMENT 10.1 The audit planning approach is a risk based one and individual audit reports provide an overall assessment on the management of risk. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT - NONE 12. CONCLUSIONS 12.1 Our overall audit opinion for this audit is that we can take a limited level of assurance. This means that internal control, governance and the management of risk are displaying a general trend of unacceptable residual risk above an acceptable level and placing system objectives are at risk. Weakness must be addressed with a reasonable timescale with management allocating appropriate resources to the issues raised. Page 129
Page 130
4 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required x Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) n/a n/a n/a n/a REPORT AUTHOR AND CONTACT Author Name: Paul Macaskill Email: paul.macaskill@argyll-bute.gov.uk Page 130
Page 131
Classification: OFFICIAL Argyll & Bute Health & Social Care Partnership Internal Audit Report April 2026 Final High Medium Low VFM Number of Findings 3 0 0 0 Care Assessment and Resources Allocation – Adult Care Audit Opinion: Limited Page 131
Page 132
2 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL Contents 1. Executive Summary ........................................................................................................................ 3 Introduction ............................................................................................................................................ 3 Background ............................................................................................................................................. 3 Scope ....................................................................................................................................................... 4 Key Dates ................................................................................................................................................ 4 Risks ........................................................................................................................................................ 4 Audit Opinion ......................................................................................................................................... 5 Recommendations ................................................................................................................................. 5 2. Objectives and Summary Assessment ........................................................................................... 5 3. Detailed Findings ............................................................................................................................ 6 Appendix 1 – Action Plan ..................................................................................................................... 10 Appendix 2 – Audit Opinion ................................................................................................................. 13 Contact Details Internal Auditor: Moira Weatherstone Telephone: 01546 604146 e-mail: moira.weathrstone@argyll-bute.gov.uk www.argyll-bute.gov.uk Page 132
Page 133
3 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL 1. Executive Summary Introduction 1. As part of the 2025/26 internal audit plan, approved by the Audit & Risk Committee in February 2025, we have undertaken an audit of Argyll & Bute Health & Social Care Partnership (HSCP) system of internal control and governance in relation to Care Assessment and Resources Allocation – Adult Care. 2. The audit was conducted in accordance with the Global Internal Audit Standards (GIAS) with our conclusions based on discussions with Health & Social Care Partnership officers and the information available at the time the fieldwork was performed. The findings outlined in this report are only those which have come to our attention during the course of our normal audit work and are not necessarily all the issues which may exist. Appendix 1 to this report includes agreed actions to strengthen internal control however it is the responsibility of management to determine the extent of the internal control system appropriate to the HSCP. 3. The contents of this report have been agreed with the appropriate Health & Social Care Partnership officers to confirm factual accuracy and appreciation is due for the cooperation and assistance received from all officers over the course of the audit. Background 4. Health and Social care provide services designed to support individuals in maintaining independence and quality of life, assisting with daily activities and personal care, helping to improve physical health, mental wellness and social wellbeing. 5. Providing effective support for people in ways that address their personal outcomes is a priority for the HSCP. However, with a shrinking population, recruitment and retention of health and social care staff and rurality of Argyll and Bute, this presents many challenges to the delivery of services. Whenever possible, the HSCP support people to live healthily and well within their local communities, with their families and friends. 6. Care Management is a term applied to an approach to intervention whereby a professionally qualified officer undertakes assessment, planning, monitoring and reviewing activity. The assessment process for services involves engaging and communicating with individuals to identify their strengths, needs, risks, capacity and aspirations with a view to determining how intervention could assist in meeting desired outcomes. Central to the process is the collation, analysis and interpretation of information. This approach has a strong focus on managing risk, the use of specific interventions and /or significant complexity will exist e.g. legal matters. 7. An assessment of need is carried out by a health or social work care manager appointed to the service user and this will fully include the person requiring support. Resources are allocated in line with the Council’s Prioritisation of Need Framework. The need for such a framework is a direct response to the increasing gap between assessed need and available resources. Details of the framework: • Priority 1: Critical risk where serious harm or loss of life may occur. • Priority 2: Significant risk where harm may occur now or in the near future. Page 133
Page 134
4 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL • Priority 3: moderate risk where harm may occur if action is not taken in the longer term. • Priority 4: Low risk where a person’s quality of life may be affected, if need not met. 8. The Council operate a charging policy and a financial assessment which is undertaken will determine the cost of services to be provided. Personal care is free. Scope 9. The scope of the audit was to assess whether there are policies and procedures in place for the assessment and allocation for resources for adult care packages. as outlined in the Terms of Reference agreed with the Head of Adults, Hospital & Community Services on 12 December 2025. Topical Requirements 10. Topical Requirements are a new, mandatory component of the updated International Professional Practices Framework for internal auditing, they must be followed when auditing subjects for which a Topical Requirement exists or when aspects of the Topical Requirement are identified within other audits. 11. With increased demand for services on limited resources there was a recent call for a Health & Social Care Emergency to be declared at the November Argyll & Bute Council meeting, including a motion that the ‘Council recognises that Argyll & Bute face distinct challenges in delivering sustainable health and social care due to its rural and island geography, demographic change and infrastructure limitations. The motion was amended but not upheld, however, has drawn attention within local press. Key Dates 12. The Terms of Reference provided provisional timescales for the review to take place, the actual dates are noted below. Exhibit 1 – Key Dates Stage Actual Date Terms of Reference agreed 12 December 2025 Fieldwork Commencement 22 December 2025 Draft Report issued 09 March 2026 Management Comments received 13 April 2026 Final Report issued 21 April 2026 Audit and Risk Committee 16 June 2026 Risks 13. The risks considered throughout the audit were: • SRR07: Failure of the HSCP to deliver on its Strategic Priorities results in deteriorating health and wellbeing outcomes for the population and / or reduced access to appropriate health and social care services. This could also result in financial and reputational risk to the Council Page 134
Page 135
5 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL • Audit Risk 1: Failure to meet our statutory requirements • Audit Risk 2: Failure to provide an effective assessment and review processes Audit Opinion 14. We provide an overall audit opinion for all the audits we conduct. This is based on our judgement on the level of assurance which we can take over the established internal controls, governance and management of risk as evidenced by our audit work. Full details of the five possible categories of audit opinion is provided in Appendix 2 to this report. 15. Our overall audit opinion for this audit is that we can take a limited level of assurance. This means that internal control, governance and the management of risk are displaying a general trend of unacceptable residual risk above an acceptable level and placing system objectives are at risk. Weakness must be addressed with a reasonable timescale with management allocating appropriate resources to the issues raised. Recommendations 16. We have highlighted 3 high priority recommendations where we believe there is scope to strengthen the control and governance environment. These are summarised below: • A comprehensive procedure and guidance document that outlines the process in relation to Care Assessment and Resources Allocation – Adult Care should be complied. This should document the various stages from referral, assessment, allocation of funding, commissioning of care packages and subsequent reviews of cases. It should also outline the process for the transferring of cases into and out of the Authority area. • Roles and responsibilities should be clearly outlined and agreed between the NHS and Social Work in relation to Care Assessment for adult care, particularly the referral process. • Once agreed, procedures should be circulated to all staff within the HSCP and should be included in a robust induction process to ensure consistency of practice across the HSCP. 17. Full details of the audit findings, recommendations and management responses can be found in Section 3 of this report and in the action plan at Appendix 1. 2. Objectives and Summary Assessment 18. Exhibit 1 sets out the control objectives identified during the planning phase of the audit and our assessment against each objective. Exhibit 2 – Summary Assessment of Control Objectives Control Objective Link to Risk Assessment Summary Conclusion 1 Care Assessment policies and procedures are in place SRR07 Audit Risk 1 Audit Risk 2 Limited Where various documents are in existence for the assessment and management of care packages, many are out of date or in draft and the 2008 procedure document which has limited circulation does not reflect current practice or are in draft. There is a comprehensive suite of procedures on Eclipse, however, these relate to tasks Page 135
Page 136
6 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL within Eclipse. There is no single document that provides comprehensive guidance through the various stages from referral, assessment, allocation of funding, commissioning of care package and subsequent reviews of cases. 2 Policies and procedures are being applied consistently across all the Council areas Audit Risk 2 Limited We met with staff from each area within Argyll & Bute; however, the lack of a comprehensive procedural documents made it challenging to assess whether procedures are being applied consistently in each of the Council areas. However, it was concluded, through discussions, that there were inconsistencies in practise with each area developing their own processes. This was particularly the case for clients transferring into the area from another Local Authority and requiring a package of care. 3 Resources are allocated in accordance with policies and procedures and reviewed on a regular basis SRR07 Audit Risk 1 Reasonable Resources are allocated in terms of the priority of needs framework with P1 and P2 cases receiving packages. It is noted that financial resources are limited in some areas, resulting in only high-risk cases being prioritised for a care package, whilst other areas have financial resources available, however care providers did not have the available hours to support a package of care. It was intimated that there were inefficiencies in the number of processes that had to be completed in some cases to reach agreement on financial resources being agreed for packages and also a lack of clarity of budget availability to the locality. 19. Further details of our conclusions against each control objective can be found in Section 3 of this report. 3. Detailed Findings Care Assessment policies and procedures are in place 20. Comprehensive, detailed procedures for the assessment and allocation of resources are not in place. Argyll and Bute Council Assessment and Care Planning Procedures was provided to audit during the 2023/2024 internal audit review of Learning & Physical Disabilities Audit. This document is dated 2008 and whilst reasonably comprehensive it is out of date and does not Page 136
Page 137
7 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL reflect current practice, this was mirrored in the 2023/2024 Audit. We met with staff from around the Council areas and there was very little knowledge of the existence of this document. 21. A Resource Allocation framework is in place based on a prioritisation of needs with supporting procedure documentation. The prioritisation of all referrals is based primarily on the information received at the time of referral including any relevant background information held on CareFirst/Eclipse (client data base) and is prioritised according to risk. 22. In addition, we were provided with a staff Induction policy: Social Work Team Manager. This is dated September 2024. This document is designed: “To assist in your new role, we have developed this induction pack which you should complete with the support of you line manager within the first 6 weeks of starting your post if full time, 12 weeks if part time. This induction covers both the requirement to complete the Council’s corporate induction process and the service specific induction process”. This document focusses very much on high level Council information and HSCP information, including the structures and does not cover care assessment and care planning procedures. The Induction policy refers to the 2008 Assessment and Care Planning Procedures document. However, during the process of meeting staff from around the area we were advised by new staff that their introduction to procedures had been to place reliance of experienced long-serving staff within the Council passing on their knowledge or they based their practice on previous experiences with other Councils. 23. A suite of procedures is available on Eclipse, the HSCP client management system, this includes guides for Eclipse and details of responsibilities at various access levels and tasks within Eclipse. The documents specifically relate to the management of client cases on Eclipse and do not outline the process for the assessment and allocation of resources or case management. 24. A Terms of reference for the Area Resource Group was reviewed. It also features a draft process map for Priority 1 and Priority 2 cases. The purpose of this document is to describe the role, function and remit of the Area Resources Group (ARG) as follows: • To oversee and manage Unmet Need lists, in line with principles of dynamic risk management. • To review all available efficiencies, across all areas, and realign according to budget pressures and organisational need. • To oversee and manage Adult Support Plan reviews and direct accordingly, in line with agreed priority and protocols. • To review and undertake quality assurance and scrutiny for all cases of 28.0 hrs or more, following an agreed checklist and process. • In cases of 28.0 hrs or more, where the specified conditions are met, forward the recommendation to the Escalations Panel for consideration resource approval. The Terms of Reference also included remits and functions for: • Care Referrals Meeting (CRM) meeting daily • Care Resources Group (CRG) meeting weekly • Area Resources Oversight Group (ARG) meeting weekly • Exceptions Panel Page 137
Page 138
8 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL 25. The overall assessment of whether policies and procedures are in place in relation to Care Assessment and Resources Allocation of Adult Care is that there are various documents in circulation, however, there is not an up-to-date document that outlines the whole process from referral to resource allocation and review of case. Action Plan 1 Policies and procedures are being applied consistently across all the Council areas 26. There is broad agreement across all areas on what the process is, however, these have been developed within the areas with slight differences. We met with staff from each area within Argyll & Bute; however, the lack of a comprehensive procedural documents made it challenging to assess whether procedures are being applied consistently in each of the Council areas and in line with agreed procedures. However, it was found that there were inconsistencies in practise with each area developing their own processes. 27. Helensburgh & Lomond have retrained the position of Information Worker. The Information Worker is the first point of contact with regards to referrals and are responsible for gathering information from the referrer and recording details on Eclipse. All other areas in Argyll & Bute do not benefit from this resource. Within the NHS, clerical staff can take details of referrals, including, at times assessment level detail. 28. There are inconsistencies in practice between Social Work and NHS staff within the HSCP in respect of the care and assessment processes, this includes suggested inefficiencies in practice. This was highlighted in one area where NHS staff will complete part of an adult care assessment following a referral, leaving Social Work staff to complete the assessment. 29. There were inconsistencies in practice where clients are transferring from one Local Authority into Argyll & Bute. There is government guidance available for this process and agreement should be reached that the out with area Authority should continue to pay care costs for a period of 12 weeks to allow Argyll & Bute HSCP to undertake a full assessment. However, this can create a situation whereby care is received ahead of those on the waiting list. Action Plan 2 30. The lack of comprehensive procedures and induction of new staff has led to new staff members, including at management level placing reliance of longer serving members of staff advising of processes or adapting best practice from the Local Authority they had previously worked for or developing their own area process maps. This further has the potential to lead to inconsistency of practice across all areas. Action Plan 3 Resources are allocated in accordance with policies and procedures and reviewed on a regular basis 31. Resources are allocated in terms of the priority of needs framework with P1 and P2 cases receiving packages. It is noted that financial resources are limited in some areas, resulting in only high-risk cases being prioritised for a care package, whilst other areas have financial Page 138
Page 139
9 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL resources available, however care providers do not have the available hours to support a package of care. 32. Resource allocation and commissioning of care packages undergo several steps prior to being authorised and a package of care put in. Where it was understood that resources are limited and had to be managed carefully, there was a feeling that processes could be seen as over complicated. In addition, in one area there was not clarity on budget availability within their area. 33. There are inconsistencies across the Council areas in terms of the level of reviews that are being undertaken due to staffing shortages or the high number of referrals being received, resulting in reviews not being undertaken unless there was a change requested to the package. Action Plan 1 Page 139
Page 140
Classification: OFFICIAL Appendix 1 – Action Plan No Finding Risk Agreed Action Responsibility / Due Date High 1 Procedures and Processes The overall assessment of whether policies and procedures are in place in relation to Care Assessment and Resources Allocation of Adult Care is that there are various documents in circulation, however, there is no comprehensive up-to-date document that outlines the whole process from referral to resource allocation and review of case. Inconsistency of practice across the Council area Establish a Short Life Working Group to review existing procedures and processes, identifying areas for improvement and updating documentation where appropriate. Agree standardisation of processes. Develop a comprehensive SharePoint directory to house all relevant processes, supported by a clear change control process to ensure accuracy, consistency, version control, and timely updates. Professional Lead Social Work/ Head of Adults – Hospital & Community Services 31 March 2027 Page 140
Page 141
11 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL High 2 Roles and Responsibilities There are inconsistencies in practice between Social Work and NHS staff within the HSCP, this includes suggested inefficiencies in practice. This was highlighted in one area where NHS staff will complete part of an adult care assessment following a referral, leaving Social Work staff to complete the assessment. In addition, there is inconsistencies in the referral processes with Helensburgh & Lomond benefiting from an Information Worker resource to NHS clerical staff taking significant confidential details of referrals, including, at times assessment level detail. Lack of clarity in terms of roles and responsibilities leading to inefficiencies within the service A part of the Short Life Working Group will be to review and define key roles and responsibilities, ensuring these are clearly articulated and embedded within a standard operating process to support effective, consistent, and accountable practice. Professional Lead Social Work/ Head of Adults – Hospital & Community Services 31 March 2027 High 3 Distribution of Policies and Procedures The lack of comprehensive procedures and induction of new staff has led to new staff members, including at management level placing reliance of longer serving members of staff advising of processes, bringing in what was best practice from the Local Authority they had previously worked for or developing their own area process maps. This further has the potential to lead to inconsistency of practice across all areas. Policies and procedures not widely distributed leading to localised procedures being adopted A part of the Short Life Working Group will be to Implement a shared directory on SharePoint to host all approved and agreed policies and procedures. This will be supported by a clear change control process, including version control, ownership, approval pathways, and scheduled review dates to ensure documentation remains current and accurate. Professional Lead Social Work/ Head of Adults – Hospital & Community Services 31 March 2027 Page 141
Page 142
12 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL In order to assist management in using our reports a system of grading audit findings has been adopted to allow the significance of findings to be ascertained. The definitions of each classification are as follows: Grading Definition High A major observation on high level controls and other important internal controls or a significant matter relating to the critical success of the objectives of the system. The weakness may therefore give rise to loss or error. Medium Observations on less significant internal controls and/or improvements to the efficiency and effectiveness of controls which will assist in meeting the objectives of the system. The weakness is not necessarily substantial however the risk of error would be significantly reduced if corrective action was taken. Low Minor recommendations to improve the efficiency and effectiveness of controls or an isolated issue subsequently corrected. The weakness does not appear to significantly affect the ability of the system to meet its objectives. VFM An observation which does not highlight an issue relating to internal controls but represents a possible opportunity for the HSCP to achieve better value for money (VFM). Page 142
Page 143
13 Argyll & Bute Health & Social Care Partnership – Internal Audit Report – Care Assessment and Resources Allocation – Adult Care, April 2026 Classification: OFFICIAL Appendix 2 – Audit Opinion Level of Assurance Definition High Internal control, governance and the management of risk are at a high standard. Only marginal elements of residual risk have been identified with these either being accepted or dealt with. A sound system of control designed to achieve the system objectives is in place and being applied consistently. Substantial Internal control, governance and the management of risk is sound. However, there are minor areas of weakness which put some system objectives at risk and specific elements of residual risk that are slightly above an acceptable level and need to be addressed within a reasonable timescale. Reasonable Internal control, governance and the management of risk are broadly reliable. However, whilst not displaying a general trend, there are areas of concern which have been identified where elements of residual risk or weakness may put some of the system objectives at risk. Limited Internal control, governance and the management of risk are displaying a general trend of unacceptable residual risk above an acceptable level and placing system objectives are at risk. Weakness must be addressed with a reasonable timescale with management allocating appropriate resources to the issues raised. No Assurance Internal control, governance and the management of risk is poor. Significant residual risk and/or significant non-compliance with basic controls exists leaving the system open to error, loss or abuse. Residual risk must be addressed immediately with management allocating appropriate resources to the issues. Page 143
Page 144
This page is intentionally left blank
Page 145
1 Audit & Risk Committee Date of Meeting: 16 June 2026 Title of Report: Strategic Risk Register Review Presented by: James Gow, Head of Finance The Audit & Risk Committee is asked to: • Review and approve the Strategic Risk Register. • Note the outcome of the Risk Appetite Workshop and consider if the committee wish to recommend any changes to the risk appetite to the IJB. • Note that the Strategic Risk Register will be presented to the September 2026 meeting of the IJB. 1. EXECUTIVE SUMMARY 1.1 An important element of effective Risk Management is to regularly review the Strategic Risk Register (SRR). The Audit & Risk Committee undertake this on behalf of the IJB. This report provides an opportunity for the Committee to review the SRR and consider the outcome of the Risk Appetite review. 2. RECOMMENDATIONS 2.1 The Audit & Risk Committee is recommended to: • Review and approve the Strategic Risk Register. • Note the outcome of the Risk Appetite Workshop and consider if the committee wish to recommend any changes to the risk appetite to the IJB. • Note that the Strategic Risk Register will be presented to the September 2026 meeting of the IJB. 3. DETAIL OF REPORT 3.1 The Strategic Risk Register (SRR) is used to identify risks, assess their perceived likelihood and impact and outline how they are being mitigated. It is a dynamic document and is reviewed by the IJB twice annually. The current SRR is attached as appendix 1. It describes 21 strategic risks facing the HSCP. The following table summarises the assessment of perceived residual risks: Page 145 Agenda Item 10
Page 146
2 Residual Risks Very High High Medium Low Total June 2022 4 14 6 - 24 June 2023 4 13 7 - 24 June 2024 5 15 1 - 21 August 2025 6 15 0 - 21 February 2026 5 15 1 - 21 June 2026 5 15 - 1 21 The main issues identified through this review of the risk register are: • Safety of services (SRR14) is considered a ‘High’ risk that is perceived to have increased as a consequence of long term absence within the management team who oversee Children’s and Family services. It is not suggested that this is increased to ‘very high’ at present as: o Recruitment to a temporary head of service post is underway o Additional support is being provided to the team o Clinical governance processes are being actively reviewed to ensure risks are understood and managed in an improved way. • The impact of the conflict in the middle east is recognised in a number of risks. It is anticipated that there will be inflation associated with this that will have financial impacts on the HSCP and it will add to the impact of the cost of living crisis within communities (SSR 21). • The SRR recognises that the new JSP has been approved and that this now aligns better to the operational and financial context facing the HSCP. • The Partnership Working risk is being held under review as requested. Working relationships remain positive with both partners and relationships with Greater Glasgow and Clyde remain professional. Joint working groups have been established to improve governance relating to the SLA costs and activity. (SSR 6 – High) • The HSCP is investing in engagement, this includes management team training, additional support from HIS and the recruitment of a new post to improve expertise and capacity. These actions are designed to reduce the risk associated with engagement which include reputational damage, poor decision making and Page 146
Page 147
3 legal challenge. Relatively high participation and media coverage of IJB decisions would suggest that the approach being taken is potentially reducing the engagement risk associated with low participation, however, it is suggested the rating is held as High due to the difficult nature of engagement. (SSR 12 – High) • Risk in respect of the GP contract is perceived to be reducing and moves from ‘Medium’ to ‘Low’. Investment in new primary care services is underway and there appears to be general acceptance that the initial expectations regarding primary care improvement will not be met in full as resourcing from the Scottish Government is insufficient. (SSR 17 – Medium to Low). 3.2 The risk register incorporates an indicator which illustrates the perceived direction of each risk, the five ‘Very High’ risks are: Financial Sustainability (SSR01) The budget gap in 2026/27 is substantial and deteriorates further in future years. The savings plan requires service reductions and there is the additional cost associated with the Glasgow SLA. The External Auditor has raised finance as a risk to the IJB and Audit Scotland consider it to be a risk across the sector. The NHS budget in particular is not balanced on a sustainable basis, available reserves are being used to fund the shortfall in the current year. Sustainability of Commissioned Service Providers (SSR08) Risk remains very high as service providers continue to struggle to recruit staff and deliver the services they are contracted to. Several are requesting unaffordable uplifts. The increase in the employer national insurance rate has added to pressure and HSCP service reductions (care at home, 3rd sector support) will increase the risk further for some. The HSCP is engaging with providers to ensure impact assessments are realistic and fairly represent this risk. Additionally, a care at home provider is in the process of winding up with the HSCP stepping in to deliver services directly in some localities (via agency staffing and re-deployment). Workforce Recruitment and Retention (SSR11) The HSCP continues to experience difficulty in recruiting staff to a variety of roles. This is a constraint on service delivery in some areas and results in extra cost and risk. The ageing population and housing emergency contribute to an increasingly difficult local context. The workforce group is in the process of implementing the Workforce Strategy and key worker accommodation options are improving in the most challenging localities. Overall the perception is that the problem is slightly improving in respect of the Health Service but not in respect of Social Care services in the west area and some islands. Socio-Economic Situation & Increasing Poverty (SSR21) This risk continues to be considered as very high and has multiple strands. It is largely outwith the influence of the HSCP. It is expected that the cost of living crisis will continue to drive increased poverty and deprivation and service demand. Recent public health publications and performance data support the evaluation. Addressing health inequality is a strategic objective for the HSCP and Government (Population Health Framework) but it is not clear that there is additional resource to support the envisaged shift in provision. Inflation (energy Page 147
Page 148
4 costs in particular) are expected to remain high / increase due to the conflict in the middle east. This risk is likely to remain high for some time. Infrastructure and Assets (SSR07) Significant backlog maintenance requirements have been identified, there is insufficient funding available. Some capital has been allocated and progress has been made in addressing the highest risks. There are excess requests for equipment replacement across the NHSH area and insufficient funding for digital infrastructure replacement and development. This risk, to a large extent, is not in the control of the HSCP and is the responsibility of partners. The risk of building failure is perceived to be increasing but there is an improved understanding of the problem and steps are being taken to address the areas of most concern. Relationships with partners are positive and some projects are now progressing. There is insufficient budget to maintain all properties to an acceptable standard in the longer term and spend is increasingly targeted at addressing issues raised by regulators and the Fire Service rather than upon the suitability of facilities. 3.4 Risk management relies upon processes and procedures within the partner organisations, particularly in respect of cyber security, data protection, infrastructure replacement and financial processes and systems. Recent Cyber Security breaches highlight the strategic nature of this risk. It is also the case that the actions that the HSCP is taking to deliver financial improvement can be expected to have further negative impacts on a range of strategic and operational risks, particularly as spend on social care services is reduced. Action is necessary to manage financial risks and respond to the expectations of partners. 3.5 Audit Recommendations The Risk Management Strategy has been reviewed recently and risks have been mapped to strategic objectives. A focus of activity at present is to develop operational risk registers to ensure that they are consistent and complete. 3.6 Risk Appetite An IJB development workshop was held in October 2023 to set the risk appetite for the HSCP. The main purpose is to ensure that the management understanding of risk appetite aligns with the IJB’s, the first iteration and adopted risk appetite is below: RISK APPETITE RATING Risk Grouping 1 2 2.5 3 3.5 4 4.5 5 Operational Risks Strategic Risk Legal / Regulatory Financial Development & Innovation Clinical & Care People & Workforce Reputational Page 148
Page 149
5 A review took place as part of the Board Development event on 10 December 2025, attendees were encouraged to complete a survey to enable the risk appetite to be updated with a second attempt to improve the response rate in early 2026. The responses are summarised below, based on 4 IJB members completing the survey the second time round. These suggest a reducing risk appetite: RISK APPETITE RATING Risk Grouping 1 2 2.5 3 3.5 4 4.5 5 Operational Risks Strategic Risk Legal / Regulatory Financial Development & Innovation Clinical & Care People & Workforce Reputational The risk appetite ratings quantitively indicate that there is a willingness within the IJB to accept higher risk relating to strategic change and innovation. This reflects a recognition that there are significant drivers for change and transformation. It is also clear that the IJB has a lower appetite for clinical, legal / regulatory and financial risks. Members may wish to consider if the current risk appetite should be retained until the next review given the low response rates. Despite this, it has been a worthwhile exercise to reconsider the approach to risk management. 4. RELEVANT DATA AND INDICATORS 4.1 The identification and rating of risk is based on internal and external data and indicators as well as a wider environmental scan. 5 CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 Robust risk management is an important aspect of the overall strategic management of the HSCP. This report also seeks to ensure that risks relating to strategic objectives are adequately reflected in the SRR. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – This report outlines a need for the HSCP to change the way it operates in order to remain financially sustainable. 6.2 Staff Governance – the risk environment suggests a requirement for change that will likely have staff governance implications. 6.3 Clinical Governance – There would be potential impact in clinical/care delivery as a consequence of the management of the risks outlined in the SRR. 7. Professional Advisory 7.1 Professional leads are embedded in operational and strategic risk management processes. Page 149
Page 150
6 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 None arising directly from the contents of this report. 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 None directly but data protection compliance is an important business risk. 10. RISK ASSESSMENT 10.1 This report provides a detailed review of the strategic risks facing the HSCP. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 None arising directly from this report. 12. CONCLUSIONS 12.1 The risk environment facing the HSCP remains challenging as financial pressures continue and the impact of service reductions are being experienced. Finance and staffing related issues continue to be amongst the main challenges. The local assessment aligns well with the national picture with recent reports published by Audit Scotland providing evidence. There is a concern that some of the recent policy and legislative requirements will further exacerbate workforce and financial risks and are not supported with financial investment. Finance and staffing constraints in turn drive many of the other key risks such as waiting times, safety of services, community engagement and culture. 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) SLT Strategic Risk Register 10/6/26 TBC REPORT AUTHOR AND CONTACT James Gow, Head of Finance : james.gow@argyll-bute.gov.uk Appendix 1: Strategic Risk Register Page 150
Page 151
APPENDIX 1 Argyll & Bute HSCP - Strategic Risk Register - June 2026 SSR Ref Description Of Risk Consequence Likelihood Impact Risk Rating / Score Mitigations / Control Measures 2026/27 Likelihood Impact Risk Rating / Score New Control Measures RiskOwner(s) 1 Medium Term Financial Sustainability - risk of financial failure. This could be as a result of demand, cost pressures, inflation, failure to deliver savings or as a result of the level of delegated resource to the IJB from Scottish Government and / or partners being insufficient to deliver on strategic objectives. Inability to deliver on the Strategic Plan, reduction in performance, progress not being made in respect of national priorities and targets, reputational damage to IJB and partners and the requirement to implement service changes or reductions that don't line with strategy. Intervention in management of HSCP. 4- Likely 5 - Extreme VERY HIGH 20 • Financial information reported to Finance & Policy Cttee and IJB for current year, next year and the 3 year outlook • Review of funding allocations and settlements from government and partners and engagement with sector networks • Finance & Policy Committee scrutiny of financial performance, risk management, savings programme and financial planning • Delivery of Savings, project management approach to monitor and record progress • Financial governance, integrated financial reporting, financial risk register, operational and strategic reporting along with modelling of cost pressures. • Independent external audit of accounting and financial planning and reporting process of partners and HSCP • Engagement with budget holders and finance teams to improve financial forecasting. • Use of general reserves to protect services and enable longer term approach and service transformation. 4- Likely 5- Extreme VERY HIGH 20 • Plans for use of reserves and refresh of Transformation Programme, available resources largely allocated • Engagement with NRAC modelling team and allocations • External audit highlighting risk to IJB, NHSH and A&B Council • HSCP inclusion in NHSH enhanced expenditure control processes • Risk increasing due to continued increasing demand and costs • Engagement with both partners and development and implementation of financial recovery plans and request for additional resource. • Nationally set strategic objectives do not align with current perception of the financial reality facing the sector at present. • Scotland's Fiscal Outlook published and indicates financial pressures are expected to continue through at least the next 5 years. •SLA with Greater Glasgow and Clyde presents a strategic financial risk. •new inflationary pressures arising from conflicts. Chief Finance Officer / Chief Officer / SLT ↑ 2 Going Concern Status - risk of financial failure within a 1 year time horizon due to overspending of service budgets, inflation and cost pressures or reductions in funding Inability to deliver on the Strategic Plan, reduction in performance, progress not being made in respect of national priorities and targets, reputational damage to IJB and partners and the requirement to implement service changes or reductions that don't align with the strategic objectives. Possibility of external intervention in management. 4- Likely 5 - Extreme VERY HIGH 20 Mitigations are as above. Budget for 2026/27 requires use of reserves and delivery of savings, however the HSCP has reserves in place. 3 - Possible 5- Extreme HIGH 15 Level of reserves and non-recurring funding currently in place mitigate - a revised assessment is required depending upon the Scottish Government budget in December 2025, the position of both partners and progress with savings delivery. Positive financial outturn in 2025/26 reduces risk. Chief Finance Officer / Chief Officer / SLT ↓ 3 Delivery of Strategic Objectives - inability to design and deliver transformational change could lead to a failure to deliver on strategic outcomes and the Strategic Plan. The pace of change to re- design services doesn't keep up with the demographic pressures. Inability to engage with the workforce and communities on the need for change could lead to reputational damage and the increased fragility of health and social care services and poorer health outcomes for local people. 4- Likely 4- Major HIGH 16 • Delivery of the annual Savings Plan with IIAs produced to highlight impacts • Medium term budget planning integrated with strategic planning • Performance reporting - management information and transparent reporting to IJB • Communications and engagement strategies and new engagement post • SLT reporting structure and links with partner organisations, including Chief Officer representation on partner senior management teams • Engagement with staff representatives • Clearly articulated impact on Quality and Performance in all service redesign plans 4- Likely 4 - Major HIGH 16 • Review of transformation programme structure and increased resourcing of key projects • Financial and staffing constraints putting ability of HSCP to deliver on strategic objectives at increasing risk • Service Reform and Population Health frameworks published - funding for delivery of the strategic objectives is not in place • Service reductions being considered which will impact on delivery of strategic objectives • New strategic plan addresses the current context and makes the strategic objectives more realistic relative to resourcing. Chief Officer / SLT ↔ 4 Demographic Changes - failure to implement strategies and actions to address future demographic challenges of declining population, reduced working age population and an increase in older people. Failure to accurately forecast the impact on services including shifting the balance of care and implementing new models of care and / or ensuring there is sufficient capacity. This could lead to service failure to meet needs of service users and deliver against the Strategic Plan objectives. 5-Almost Certain 4 - Major VERY HIGH 20 • Strategic Plan and role of Strategic Planning Group • Incorporation of demographic forecasts into Strategic Planning and Locality Planning • Locality Planning Groups to inform service re-designs in each locality in line with needs of the population • Strategic Workforce Planning Group established to share data and good practice and develop 3-year workforce plans • Demand pressures for services incorporated into budget process • National awareness of demographic changes been driver for change in the way services are delivered • Ongoing engagement with Community Planning Partners and joint planning •Strategic Care Home Review 4- Likely 4- Major HIGH 16 • Resourcing and commencement of prevention agenda and co- production work • Planning for future workforce demographic changes in Workforce Plan • Updated population modelling and indication of increasing demand for Older Adult Services and review of care home provision • Workforce planning and key worker accommodation project. Chief Officer / SLT ↑ 5 Governance and Leadership - IJB arrangements are not conducive to effective working and lead to poor decision making and lack of strategic direction and inability to have appropriate risk management, contingency and resilience processes in place to respond appropriately to emergencies and changing circumstances. Service and reputational damage, lack of confidence in the IJB and inability to deliver on strategic objectives in a consistent manner. 4- Likely 4 - Major HIGH 16 • Appropriate representation on the IJB • Programme of development sessions for IJB members • Standing Orders and Code of Conduct in place • Effective sub-committee structure in place • Internal Audit review of governance arrangements and recommendations implemented • External Audit review of governance and annual governance statement • Regular engagement with Standards Officer and regulatory bodies • Full engagement of Board in development of Strategic Plan and Commissioning Strategy 4- Likely 4- Major HIGH 16 • Continuous improvement to achieve a holistic approach to the Governance of the IJB and regular review of performance • Implementation of governance improvement actions and audit recommendations • New Strategic Plan developed, consulted upon and approved by the IJB. • Resilience and contingency planning incorporated within SLT and contingency plans in place • Integration scheme review complete. • HSCP leadership group established and engagement in potential reform models (SAM) • Increased stability in the Senior Leadership Team but highlighted as a risk nationally by audit Scotland regarding statutory posts in particular. Chief Officer ↓ Gross Risk Residual Risk Page 151
Page 152
6 Partnership Working - Service delivery failure due to inadequate relationships with partners including the Council and Health Board and commissioned service providers including NHS GG&C and the third sector. May lead to duplication of effort, poor relationships and the inability to effectively negotiate the IJB's position. The partnership may be viewed as failing or not achieving objectives, leading to reputational damage and loss of confidence in IJB. Could also result in a reduction or loss of services to the community and failure to exploit opportunities for joint working, innovation and efficiencies. 4 -Likely 4 - Major HIGH 16 • Integration Scheme in place and clear • Independent scrutiny arrangements in place and work of internal audit, including assurance mapping • Representation on IJB from partners, community representatives and third sector representatives • Clear channels of communication and information sharing protocols in place • Directions are issued to Partners in line with strategic direction and operational delivery of services • Strategic Planning work with Commissioned Service providers and new Commissioning Strategy • Third Sector representation on the IJB and commitment to co- production 4- Likely 4- Major HIGH 16 • Approval of Commissioning Strategy, following consultation with Partners • Resourcing and Commencement of Prevention and Co- Production work and activities and integration of these within Transformation Programme • Re-establishment of regular meetings with GGCHB but increased charging and worsening delayed discharge performance increasing risk re GGC. Additional resource allocated to improve governance and operational oversight of this contract locally and regionally. • Improved engagement mechanisms and establishment of prevention and co-production workstreams • Improved engagement with RSLs • Discussions with Partners over funding becoming increasingly challenging and change management processes within HSCP, and Partners present a risk to working relationships. • Savings proposals, budget gaps and delayed discharge performance contributing to increasing risk - particularly for 3rd sector partners where funding has been reduced but mitigation in place to assist transition. • Review of integration Scheme complete. Chief Officer / SLT ↑ 7 Infrastructure and Assets - assets are owned by the Council and Health Board. Risk that these do not meet the current and future requirements due to underinvestment in maintenance, equipment and ICT or that assets are not being used or managed efficiently and effectively. Risk assets not being maintained / replaced or being otherwise appropriate to support the IJB's strategic outcomes and do not enable efficient, safe and effective service delivery. Properties will fail to meet standards required by regulators and fail to deliver on carbon reduction commitments. Equipment will become unreliable with additional downtime and ICT infrastructure will not support Digital Transformation ambitions or may add to cyber security risks. Increasing risk of failure which could result in facilities or equipment being unavailable. Risk associated with inspections by regulators / inspectors increasing as several facilities in use are not compliant with current standards. 5-Almost Certain 4 - Major VERY HIGH 20 • Progressing co-location options with Argyll & Bute Council • Represented on Argyll & Bute Council and on NHS Highland Asset Management Boards • Partnership working to reflect joint planning approach with membership of both partner Asset Groups • Appointment of new senior management post to increase capacity • Operation of Infrastructure Transformation Board and engagement of both partners in it. 5-Almost Certain 4 - Major VERY HIGH 20 • HSCP Digital / IT strategy now complete to better enable TEC / remote working. • New Strategic Estates & Sustainability Post, establishment of Infrastructure Transformation Board. • Strategic Assessment work underway to get replacement assets in capital pipeline with NHSH, A&B projects on priority list. • Focus to shift to maintenance of existing assets and rationalisation and do minimum approach. Budget not sufficient to address backlog maintenance or essential asset replacement. Some funding in place to address Fire safety works in NHS buildings, funding being sought for a variety of projects. • Care Homes review now moving to engagement stage and improved understanding of long-term service demand • Some essential projects completed to reduce specific risk, key worker accommodation project having an impact • Risk associated with regulatory non-compliance is increasing • Building fabric issues and risks better understood across all sites and prioritisation processes in place. Chief Officer / Head of Strategic Planning and Performance / Head of Finance ↔ Risk relates to both local operational and strategic impacts. 8 Sustainability of commissioned service providers - financial and operational sustainability of care at home and care home commissioned service providers deteriorates as a result of financial and workforce pressures. Market failure would lead to disruption of service, the implementation of contingency plans, increased costs and an adverse impact on individuals and their families. Would also impact on the ability of the IJB to deliver on the planned shift in the balance of care. 5 - Almost Certain 5 -Extreme VERY HIGH 25 • Commissioning Team supplier relationship and market management, including contract management and review processes and solvency checks, as part of contract management • Additional funding for providers to facilitate the implementation of wage increases and Fair Work Practices • Engagement with national work supporting the National Contracting • Contingency planning in localities for care at home. Care Home and Care at Home Assurance Group for Argyll and Bute to identify and manage local and short term risks • Care Home Strategic Review underway and demographic modelling complete. • Engagement with national workforce planning and local training providers around promotion of care profession 5 - Almost Certain 4- Major VERY HIGH 20 • Continuing work with providers in partnership and quarterly provider forums for care homes and care at home • Ongoing engagement nationally with financial sustainability plans and flexible approach to local support, where necessary • Contingency planning, ability to respond effectively to issues, as they arise. • Engagement with key providers and project planning to address issues, as they arise and regular management escalation, where appropriate • Positive Internal Audit review provides assurance risk is being managed appropriately • Potential service reductions could increase this risk further, context of NI increase not being funded. Sector publicly communicated the fragility of many independent care providers to government. • Transition budget to help with managing savings and funding reductions. • A further care provider is in the process of closing and HSCP responding effectively to this however new service models require to be developed in some areas. Chief Finance Officer / Chief Officer / SLT ↑ 9 Equalities - Services are not delivered in a way that addresses inequality or takes into account the needs of those with protected characteristics. Service users are put at unnecessary risk of harm and people with poorer life chances may have their health and wellbeing impacted. Groups with protected characteristics may be perceived to be impacted unfairly. 4 - Likely 3- Moderate HIGH 12 • Equalities Outcomes Framework in place • Equalities impact considered, as part of IJB decision-making and Service change • Communication with Service users, as part of implementation of Service change, using engagement and communication strategies • Adjustments to implementation plans are actioned, where appropriate, to mitigate any potential negative impact • Service changes not implemented where this would constitute unlawful discrimination 4 - Likely 3 - Moderate HIGH 12 • IIA and community engagement processes are improving • Review of Equality outcomes in line with Policy • Requirement to make savings may result in increasing adverse impacts and risk of challenge in respect of equality impacts Chief Officer ↔ 10 Scottish Government Policies - risk of further legislative, policy developments or change which impacts on the IJBs ability to deliver on the current Strategic Plan. Inability to deliver SG policies alongside the Strategic Plan and IJB's agreed objectives and the impact of additional unfunded cost pressures. Could extend to approach being taken by regulators which could put viability of some services at risk. 5 - Almost Certain 4 - Major VERY HIGH 20 • Horizon scanning for policy developments through partners and SMT network groups • Regular liaison with Senior officers in the Scottish Government, and through Cosla • Respond to Scottish Government information requests on impact of future policies • Early impact assessment locally for national policies, including any impact in budget outlook • Implement and adopt innovative ways of implementing policies • Role of Elected Members and IJB members to influence Scottish Government decision-making through political routes 4- Likely 4 - Major HIGH 16 • Respond to requests for evidence from Parliamentary Committees • Positive relationships with key partners, Civil Servants and Politicians • Work on-going re implementation of Staffing Act and second cycle complete for nursing establishment setting. • Care reform act and policy direction (population health and service reform frameworks) are expected to create additional burdens and expectations for health and social care. Funding not in place. • Implementation of the promise is likely to result in increasing cost. •Funding allocated for second Bairns Hoose in Lochgilphead. • Disconnect between policy landscape, available resources and sustainability, highlighted by Audit Scotland • NCS now on hold but care reform Bill enacted •SAM models under consideration and SG developing approach to public sector reform. Chief Officer / Heads of Service ↑ Page 152
Page 153
11 Workforce Recruitment, Retention and Management - inability to recruit and retain the required workforce because of local or national workforce shortages. This may result in increased costs, increased risk or reduced service. Applies to commissioned services as well as direct provision. Service users needs for particular disciplines or in particular areas may not be met if workforce is not in place. Some sites and services at risk of closure due to persistent staffing shortages. 5 - Almost Certain 5 - Extreme VERY HIGH 25 • Workforce Plan • Strategic Workforce Planning Group to ensure overall visibility of recruitment, retention and development challenges across HSCP • #abplace2b Campaign framework for attracting people into area • Service re-designs to plan for changes to services in line with workforce capacity • Modern Apprentices to reduce average age of workforce • Support commissioned service providers with recruitment and retention, for example, supporting implementation of Living Wage and pay rate increases • Links with Open University assisting recruitment of students for Social Work and to Nursing • Programme for delivering SVQs for Social Care 5 - Almost Certain 4 - Major VERY HIGH 20 • Strategic Workforce Planning Group to implement Workforce Strategy • Development of approaches to reduce reliance on locum and agency staff • Ensure on-going support for CPD • Progress in address housing shortages and key worker housing in partnership with Housing Associations, Shelter Scotland, and Argyll & Bute Council • Additional focus on management of absence underway. •National improvements in terms and conditions, increased milage rates, safe staffing levels, reduced working week all contribute SLT / Head of People, Planning and Reward / People Partner ↔ 12 Communications and Engagement with Communities - risk of inadequate arrangements in place to communicate with stakeholders, communities and partners. HSCP ineffective at managing implications of mis- information locally and nationally / internationally resulting in harm. Could result in failure to gain community support for service changes and ineffective partnership working with communities. Reputational damage from failure to adequately consult and engage. Could result in failure to deliver planned change or legal challenge. 5 - Almost Certain 4- Major VERY HIGH 20 • Communication and Engagement Strategies delivered • Openness and transparency of publicly available information • Communications events and information widely available to engage stakeholders in conversations about service changes and the need for change • Engagement with politicians to ensure the Argyll and Bute position is shared and understood • Locality Planning Groups and other forums are used to communicate with communities and explore new ways of getting the IJB message across • Communication Plans developed, as part of implementation of service changes 4- Likely 4- Major HIGH 16 • Review of Communications and Engagement Strategy and framework. • Delivery of communication and Engagement Plans, within guidelines. Ensure conforms to Scottish Government guidance "Planning with People" and standards for community engagement • Effective engagement on strategic plan and budget consultation during 2025/26 with high participation. • Committee meetings to be made public from 2026/27 onwards to improve transparency. • Support from Health Improvement Scotland and staff training and awareness raising • Initial media training taken place for leadership team • New post being recruited for to assist and additional support from HIS put in place to better support engagement. • Use of engagement hub and increased experience of consultation re Threshold of Care, Strategic Plan and Budget Consultation with externally facilitated care homes consultation planned for 2026. Events held in many areas and senior staff attending to improve visibility. Associate Director Public Health / Communications Team / Heads of Service ↓ 13 Workforce Shift - risk that there is not appropriate engagement with staff groups, particularly over the need for service changes and the requirement to work in a different way. There may be professional concerns about inter- disciplinary working and cultural barriers will prevent effective integration. Would result in poor morale and the failure to gain staff support for the workforce shift and culture change required. Resistance from the staff group would in turn limit the flexibility required to deploy the workforce in line with changed models of care, full integration will not be achieved and teams will be disjointed. Ultimately impacting on the service provided to communities. 4 - Likely 4 - Major HIGH 16 • Joint Partnership Forum and Staff side liaison facilitate communications and information flow between Management to Staff side and Trade Unions • Communications plan for each service change project, including staff, as stakeholders • Support from staff side partnership to support staff with new ways of working with an integrated partnership approach • Compliance with terms and conditions of employment for both staff groups • Individual staff development plans and training programmes • Workforce Planning • Staff surveys used to inform targeted improvement work with individual teams • Strengthened communication and cascade of information from Chief Officer 4- Likely 4- Major HIGH 16 • Clarity over role and function of teams working in our communities. OD support will be offered to Area Managers, to support teams • Ongoing work of the culture and staff wellbeing workstreams • Implementation of the Workforce strategic plan and recommendations from internal audit of Culture • Improve management of redeployment • Staff side involvement in SLT meetings and in the Transformation Board • Planning for reductions in working week for NHS employed staff underway • Safe staffing act implementation underway • Requirement for change likely to put upward pressure on this risk Chief Officer ↔ 14 Safety of Services - inability to maintain the safety of services due to demographic changes, increasing need and complexity and the ability to recruit staff for direct employment and for delivery partners. Risk includes Social Work protective services and work of COG. May result in harm to service users or patients, the failure to provide appropriate care and reputational damage to the IJB and partners. 4-Likely 5 - Extreme VERY HIGH 20 • Clinical and Care Governance Committee and professional leadership • Risk Management Strategy recently updated and operational risk management arrangements • Recruitment, retention and training of staff • Triggers for service re-designs including ensuring clinical safety is not compromised • Prioritisation of need frameworks in place to determine need for access to services • Develop and implement contingency arrangements for localities and services, and improved clinical and care governance at service level 4-Likely 4- Major HIGH 16 • Increased focus on training and development of staff and improved flexibility • Increased engagement with commissioned service providers • Improved Health & Safety Training and governance arrangements • New focus on establishment setting and risk management to comply with Staffing Act requirements • Development of Hospital at Home Service and improved whole system planning • Revised assurance mechanisms in respect of Protective Services led by the chief Social Work Officer •Clinical Governance processes under review to deliver improvements •Short term actions being taken to manage increased risk in Children and Families services due to absence levels in the management team. • Risk will continue to remain high as service reductions are implemented in response to financial constraints. Professional Leads / Chief Social Work Officer ↑ 15 Waiting Times - failure to meet waiting times targets and treatment times guarantees for treatment in specialities in NHS GG&C and outreach clinics in Argyll and Bute. Waiting times have increased due to Covid-19 response and disruption and pressures within the Health system continue. Poor level of service for patients, the potential to have to travel further for appointments, and is not in line with the anticipatory and preventative approach to care. 4-Likely 4 - Major HIGH 16 • Continued engagement with NHS GG&C to agree a strategic jointly planned approach to Outreach services • Monitoring and reporting of waiting times • Development of new delivery models such as specialist nurses, tele-consultation and direct or follow up referral to primary care or AHP professionals • Plans for use of Waiting List and unscheduled care funding 4- Likely 4- Major HIGH 16 • Inclusion in NHS Highland Remobilisation plan to request additional funding to redesign services and address backlog. Initiatives include increasing virtual clinics / services, digital and appointment modernisation, enhanced role of AHPs and waiting times initiatives additional clinics • Use and expansion of Near Me and Outreach Clinics • Evidence of continuing disruption to services and staffing shortages throughout local and national healthcare system continuing to make it challenging to address increased waiting times. • HSCP performance improved in 2025/26 particularly for long waits, increased governance relating to activity in Glasgow will improve governance further. Risk reducing as improvement has been delivered but still too many people are waiting longer than the HSCP would like and therefore no reduction in risk rating is proposed. Chief Officer / Heads of Service ↔ Page 153
Page 154
16 Support Services - Risk that support services do not adequately support front line service delivery. Inability to integrate support services which are not fully delegated to the IJB. Continued reliance on two systems, processes and approaches may lead to confusion and ongoing inefficiency. Risk that partners will not support changes to current arrangements. Could adversely affect services experienced by patients and service users if support services cannot fully support front line services. Wasteful duplication and inefficient use of resource and impacts on partners if payments and assessments not processed efficiently. Also increased risk of legal challenge. 5 - Almost Certain 4- Major VERY HIGH 20 • Co-location of staff • Some IT systems integrated and further plans to review this and to facilitate access to joint systems • Rollout of MS Teams - IT services and remote working are much improved, as a result • Committee support arrangements in place • Continuous improvement in support service provision 4- Likely 4- Major HIGH 16 • Replacement programmes for new systems Social work (Eclipse), Hospital Telecoms, and portal (link systems) funded and in place • Work to improve recruitment processes on-going • Implementation of Staffing Act presents an additional pressure on Support Services •Improved HR support now in place, risk declining at present. Chief Officer ↓ 17 General Medical Services Contract - risk that the HSCP are not in a position to support the implementation of the new GP contract as a result of availability of funding and capacity for the HSCP to deliver services transferred from GPs. Higher risk of implementation across remote and rural areas. Could adversely affect services experienced by patients as gaps in service may arise. Potential for negative impact on relationships with Primary Care practitioners. 4-Likely 4 - Major HIGH 16 • Ongoing collaboration between the HSCP and Primary Care to support practices • Primary Care Modernisation Board with priorities established and Programme Manager in place • Regular updates on progress to Transformation Board and the IJB, constructive progress being made Pharmacotherapy, Physiotherapy, and Mental Health workstreams 1 - Rare 4- Major Low 4 • Head of Primary Care in place to add Management capacity • Funding for Primary Care improvement reduced substantially by Scottish Government, and acknowledged that the contract cannot be delivered in full within existing resourcing, this appears to be understood now. • Progress in returning directly run practices •new GP walk in service funded and under development. Associate Medical Director / Head of Primary Care ↓ 18 Culture - risk that perception of negative culture results in increased difficulties in recruiting and retraining staff, staff wellbeing and wider reputation of the HSCP. Adverse impact on reputation and ability to recruit. Also impacts on service delivery if teams are unhappy or short staffed as a consequence 4-Likely 5 - Extreme VERY HIGH 20 • Wellbeing groups and Workforce Strategy Group, in place • Whistleblowing process in operation • Extensive roll out of 'courageous conversations' training 4- Likely 3 - Moderate HIGH 12 • Some indications of improving culture from staff surveys • Continuing high levels of pressure on staff across many working environments • Implementation of savings resulting increasing pressure on culture. Chief Officer / Heads of Service ↑ 19 Statutory/Mandatory Training - risk that patient / service user harm could result directly from, or be attributed to, a failure to comply with statutory and mandatory training requirements. This could result in harm to an individual or group of service users, members of staff and could result in financial claims and reputational damage. Adverse effect on quality and safety of care and service delivery. -Potential to result in Adverse Events with harm to service users and staff which could result in civil claims being made with a risk of high financial cost. -Potential for enforcement action being taken against the HSCP by the HSE with severe financial and reputational consequence 5-Almost certain 5- Extreme VERY HIGH25 • Stat / Man training policy in place • Training programmes in place via on-line training and face to face • Induction programme 3-Possible 5- Extreme HIGH 15 • Head of Service/senior managers to compile service improvement plans with local delivery based on individual service position. Plans in place for online training and for face to face training. • Heads of Service to ensure there is a regular forum for reviewing the plan, ensuring implementation and escalating barriers. • All staff receive a communication from the Chief Officer on responsibilities for mandatory training. • Managers to ensure that they are up to date with their own training. • Managers to monitor compliance, support staff to access computers and have time to bring their mandatory training up to date. • Managers to support staff who are falling behind with their compliance with mandatory training and follow up until the training has been completed. • The Health & Safety Committee and Strategic Leadership Team to review, compliance is improving but still gaps and data issues to be addressed.. Chief Officer ↔ 20 Climate Change - risk that the HSCP will not achieve the climate change decarbonisation and emissions targets set for it. This is likely to result in reputational damage at both a community and political level as well as a financial cost. -Perception that the HSCP is not fully committed to delivering on the Scottish Government Climate Change targets as a result of lack of capital and revenue funding or management capacity to prioritise this work. 4-Likely 3- Moderate HIGH 12 • On-going engagement and participation with Argyll & Bute Council, NHS Highland, and Scottish Government partners in respect of all Health and Care areas producing CO2 emissions, including procurement decisions, estate, travel and transport. Services provided by the HSCP • Access to funding revenue and capital to undertake CO2 reduction projects e.g. reduced emission NHS fleet • Expectations continuing to increase without sufficient funding - infrastructure investment critical (fabric first approach required). 4-Likely 3- Moderate HIGH 12 • Secured funding for carbon reduction consultancy, but limited capital available in and targets being pushed back nationally • Development of capital and revenue investment plans in HSCP, Argyll and Bute Council, and NHS Highland • Local projects underway, climate change report submitted • Funding in 26/27 secured for LED lighting installation in hospital sites and further investment in electrical capacity and EV chargers. • New Estates and Sustainability Manager now in post. • Reduced size of NHS fleet and increased electric vehicles and investment in charging infrastructure will have positive impact on emissions Head of Finance / Senior Manager - Estates & Sustainability ↔ 21 Socio-Economic Situation & Increasing Poverty and Deprivation - multiple risks relating to the current socio economic situation. Risk is driven by direct and indirect implications of high inflation, expected increase in poverty, increasing interest rates and tightening public funding position. Linked to impact of lockdowns on mental and physical health. Risk that the health and wellbeing will deteriorate and the HSCP will be unable to respond appropriately to increased service demand. Consequences may include: -increased staff and non-staff costs reducing real terms values of budget and reserves. -potential forstrike action within HSCP,partners and in other services and industries. -additional service demand arising from cost of living crisis, increased poverty levels, increased pressure on mental health services may be a particular pressure. -shortages of supplies and services which could include supplies of drugs and other critical supplies and care provision. 4-Likely 5 - Extreme VERY HIGH 20 • Recognition that this is a national socio-economic issue, and local mitigations and influence is limited • Resilience and contingency planning • Remobilisation of services • May need to consider prioritisation of services and resources 4-Likely 5 - Extreme VERY HIGH 20 • HSCP planning sensitive to issues facing local communities • Awareness of pressures and careful financial and service planning to mitigate impact, particularly on most vulnerable • Initial evidence of increase in cases requiring expensive residential care packages, which could result in severe cost pressures • Continuing to work with key partners and community planning to help mitigate the impact • Largely outwith the control of the HSCP • Savings and service reductions and sustainability of 3rd Sector increasing this risk to Communities further. • Conflict in middle east now expected to result in further inflation in the medium term. •Uk Government increased the milage rate to compensate staff for increased fuel costs, implementation of increase still to be confirmed. Chief Officer / SLT ↑ Page 154
Page 155
# Risk Matrix Risk Rare (1) Unlikely (2) Possible (3) Likely (4) Almost Certain (5) Extreme (5) MEDIUM 5 HIGH 10 HIGH 15 VERY HIGH 20 VERY HIGH 25 Major (4) MEDIUM 4 MEDIUM 8 HIGH 12 HIGH 16 VERY HIGH 20 Moderate (3) LOW 3 MEDIUM 6 MEDIUM 9 HIGH 12 HIGH 15 Minor (2) LOW 2 LOW 4 MEDIUM 6 MEDIUM 8 HIGH 10 Insignificant (1) LOW 1 LOW 2 LOW 3 MEDIUM 4 MEDIUM 5 Table 1 Assessment of likelihood Score Description 1 Rare 2 Unlikely 3 Possible 4 Likely 5 Almost Certain Table 2 Assessment of Impact Descriptor Insignificant Minor Moderate Major Extreme Score 1 2 3 4 5 Patient Experience Reduced quality of patient experience / clinical outcome not directly related to delivery of clinical care. Unsatisfactory patient experience / clinical outcome directly related to care provision – readily resolvable. Unsatisfactory patient experience / clinical outcome, short term effects – expect recovery <1wk. Unsatisfactory patient experience / clinical outcome: long term effects – expect recovery - >1wk. Unsatisfactory patient experience / clinical outcome: continued ongoing long term effects. Injury (physical and psychological) to patient / visitor / staff. Adverse event leading to minor injury not requiring first aid Minor injury or illness, first aid treatment required Agency reportable, e.g. Police (violent and aggressive acts) Significant injury requiring medical treatment and/or counselling. Major injuries/long term incapacity or disability (loss of limb) requiring medical treatment and/or counselling. Incident leading to death or major permanent incapacity. Complaints/ Claims Locally resolved verbal complaint Justified written complaint peripheral to clinical care. Below excess claim. Justified complaint involving lack of appropriate care. Claim above excess level. Multiple justified complaints. Multiple claims or single major claim. Complex justified complaint. Staffing and Competence Short term low staffing level temporarily reduces service quality (< than 1 day). Short term low staffing level (> 1 day), where there is no disruption to patient care. Ongoing low staffing level reduces service quality. Minor error due to ineffective training/ implementation of training. Late delivery of key objective / service due to lack of staff. Moderate error due to ineffective training/implementati on of training. Ongoing problems with staffing levels. Uncertain delivery of key objective / service due to lack of staff. Major error due to ineffective training/implementati on of training. Non-delivery of key objective / service due to lack of staff. Loss of key staff. Critical error due to ineffective training/implementati on of training. Financial (including damage/ loss/ fraud) Negligible organisational/ personal financial loss (< £1k) (NB. Please adjust for context) Minor organisational/per sonal financial loss (£1-10k). Significant organisational /personal financial loss (£10-100k). Major organisational/ personal financial loss (£100k - £1m). Severe organisational/ personal financial loss (>£1m). Adverse Publicity / Reputation Rumours, no media coverage. Little effect on staff morale Local media coverage – short term. Some public embarrassment. Minor effect on staff morale / public attitudes. Local media – long- term adverse publicity. Significant effect on staff morale and public perception of the organisation National media / adverse publicity, less than 3 days. Public confidence in the organisation undermined. Use of services affected National / International media / adverse publicity, more than 3 days. MSP / MP concern (Questions in Parliament). Court Enforcement. Public Enquiry/ FAI. Strong possibility that this could happen again This is expected to frequently happen again – more likely to re-occur than not LIKELIHOOD IMPACT Chance of Occurrence Can’t believe this event would happen again – will only happen in exceptional circumstances Not expected to happen again, but definite potential exists Has happened before on occasions – reasonable chance of re-occurring Page 155
Page 156
This page is intentionally left blank
Page 157
1 Audit & Risk Committee Date of Meeting: 16 June 2026 Title of Report: Integration Joint Boards – Finance Bulletin 2024/25 Presented by: James Gow, Head of Finance The Audit & Risk Committee is asked to: • Note the contents of the report published by Audit Scotland; • Note the severe financial and operational challenges that continue to face Health and Social Care; and • Note that the Argyll and Bute HSCP was in a relatively favourable financial position at the end of the 2024/25 year. 1. EXECUTIVE SUMMARY 1.1 Audit Scotland recently published their analysis of IJB accounts for the year ended 31 March 2025. Whilst this is somewhat out of date, it provides further insight into the worsening financial challenges facing the sector. It is clear that the data presented across the sector supports the contention made by Audit Scotland in the past the IJBs are not operating on a financially sustainable basis. This has now translated to actual deficits and overspending, deterioration in performance and depletion of financial reserves and financial resilience. The report is attached as appendix 1. 1.2 Audit Scotland highlight a range of difficulties facing IJBs across Scotland including demographic change including population growth, increasing morbidity and an ageing population. The report highlights that most IJBs were in deficit and many reliant upon additional unplanned contributions from partners. The position of the Argyll & Bute HSCP, when placed in a national context was relatively favourable. 2. Recommendations 2.1 The Audit & Risk Committee is recommended to: • Note the contents of the report published by Audit Scotland; • Note the severe financial and operational challenges that continue to face Health and Social Care; and • Note that the Argyll and Bute HSCP was in a relatively favourable financial position at the end of the 2024/25 year. 3. DETAIL OF REPORT 3.1 Appendix 1 provides the Audit Scotland Report. It draws on analysis of IJB accounts and supplements an earlier report which provided an operational performance analysis for each IJB. This is available at the link below: https://audit.scot/publications/community-health-and-social-care-performance- 2025 Page 157 Agenda Item 11
Page 158
2 3.2 Firstly the report highlights the national context which is extremely challenging consistent with reporting locally: Audit Scotland report that funding to IJBs has increased in real terms (adjusted for inflation) by 2.3% but acknowledge that costs have increased by more. For example pay increases, inflation on drugs, the national care home contract and the costs of the reduced working week are all examples of costs that have increased by more than general price inflation, adding to the demand problem. Financial performance during the year is concerning, 22 IJBs reported an operational deficit, some reported substantial deficits. Due to reducing availability of reserves, 19 IJBs required additional in-year funding support from their funding partners. Clearly this is not sustainable and the report confirms that IJBs are now perceived as a financial risk to NHS Boards and Local Authorities. The key messages in the report include: • Scotland IJB’s are in a critical financial position with a £449m funding gap for 2025/26. • IJB’s need to take decisive action and make difficult decisions about services • Reserves have reduced and are lower than the budget gap, IJBs are a financial risk to partners. • Funding gaps are significant and budgeting needs to be transparent and realistic. Page 158
Page 159
3 The tone of the report has strengthened each year as finances deteriorate. The scale of the challenge ahead is substantial, this report confirms that the situation is as has been described previously and is now being demonstrated in the actual financial performance. 3.3 In respect of our financial performance, the report provides a series of comparative graphs which tend to suggest that the Argyll and Bute HSCP has performed relatively well in respect of most measures and is not an outlier in any regard. It still had some reserves at the year end, reported a relatively modest deficit and has a proportionate or mid-range budget gap. To date, the HSCP has not required additional or unplanned financial support from either partner. However, like most the HSCP is not yet operating on a financially sustainable basis. 4. RELEVANT DATA AND INDICATORS 4.1 The Audit Scotland report draws upon a range of data and statistics, mostly the audited accounts of IJBs. 5 CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 The report provides valuable insight into a range of challenges facing IJBs nationally at present and describes the financial position of the sector as critical. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – no immediate impacts, the report highlights the scale of the financial challenge facing IJBs at present and supports the risk assessment in this regard. The report provides some assurance that the HSCP is not an outlier and appears to be performing relatively well and is taking actions which appear to be broadly consistent with the rest of the sector and proportionate. 6.2 Staff Governance – none. 6.3 Clinical Governance –none. 7. Professional Advisory 7.1 Not applicable. 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 There are no direct implications from the contents of this report. 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 None. 10. RISK ASSESSMENT 10.1 The report highlights significant risks facing the Health and Social Care Sector at present, mainly focused upon finance. This is reflected in the Strategic Risk Register (SRR), the Audit Scotland provides external assurance that the rating of financial risks in the SRR is appropriate. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 Audit Scotland reports are publicly available. Page 159
Page 160
4 12. CONCLUSIONS 12.1 The Audit Scotland report provides a useful overview of the performance of IJB’s. It again highlights the financial challenge facing the sector and confirms that actual reported performance is now reflecting the adverse projections / forecasts made in recent years. The report is clear that the sector is not operating on a sustainable basis and that the situation is critical and expected to deteriorate further. The report provides some assurance in respect of the relative performance of the Argyll and Bute HSCP. 13. DIRECTIONS Directions required to Council, NHS Board or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) Finance & Policy Committee Integration Joint Boards – Finance Bulletin 2024/25 17/03/2026 noted AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk Appendix 1 - Integration Joint Boards Finance Bulletin 2024/25 Page 160
Page 161
Integration Joint Boards Financial bulletin 2024/25 Prepared by Audit Scotland February 2026 Page 161
Page 162
2Integration Joint Boards Contents Key facts 3 Key messages 4 Recommendations 6 Introduction 7 Context 9 Financial performance 11 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Audit team The core audit team consisted of: Christopher McClelland, Christopher Holgate and Kathrine Sibbald, under the direction of Blyth Deans. Page 162
Page 163
3Key facts Key facts 2.3% Real-terms increase in IJB funding between 2023/24 and 2024/25 £12.5 billion Net cost of services for IJBs in 2024/25 78% Proportion of planned savings achieved by IJBs in 2024/25 12% Reduction in total reserves since 2023/24 £404 million Total IJB reserves remaining at the end of 2024/25, £316 million of which is earmarked £449 million The budget gap at the time of budget setting for 2025/26 Page 163
Page 164
4Key messages Key messages Key messages Key messages Despite a real-terms increase in funding, Scotland’s Integration Joint Boards (IJBs) are in a critical financial position. With increasing cost pressures and the total level of reserves now lower than the budget gap forecast, IJBs need to take decisive action and make difficult decisions about services. 1 Despite a real-terms increase in funding between 2023/24 and 2024/25 of 2.3 per cent, the financial position of IJBs has become increasingly concerning. Financial pressures and demands on services continue to grow, outstripping increased funding and savings made, raising concerns around IJBs’ financial sustainability. IJBs must make difficult decisions about how services are delivered, determine the appropriate level of services, and decide where to redesign, reduce or discontinue services. They must be transparent with service users and the public about the potential impact of these changes on service performance and outcomes. 2 Total reserve levels continue to fall across IJBs. Almost half of IJBs no longer hold any contingency reserves. The total level of reserves held by IJBs is now lower than the budget gap forecast for the year ahead. 3 The majority of IJBs reported operational overspends in-year, continuing the trend from previous years. While unplanned use of reserves decreased in 2024/25, as expected given the significant reduction in reserve levels in recent years, this was offset by a large increase in additional contributions from Page 164
Page 165
Key messages 5 partners. The partners, NHS boards and councils, also face significant financial challenges and will find it increasingly difficult to allocate further funding to IJBs during the year. 4 The funding gap in 2025/26 remains significant at £449 million, a slight decrease from £457 million in 2024/25. IJBs must work closely with partners to ensure budgets and savings plans are realistic and to identify solutions that will ensure services remain financially sustainable over the medium to long term. 5 Although the majority of planned savings were achieved in 2024/25, it is unclear what proportion of these savings are recurring. There continues to be a lack of transparency and detail in public reporting on savings performance. Page 165
Page 166
6RecommendationsRecommendations Recommendations Over the next year, IJBs and their partner council and NHS boards need to work more collaboratively to: • set realistic budgets before the start of the financial year that minimise the need for additional in-year contributions • consult and communicate with service users, carers and the wider public on plans for changes to services and ensure appropriate impact assessments are undertaken • set out in strategic plans how services will be made financially sustainable and how future demand can be managed through investment in prevention in the medium and long term, including consideration, for example, what services are delivered, how and to whom those services are delivered, and charges for services. Over the next year, IJBs should: • improve the clarity and comprehensiveness of their public reporting on savings performance, including comparisons to targets agreed during budget-setting, and whether savings made were recurring or non-recurring. Page 166
Page 167
7Introduction Introduction About health and social care integration 1. The Public Bodies (Joint Working) (Scotland) Act 2014 (the Act) requires councils and territorial NHS boards to work together in partnerships, known as Integration Authorities (IAs). As part of the Act, new bodies were created – Integration Joint Boards (IJBs). An IJB is a separate legal entity, responsible for the strategic planning and commissioning of a wide range of health and social care services across a partnership area. NHS board and council partner organisations are responsible for the delivery of services as directed by the IJB. 2. Of the 31 IAs in Scotland, 30 are IJBs. Stirling and Clackmannanshire councils have formed a single partnership with NHS Forth Valley. Highland currently follows a Lead Agency model where a Joint Monitoring Committee takes a similar strategic oversight role of adult community health and social care. Each IA is supported by an operational delivery partnership – the Health and Social Care Partnership (HSCP) – that manages the delivery of the services. The HSCP staff remain employees of the NHS or the council, depending on their role. More detail about integration can be found in our short guide – What is integration? Financial bulletin 2024/25 3. On behalf of the Accounts Commission, Audit Scotland has undertaken an analysis of the IJB annual accounts for 2024/25 and the annual audit reports produced by external auditors. The data and analysis are published on the Audit Scotland website as an interactive online tool – The IJB finance bulletin 2024/25. This interactive tool is supported by this bulletin. Data tool 4. In March 2025, we published a data tool that sets out financial data in an interactive way so that members of the public and in particular IJB members and other stakeholders could view the data and compare financial performance across the 30 IJBs in one location. This has been updated with data from the 2024/25 annual accounts. Page 167
Page 168
Introduction 8 5. We anticipate this will be a useful resource again for IJBs, their stakeholders and members of the public. It includes data on the funding and income and reserves position, outturn budget position, savings performance and financial outlook. The tool also includes local and national contextual data from the 2022 census that illustrates the increasing population pressures nationally and the significant variation across Scotland. Bulletin 6. This bulletin accompanies the interactive online data tool and provides a summary of the national level messages along with identified recommendations for improvement. 7. Our findings are based on the 2024/25 annual accounts for 30 IJBs (27 audited and three unaudited), 2024/25 annual audit reports, as well as IJB budget documentation for 2025/26. In addition, to assist understanding of the issues behind the data, a roundtable discussion was held with a group of IJB chief officers and chief finance officers in January 2026. 8. In the bulletin and data tool we convert some figures to real terms. This adjusts financial information from past and future years to prices for the year under review (2024/25). This is to take account of inflation so that trend information is comparable. To adjust for inflation, we use gross domestic product (GDP) deflators, which are published quarterly by HM Treasury. GDP deflators are the standard approach adopted by both the UK Government and Scottish Government when analysing public expenditure. Page 168
Page 169
9Context Context Demographic shifts are driving an increase in the demand and complexity of health and care needs 9. The pressures on Scotland’s community health and social care services are escalating. There are increased public expectations of services and as we live longer and the proportion of the population over 65 continues to rise, the demand for the care and support that this positive outcome brings also increases. Positive progress with improving the life expectancy in people of all ages with complex needs also brings associated additional costs. The increasing financial pressures the sector is experiencing are further aggravated by inflationary cost pressures. 10. Our roundtable discussions with IJB chief officers and chief finance officers raised several key challenges for the sector including some of the main drivers of cost pressures. These include prescribing costs, individually complex care packages, impacts of increased life expectancies and reduction in the working week for NHS and council staff. 11. Scotland’s wide-ranging population density from remote rural setting to urban populations in our towns and cities, presents different logistical challenges for providing community health and social care services to communities. This brings different associated cost pressures. Our interactive data tool provides information on the contextual profile of each IJB alongside the 2024/25 and 2023/24 financial data. 12. The 2022 Census sets out how the underlying factors impacting on the demand for social care and healthcare services have changed since 2011, Exhibit 1 (page 10). Page 169
Page 170
Context 10 Exhibit 1. 2022 Census data with comparison to 2011 Census The 2022 Census sets out how the underlying factors impacting on the demand for social care and healthcare services have changed since 2011. Source: Scotland’s Census 2022 2022 Census data Movement since 2011 Population 5.4 million 2.7% increase Proportion of population aged over 65 20% Increasing from 17% Population density (residents per km2) 70 Varying from 9 (Eilean Siar) to 3,555 (Glasgow) Percentage of people who reported having bad or very bad health 7% 27% increase Percentage of people with a long- term illness, disease or condition 21% Increasing from 19% Percentage of population that provide unpaid care 12% 28% increase Page 170
Page 171
11Financial performance Financial performance The financial position of IJBs continues to deteriorate, with increasing cost pressures meaning difficult decisions must be made IJB funding has increased in real terms since 2023/24 13. IJBs receive their funding as annually agreed contributions from their council and NHS board partners. Funding is largely provided to cover in-year expenditure on general services but can also be ring-fenced for specific services and national initiatives to be funded in future years. The funding split between NHS and council partners remains around 70 per cent from NHS boards and 30 per cent from councils. 14. There has been a 2.3 per cent real terms increase in funding between 2023/24 and 2024/25 as shown in Exhibit 2. Exhibit 2. IJB funding and income 2021/22 – 2024/25 Funding increased by 2.3 per cent in real terms in the past year. Source: IJB annual accounts £ million Partner contributions Covid-19 funding £594 £1,051 0 3,000 6,000 9,000 12,000 15,000 2024/252023/242022/232021/22 £12,642 £12,617 £12,903£10,948 Page 171
Page 172
Financial performance 12 15. The real-terms increase in funding helps cover inflationary cost pressures and increases in the living wage, however it does not necessarily result in additional funding for baseline services as the costs incurred by IJBs are increasing at a faster rate than funding. Most IJBs reported operational overspends in-year, requiring a notable increase in additional contributions from partner bodies as well as the unplanned use of reserves 16. Total net cost of services across all IJBs totalled £12.486 billion, an increase of five per cent on 2023/24. 17. Twenty-two IJBs reported a deficit on the cost of providing services with the majority (14) reporting a deficit of up to three per cent of their net cost of services. Eight IJBs reported a deficit of over three per cent, with the largest deficit being 5.1 per cent (Exhibit 3, page 13). There was a reduction in unplanned use of reserves, reflecting the falling reserve levels across the sector, however this was offset by a significant increase in additional partner contributions 18. Of the 22 IJBs reporting an operating deficit, ten IJBs made an unplanned drawdown from reserves to fund these deficits compared with 16 in the prior year. This reduction in unplanned drawdowns from reserves is in line with expectations as reserve levels fall across the sector (paragraphs 29–32). 19. Nineteen IJBs received additional contributions from partner bodies to cover the year-end overspend, a 73 per cent increase on 2023/24. The level of additional contributions from partners rose by 79 per cent, from £91 million in 2023/24 to £163 million in 2024/25. 20. Given the financial challenges faced by NHS boards and councils this continued level of additional contribution is unsustainable. The Local government financial bulletin 2024/25 and the Auditor General for Scotland’s NHS in Scotland 2025 report, both note the financial sustainability risks in these bodies. 21. A number of IJBs will have received additional partner contributions during the year that will not be captured by this analysis. These additional in-year contributions can arise for a variety of reasons, including specific one-off cost pressures not anticipated during budget-setting. Greater collaboration with partner NHS boards and councils in budget-setting could help ensure realistic budgets are set, minimising the need for additional contributions. Baseline services are the essential, minimum level of care and support to make sure everyone’s basic needs are met. These usually include things like: • access to a GP • help with daily living (such as washing, dressing, or eating) for those who need it • support to keep people safe and well in their homes • essential safeguarding and protection for vulnerable people. Page 172
Page 173
Financial performance 13 Exhibit 3. Operational surplus/deficit as a proportion of the 2024/25 net cost of service The majority of IJBs reported a deficit on the cost of providing services in 2024/25 requiring additional contributions from partner bodies and the unplanned use of reserves. Source: IJB audited and unaudited annual accounts -10% -8% -6% -4% -2% 0% 2% 4% North Lanarkshire South Lanarkshire Eilean Siar East Renfrewshire Angus South Ayrshire Glasgow Inverclyde West Dunbartonshire Argyll and Bute East Dunbartonshire North Ayrshire Renfrewshire Edinburgh East Lothian East Ayrshire Scottish Borders Dundee Moray West Lothian Clackmannanshire and Stirling Perth and Kinross Shetland Falkirk Midlothian Fife Aberdeen Dumfries and Galloway Orkney Aberdeenshire 2023/24 2024/25 Page 173
Page 174
Financial performance 14 Staff vacancies continue to affect the level of spend, but cost pressures continue to rise 22. Eight IJBs reported a surplus on the cost of delivering services in 2024/25, up from five in 2023/24. The surplus in all IJBs was mainly due to ongoing recruitment challenges and staff vacancies across the sector. It is likely that these recruitment issues are contributing to the picture of general decline in performance and satisfaction across the health and social care sector as we reported in our Community Health and Social Care: Performance 2025 report. 23. There are several significant cost pressures impacting on the level of deficits being faced by IJBs. Most notable among these are: • inflationary pressures • rising wage costs • prescribing costs • changing demographics and complexity of care, especially the cost of individual adult social care packages and care for people with learning disabilities. 24. We have produced several reports in recent years highlighting the challenges facing the health and social care sector. Most of the savings planned by IJBs were achieved; however, there is a lack of transparency around whether savings made were recurring in nature 25. There was a 71 per cent increase in the total savings target set by IJBs between 2023/24 and 2024/25, increasing from £214 million to £364 million. Overall, IJBs achieved 78 per cent (£276 million) of their planned savings in 2024/25, which is in line with the prior year performance. 26. Of the 28 IJBs where we could identify overall savings performance for the year, only four IJBs met or exceeded their savings target, with two achieving less than half of their target. 27. We could identify publicly reported information for only 15 of the 28 IJBs (54 per cent) regarding the split of savings between recurring and non-recurring. Based on the information available, 79 per cent of the achieved savings were recurring in nature. Examples of recurring savings include deletion of long-term vacant posts, efficiency savings and reduction in services. 28. The majority of IJBs have noted savings or operational underspends from unfilled vacancies due to issues with recruitment, which is in some cases offset by the additional costs of hiring agency staff. Savings of this nature are non-recurring and will need to be carried forward to be Some of the many reports where we have set out the range of pressures and challenges for the health and social care sector include: • IJB Finance and performance 2024 and IJBs’ Finance bulletin 2023/24 • NHS in Scotland 2024 and NHS in Scotland 2025 • Adult mental health, 2023 • General practice: Progress since the 2018 General Medical Services, 2025 • Improving care experience – delivering The Promise, 2025 • Community health and social care: Performance, 2025 • Delayed discharges, 2026 • Local Government Finance bulletin 2024/25. Page 174
Page 175
Financial performance 15 found again in future years. It is essential that IJBs identify and achieve recurring savings as part of their budgeting and financial planning processes. Reporting around the nature of these savings and progress against these targets should be transparent. Total reserve levels continue to fall across IJBs. Almost half of IJBs no longer hold any contingency reserves 29. Total reserve levels across all IJBs have fallen by 12 per cent between 2023/24 and 2024/25 as shown in Exhibit 4. Contingency reserves have fallen by 13 per cent in the same timeframe and now represent only 0.7 per cent of the total net cost of services from IJBs. Contingency reserves are reserves that have not been earmarked for specific purposes and are used to mitigate the impact on ongoing financial pressures. The five IJBs with the highest total reserve balance hold 54 per cent of the total IJB reserves and 71 per cent of the contingency reserves, highlighting the generally low level of reserves across the sector. Exhibit 4. Total reserves level by year from 2021/22 to 2024/25 Total reserves held by IJBs have fallen by 12 per cent since 2023/24. Source: IJB audited and unaudited annual accounts £ million Ring-fenced/ Earmarked reserves Contingency reserves 0 300 600 900 1,200 1,500 2024/252023/242022/232021/22 Covid reserves 30. Two IJBs have utilised all of their reserves and a further 11 have utilised all of their contingency reserves, meaning 13 out of 30 IJBs (43 per cent) do not have reserves to drawdown to meet unforeseen financial challenges. Page 175
Page 176
Financial performance 16 31. Of the 17 IJBs that currently hold contingency reserves, only two of these maintain this reserve at the level of two per cent of their net cost of services, which is a common threshold used in IJB reserve policies. The average funding gap for 2025/26 is 3.6 per cent of net cost of services (paragraph 36) meaning even for IJBs who still maintain a level of contingency reserve, this would not be sufficient to meet the current level of financial challenge they are facing. 32. IJB reserve levels as a proportion of the net cost of services of each IJB are shown in Exhibit 5 (page 17). Page 176
Page 177
Financial performance 17 Exhibit 5. 2024/25 IJB year-end reserves as a proportion of net cost of services Almost half of IJBs have no contingency reserves and only two have contingency reserves above two percent of net cost of services. Source: IJB audited and unaudited annual accounts 0% 2% 4% 6% 8% 10% 12% Aberdeen Aberdeenshire Fife Midlothian Shetland West Lothian East Lothian Moray Dumfries and Galloway East Renfrewshire North Ayrshire Edinburgh Perth and Kinross East Ayrshire Glasgow Dundee South Ayrshire Scottish Borders Clackmannanshire and Stirling Falkirk Orkney South Lanarkshire Argyll and Bute Renfrewshire Angus North Lanarkshire West Dunbartonshire East Dunbartonshire Inverclyde Eilean Siar Ring-fenced/Earmarked reserves Contingency reserves Page 177
Page 178
Financial performance 18 Financial sustainability risks were raised in the majority of IJBs by appointed auditors 33. The majority of auditors raised financial sustainability risks in their reporting on the annual audit of IJBs. The risks identified included falling reserve levels, significant budget gaps and underdeveloped plans for the achievement of recurring savings. Based on a review of 27 annual audit reports, there were no modified opinions raised in any of the audits of IJBs in 2024/25 (Exhibit 6). Exhibit 6. 2024/25 analysis of IJB annual audits The majority of auditors raised financial sustainability risks in their reporting on the annual audit of IJBs. 2024/25 audit Financial management risks identified1 29% Financial sustainability risks identified1 86% Medium-term financial plan in place2 97% IJBs reporting turnover in senior officer roles (CO/CFO)2 60% IJBs who agreed a budget prior to the start of the financial year2 83% Notes: 1. Based on 28 IJBs, where Annual Audit Plans were available 2. Based on all IJBs Turnover figures include IJBs with interim chief officers (CO)/chief finance officers (CFO) in place. Source: Annual Audit Reports, Annual Audit Plans, IJB budget papers, medium-term financial plans Instability of leadership continues to be a challenge for IJBs 34. Over half of IJBs experienced a change in senior leadership at either the chief finance officer or chief officer level in 2024/25. This continues a pattern that has been evident for several years. 35. The leadership and strategic vision of senior officers is crucial in the strategic planning and decision-making required to drive much-needed transformation. Instability in leadership teams has the potential to disrupt strategic planning and the leadership capacity to bring about the fundamental change required to address the growing scale of challenges facing IJBs. This also has the potential to impact on relationships between IJBs and their partner bodies. Effective partnerships rely on strong and trusting relationships which can take time to develop and can be undermined by frequent turnover in key individuals. Throughout the report we refer to timescales in the short term as 1–2 years, medium term as 3–5 years and long term as over five years. Page 178
Page 179
Financial performance 19 The 2025/26 budget gap presents significant cause for concern, particularly given low levels of reserves 36. Budget setting in 2025/26 highlighted a gap of £449 million, a slight decrease from the prior year (£457 million) (Exhibit 7, page 20). The average budget gap for IJBs is 3.6 per cent of the 2024/25 net cost of services. IJB chief officers and chief finance officers in our roundtable discussion, acknowledged there remains scope for service redesign but IJBs are facing limited options for balancing budgets without reducing the services available and the eligibility of those who can access these services. Participants also recognised a need for improved data across the sector to give a stronger evidence base for planning and decision-making. 37. Twenty-one IJBs agreed a balanced budget before the start of the 2025/26 financial year. A further four agreed a budget that relied upon delivery of unidentified savings, which made up ten per cent of the budget gap. Five IJBs did not agree a budget before the start of the financial year. Delays in the agreement of savings plans and partner funding were the most common reasons for balanced budgets not being agreed at the start of the financial year. It is essential that IJBs and their partners work closely to ensure that savings plans are agreed and realistic. 38. We have not undertaken analysis of the draft 2026/27 Scottish Budget for this bulletin. In February 2026 the Accounts Commission published a supplement to the Local government financial bulletin that considers the impact on local government including social care services. Page 179
Page 180
Financial performance 20 Exhibit 7. IJB funding gaps for 2025/26 as a proportion of net cost of services The average budget gap for IJBs in 2025/26 is 3.6 per cent of the 2024/25 net cost of services. Source: IJB budget papers for 2025/26 0% 2% 4% 6% 8% 10% 12% Shetland Perth and Kinross Inverclyde North Ayrshire East Lothian North Lanarkshire South Ayrshire Renfrewshire Glasgow South Lanarkshire Angus West Lothian Argyll and Bute East Renfrewshire Edinburgh West Dunbartonshire Midlothian East Dunbartonshire Orkney Falkirk East Ayrshire Dundee Eilean Siar Fife Moray Aberdeen Scottish Borders Clackmannanshire and Stirling Aberdeenshire Dumfries and Galloway 25/26 gap as a proportion of NCOS 24/25 gap as a proportion of NCOS Page 180
Page 181
Financial performance 21 Exhibit 8. 2025/26 IJB funding gap planned actions The use of non-recurring reserves makes up five per cent of plans to bridge the funding gap. A further 10 per cent is made up of unidentified savings. Source: IJB budget papers for 2025/26 Agreed savings 68% Remaining gap 10% Deficit funding by partner bodies 9% Other 8% Use of reserves 5% 68% 8% 9% 10% 5% Reliance on non-recurring savings and sources of income is unsustainable 39. When IJBs set the 2025/26 budgets, they planned to bridge five per cent of the budget gap by deploying reserves (Exhibit 8). 40. The agreed savings contain both recurring and non-recurring savings, however we were only able to determine this information for 11 out of 30 IJBs based on a review of their budget papers at the time the budget was set. This further highlights the need for greater transparency around the nature of planned savings. Reliance on non-recurring savings to produce a balanced budget and fund recurring budget pressures is unsustainable. Service redesign is essential to ensuring the sustainability of health and social care services; however, this alone may not be sufficient. 41. The majority of auditors noted the need for IJBs to consider how services can be delivered differently to ensure they remain sustainable in the future. Given the scale of the financial challenges facing the sector, it is unlikely that service redesign projects will be sufficient to bridge the financial gaps facing IJBs in the medium-term. 42. IJBs will need to make difficult decisions to secure their financial sustainability, including the possibility of service reductions, changes to eligibility criteria, charging for some services or stopping non-essential services. It is essential that IJBs and partner bodies work closely together to address underlying financial and service pressures. This should involve appropriate consultation with service users and the wider public. IJBs must be transparent about the potential implications for service performance and outcomes that service changes may bring. Page 181
Page 182
Integration Joint Boards Financial bulletin 2024/25 Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot ISBN 978 1 918486 01 8 Page 182
Page 183
1 Audit & Risk Committee Date of Meeting: 16 June 2026 Title of Report: Audit Scotland: Publications Presented by: James Gow, Head of Finance The Audit & Risk Committee is asked to: • Note the Audit Scotland publications highlighted. 1. EXECUTIVE SUMMARY Audit Scotland regularly publish reports which are relevant to public bodies. This report highlights five reports published in recently that may be of interest to the Committee. 2. RECOMMENDATION 2.1 The Audit & Risk Committee is recommended to: • Note the contents of the publications highlighted. 3. DETAIL OF REPORT 3.1 Audit Scotland publish their reports on their web-site: https://www.audit- scotland.gov.uk/publications. This report highlights five recent publications: • Annual Assurance and Risks Report – 2024/25 Local Government audits • The 2024/25 audit of Clackmannanshire and Stirling IJB • Delivering for the Future – Transformation and how councils are redesigning and delivering more efficient services • Transforming the approach to climate change • Annual Audit report – Argyll & Bute Council 2024/25 3.2 Annual Assurance and Risks Report (Appendix 1) The report provides an analysis of key themes arising from local authority audits, including IJBs. The key areas of concern and risk identified by auditors are summarised below: - Many councils and IJBs (and their auditors) are failing to meet the statutory deadline for completion of audited accounts (17 councils and 13 IJBs). 4 councils failed to publish their un-audited accounts for public inspection by 1 July. The report suggests that, in the main, councils and IJBs have appropriate capacity in finance teams. Page 183 Agenda Item 12
Page 184
2 - Financial sustainability is flagged as a concern across all councils. Delivery of savings, use of reserves and one-off measures to achieve financial balance, increased borrowing and breaches of reserves policy are all noted. - Financial management and reporting processes are generally effective. Overspends generally found to be as a result of inflation and demand factors rather than arising from financial mis-management. Social Care and Education are noted as specific pressures with capital budgets generally underspending. - IFRS 16 implementation, equal pay claims, contract management, elected member behaviour, workforce restructuring, IT systems (and assurance where externally hosted) were other common risk threads highlighted in council audits. - IJBs are discussed, financial arrangements are broadly considered to be effective but issues such as financial sustainability, delivery of savings, use of reserves, overspending, realistic budgeting and lack of transparency are flagged up as concerns. Turnover of senior staff is a further issue with specific problems noted at some IJBs. Many of the issues referred to have been picked up several times in the past by Audit Scotland. IJBs are considered a risk to partner bodies in respect of sustainability. The report states: ‘the sustained and recurring pressures facing councils and IJBs must be addressed to secure financial sustainability in the medium term. Decisive action and difficult decisions about services will be required’. Appendix 2 of the report lists a number of other publications that are relevant, many of these have been considered by the Committee. 3.3 Clacks and Stirling IJB – Securing a section 95 officer (Appendix 2) This report describes the failure of the IJB to comply with section 95 of the Local Government (Scotland) Act 1973. This was primarily due to there being a period of time whereby there was no formally designated Chief Finance Officer in place. The situation is presented as a governance failure as the statutory requirement to have a named person in place was not met but advice given to the IJB was that sharing the responsibilities between the chief finance officers of the three partner bodies did meet the legal requirement. The report indicates that proper financial management was maintained and not adversely impacted by the gap. Whilst there are specific issues at the Clackmannanshire and Stirling IJB raised, Audit Scotland suggest all IJBs could learn lessons as reproduced below: ‘There is a notable turnover of CFOs and COs in IJBs and there is a limited pool of candidates with the skills, experience and appetite to take on these challenging roles. The circumstances at Clackmannanshire and Stirling IJB are not unique and it is important that all IJBs consider their arrangements to manage the duties and responsibilities of these posts if there is a period when they may become vacant. The duties of statutory roles such as s95 and COs must be formally assigned to an appropriate individual or individuals. These arrangements should be considered by the IJB’s legal advisor to ensure they are appropriate and reflect the requirement of the role. The proposed arrangements should be agreed by the IJB. Informal agreements do not meet the legal requirement and do not provide satisfactory accountability for the significant responsibilities held by these posts. Page 184
Page 185
3 Each IJB should: • ensure it has appropriate legal support to provide advice on meeting statutory and governance requirements • ensure governance documentation includes contingency arrangements for a gap in a statutory role so that in these circumstances an appropriate individual is identified as responsible and accountable for the specific duties. If there is the potential for a statutory role to become vacant, IJBs should: • seek an immediate interim appointment until the permanent post can be filled to meet the statutory obligations under section 95 and ensure continuity of statutory financial administration • accelerate permanent recruitment • proactively inform the appointed auditors about the vacancy, the interim measures in place, and the recruitment timetable • while interim cover is in place: − strengthen internal controls and monitoring including internal audit scrutiny − reassess financial strategy and risks − introduce safeguards for financial decision-making − maintain transparency with board members, including increasing the frequency of financial monitoring reports.’ 3.4 Delivering for the Future (Appendix 3) This report provides a helpful overview of how service transformation is being developed and implemented across local authorities. The first part of the report summarises the need for transformation. It then provides some analysis and case studies providing positive examples using the framework / headings below: Vision -Strategic Planning Planning -Financial Planning -Transformation Funding -Project Plans -Resourcing -Impacts Governance -Managing projects and prgrammes -Councillor engagement Collaboration -Partnership working -Joint Funding -Community Engagement Innovation The report also summarises the national work and outlines the Solace framework. There are aspects of the HSCP transformation programme that fit well in the framework but there are useful lessons contained within the approach which could strengthen the transformation programme structure within the HSCP. 3.5 Transforming the approach to climate change (Appendix 4) Page 185
Page 186
4 This report outlines the policy approach put in place by the Scottish Government and the legally binding targets set by the government, noting that one milestone of a 75% reduction by 2030 is no longer credible and has been dropped. Audit Scotland summarises a wide range of issues and barriers associated with the implementation of change across the public sector required to enable the targets to be met. These include lack of finance, resistance to change and lack of management capacity, leadership and prioritisation. A range of issues are identified and described under each of the headings provided below: The report is clear that significant resource is required and delivery of value for money and effective measures are key to making progress. It doesn’t particularly address the issue of where this resource should be reallocated from or what other services should be reduced to fund it. This is particularly challenging in respect of local authorities, health boards and IJBs which are all highlighted as generally not operating on a financially sustainable basis at present with increasing service demands in the future. The HSCP has indicated some of the positive action it is taking in its climate change report considered recently by the IJB. Work is on-going to develop the estates strategy and implement a number of carbon reduction projects. 3.6 Annual Audit Report – Argyll and Bute Council (Appendix 5) Appendix 5 provides the detailed audit report in respect of Argyll & Bute Council. This is brought to the attention of the committee as it: • Provides assurance that the systems, processes and services upon which the IJB places reliance upon are operating effectively. • Highlights areas for improvement which often include HSCP delivered services. • Outlines the financial sustainability risks specific to the Council which incorporates social work and social care. Page 186
Page 187
5 • Highlights areas for further development around best value, performance management and transformation. 4. RELEVANT DATA AND INDICATORS 4.1 Audit Scotland Reports rely on a wide range of data and information. 5 CONTRIBUTION TO STRATEGIC PRIORITIES 5.1 Audit Scotland Reports are of strategic relevance to public service delivery in Scotland. 6. GOVERNANCE IMPLICATIONS 6.1 Financial Impact – no direct impacts but the nature of the financial challenges facing the public sector is a key theme. 6.2 Staff Governance – Public Sector staffing challenges are highlighted repeatedly by Audit Scotland. It is also clear that the number of Public Sector employees is expected to be managed down, in the coming years, as current arrangements are not financially sustainable. 6.3 Clinical Governance – as above, the reform agenda is likely to have clinical governance implications. 7. PROFESSIONAL ADVISORY 7.1 The report has been circulated for information. 8. EQUALITY & DIVERSITY IMPLICATIONS 8.1 None directly. 9. GENERAL DATA PROTECTION PRINCIPLES COMPLIANCE 9.1 None. 10. RISK ASSESSMENT 10.1 This report summarises a series of contextual reports which generally support the assessment of risk in the Strategic Risk Register. 11. PUBLIC & USER INVOLVEMENT & ENGAGEMENT 11.1 Audit Scotland reports are publicly available. 12. CONCLUSIONS 12.1 This report seeks to bring key public sector audit reports to the attention of the Committee. Page 187
Page 188
6 13. DIRECTIONS Directions required to Council, NHS Board, or both. Directions to: tick No Directions required √ Argyll & Bute Council NHS Highland Health Board Argyll & Bute Council and NHS Highland Health Board 14. PREVIOUS REVIEW OF THE REPORT Meeting Title of report Date Output (if relevant) N/A AUTHOR NAME: James Gow, Head of Finance EMAIL: james.gow@argyll-bute.gov.uk Appendix 1 – Annual Assurance and Risks Report Appendix 2 – Clacks and Stirling IJB – Securing a section 95 officer Appendix 3 – Delivering for the Future Appendix 4 – Transforming the approach to climate change Appendix 5 – Annual Audit Report – Argyll and Bute Council Page 188
Page 189
Annual Assurance and Risks Report A review of 2024/25 local government audits in Scotland Prepared by Audit Scotland March 2026 Page 189
Page 190
2Annual Assurance and Risks Report Contents Introduction 3 Part 1. 2024/25 council and IJB audits 5 Part 2. Assurance arrangements 13 Appendix 1 17 Appendix 2 19 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Audit team The core audit team consisted of: Emma Brown, Jack Nixon, Liam Prior, and Kathrine Sibbald, under the direction of Blyth Deans. Page 190
Page 191
3Introduction Introduction 1. 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. 2. This report highlights recurring themes across our 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. Context 3. The Accounts Commission continues to highlight the significant financial challenges across local government in Scotland. The cost of delivering services continues to rise, the cost of servicing debt is increasing, reserve levels are falling and there’s continued reliance on non-recurring measures to close significant and growing budget gaps. 4. The Local government in Scotland: Financial bulletin 2024/25 provides a detailed analysis of councils’ financial performance in 2024/25. The accompanying budget supplement highlights these challenges will continue despite a real terms funding increase in the 2026/27 budget with a projected fall in funding from the Scottish Government in 2028/29. We will report on this further in June 2026. 5. The annual audit of local government bodies provides independent assurance on how well public money is being spent, ensuring it is properly accounted for, used for the intended purposes, and delivers positive outcomes for communities. While the value of an unmodified (or ‘clean’) audit opinion can’t be underestimated, our annual audit reports also contain a wealth of information and recommendations to support public bodies to continue to improve. What we found 6. In their annual audit reports, auditors highlighted that unaudited accounts are prepared to a good standard. Some councils, however, are struggling to meet statutory deadlines, with some challenges in meeting agreed audit timeframes. These delays have an impact on accountability Page 191
Page 192
Introduction 4 and reporting of risks. This is an area we will continue to monitor, ensuring auditors and audited bodies continue to work collaboratively to secure timely, high-quality audit delivery. 7. Auditors continued to raise significant concerns about the financial sustainability of councils and Integration Joint Boards (IJBs), reporting that councils and IJBs are overspending because of wider financial pressures. While in some cases auditors reported room for improvement in financial management, the overall sense is that poor financial management is not the cause of the financial sustainability challenge. There is an urgent need for a radical shift in how services are delivered. 8. This shift will need to be underpinned by stable leadership, robust workforce management and digital tools that support effective delivery. The Accounts Commission has reported for some years that there is ongoing instability and change in senior leadership across IJBs. This has the potential to disrupt the longer-term strategic planning vital for change. 9. Where councils are undertaking workforce restructuring, auditors recommended business cases, transparency and elected member scrutiny could have been clearer. 10. Auditors also reported that IT assurance remains a recurring risk across councils, with many relying heavily on externally-hosted systems, but without formal assurance from third party providers. Councils must review and strengthen these arrangements. 11. As planning for the 2025/26 annual audit gets under way, the overall operating context remains challenging. Auditors will continue to keep the issues highlighted in this report under review as part of their upcoming audit work. Structure of the Annual Assurance and Risks Report 12. The report covers the following: • Part 1 provides an overview of audit delivery and highlights the key risks raised in 2024/25 annual audit reports for councils and IJBs. It pulls out key messages from financial audit work to support wider reflection and learning. A comprehensive analysis of the nature and impact of auditors’ recommendations will be available in our annual impact report, later in 2026. • Part 2 sets out the processes in place to identify emerging risks and address these through timely and high-quality audit work. • More information on relevant recent publications can be found in the appendices to this report. The Accounts Commission is an independent public body appointed by Scottish ministers to hold local government to account. The Controller of Audit is an independent post established by statute, with powers to report directly to the Commission on the audit of local government. To find out more about the role of the Controller of Audit and the Accounts Commission go to our website: Our people – Audit Scotland and Accounts Commission – Audit Scotland. Page 192
Page 193
5Part 1. 2024/25 council and IJB audits Part 1. 2024/25 council and IJB audits Local and national audits have identified several risk areas which auditors will keep under review 13. The results of the range of audit work undertaken in 2024/25 highlight significant strategic areas of concern. The Commission, auditors and the local government sector may find this useful when reflecting on upcoming audit work, priorities and risks. More annual audit reports were issued by the target date in 2025 following collaboration between councils and IJBs and their auditors, but some audits continue to be delayed 14. The Commission set a target completion date of 30 September 2025 for annual audit reports in the local government sector. Out of 32 councils and 30 IJBs: • Fifteen councils and 17 IJBs met this deadline (compared to ten councils and 14 IJBs in 2024). • Five councils and seven IJBs did not meet this deadline, but annual audit reports were submitted by January 2026 in time for consideration in this report. • Annual audit reports for 12 councils and six IJBs were outstanding at the time of drafting this report in January 2026. 15. Under the Local Authority Accounts (Scotland) Regulations 2014, councils must publish a notice on their website by 17 June setting out their intention to display their unaudited accounts for public inspection and when and where they will be available. Twenty-eight councils met this deadline in 2025. 16. Four councils (Aberdeenshire, Clackmannanshire, East Dunbartonshire and Stirling) failed to meet the deadline to make available their unaudited accounts for public inspection by 1 July. 17. Financial reporting cycles were extended due to Covid-19, and auditors and audited bodies are now making efforts to return to pre-Covid reporting timelines. Auditors and the Controller of Audit have reported on the timeliness of audit delivery, while encouraging audited bodies and auditors to work collaboratively to secure timely, high-quality audit delivery. Page 193
Page 194
Part 1. 2024/25 council and IJB audits 6 18. Delays in reporting and audit sign-off may impact accountability and reporting of risks. Audit Scotland continues to take steps to promote timely delivery from auditors, while emphasising that audit quality must not be compromised. The Controller of Audit can publish Section 102 reports where councils have had continuing challenges in enabling timely audit delivery. Councils and IJBs generally have sufficient skills and capacity within their finance teams and provide unaudited accounts to a good standard 19. Overall, council finance teams are led by suitably qualified and experienced staff, with several auditors noting sufficient skills, capacity and capability within the core finance team and good support for the audit. 20. Likewise, IJB auditors did not generally highlight issues around finance team capacity or capability (outwith concerns raised around turnover of senior financial officers which are detailed in paragraphs 55–58). While the auditors of both Aberdeenshire and Moray IJBs did note risks around finance team capacity, auditors reported staff were suitably capable and qualified. 21. Of the 44 council and IJB annual audit reports reviewed, 42 noted receipt of the unaudited accounts being on time, though seven noted some missing information or supporting papers. The remaining two annual audit reports did not comment on the timeliness of the accounts. 22. Where auditors commented on the quality of unaudited accounts, it was usually to note that they were of a reasonable standard. Auditors also generally concluded that councils have appropriate financial scrutiny arrangements. 23. The majority of councils we reviewed required material audit adjustments. These were for a variety of issues with the most common being valuation of Property, Plant and Equipment. Auditors also reported adjustments relating to IFRS 16 (paragraphs 33–35) and pensions treatment at multiple councils. These are complex areas of the accounts where material adjustments are more likely. 24. The majority of IJBs did not require material audit adjustments. Annual audit plans and reports highlight the key risks facing councils 25. Our review of annual audit plans and annual audit reports identified a range of risks across councils, which we have summarised below. As outlined in paragraph 14, audit delays for some councils mean that this report draws upon the findings from 29 annual audit plans and 20 annual audit reports (out of 32 councils in total). Section 102 of the Local Government (Scotland) Act 1973 sets out arrangements for the Controller of Audit’s reporting to the Accounts Commission. This includes reporting on matters arising from the accounts, or from the audit of those accounts. Page 194
Page 195
Part 1. 2024/25 council and IJB audits 7 Financial sustainability 26. All councils reviewed have medium-term financial plans, consistently forecasting significant budget gaps. This is within a context of inflationary pressures and high demand in certain service areas. Councils continued to take a range of measures to address budget gaps in 2024/25, with savings and use of reserves being the most significant across the sector. 27. Though auditors recognised the significant recurring savings delivered by councils, several flagged the use of unsustainable ‘one-off’ measures, such as reserves and non-recurring savings, to balance the budget (see Local government in Scotland: Financial bulletin 2024/25 for more detail on this). Some auditors also flagged risks around the deliverability of further savings. 28. The Local government in Scotland: Financial bulletin 2024/25 reflected auditors’ findings on reserves use, highlighting a decrease in usable reserves in 2024/25, a high proportion of reserves being committed for specific purposes, and a number of councils being in breach of their own reserves policies. It also noted a £1.2 billion increase in long-term external borrowing since the prior year, primarily to fund investment in assets. The report warned that councils face substantial challenges to maintain financial sustainability over the medium term. Financial management 29. Almost all auditors found that councils had effective (or largely effective) arrangements in place for financial management, noting established budget setting and monitoring processes with clear, regular reporting to elected members. 30. Despite this, more than a third of councils overspent against their general fund revenue budget in 2024/25. The Local government in Scotland: Financial bulletin 2024/25 highlighted inflation and increasing demand as factors driving overspends in a range of areas, including adult social care and education. 31. Capital expenditure was an exception, with a trend of underspends against budget. Auditors highlighted capacity and supply chain issues as contributing factors. Auditors will report on these issues through their 2025/26 local Best Value thematic work on asset management. 32. As noted in paragraph 27, councils delivered significant savings as part of measures aimed to close budget gaps, but reporting on savings at council level is mixed. The Local government in Scotland: Financial bulletin 2024/25 highlighted the need for improved clarity and comprehensiveness around savings performance in management commentaries. IFRS 16 implementation 33. The International Financial Reporting Standard 16: Leases (IFRS 16), issued in January 2016, came into effect for local government bodies from Page 195
Page 196
Part 1. 2024/25 council and IJB audits 8 2024/25. It is a complex accounting standard with significant accounting impacts. Many councils used external advisors to support implementation. 34. Overall, the conclusion from 2024/25 audit work reported to date is that councils appropriately reflected the impact of IFRS 16 in their final accounts. However, there was scope for a smoother implementation process given the years available for councils to prepare. 35. Five councils had missing information (either financial or disclosures) in relation to this in their draft accounts presented for audit. Delays in receiving information from external advisors were often noted. In addition, auditors identified widespread errors, though in all cases these were either corrected or not material to the accounts. Equal pay claims 36. Equal pay claims are creating ongoing financial uncertainty for some councils, with several recognising provisions or contingent liabilities. No widespread new settlements or major cash impacts were reported in 2024/25. Where issues were identified, audit attention focused on correct accounting treatment and disclosure. 37. Overall, equal pay claims do not represent a significant new financial risk for most councils but continue to require ongoing monitoring and transparent reporting. Contract management 38. Across most councils, auditors reported no significant risks in relation to contract management, though there were isolated project-specific issues in a small number of councils. Highlighted risks focused on contract delivery issues with large capital projects, resulting in increased costs and the requirement to strengthen procurement governance. Elected member behaviour 39. Auditors reported concerns about elected member behaviour at a small number of councils. Issues included a lack of cross-party collaboration, tensions with officers, and, on occasion, unprofessional behaviour. 40. Elsewhere, auditors pointed to robust elected member scrutiny and constructive relationships between political parties and between members and officers, as well as highlighting the importance of collaborative decision-making. Workforce restructuring 41. Some councils have implemented reductions in senior management structures or broader organisational restructures in light of ongoing financial pressures. This has included the use of voluntary severance and early retirement schemes to reduce staffing costs and reshape capacity. Page 196
Page 197
Part 1. 2024/25 council and IJB audits 9 42. Governance and oversight of restructuring and exit decisions remains critical to ensure required savings are delivered. Auditors emphasise the need for clear business cases, transparency, and elected member scrutiny. 43. Exit packages represent a significant cost for some councils. This is primarily driven by voluntary severance and early retirement schemes. For example, North Ayrshire and Dundee City Councils have used or plan to use voluntary severance and early retirement schemes in 2024/25 and 2025/26, generating recurring savings of £2.5 and £1.2 million respectively. 44. Auditors highlighted scope for greater scrutiny and transparency around the exit of senior officers in the 2024/25 audits of North Lanarkshire and Perth and Kinross councils respectively and in a Section 102 report on Glasgow City Council (published in August 2025 following the 2023/24 annual audit). Perth and Kinross Council noted that its normal process would involve elected member approval (where possible), while North Lanarkshire and Glasgow City Councils committed to actions to strengthen arrangements. System updates 45. Many councils are undergoing major system replacements or implementations in areas such as HR, payroll and finance, with a move to externally-hosted or cloud-based systems. These are often complex projects with an important role in business continuity, resilience, and transformation. 46. Auditors at Highland and South Lanarkshire Councils reported successful implementation of new systems with appropriate governance and assurance arrangements in place. Elsewhere, auditors reported delays, partial system go-lives, or gaps in post-implementation review and assurance. Such issues can have operational impacts and reduce officers’ capacity for other priorities. Assurance over third-party systems 47. Auditors reported that IT assurance remains a recurring risk across councils, with many relying heavily on externally-hosted finance, HR, payroll and procurement systems but not receiving formal assurance reports from third-party providers. This may increase the risk of data compromise or loss and insufficient resilience. This has led some auditors to raise recommendations that councils review and strengthen current assurance arrangements. 48. Auditors consider cybersecurity arrangements more broadly as part of annual audit work. A recent Section 102 report on a significant cyber-attack on Comhairle nan Eilean Siar shared learning for the sector. Page 197
Page 198
Part 1. 2024/25 council and IJB audits 10 IJBs face significant challenges around financial sustainability 49. Our review of annual audit plans and annual audit reports identified a range of risks across IJBs, with financial sustainability consistently raised as an area of significant challenge. As outlined in paragraph 14, audit delays for some IJBs mean this report draws on findings from 28 annual audit plans and 24 annual audit reports (out of 30 IJBs in total). Financial sustainability 50. Auditors consistently flagged acute risks to financial sustainability, highlighting budget gaps, depleted reserves, and overspends. IJBs often bridged budget gaps through one-off measures such as use of reserves or unplanned partner contributions. 51. This has caused an overall reduction in reserves across the sector: two IJBs (Aberdeenshire and Aberdeen City) have utilised all their reserves and a further 12 have utilised all contingency reserves. Meanwhile, unplanned partner contributions have knock-on effects on the financial sustainability of councils and NHS boards. 52. The recent IJB financial bulletin 2024/25 sets out more detail on the financial challenges faced by IJBs. Financial management 53. Though specific areas for improvement were identified at some IJBs, auditors broadly found financial management arrangements to be effective. Overspends were widespread across the sector, but auditors tended to attribute the level of spend to wider issues rather than to ineffective financial management. The IJB financial bulletin 2024/25 highlighted that IJBs must work closely with partners to ensure budgets and savings plans are realistic. 54. Overall, IJBs delivered 78 per cent of planned savings in 2024/25. However, auditors noted risks around the deliverability of recurring measures at the scale required to meet budget gaps moving forwards. The IJB financial bulletin 2024/25 highlighted that IJBs need to be more transparent on what proportion of savings are recurring. Senior leadership turnover 55. Auditors reported high turnover across IJB senior leadership, with over half of IJBs experiencing a change at chief financial officer or chief officer level in 2024/25. This frequently led to interim appointments while a permanent replacement was sought. 56. Clackmannanshire and Stirling IJB was without a chief financial officer for two months in late 2025, during which time it did not meet its statutory duty for ensuring proper financial administration. Further detail will be provided in a forthcoming Section 102 report, due for publication in March 2026. Page 198
Page 199
Part 1. 2024/25 council and IJB audits 11 57. The auditors of Scottish Borders IJB also highlighted that the chief officer resigned in April 2025 and a successor had still to be appointed as of September 2025, noting an urgent need to fill the role. Similarly, the Cùram Is Slàinte nan Eilean Siar (Western Isles IJB) Chief Officer resigned in July 2025 and left his post in early October 2025. Applications for an Interim Chief Officer were invited in late September, with an appointment made in early November. In their 2023/24 annual audit report, auditors reported that there was a lack of clarity over who was fulfilling key responsibilities over the interim period. 58. Auditors emphasised the risk that instability in leadership teams can disrupt strategic planning to address the challenges faced by IJBs. Workforce restructuring 59. Auditors noted that IJBs face challenges around workforce capacity. In some cases, they noted an appetite to shift away from the use of agency workers, but in some locations, local workforce demographics make this very challenging. Meanwhile, some IJBs are using vacancy management and/or wider restructures to reduce staffing costs in response to financial challenges. 60. The IJB financial bulletin 2024/25 noted ongoing recruitment challenges and staff vacancies across the sector as factors likely contributing to the general decline in performance and satisfaction across the health and social care sector. System updates and IT assurance arrangements 61. IJBs rely on partner body systems at councils and NHS boards, with no standalone HR, payroll or finance systems in operation. Most auditors were satisfied with IJBs’ IT assurance arrangements. 62. Some auditors raised concerns around reliance on legacy care systems that are now considered not fit for purpose, increasing the risk of IT application failure, data quality issues and cyber-attacks. Projects to replace legacy systems are under way but have long timescales and are often affected by delays. Best Value reporting highlighted a range of national and local issues 63. The Delivering for the future: Responding to the workforce challenge Best Value national thematic report (published in August 2025) drew together findings from 2023/24 local Best Value reporting on workforce. It highlighted that councils urgently need to make progress with workforce plans if they are to protect services and ensure financial sustainability. 64. Under the integrated approach to Best Value set out in paragraph 85, 2024/25 council audits included thematic reports on transformation. Page 199
Page 200
Part 1. 2024/25 council and IJB audits 12 Twenty such reports have been published at the time of drafting this report in January 2026. The upcoming Best Value national thematic report on transformation (publishing in May 2026) will draw together local findings. 65. Since February 2025 the Controller of Audit has published seven Section 102 Best Value reports, as detailed in Appendix 2. These highlighted the financial sustainability risks facing councils, with IJBs often a contributing factor. The Commission emphasised the importance of progressing transformation plans in light of budget gaps, and the need for open and meaningful engagement with communities when taking the difficult decisions required to balance budgets. Conclusion 66. The local government sector continues to face significant pressures from rising demands, which are driving continued financial challenges across councils and IJBs. As levels of IJB reserves fall, IJBs will become increasingly reliant on partner contributions, which will impact council finances. 67. Most auditors reported sound financial management overall, which will be important as bodies respond to the challenges ahead. Councils and IJBs have delivered substantial savings, but a step change is required to achieve longer-term financial sustainability. 68. For IJBs, high levels of senior leadership turnover continue to present a risk to achieving the scale of change required. Meanwhile, some councils and IJBs have restructured senior management or the wider workforce in order to make savings. 69. The sustained and recurring pressures facing councils and IJBs must be addressed to secure financial sustainability in the medium term. Decisive action and difficult decisions about services will be required. Auditors will continue to keep this, and the issues highlighted in this report, under review as part of their upcoming 2025/26 annual audits. Page 200
Page 201
13Part 2. Assurance arrangements Part 2. Assurance arrangements Existing processes and engagement activities identify risks and provide assurance to the Commission 70. This section covers the arrangements in place to assure the Commission that the audit work undertaken on its behalf is informed by the emerging risks across the sector. It also sets out the arrangements for monitoring and reporting on audit delivery and quality. The Code of Audit Practice includes significant wider- scope elements. 71. The Code of Audit Practice (June 2021) (‘the Code’) defines the independent audit of public bodies in Scotland. All auditors appointed by the Auditor General and the Accounts Commission are required to comply with the Code. It sets out the responsibilities of appointed auditors, alongside the independent role of the Controller of Audit to report to the Commission. 72. Reflecting the fact that public money is involved, public audit is undertaken from a wider perspective. This includes consideration of: financial management; financial sustainability; vision, leadership and governance; and use of resources to improve outcomes. In local government, public audit also assesses arrangements for, and performance of, the audited body’s duties for Best Value and community planning. 73. Under the approach adopted for the current five-year audit appointments, auditors integrate their assessment of these areas with the annual audit, taking a risk-based approach. Robust arrangements are in place to support audit delivery and quality 74. The Audit Quality Framework sets out the overall approach to measuring high-quality public audit by all appointed auditors. It gives the Commission robust, objective and independent assurance over the quality of audit work carried out on its behalf. The current framework has been in place since November 2024 and there are plans to review and revise the framework ahead of the next five-year audit appointment from 2027/28. Page 201
Page 202
Part 2. Assurance arrangements 14 75. To support audit quality, Audit Scotland issues annual guidance to all appointed auditors, incorporating wider scope requirements. In addition, a programme of audit quality reviews (both internal and external) is in place, with auditors supported to learn from findings. Monitoring arrangements allow oversight of compliance with ethical standards, quality standards, achievement of target dates, and stakeholder survey responses. 76. Each year, Audit Scotland publishes an annual report on the quality of public audit in Scotland. The report due to be published in June 2026 will set out progress against the Audit Quality Indicators set within the Audit Quality Framework for the 2024/25 audit year. 77. Audit Scotland also monitors whether audits are being delivered to target completion dates and planned timetables. This monitoring forms the basis of regular updates to the Commission by the Controller of Audit. 78. In February 2026, the Commission published a Response Framework, which includes an escalation process for use where audit delivery concerns are highlighted by the auditor or the audited body. It emphasises the need for a partnership approach to be taken, with a clear focus on addressing delays as early as possible. Statutory Performance Information (SPI) Directions and the Local Government Benchmarking Framework (LGBF) allow auditors to assess how councils are performing 79. The Commission directs councils to publish specific information on their performance through SPI Directions. 80. As part of annual audit work, auditors evaluate the effectiveness and appropriateness of performance management arrangements at each council, and conclude on compliance with the SPI Direction. All annual audit reports available at the time of drafting this report concluded that councils were compliant. 81. A revised SPI Direction will apply from the financial year 2025/26 onwards. This sets clear expectations that councils will use the Local Government Benchmarking Framework (LGBF) to report performance against their priorities over time and to draw comparisons with similar councils. 82. The LGBF itself is designed to support councils to scrutinise their services through measurable and comparable data. This is intended to support service improvement and effective targeting of resources. LGBF data is regularly considered by the Commission and through audit intelligence to inform reporting. Page 202
Page 203
Part 2. Assurance arrangements 15 Audit work is informed by ongoing stakeholder engagement 83. Throughout the year, the Controller of Audit and auditors engage regularly with representatives from the local government sector. This informs audit work, while also providing a valuable opportunity to share key insights and consult on current issues. 84. A six-monthly intelligence report to the Commission highlights issues raised in correspondence to Audit Scotland or reported by other public sector oversight bodies. Annual audit reporting ensures that the Commission is well informed about the challenges faced by individual councils 85. Reporting to the Commission on Best Value is fully integrated into annual financial audit work. Auditors present a Best Value report on a prescribed theme to each council annually, as well as reporting on aspects of Best Value within annual audit reports. 86. At a sector level, findings from local Best Value thematic reports are drawn together into an annual national report. At an individual council level, findings on Best Value over the course of the audit appointment are brought together in Section 102 Best Value reports. 87. The Controller of Audit also prepares Section 102 reports on matters arising from the audit of local government accounts. These report on specific concerns identified by auditors at individual councils or IJBs. 88. This suite of work provides an ongoing assessment of individual councils’ achievement in embedding Best Value and continuous improvement, as well as more detailed assessment of the risks being faced by councils, both individually and as a sector. For further details on recent publications, see Appendix 1 and 2. Local government overview reporting plays an important role in highlighting areas of interest and concern 89. Local government overview reporting comprises two core annual outputs: • Local government financial bulletin – covering the financial performance and position of Scotland’s councils. • Local government budgets – covering budgetary issues at a national and local level. Page 203
Page 204
Part 2. Assurance arrangements 16 90. In 2024/25, the Commission’s overview reporting also included a performance spotlight. This looked at the delivery and performance of councils’ culture and leisure services. 91. In addition, a separate financial bulletin sets out the financial performance of IJBs. 92. To inform overview reporting, auditors consult an independent advisory panel drawn from across the sector. In addition, for each national audit output, two Accounts Commission members bring additional perspectives and insights as well as constructive challenge, based on their experience and expertise. 93. Sector overview reports distil findings from annual audit work, Best Value reporting and sectoral engagement to allow the Commission to make recommendations and set expectations for the sector. They allow the Commission to ensure that the challenges councils face are well understood. 94. These reports are supplemented by a range of performance audits and briefings on specific topics. A summary of key findings from overview reporting and wider performance audit work is included in Appendix 1. Page 204
Page 205
17Appendix 1 Appendix 1 The Accounts Commission published the following local government sector overview reports during 2025/26: • Local government budgets 2025/26 (May 2025) – Councils continue to face financial pressures in excess of funding uplifts, despite making a broad range of recurring savings. The report highlighted the need for greater transparency and accessibility of budget information to facilitate community engagement in decisions to address financial challenges. • Local government performance: Spotlight on culture and leisure services (October 2025) – Funding for culture and leisure services fell by three per cent in real terms between 2018/19 and 2023/24, with an increasing reliance on charging service users. The report highlighted that, in order to support informed budgetary decisions, councils need to strengthen their understanding of how these services contribute to improved outcomes. • Local government in Scotland: Financial bulletin 2024/25 (January 2026) – The report warned that there are signs that councils will become financially unsustainable over the medium term if sustained and recurring cost pressures are not addressed. • Integration Joint Board Financial Bulletin 2024/25 (February 2026) – IJBs are facing increasing cost pressures and with total reserves now lower than the forecast budget gap, difficult decisions need to be made about how services are delivered, who is eligible for services, and where to reduce or discontinue services. The Accounts Commission published the following national performance audits in partnership with the Auditor General in 2025/26: • Flooding in communities: Moving towards flood resilience (August 2025) – While there are positive examples of public bodies and councils collaborating effectively to tackle flooding, gaps remain in leadership, data, resources, skills and capacity. Auditors highlighted the need for clarity over roles and responsibilities, timelines, and delivery and funding mechanisms, as well as the importance of having enough people with the right skills and experience to support councils to tackle flooding. • Improving care experience: Delivering The Promise (October 2025) – The Promise is a commitment to improve Scotland’s ‘care system’. Plans have been slow to come together after insufficient early delivery planning by the Scottish Government and COSLA. Page 205
Page 206
Appendix 1 18 • Community health and social care: Performance 2025 (January 2026) – There is a lack of comprehensive and consistent national performance information about community health and social care demand, workload, quality of care and outcomes. This makes it difficult to fully assess performance and progress, but from the available data there is a long-term picture of declining performance and satisfaction. • Delayed discharges: A symptom of the challenges facing health and social care (January 2026) – Delayed discharges (when someone remains in hospital despite being medically ready to leave) are well above pre-pandemic levels. This is symptomatic of wider issues in health and social care. Better analysis and transparency are needed around the costs and impacts of this issue, and the outcomes of initiatives to address it. Page 206
Page 207
19Appendix 2 Appendix 2 Plans are in place to ensure Section 102 Best Value reports for all 32 councils are presented to the Commission by the end of the current five-year audit appointment. The Controller of Audit has published the following such reports since February 2025: • Controller of Audit report: Fife Council (February 2025) – The report concludes that the council must set out how it will respond to worsening inequalities, significant in-year financial challenges (including a large IJB overspend), Housing Revenue Account pressures and its significant use of reserves. The Commission welcomed improved performance reporting, cross-party collaboration on difficult decisions, and the council’s innovative approach to workforce challenges. • Controller of Audit report: Argyll and Bute Council (April 2025) – The report recognised a long-standing culture of innovation as the council looks to close its budget gap. The council has delivered significant recurring savings, but the report emphasised that a more strategic approach to transformation is now required. • Controller of Audit report: The Highland Council (April 2025) – The Commission welcomed the progress made since the council’s last Best Value Assurance Report in 2020, commending the council’s culture of transformation. The Commission also noted that savings challenges and financial risks still lie ahead. • Controller of Audit report: Renfrewshire Council (June 2025) – The report recognised improvement following the recent Section 102 report on Dargavel school accommodation. The report details how past prudent financial management has helped smooth financial challenges and how the next phase of transformation will be critical in tackling the council’s growing budget gap. Additionally, the Commission welcomed the council’s commitment to leadership and creating a positive working culture across services. • Controller of Audit report: East Lothian Council (July 2025) – The report sets out that performance has been maintained or improved in many areas, despite an increase in demand and financial challenges. However, the Commission highlighted that the use of reserves to balance budgets is unsustainable. It emphasised the need for an increased focus on transformation and continuing to develop opportunities to collaborate and share services as being crucial to future service delivery. Page 207
Page 208
Appendix 2 20 • Controller of Audit report: North Ayrshire Council (October 2025) – The report commended the council for working effectively with the other Ayrshire councils and local partners, exploring sharing services and doing things differently as it looks to tackle the significant financial challenges and future service pressures that lie ahead with sustainable solutions. • Controller of Audit report: North Lanarkshire Council (January 2026) – The report commended the council’s ambitious vision, place-based approach and strong partnership working, alongside its high-performing housing and homelessness services. It also highlighted declining satisfaction levels and a large budget gap, noting that while the council is well placed to respond through transformation and effective financial management, it must set out how services will be delivered in the longer term. 95. The Controller of Audit also published the following reports under Section 102 over the last year based on the findings of 2023/24 annual audit work: • The 2023/24 audit of Glasgow City Council: Senior officer exit packages (September 2025) – Auditors found that the processes, decisions and actions around significant early retirement and redundancy payments for five senior officers fell short of the behaviour and standards expected of public servants. • Cyber-attack affecting operations and services: The 2023/24 audit of Comhairle nan Eilean Siar (November 2025) – The report highlighted that all Scottish councils must learn from the immediate and ongoing impacts of a significant cyber-attack on Comhairle nan Eilean Siar. Page 208
Page 209
Annual Assurance and Risks Report A review of 2024/25 local government audits in Scotland Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot ISBN 978 1 918486 03 2 Page 209
Page 210
This page is intentionally left blank
Page 211
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board Securing a section 95 officer Prepared by the Controller of Audit March 2026 Page 211
Page 212
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 2 Contents Commission findings 3 The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board 5 Conclusions 11 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Page 212
Page 213
Commission findings | 3 Commission findings The Accounts Commission is pleased that the Controller of Audit used her powers to highlight a matter arising from the 2024/25 audit of the Clackmannanshire and Stirling Integration Joint Board (IJB) in relation to the departure of the section 95 officer (as required under the Local Government (Scotland) 1973 Act) in October 2025. Following consideration of the Controller’s report (presented at page 5) at its meeting on 12 March, the Commission has made the findings presented below, and would urge all IJBs to review paragraphs 29–32 in the report and take appropriate action: 1 Legislation requires IJBs to appoint a section 95 officer (often referred to as a chief finance officer or CFO). This role is fundamental to good governance, accountability and strategic financial planning. The CFO is responsible for ensuring resources are aligned with priorities so is the statutory financial lead. Given current financial pressures, this role is more important than ever, and our 2024 blog and the CIPFA briefing referenced within it remain highly relevant. 2 In this case, partner bodies undertook the necessary financial management after the CFO’s departure, and there is clear evidence of strong partnership working in day-to-day financial management and in preparing the annual accounts. However, the failure to formally appoint a CFO, even on an interim basis, meant legal requirements were not met. We view this as a serious failure by all three partners. Following the Scheme of Delegation in future would prevent this. We expect to see evidence of lessons learned in the IJB’s own Annual Governance Statement, as well as in the auditor’s 2025/26 report. 3 We are particularly concerned about advice given to the IJB in November stating that ‘all statutory requirements are being met; no legal issues identified’. In the minutes of that meeting, the IJB Chair stated that assigning specific people to statutory posts was essential for meeting legal requirements. However, no formal appointment was made at that time to the role of CFO, despite uncertainty over the outcome of the recruitment being undertaken. Additionally, there was no clarity in relation to contingency Page 213
Page 214
Commission findings | 4 arrangements had the IJB failed to recruit which is concerning from a financial planning and governance perspective. 4 We recognise the recruitment and retention challenges faced by all IJBs, especially at senior levels. High turnover increases the risk that institutional knowledge is undermined, and statutory obligations are misunderstood. Robust induction processes are therefore essential across the IJB, so everyone clearly understands their legal duties. Clear contingency arrangements are also essential to address any gaps that arise in relation to statutory roles. Page 214
Page 215
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 5 The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board Introduction 1. The Code of Audit Practice requires appointed auditors to produce an Annual Audit Report (AAR) summarising the significant matters arising from their audit work. For Integration Joint Boards (IJBs), auditors appointed by the Accounts Commission address the AAR to the IJB and the Controller of Audit. 2. I have received the AAR and the audited annual accounts for Clackmannanshire and Stirling Integration Joint Board (IJB) for 2024/25. The appointed auditor has issued unqualified opinions on the annual accounts but has identified a matter relating to the departure of the chief finance officer (CFO) in October 2025. The IJB failed to formally designate a section 95 (s95) officer until an interim CFO appointment was made in December 2025. 3. I have therefore decided to use the reporting powers available to me under s102 (1) of the Local Government (Scotland) Act 1973 to bring this matter to the Accounts Commission’s attention. Background 4. IJBs are separate legal entities, bound by Part VII of the Local Government (Scotland) Act 1973 (the 1973 Act) which includes requirements relating to finance. Under section 95 of the 1973 Act, IJBs are required to ‘make arrangements for the proper administration of their financial affairs and shall secure that the proper officer of the authority has responsibility for the administration of those affairs’. The ‘proper officer’ referred to in the legislation is commonly referred to as the s95 officer. 5. IJBs were established under the Public Bodies (Joint Working) (Scotland) Act 2014 (the Public Bodies Act). The Public Bodies Act requires the 32 Scottish councils and 14 territorial NHS boards to work together in partnerships to integrate how social care and community healthcare services are provided. Clackmannanshire and Stirling councils formed a single partnership with NHS Forth Valley. Page 215
Page 216
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 6 6. Supporting legislation (Scottish Statutory Instruments 2014 No. 285, Article 5) and statutory guidance for the Public Bodies Act (Roles, Responsibilities and Membership of the Integration Joint Board), set out that the minimum membership of the IJB must include a chief officer (CO) and a s95 officer, appointed by the IJB. The CO provides a single point of accountability for integrated health and social care services. For most IJBs the s95 officer is the CFO. This officer is responsible for the financial arrangements of the IJB. The Clackmannanshire and Stirling IJB’s scheme of delegation sets out that a range of important responsibilities are delegated to its CFO (the s95 officer). Specifically: ‘The CFO will have delegated responsibility from the IJB for the planning, development and delivery of the three-year financial strategy together with such statutory or other legal duties as may have been specifically assigned to the CFO including: • establishing financial governance systems for the proper use of the delegated resources • ensuring that the strategic plan meets the requirement for Best Value in the use of the IJB’s resources • ensuring that the directions to the health board and local authority provide for the resources that are allocated in respect of the directions are spent according to the plan.’ 7. In August 2025, the IJB’s CFO resigned and on 17 October 2025 left the IJB. An initial recruitment process commenced after the CFO gave notice, and this was followed by a direct request to other IJBs nationally for a secondee. Both were unsuccessful. The IJB operated without a s95 officer for nine weeks until an interim CFO was appointed and started in post on 22 December 2025 on a six-month fixed contract. 8. During this time, the s95 officers and the Director of Finance from all three partners collaborated with the interim CO, sharing key duties to maintain financial management and reporting to the board. 9. At the IJB’s November 2025 meeting, an update was provided to the board, setting out that the post of CFO was to be re-advertised, that temporary cover was being arranged through an agency and that ‘in the short term, the s95 council finance leads from all partner organisations and the Director of Finance for NHS Forth Valley are working together to cover the core financial requirements’. Minutes of the meeting record that the IJB Chair noted that assigning specific people to these positions is essential for meeting statutory requirements. The supporting paper presented to the IJB notes under the heading of ‘legal implications’ – ‘All statutory requirements are being met; no legal issues identified’. 10. Interviews for the permanent CFO post took place on 12 February 2026. The interim CO has advised that the recruitment was successful, Page 216
Page 217
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 7 resulting in an appointment being made. A timeline of the relevant events is set out in Exhibit 1. Exhibit 1 Timeline of events Events relating to the IJB s95 officer role and wider leadership changes at Clackmannanshire and Stirling IJB between August 2025 and February 2026. Month Event August 2025 CFO resigns September 2025 Recruitment process for CFO began October 2025 1 October: recruitment process concludes but unable to appoint new CFO 2 October: request put out to other IJBs, councils and NHS boards for a temporary secondment opportunity – no interest 3 October: HSCP management accountant left post 17 October: the former CFO leaves having served his notice November 2025 3 November: partner finance leads meet to discuss IJBs finance priority actions Weekly meetings of partner finance leads and interim CO established IJB chair changes Further recruitment work undertaken to identify a temporary CFO through an agency Paper to IJB meeting updates on interim arrangement – the IJB Chair raises the lack of a designated s95 officer December 2025 5 December: former interim CO leaves 8 December: new interim CO starts secondment from NHS Forth Valley – due to finish 30 September 2026 22 December: interim CFO starts six-month fixed-term contract (to June 2026) January 2026 Recruitment for substantive CFO post began 28 January: interim CFO presents financial report and update to the IJB February 2026 12 February: interviews for new CFO led to the appointment of the interim CFO into the substantive post Source: Audit Scotland Page 217
Page 218
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 8 The auditor’s opinion 11. The auditor highlights in the 2024/25 AAR that: • ‘The Section 95 Officer left the IJB in October 2025 and while this has not directly impacted the financial management of the IJB in the 2024/25 financial year, this has presented challenges with the year-end audit timetable. The IJB operated without a named section 95 officer from 18 October 2025 to 21 December 2025. • Per the Local Government (Scotland) Act 1973 it is a requirement to have a named officer with responsibility for the administration of financial affairs in place. It is our understanding that during this time the responsibilities of the section 95 officer were shared between the Chief Finance Officers of the three partner bodies. However, there was no named officer with overall responsibility for the financial affairs of the IJB in place.’ The legal requirement was not met 12. Qualified colleagues from the partner organisations managed financial tasks during the period when the IJB had no CFO, ensuring operations continued. However, their roles were not officially assigned or delegated, and no one was appointed as the s95 officer. 13. The IJB’s scheme of delegation specifically states: ‘If the CFO is absent or otherwise unable to carry out their responsibilities, any suitably experienced and qualified person formally appointed by the IJB to carry out the role in the CFO’s absence would be entitled to exercise delegated responsibility under this Scheme as is afforded to the Chief Finance Officer.’ 14. Although the partner bodies have provided effective support and have done so in good faith, there is no evidence that the IJB ‘formally appointed’ any or all the lead officers to fulfil this role. 15. Not appointing a s95 officer means the IJB was not complying with a legal requirement of the 1973 Act, or the supporting Scottish Statutory Instrument and statutory guidance of the Public Bodies Act. The s95 officer has specific duties and responsibilities for the appropriate financial management of significant amounts of public money and is legally accountable for this. If there is a failure to maintain the financial governance and control systems effectively there is increased risk of inaccuracies, mismanagement and legal implications for the IJB. Financial administration has been maintained 16. The auditor found that the gap in having an identified s95 officer did not result in a failure to deliver proper financial administration. He did report that there were challenges with meeting the year-end audit Page 218
Page 219
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 9 timetable. This also reflects that the other member of the IJB finance team left two weeks before the CFO, leaving no dedicated finance staff. 17. This adds pressure to an already challenging budget process for the IJB and its partners for 2026/27, alongside revising the integration scheme and medium-term financial planning. 18. Delays at the IJB also mean that information is not as readily available for financial reporting and planning at partner bodies. Increased partner involvement has directly strained the finance teams’ capacity in each organisation, especially during financially challenging times. 19. Officers of the partner bodies acknowledge that working closely on the financial requirements of the IJB has improved their understanding and their collective approach to addressing the issues faced. The improved working arrangements, understanding and relationships may assist in managing the complex and challenging financial issues ahead for the IJB and partners to address. 20. The Accounts Commission’s IJB Finance bulletin for 2024/25, highlights that IJBs are in a critical financial position, ‘with increasing cost pressures and the total level of reserves now lower than the budget gap forecast, IJBs need to take decisive action and make difficult decisions about services’. In 2024/25, Clackmannanshire and Stirling IJB faced a financial gap of £24.7 million, which is almost 8.9 per cent of total budgeted expenditure. By the end of the financial year, the IJB was forecast to achieve £8.6 million savings and had no contingency reserves left. The IJB has experienced significant leadership instability 21. The initial difficulties that the IJB faced in recruiting a new CFO reflect a challenging context for recruitment and retention of CFOs (and COs) across the sector. The IJB Finance bulletin 2024/25 highlights that ‘over half of IJBs experienced a change in senior leadership at either the CFO or CO level in 2024/25. This continues a pattern that has been evident for several years. The leadership and strategic vision of senior officers is crucial in the strategic planning and decision-making required to drive much-needed transformation. Instability in leadership teams has the potential to disrupt strategic planning and the leadership capacity to bring about the fundamental change required to address the growing scale of challenges facing IJBs’. 22. The IJB has been through a period of leadership instability. Although the CFO had been in post for ten years, the CO role has been held by four individuals over the past five years with three of those being on an interim basis. The chair’s role changes every two years by design, but five different individuals have served as chair in the past five years. Page 219
Page 220
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board | 10 23. The interim CO came to the end of her appointment and was replaced by the current interim CO in December 2025. In December 2025, the CO and CFO were both new to the role and interim appointments. In November 2025, the chair of the IJB also changed. 24. The IJB will benefit from a period of leadership stability, particularly given the challenging financial context it faces. The appointment of the interim CFO into the substantive post in February 2026 is a positive step. The IJB also anticipates beginning recruitment for the substantive CO post before the end of March 2026. 25. The interim CO has recently sought and agreed legal support for IJB meetings from one of the partner councils. This had been the arrangement in the past but was discontinued in 2024. The legal implications of not appointing a s95 officer is an example of where appropriate legal support is important. Page 220
Page 221
Conclusions | 11 Conclusions 26. The departure of the IJB CFO did not adversely affect financial management or annual account preparation, though the auditor reported some challenges with year-end audit arrangements. The limited impact reflects the close working undertaken by the three partner body CFOs and the IJB interim CO. 27. However, it is a legal requirement for the IJB to have a s95 officer in place and the informal arrangement between October and December 2025 did not fulfil this requirement. At any point, financial management of public money requires clear lines of responsibility and accountability, and this is heightened with the current challenging financial landscape as set out in the Accounts Commission’s Integration Joint Boards Financial bulletin 2024/25. 28. I have asked the appointed auditor to monitor progress at Clackmannanshire and Stirling IJB with the effectiveness of the financial management arrangements as the new s95 officer takes up the substantive role. The auditor will also monitor the wider stability of leadership at the IJB and report on progress with improving governance arrangements in their report on the audit of the 2025/26 accounts. Lessons for all IJBs 29. There is a notable turnover of CFOs and COs in IJBs and there is a limited pool of candidates with the skills, experience and appetite to take on these challenging roles. The circumstances at Clackmannanshire and Stirling IJB are not unique and it is important that all IJBs consider their arrangements to manage the duties and responsibilities of these posts if there is a period when they may become vacant. 30. The duties of statutory roles such as s95 and COs must be formally assigned to an appropriate individual or individuals. These arrangements should be considered by the IJB’s legal advisor to ensure they are appropriate and reflect the requirement of the role. The proposed arrangements should be agreed by the IJB. Informal agreements do not meet the legal requirement and do not provide satisfactory accountability for the significant responsibilities held by these posts. 31. Each IJB should: • ensure it has appropriate legal support to provide advice on meeting statutory and governance requirements Page 221
Page 222
Conclusions | 12 • ensure governance documentation includes contingency arrangements for a gap in a statutory role so that in these circumstances an appropriate individual is identified as responsible and accountable for the specific duties. 32. If there is the potential for a statutory role to become vacant, IJBs should: • seek an immediate interim appointment until the permanent post can be filled to meet the statutory obligations under section 95 and ensure continuity of statutory financial administration • accelerate permanent recruitment • proactively inform the appointed auditors about the vacancy, the interim measures in place, and the recruitment timetable • while interim cover is in place: − strengthen internal controls and monitoring including internal audit scrutiny − reassess financial strategy and risks − introduce safeguards for financial decision-making − maintain transparency with board members, including increasing the frequency of financial monitoring reports. Page 222
Page 223
The 2024/25 audit of Clackmannanshire and Stirling Integration Joint Board Securing a section 95 officer Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot ISBN: 978 1 918486 05 6 AS.5.1 Page 223
Page 224
This page is intentionally left blank
Page 225
Delivering for the future Transformation: How councils are redesigning and delivering more efficient services Prepared by Audit Scotland May 2026 Page 225
Page 226
2Delivering for the future: Transformation Contents Key messages 3 Commission expectations 5 1. Introduction 7 2. Planning 13 3. Programme management 18 4. Partnership working, community engagement and impacts 22 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Audit team The core audit team consisted of: Kathrine Sibbald, Emma Brown, Liam Prior and Jack Nixon under the direction of Blyth Deans. Page 226
Page 227
Key messages 3 Key messages 1 Scotland’s councils continue to face deepening financial challenges, with increasing demand, the cost of delivering services rising faster than available funding, mounting debt and falling reserves. The need for sustainable change is urgent. Transformational approaches to redesign services are an important part of the solution and delaying transformation could risk greater costs, tougher decisions and increased challenges in future years. However, our analysis highlights that the understanding of the anticipated financial and non-financial benefits of transformation projects varies across councils. Half of the councils in our sample still need to set out how transformation activity will support future financial sustainability. Integrating this information into council medium- and long-term financial plans is key to understanding whether the scale of transformation being delivered is sufficient to respond to the challenges facing local government. 2 Some councils have shown progress with articulating their approaches to transformation, but the picture is mixed across the sector. Those councils that have done this well are able to set out clear objectives and measurable outcomes, as well as clear alignment with strategic priorities and wider plans. In some councils, oversight of transformation activities is not always clear, and reporting to councillors is often not comprehensive enough to fully inform their leadership and scrutiny responsibilities. The timely and effective delivery of transformation plans requires appropriate workforce capacity and skills, in leadership, Page 227
Page 228
4Key messages management and frontline roles. While some councils manage this well, resourcing challenges have been a barrier to faster progress in others. 3 It is essential that councils work with their partners in the public, private and third sectors to deliver transformation. Although there are some positive examples of effective partnership working, challenges persist in achieving real change for service users and delivery of clear cost savings. Barriers include funding, capacity and resource constraints, governance, and IT and data-sharing issues. 4 While there are examples of consultation with communities on transformation projects, it is often not clear how this engagement has been reflected in service redesign proposals. Councils are also often unable to clearly report the financial impact and wider benefits of their transformation activities. As a result, it is difficult for communities to understand how transformation is contributing to strategic priorities, financial sustainability and service delivery. 5 Not all councils are using Equality Impact Assessments in a consistent or effective manner to identify and monitor the effects of transformation activities on vulnerable and protected groups. This inconsistency can result in gaps in understanding how changes may disadvantage certain sections of the community. Where Equality Impact Assessments are not fully embedded in the planning and monitoring processes, there is a risk that the potential impacts on those most at risk are not adequately considered or addressed. Page 228
Page 229
5Commission expectations Commission expectations In its October 2024 report, Transformation in councils, the Accounts Commission urged councils to ‘prioritise and urgently progress the delivery of their local transformation ambitions and engage effectively in sector-led transformation activity, securing political backing and committing resources’. As set out in the key messages on pages 3 and 4, the local Best Value audit work has shown mixed progress across councils with transformation. With the financial sustainability of councils becoming increasingly at risk, the Commission asks councils to reflect on the messages in the 2024 report and ensure they have effective arrangements in place to support transformation, are learning from and sharing effective practice with others and are engaging with national sector-led approaches. This report summarises learning from local work and highlights specific expectations of all councils. The Commission expects, in respect of transformation plans, that councils ensure these: • are sufficiently ambitious to respond to the financial challenges • are clearly linked and reflect wider strategic plans and priorities • clearly set out details to support effective implementation, monitoring and reporting • clearly set out planned savings from transformation programmes and plans, linking these to financial plans including medium- and long-term financial plans. In respect of programme management and resourcing, councils need to ensure: • they have clear oversight at a strategic level of all transformation activity Page 229
Page 230
Commission expectations 6 • there is effective engagement with councillors accompanied by comprehensive reporting on transformation initiatives • they regularly review whether workforce capacity (in terms of time availability and skills) is sufficient to plan, manage and deliver current and medium-term transformation plans and programmes • they strategically plan and establish the necessary workforce capacity to support transformation initiatives, ensuring adequate management and staff availability to facilitate the development and execution of transformation activities • transformation plans (at strategic and project level) set out appropriate success measures so that there is clear data to support scrutiny and demonstrate progress and impact against objectives. In respect of partnership working, community engagement and impacts, councils should ensure: • opportunities to work in partnership or to share services continue to be sought • they clearly document how community engagement, data, and equality impact assessments have influenced plans and implementation • they have arrangements in place to effectively monitor and report the impacts of transformation activities. Page 230
Page 231
1. Introduction 7 1. Introduction About the audit work and this report 1. Since 2022, auditors have undertaken thematic Best Value audit work alongside annual audit work at Scottish councils. In previous years this has focused on why leadership matters and responding to workforce challenges. Local transformation was the theme audited alongside the 2024/25 annual audit work. The findings are set out in a management report to each council. 2. This report draws on the findings of the 22 management reports available at the time of drafting. The Accounts Commission considered it important to share the messages and learning from this work as early as possible. This sample approach allows more timely reporting, while still including a representative range of councils in terms of size, location and demographics. 3. This report covers the following areas: • Transformation planning: To what extent do councils have clear plans for transformation that link to their priorities and support long- term financial sustainability? • Programme management: To what extent do councils’ programme management arrangements facilitate effective oversight of transformation plans? • Partnership working, community engagement, and impacts: To what extent are partners and communities involved in the development and delivery of councils’ plans for transformation? And to what extent have councils considered the impact of transformation activity, including on vulnerable or protected groups? 4. The report sets out a high-level view of progress across councils. It also aims to support further improvement in the sector by providing information and assessment of different arrangements for transformation in councils. A supplement to the report, Delivering for the future – Case studies, collates case studies from the management reports reviewed. These are illustrative examples of approaches that are contributing positively within the respective councils. They are intended as a resource to support councils learn from others. It is structured to set out examples against the different factors, considered in this report, that contribute to effective transformation arrangements. It is a snapshot of examples at the time of drafting and many other valid approaches exist beyond those reflected in the supplement. Case studies in the supplement are referenced but not replicated within this report. The 22 management reports in scope are for the following councils: Aberdeenshire, Angus, Dundee City, East Ayrshire, East Lothian, East Renfrewshire, City of Edinburgh, Falkirk, Fife, Highland, Midlothian, Moray, North Ayrshire, North Lanarkshire, Perth and Kinross, Renfrewshire, Scottish Borders, Shetland Islands, South Ayrshire, South Lanarkshire, West Dunbartonshire, and West Lothian. The management reports for the following ten councils were not yet published at the time of drafting (owing to a variety of factors): Aberdeen City, Argyll and Bute, Clackmannanshire, Dumfries and Galloway, East Dunbartonshire, Eilean Siar, Glasgow City, Inverclyde, Orkney Islands, and Stirling. Page 231
Page 232
1. Introduction 8 What is transformation? 5. Transformation is about radically changing how local government operates and delivers services to improve people’s lives in a financially sustainable way. There is no single, concise definition of transformation in a local government context. Individual councils must have the flexibility to transform service delivery appropriately to the needs of their communities. 6. While there will be differences in approach across councils, the Accounts Commission’s October 2024 Transformation in councils report set out five principles that must underpin transformation. This report summarises learning from local work in these areas to support councils with delivery. Transformation principle: Covered in this report under: Vision Strategic planning (paragraph 20) Planning Financial planning (paragraphs 21–24) Transformation funding (paragraphs 25–27) Project plans (paragraphs 28–29) Resourcing (paragraphs 37–39) Impacts (paragraphs 57–58) Governance Managing projects and programmes (paragraphs 33–34) Councillor engagement (paragraphs 35–36) Collaboration Partnership working (paragraphs 46–50) Joint funding (paragraphs 51–52) Community engagement (paragraphs 53–56) Innovation This has been considered across our transformation work. Examples of the different approaches councils are taking are included in our case study supplement. 7. Both local and sector-led approaches have an important role to play in driving and delivering transformation. In Transformation in councils, the Accounts Commission set out a specific expectation for individual councils to ‘prioritise and urgently progress the delivery of their local transformation ambitions and engage effectively in sector-led transformation activity, securing political backing and committing resources’. Why is transformation important? 8. The Accounts Commission underlined in its Local government in Scotland: Financial bulletin 2024/25 that the financial challenges Page 232
Page 233
1. Introduction 9 facing Scotland’s councils continue to deepen. With increasing demand, the cost of delivering services is rising faster than available funding, together with mounting debt, falling reserves and a continued reliance on non-recurring measures to close significant budget gaps. This risks the financial sustainability of councils over the next three to five years. Meanwhile, national indicators show satisfaction with council services is decreasing. 9. In this context, the need for sustainable change is urgent. Councils have made considerable savings, including those stemming from transformation, but these have been insufficient to close the gap between the funding needed and funding available. While only part of the solution, transformational approaches (in areas such as early intervention, prevention, partnership working or digital) can reduce costs while bringing meaningful improvements for those who use council services. 10. Alongside transformation, difficult decisions will be needed, which could include stopping services, reducing services, or making new or additional charges. The Accounts Commission recognises that implementing transformation is challenging and that some initiatives may not succeed. However, delaying transformation could risk greater costs, tougher decisions and increased challenges in future years. Progress with national approaches 11. The audit work and this report focus on progress at each council with their local approach to transformation, however national sector-led transformation work, alongside local approaches, has the potential to help councils achieve financial sustainability and deliver better outcomes in the medium to long term. It offers an opportunity to build consensus across the sector and with communities on what local government transformation should look like and how and when that will be achieved. 12. Councils face many of the same challenges. For example, many councils are being impacted by demographic change, including the challenges of either growing or declining populations, or a growing older population. There is an opportunity to share knowledge, data, expertise and experience around planning and delivering change, with greater efficiencies from shared learning. 13. In 2023, the Society of Local Authority Chief Executives (SOLACE) and the Improvement Service launched the local government transformation programme following the publication of Delivering a future for Scottish Local Authorities. Within the programme, a range of national approaches are being undertaken in three workstreams, as set out in Exhibit 1 (page 10). Page 233
Page 234
1. Introduction 10 Exhibit 1. SOLACE and Improvement Service Transformation Programme structure Anchor 1. Unlocking community action Anchor 2. Tackle inequality and meet the needs of all citizens Anchor 3. Enable a functioning, trusted local and central government relationship Anchor 4. Design for people’s needs Anchor 5. Create digital, design and technology- enabled transformation Anchor 6. Lead council and cross-sector partnerships Workstream 1 Officer-led conversation on public sector reform Workstream 2 Short-term local government transformation projects Workstream 3 Building capacity to lead and deliver transformation1 14. Progress reported by SOLACE and the Improvement Service against each workstream is set out at Exhibit 2 (page 11). Note 1: Including the Leadership Practitioner Forum. Source: Audit Scotland Page 234
Page 235
1. Introduction 11 Exhibit 2. Progress with the Transformation Programme Workstream 1 Officer-led conversation on public sector reform A draft report on public service reform from a local government perspective that will set out challenges and opportunities for the sector is due for publication in summer 2026. Workstream 2 Short-term local government transformation projects • Duties and powers portal – in April 2026, a portal was launched that brings together the statutory duties and powers held by councils, to ‘make the legislative landscape easier to navigate and to provide a shared, consistent foundation to support service improvement and transformation activity’. • National self-evaluation framework – in April 2026 the framework was launched with four councils due to pilot the framework over 2026/27. • Other areas of work under way including collaboration on procurement, guidance and toolkits for digital programmes, potential shared digital services and opportunities for wider shared services arrangements. Workstream 3 Building capacity to lead and deliver transformation Each council has appointed a senior leader in their organisation to be the single point of contact for the transformation programme and a network for senior officers, the Leadership Practitioner Forum, brings together officers from across the sector to discuss and contribute to the programme as it progresses. Note: Further information and progress updates are available on the Improvement Service website Source: SOLACE and Improvement Service Page 235
Page 236
1. Introduction 12 15. In Transformation in councils, the Accounts Commission was clear that both SOLACE and the Improvment Service needed to sustain the momentum of their Transformation Programme and be clear on actions needed, timescales, costs, resources, outcomes, outputs and impacts. 16. Given the major risks to financial sustainability across the sector, fast progress from this initiative is essential. Sector-led improvement activity is more important than ever, as it can be instrumental in driving meaningful change locally and improving outcomes for communities. Page 236
Page 237
132. Planning 2. Planning To what extent do councils have clear plans for transformation that link to their priorities and support long- term financial sustainability? Why it is important 17. The scale, pace and ambition of transformation must increase to meet rising demand, rising expectations and rising costs facing councils. Significant change cannot be delivered in the short term. Early intervention and preventative approaches take time to deliver benefits, and major digital transformation projects often require significant investment and lengthy implementation periods. Officers and councillors will need to work collaboratively to plan change over the longer term. The Accounts Commission recognises the challenges that councils face in planning for the long term, while managing day-to-day demands within a difficult financial context. However, proactively planning for change will reduce the need for more difficult measures and further costs in future. 18. Delivering meaningful change is complex. It can and should involve coordination across different areas of the council, across political groupings and more widely with partners. Success depends on having clear aims, realistic timescales, and a shared understanding of the expected costs, outcomes, and impacts. Clearly establishing these at the outset enables councils and their partners to better direct their limited time and resources. 19. When planning changes to how services are delivered, it is vital that councillors and officers consider and assess the impacts on service users. Decisions can have unintended consequences, particularly for the more vulnerable members of communities who often have a greater need for council services. What we found Councils that have articulated their approaches to transformation well have underpinned plans with clear objectives and measurable outcomes, as well as demonstrating clear alignment with strategic priorities and wider plans. The quality and availability of details about projects and their planned impact (both financial and non-financial) varies across councils: Page 237
Page 238
2. Planning 14 • Over a third of the councils in our sample have not sufficiently determined the financial impacts of their transformation plans. • Half of the councils in our sample have not clearly set out the anticipated financial impacts of their transformation activity in their medium- and long-term financial plans. • Most councils in our sample need to improve how they identify, monitor and report on wider benefits. Where these are lacking, councils face risks around delivery, financial planning and achieving improvements for communities. Strategic planning 20. Whether transformation plans are stand-alone or embedded in wider strategic plans, councils need to ensure there are clear links between projects and their contribution to the council’s strategic priorities and aims. In addition, there should be clear links with other corporate programmes such as financial, workforce, digital, capital and asset strategies and plans. Strategic planning Case studies: 1. East Ayrshire Council – a service embedded approach that is well linked to wider corporate strategies. 2. North Lanarkshire Council’s ‘Programme of Work’ and accompanying delivery plan – seeing transformation through a regional lens. 3. The Highland Council’s ‘Delivery Plan 2024–2027’ – a strong example of the transformation programme sitting within the corporate strategic plan. 4. West Lothian Council – an example of a stand-alone ‘Performance and Transformation Strategy’ with projects embedded in services. All case studies are provided in a separate supplement. View case studies Page 238
Page 239
2. Planning 15 Financial planning 21. Given the significant financial challenges outlined at paragraph 8, it is essential that councils establish strong links between transformation plans and medium- to long-term financial planning. 22. Auditors reported that just over half of the 22 councils in our sample identified savings from transformation initiatives. For just over a third of councils, savings were either identified for some projects or not at all. At four councils, auditors made recommendations around identifying transformation savings, while at others they noted this reflected the stage projects had reached at the time of audit work. 23. Where savings have been identified, all but two councils in our sample appropriately incorporated these into wider financial plans, such as medium-term financial strategies and budget documentation. Half of the councils in our sample still need to progress this further. This is important to give councillors and communities a clear picture of how far budget gaps are being addressed through transformation. Not doing so could undermine the level of support for transformation. 24. North Ayrshire Council is one council that demonstrates a strong and clear approach to transformation in its financial planning. The primary driver behind the council’s transformation programme is to deliver savings to address financial challenges and protect frontline services. The council has also been clear that transformation is only part of the solution to closing its budget gap, with significant further measures also needed. It has recognised that these will need to include future recurring savings through workforce changes, cuts to services, and increases to council tax and fees and charges. Financial planning Case study: 1. North Ayrshire Council – a strong approach to planning transformation to deliver savings and protect frontline services. All case studies are provided in a separate supplement. View case studies Page 239
Page 240
2. Planning 16 Transformation funding 25. Almost all councils reviewed have earmarked reserves set aside for transformation, but these vary in purpose and value. About two- thirds of the councils in our sample have a fund that supports general transformation or change activity. Meanwhile, other councils have set aside funds for more specific purposes, such as digital transformation, capital investment, adult social care or early intervention and prevention. 26. Some councils have set out timeframes for the use of transformation reserves, ranging from the medium term (three to five years) to the long term (up to 15 years). Others use spend-to-save models, allowing ongoing replenishment of funds, for example Falkirk and Scottish Borders councils. 27. It is difficult to get a clear picture of the amount set aside across the sector for transformation given ongoing movements in reserve levels and some reserves being used for a mixture of transformation and other activity. North Lanarkshire Council has used its £793.1 million Community Investment Fund to support transformation through capital investment and economic regeneration (see case studies). Other reserves referenced in local reports as being used for transformation ranged from £1.6 million to £40 million. Some examples of larger transformation reserves are set out in the case studies. Transformation funding Case studies: 1. North Lanarkshire Council Community Investment Fund – supporting capital investment and economic regeneration by setting aside council tax income. 2. Renfrewshire Council Service Modernisation and Reform Fund – supporting transformation through a combination of reserves, short- term capacity within service budgets and external funding. 3. Scottish Borders Council Change Fund – a £20 million self- replenishing reserve to support transformation projects. 4. East Ayrshire Council Early Intervention and Prevention Fund – using funding generated on a one-off basis from financial flexibilities to support early intervention and prevention. All case studies are provided in a separate supplement. View case studies Page 240
Page 241
2. Planning 17 Project plans 28. Auditors reviewed samples of councils’ project plans for transformation as part of local audit work. Those councils who have good project plans were able to set out clearly: • planned annual costs and savings • potential impact on service delivery, performance, staffing, and service users • alignment with strategic plans and priorities • timescales for delivery • risk management • consultation requirements • whether a full integrated impact assessment is required. 29. Our work has shown that some councils do not have the level of detailed project planning in place needed to support delivery of transformation. Some projects were at an early stage in the planning cycle when audit work was carried out. For others, auditors noted slow progress developing detailed project plans or project plans not consistently covering all the expected areas. This presents risks to timely delivery and brings a lack of clarity over how strategic plans will be achieved. Project plans Case study: 1. West Lothian Council – a comprehensive template for budget reduction measures, which include transformation projects. All case studies are provided in a separate supplement. View case studies What needs to happen 30. Councils need to ensure transformation plans: • are sufficiently ambitious to respond to the financial challenges • are clearly linked and reflect wider strategic plans and priorities • clearly set out details to support effective implementation, monitoring and reporting • clearly set out planned savings from transformation programmes and plans, linking these to financial plans. Page 241
Page 242
183. Programme management 3. Programme management To what extent do councils’ programme management arrangements facilitate effective oversight of transformation plans? Why it is important 31. Effective programme management and governance arrangements are vital to ensure that transformation activities are effectively coordinated, resourced, monitored and evaluated. 32. Councils will not achieve transformation at the scale needed to address current challenges if they do not have staff with the right skills and sufficient capacity to deliver it. What we found • Not all councils have clear oversight at a strategic level of all transformation activity. More broadly there is a need for better and more comprehensive reporting of the planned benefits to support effective management and scrutiny by councillors. • Councillors have a crucial role in supporting and scrutinising transformation. Open and effective collaboration across political lines, as well as with senior officers, is critical when making the difficult decisions that transformation work can involve. • Many councils need to improve the workforce capacity available to make better progress with transformation. However, there are strong examples of councils managing these challenges effectively. Managing projects and programmes 33. Councils manage transformation projects and programmes in different ways. In some councils, they are managed as a central portfolio of projects and in others they are managed within service areas. Regardless of the approach taken, it is important that there is clear oversight at a strategic level of all transformation activity so that the impact on council priorities, finances and communities can be understood. 34. Auditors found some councils do not have this central oversight, or lack a clear sense of what activity should be treated as transformation. This brings risks that transformation activity is not sufficiently focused on strategic priorities. Page 242
Page 243
3. Programme management 19 Managing projects and programmes Case studies: 1. Falkirk Council – strong arrangements for officer monitoring of transformation activity. 2. Highland Council, 3. North Lanarkshire Council and 4. Renfrewshire Council – operational governance arrangements align with arrangements for strategic and financial priorities. 5. Fife Council and 6. North Ayrshire Council – transformation/reform boards. 7. Dundee City and 8. Perth and Kinross councils – Programme Management Offices. All case studies are provided in a separate supplement. View case studies Councillor engagement 35. Auditors regularly highlight the importance of councillors collaborating well with each other, including across political lines, and with officers when making long-term strategic decisions to address financial sustainability risks. Three 2024/25 annual audit reports (out of 20 published at the time of drafting) raised concerns around a lack of collaborative leadership. 36. A common finding from audit work on transformation is the need for more comprehensive reporting to councillors about transformation initiatives, with recommendations around this at ten councils. Most formal engagement with councillors on transformation is through Full Council meetings and policy committees, but some councils have dedicated councillor forums for transformation. These have been used to allow early engagement and in-depth scrutiny of transformation plans by councillors. This supports a collaborative approach between officers and councillors, which is needed to underpin meaningful change. Councillor engagement Case studies: 1. Midlothian Council – effective governance arrangements for reporting progress to the senior leadership team and councillors. 2. Scottish Borders Council – improving transformation visibility for councillors. All case studies are provided in a separate supplement. View case studies Page 243
Page 244
3. Programme management 20 Resourcing 37. A lack of capacity (both time and skills) is a significant risk to delivery of transformation across the sector. Around a third of the reports reviewed as part of our sample made recommendations about improving workforce capacity to deliver transformation. These stemmed from risks identified around capacity across leadership, service staff, and dedicated transformation teams. 38. Councils have had varying levels of success in managing staff capacity to deliver transformation work. Some councils have handled this well through close monitoring and ongoing management of staffing arrangements. At others, a lack of capacity has led to slower than anticipated progress. 39. Councils have used different staff structures to deliver transformation. Some use a centralised management approach, finding this supports more collaborative working and sharing of learning. At other councils, staff within specific service areas lead transformation. This means implementation is owned within services and not seen as the responsibility of others. Stronger examples of this approach have ensured that there is specialist skills capacity embedded in services. There are risks and benefits for councils to manage under both approaches. In all cases, councils need to ensure that their arrangements are clear and support achieving their overall objectives. Resourcing Case studies: 1. Midlothian Council – Programme Management Office provides coordination, skills and support. 2. West Lothian Council – Service Design Champions Group embedded in the workforce. All case studies are provided in a separate supplement. View case studies Page 244
Page 245
3. Programme management 21 What needs to happen 40. Councils need to ensure: • they have clear oversight at a strategic level of all transformation activity • there is effective engagement with councillors accompanied by comprehensive reporting on transformation initiatives • they regularly review whether workforce capacity (in terms of time availability and skills) is sufficient to plan, manage and deliver current and medium-term transformation plans and programmes • they strategically plan and establish the necessary workforce capacity to support transformation initiatives, ensuring adequate management and staff availability to facilitate the development and execution of transformation activities • transformation plans (at strategic and project level) set out appropriate success measures so that there is clear data to support scrutiny and demonstrate progress and impact against objectives. Page 245
Page 246
22 1. 4. Partnership working, community engagement and impacts 4. Partnership working, community engagement and impacts To what extent are partners and communities involved in the development and delivery of councils’ plans for transformation? And to what extent have councils considered the impact of their transformation activity, including on vulnerable or protected groups? Why it is important Partnership working 41. Councils cannot deliver transformation alone and it is essential that they work with the Scottish Government, Community Planning partners, and third sector partners on the transformation of local services. 42. Councils and their partners need to radically rethink how they work together to support more sustainable models of service delivery. While there are challenges with implementation, working in partnership can create meaningful changes in how services are delivered, making best use of workforce skills and capacity, as well as contributing to addressing financial sustainability challenges. Community engagement and impacts 43. Communities must be actively involved in the difficult decisions councils make about their local services. Councils need to be clear on the need for change, the options and implications. This is vital given that changes or reductions to services can have a significant impact on people’s lives. 44. General public consultations need to be supplemented by targeted consultations with the groups most impacted by changes to specific services, with consideration given to encouraging participation. 45. Failure to engage over proposed changes exposes councils to substantial risks, including the need to withdraw proposals or defend legal challenges. Doing so also means savings and efficiencies have to be found from other services and budgets. Community Planning is led by Community Planning Partnerships within each council area. It involves councils and other public bodies working with local communities, businesses and the voluntary sector to plan and deliver services that improve people’s lives. Page 246
Page 247
4. Partnership working, community engagement and impacts 23 What we found • There are many positive examples of partnership working, but most of these are on the margins in terms of transformation. Partnership working that meaningfully addresses financial sustainability challenges or significantly changes how services are delivered to communities remains difficult. • There is limited evidence of how community engagement has influenced project design and delivery. For vulnerable and protected groups, this should be evidenced through Equality Impact Assessments, but around a quarter of the councils in our sample need to develop a more consistent, thorough process for these. • Councils are often failing to report clearly and transparently on the progress and impacts of transformation activity. This means that it is difficult for communities to understand how transformation is contributing to strategic priorities, financial sustainability, and service delivery. Partnership working 46. Councils can point to many positive examples of how they work with partners across the public, private and third sectors. However, there are varying degrees to which this work can be considered transformational. 47. Some of the most notable plans for transformation in local government involve shared services. At the time of audit work, North Ayrshire, East Ayrshire and South Ayrshire councils were exploring ‘Pan- Ayrshire’ joint working. The councils highlighted barriers (including the siloed approach to funding, governance and reporting) and referred to the vital role of national government in enabling more transformational partnership working. 48. Some councils are developing partnership or place-based approaches to support joint delivery with partners. For example, Midlothian Council established a Multi-Agency Transformation Management Group with partners to deliver whole system change. Falkirk and Clackmannanshire councils are exploring future joint transformation opportunities. 49. Councils also provided examples of partnership working on energy initiatives, property rationalisation, and digital initiatives. 50. The Improvement Service’s September 2025 report on Collaborative Working in Scottish Local Government identified a number of barriers to further partnership working in local government that were echoed in our local audit work. These included: • funding • capacity and resource constraints • variability in local requirements and loss of dedicated local capacity Page 247
Page 248
4. Partnership working, community engagement and impacts 24 • inconsistencies in service delivery • cultural, governance, legal and organisational barriers • HR and employment policies • IT and data-sharing issues • sustainability and maintaining momentum • measuring impact. Partnership working Case studies: 1. Pan-Ayrshire shared services. 2. Midlothian – Multi-Agency Transformation Management Group. All case studies are provided in a separate supplement. View case studies Joint funding 51. Joint funding arrangements can be a strong enabler to progressing transformational partnership initiatives. Funding arrangements with the UK or Scottish governments were highlighted most frequently in audit work. 52. Joint funding with wider partners is more limited. The Improvement Service’s report on Collaborative Working in Scottish Local Government, September 2025 noted that projects could be left in a financially vulnerable position if one or more partners were to pull out and withdraw their funding. This risk is heightened by the difficult financial situation facing councils. Joint funding Case studies: 1. Aberdeen City, Aberdeenshire, Highland and Moray councils – expanding electric vehicle infrastructure supported by £7.5 million of Scottish Government funding. 2. Moray Council’s m.connect project – developing a demand- responsive council-run bus service using funding provided by the Scottish Government. 3. Shetland and Orkney Islands councils – working with partners in the private and third sectors on rural energy hubs. 4. Midlothian Council’s joint venture with private sector to deliver low- carbon energy projects across the area – Midlothian Energy Limited. All case studies are provided in a separate supplement. View case studies Page 248
Page 249
4. Partnership working, community engagement and impacts 25 Community engagement 53. Auditors reported examples of effective community engagement at individual project level, but only a small number of councils were able to provide evidence this had influenced project design and delivery. Examples of project-level engagement included targeted consultation for individual projects, direct engagement with service users to inform service redesign, and engagement with vulnerable or protected groups where projects were likely to have a material impact. 54. Equality Impact Assessments provide a framework for documenting how consultation with and data on vulnerable and protected groups has influenced plans and for monitoring impacts as work progresses. However, auditors found these were not carried out consistently at three councils and not completed thoroughly at six councils. 55. Councils also consult on their budgets, taking a range of approaches. Some include engagement on specific transformation savings or wider engagement on how funding should be prioritised. For example, North Ayrshire Council carried out extensive engagement in winter 2024 on its budget, including several areas of transformation work. The council reported that consulting on specific budget options rather than generic areas of priority led to increased engagement from communities. 56. Perth and Kinross Council rolled out a structured and user-focused ‘service design’ approach to transforming services. The council uses various methods (including workshops, events, and meetings) to gather feedback and ideas from those who deliver, use and interact with services. This feedback is then used to set clear actions for progress and agree solutions for future improvement. Community engagement Case studies: 1. North Ayrshire Council – budget consultation. 2. Perth and Kinross Council – user-focused service design approach. 3. East Renfrewshire Council – use of data. All case studies are provided in a separate supplement. View case studies Page 249
Page 250
4. Partnership working, community engagement and impacts 26 Impacts 57. Once projects are under way and then implemented, councils are often failing to report clearly and transparently on progress and impacts. Councils often do not have stated measures of success in place at the outset to allow them to track progress. This limits self-evaluation, scrutiny and accountability on whether anticipated timescales, impacts and value for money have been met. Councils can also miss opportunities to review, improve and share learning. 58. Around two-thirds of the reports in our sample included recommendations about identifying and monitoring the impacts and benefits of transformation. Several councils have recognised the opportunity for further progress in this area and are developing processes to assess how far benefits have been realised. A lack of clear reporting on benefits makes it difficult for a council to communicate to councillors and the wider public on the overall impacts and value of its transformation initiatives. Impact Case studies: 1. Perth and Kinross Council – benefits realisation log. 2. Highland Council – incorporating success measures into Performance and Risk Management System. 3. Highland Council – in-house bus service delivering savings while improving service quality. 4. Angus Council – tracking the impacts of estate rationalisation. All case studies are provided in a separate supplement. View case studies What needs to happen 59. Councils should ensure: • opportunities to work in partnership or to share services continue to be sought • they clearly document how community engagement, data, and Equality Impact Assessments have influenced plans and implementation • they have arrangements in place to effectively monitor and report the impacts of transformation activities. Page 250
Page 251
Delivering for the future Transformation: How councils are redesigning and delivering more efficient services Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot ISBN 978 1 918486 07 0 Page 251
Page 252
This page is intentionally left blank
Page 253
Transforming the approach to climate change Lessons from public audit Prepared by Audit Scotland March 2026 Page 253
Page 254
2Transforming the approach to climate change Contents Introduction 3 Key challenges for Scotland’s public sector 5 Leadership and collaboration 6 Planning for delivery 10 Financial planning 13 Governance 16 Public engagement 19 Questions for public bodies 22 Evidence base 24 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Page 254
Page 255
3Introduction Introduction Context The Scottish Government has a legally binding target of achieving net zero emissions by 2045, five years earlier than the rest of the UK. It has also set out actions to help build resilience to the unavoidable impacts of climate change. Progress towards climate change commitments and targets in key areas has been slow, for example on decarbonising heat in homes and reducing car use. In 2024, the Scottish Government dropped its interim target to reduce emissions by 75 per cent by 2030, following advice by the UK’s Climate Change Committee that the target was no longer credible. The Scottish Parliament passed legislation in November 2024 that replaced statutory annual and interim emissions reduction targets with a five-year carbon budget approach. The first carbon budget covers the period 2026–2030. The Scottish Government published a draft updated Climate Change Plan in November 2025, setting out how it intends to achieve its emission reduction goals over the first three carbon budget periods, to 2040. Our audit work has shown that climate change is a complex challenge that spans most areas of public policy. Huge amounts of public money will be invested in activity to tackle and adapt to it. It requires a transformation in approach to enable effective cross-sector collaboration over several years. This applies to public bodies’ role in implementing national policies and delivering services, as well as how they manage their own environmental impact. Public audit and climate change Audit Scotland is uniquely placed to examine the efficiency and effectiveness of climate change activity across the Scottish public sector, on behalf of the Auditor General and Accounts Commission. Our approach is set out in our strategy for auditing climate change. Since the Scottish Government declared a climate emergency in 2019, the Auditor General and Accounts Commission have published several reports assessing how public bodies are responding to climate change and the challenges it will present, and how public money is being used to help achieve Scotland’s climate change ambitions. All our work on climate change can be found on the climate change page on our website. Page 255
Page 256
Introduction 4 Identifying lessons from our work We have reviewed the audit findings, judgements and recommendations on climate change from performance audits, Best Value thematic reports and a sample of individual public bodies’ annual audit reports (see the section, Evidence base (page 24) for more details). We have identified the elements that auditors have highlighted as hindering and supporting progress, and the areas where improvements are needed to help the public sector address the challenges it faces in tackling climate change. By bringing together learning from across our audit work, and spotlighting examples of public bodies’ approaches to tackling climate change, we aim to help drive change and improvement and support the Scottish public sector in delivering its long-term climate change ambitions. Supporting improvement We have identified five common challenges that are relevant to individual public bodies and the wider public sector. Taken together, they form the building blocks of a whole-system approach to addressing climate change – both reducing emissions and adapting to the impacts of climate change. The themes are interlinked, with progress in one area relying on others. For example: • Leadership and collaboration + governance: decisions on climate-related policy and strategic direction will be difficult to implement effectively without clear governance arrangements for effective cross-public sector working. • Planning for delivery + financial planning: action plans and goals will not be delivered without clear and effective financial plans to support them. • Leadership and collaboration + public engagement: successful policy implementation needs effective engagement with individuals and communities to help shape shared priorities, and to deliver the behaviour change required to achieve long-term climate ambitions. We have included examples of positive approaches by public bodies identified through our audit work. We have also included Questions for public bodies (page 22) that may help public sector leaders to reflect on their organisation’s readiness to address key delivery challenges and identify areas for improvement. + + + Page 256
Page 257
5Key challenges for Scotland’s public sector Key challenges for Scotland’s public sector Leadership and collaboration Planning for delivery Financial planning Governance Public engagement Our audit programme over the last four years has identified five key areas of challenge that the public sector needs to address to ensure an effective approach to tackling climate change. The challenges are interlinked and need to be considered together, taking a whole-system approach to ensure each element is working effectively to support the others. Click on each challenge to read more about the findings from our audit work and what needs to happen next. Page 257
Page 258
6Leadership and collaboration Leadership and collaboration Why it’s important A long-term, whole-system approach to achieving national climate change goals is needed, involving the Scottish Government, councils and public bodies, the UK Government and other devolved administrations, the private sector, third sector organisations and individuals. The causes and consequences of climate change extend across multiple sectors and policy areas. Because of this, strong leadership and joined up working within and between public bodies and their partners is essential for making sustained progress. It also offers opportunities to share knowledge, skills and resources. What we’ve found A lack of strategic leadership and barriers to effective collaboration are hindering sustained progress towards Scotland’s climate change ambitions at a national and local authority level. Our performance audits have highlighted that strong strategic and collaborative leadership is needed to reduce emissions and build resilience to the impacts of climate change. Ministers, public bodies and local leaders must work together to provide a clear long-term vision for specific climate change policies. This helps to create a shared understanding of what partners are aiming for over the long term. Achieving long-term climate change goals rests on several key pillars, with complex interdependencies and multiple stakeholders. Our audit work has highlighted the important leadership role of the Scottish Government, councils and COSLA in coordinating activity across these pillars and stakeholders. This involves collaborating across different levels of government (local, Scottish and UK) and across sectors (public, private and third sectors). For example, we have reported that to deliver actions successfully to reduce emissions from heating in homes, the Scottish Government needs to collaborate with the UK Government to address challenges Page 258
Page 259
7 with energy infrastructure and energy pricing. It also needs to collaborate with the private sector to develop and roll out financial products that will support people in overcoming affordability challenges to changing how they heat their homes. Leadership may also involve taking difficult and potentially unpopular decisions. For example, we found that a lack of leadership from the Scottish Government resulted in minimal progress to reduce car use. The Scottish Government regularly delayed taking important decisions to deliver its target to reduce car kilometres driven, which affected the actions of other public bodies. Making unpopular decisions: Aberdeen city bus gates Measures to prioritise bus travel in Aberdeen city centre have faced strong opposition but have resulted in improvements in bus journey times. Aberdeen City Council introduced three additional bus gates to the city centre in 2023. The aim of the gates was to establish a priority route for buses that would reduce the non-essential traffic travelling through the city centre, seeking to reduce bus journey times, improve punctuality, and provide an improved environment for pedestrians and cyclists. Source: Sustainable transport, Audit Scotland, January 2025 There are good examples of joint working across the public sector, such as local partnerships to reduce flood risk. Joint working: Metropolitan Glasgow Strategic Drainage Partnership The MGSDP is a partnership between Glasgow City Council, Scottish Water, Scottish Environment Protection Agency (SEPA), Scottish Canals, NatureScot, Housing Associations and Glasgow City Region City Deal partners. The group aims to reduce flood risk, improve river water quality, support economic development, and protect and improve natural environments. Its remit is wide ranging, including supporting policy development, supporting the development and implementation of flood risk management planning, and enabling partners to deliver collaborative projects on the ground. Source: Flooding in communities: Moving towards flood resilience (Case studies), Audit Scotland, August 2025 Leadership and collaboration Page 259
Page 260
8 However, common barriers to effective collaboration identified in our audit work include: • Limited alignment across policy areas: differing priorities across levels of government or sectors may mean that opportunities are missed to deliver policies in the most efficient way, minimise duplicated effort and realise co-benefits. • Ambiguities and gaps in roles and responsibilities: lack of clarity on who is responsible for what presents a risk that important areas of activity are missed, or activities are duplicated. It can also create inconsistencies in the type and extent of action taken by different organisations. • Insufficient workforce capacity and skills: not having enough staff or people with specific skills can limit opportunities for public bodies to collaborate effectively and participate in partnership initiatives, as they are required to focus on ‘core’ activities. • Insufficient resources: public bodies face competing demands for resources and increased financial pressures, which can limit how much they invest individually in activity to tackle climate change. What needs to happen A culture of collaborative leadership is needed to support the public sector’s approach to tackling climate change. Public bodies need to demonstrate stronger collaborative leadership and better joined up working within organisations and across the public sector. All levels of government and public bodies need to improve how they work together, and with partners and communities, to develop and deliver effective climate policies. Climate change challenges require action across both geographic boundaries and devolved and reserved policy areas. This calls for effective engagement between the Scottish Government and the UK Government, and other devolved national administrations. A collaborative leadership approach to achieving climate change goals and wider co-benefits can be supported through: • Identifying shared long-term goals and strategic objectives to help provide certainty on direction of travel to public bodies, private sector investors, businesses, communities and individuals. • Aligning policies that have shared priorities to help identify opportunities to use financial and other resources more efficiently. Leadership and collaboration Page 260
Page 261
9 • Combining resources and sharing services where it is more efficient to do so. • Clarifying roles and responsibilities and addressing gaps in skills and capacity to ensure these roles can be fulfilled. • Sharing learning and good practice to support continuous improvement and ensure sustained progress. Leadership and collaboration Page 261
Page 262
10Planning for delivery Planning for delivery Why it’s important Achieving climate objectives and realising joint benefits requires effective coordination of policies, actions, funding and other resources that contribute collectively towards climate goals. Detailed delivery plans are essential for coordinating and targeting public bodies’ activities across the five common challenge areas we have identified. Effective delivery plans provide clarity and detail on how and when bodies will resource and implement actions to achieve climate change goals, and the expected impacts. Building climate considerations into public bodies’ decision-making can help decision-makers to understand the individual and collective impact of policies and activities on climate goals, such as emissions reductions. It can also help to identify any gaps between what is needed and what is currently in place to achieve these goals. This supports informed decision-making about what actions are needed and how they can be delivered. What we’ve found There is a lack of clarity over how strategies will be implemented and resourced. Climate change considerations are not yet fully integrated into strategic decision-making. Our performance audit reports have highlighted a lack of detailed delivery plans to support strategic decisions and long-term strategies. This means there is insufficient clarity and transparency over the steps that need to be taken to deliver action, who needs to work together to make it happen, what it will cost, and what the anticipated impact of that activity and spend is. This creates a high risk that the action needed will not happen at the scale and speed required. We have reported that councils and the Scottish Government have more to do to fully embed climate change considerations into policy, financial and operational decision-making. This is likely to require shifting the focus from actions that might be considered as specifically climate change Page 262
Page 263
11 related towards considering climate change as a feature of all activity. This can be challenging due to financial and workforce constraints, where climate action is competing with other areas for funding and staff. It is also hindered by a lack of access to data on the potential or actual impact of policies and spending on climate objectives. The Scottish Government, public bodies and councils have identified issues relating to workforce capacity and capability as key challenges in implementing climate change policies. Identifying any gaps between ambition and planned action can help decision-makers make more informed choices about how they are prioritising spend and using resources, and to focus activity where it is most needed. What needs to happen Public bodies need to ensure policies and strategies are supported by detailed delivery plans and appropriate resources, and to integrate climate considerations into decision-making processes. Effective planning for the delivery of climate change policies and strategies includes the following: • Planning for the short and longer term, ensuring plans are kept under review and updated as necessary. • Ensuring policies and strategies at all levels are underpinned by clear, detailed delivery plans, which include the elements set out on page 12. • Assessing the resources needed to deliver objectives, identifying any gaps in capacity and skills and developing actions to address them (including potential opportunities to share resources), and keeping resource requirements under review. • Considering contingency measures to address unforeseen developments such as challenges to delivery timelines or availability of resources. Climate change considerations need to be integrated into public bodies’ decision-making at all levels and in all areas of planning and operational delivery – not just in those that are specifically focused on the environment. This includes embedding arrangements to ensure that the potential impact of all policies on climate change goals, in the short and longer term, is considered fully in decision-making. Planning for deliveryPage 263
Page 264
12 Key elements of effective delivery plans Specific actions Including a clear indication of how the actions will progress the strategic aims. Timescales Attaching specific timescales and dates for the implementation of specific actions. Roles and responsibilities Setting this out clearly so individuals and organisations responsible for strategic delivery and wider stakeholders fully understand who will deliver the activities in the plan. Governance and accountability structures Clarifying the arrangements that will support effective collaboration and decision-making where multiple partners are involved, and ensure delivery of the strategy or policy aims. Resources Setting out clearly how the strategic aims and supporting actions will be funded for the length of the planned activity. Targets and indicators Setting specific targets to underpin the long-term vision with indicators to measure progress. Monitoring progress Putting arrangements in place for monitoring and reporting on progress against targets and indicators and for assessing the impact of actions in the plan. Regular review Setting out how regularly the plan will be reviewed and refreshed, to support improvements and to be able to respond to changing circumstances. Planning for deliveryPage 264
Page 265
13Financial planning Financial planning Why it’s important In an increasingly difficult financial environment, leaders need to fully understand the impact of spending decisions on climate change goals, and provide certainty about when and how investment will be funded. Achieving net zero and building resilience to the impacts of climate change will require large and sustained investment over time. However, pressures on public finances are impacting on public bodies’ delivery of the long-term actions that are needed to deliver climate change objectives. For example, decarbonising buildings and transport requires investment up front to reduce emissions, even if they deliver cost savings in the longer term. What we’ve found Greater transparency is needed about how specific policies and public spending are expected to contribute towards climate targets and goals. Our audit work has highlighted significant barriers to effective financial planning for climate change activity. This includes uncertainty over sources and levels of public funding over the longer term, and the challenges presented by annual budgeting processes to long-term investment planning. We have also reported on gaps in public bodies’ monitoring of the impacts and value for money provided by their climate-related spending. There is not yet enough information to help decision-makers fully understand the implications of spending choices on climate goals and whether they offer value for money. Financial pressures pose a risk to climate change ambitions not being realised, as actions and investments may not be affordable. Decisions on future public investment will be made in the context of limited public resources and competing spending priorities. However, failure to act early enough will increase costs in future years. There are difficult choices to be made and this requires strong leadership. Page 265
Page 266
14 Investing in emissions reduction: Decarbonising The Highland Council’s fleet Climate change considerations are being built into the asset management plans of organisations, for example through changing vehicle fleets to more carbon friendly models or planning building upgrades. The Highland Council is working toward decarbonisation of its fleet and accelerating the transition to low carbon transport for the council and communities. This includes the introduction of electric charge points within a 30-mile radius across the Highland region. Source: The Highland Council annual audit report 2022/23, Audit Scotland, August 2024 Securing private finance: Green Heat Finance Taskforce The financial market for supporting the decarbonisation of heat in homes is in its early stages. Due to the complexities of changing heating systems and lack of demand to date, there is a higher perceived risk to these investments, which is preventing market growth. The Scottish Government set up the Green Heat Finance Taskforce at the start of 2022. It was a partnership between the Scottish public sector, heat decarbonisation experts and the financial sector. It aimed to explore potential new innovative financing mechanisms for both at-scale and individual level investment. The Taskforce published its second and final report in April 2025 following completion of its work. Source: Decarbonising heat in homes, Audit Scotland, February 2024 What needs to happen Public spending over the short and long term, needs to be aligned more clearly with climate change priorities while ensuring it offers value for money. Public bodies’ financial and policy decisions around climate change and net zero must be aligned, supported by strong, focused leadership. Given the scale of the spending required, investment from the private sector Financial planningPage 266
Page 267
15 and individuals will be necessary. The public sector has an important role in creating the conditions to secure private finance to enable businesses and people to make the changes required to achieve climate goals, for example purchasing flood protection measures for their home or changing their home heating system. Considerations to support public bodies’ financial planning for climate change include: • Identifying how best to target spending on the areas that will have the most impact on emissions reduction and climate adaptation, while ensuring value for money. • Developing clear financial plans and budgets for climate-related activity that consider the long-term investment needed to deliver climate goals and set out how interventions will be funded. • Allowing for flexibility in budgeting, recognising that climate change related projects can be complex and cut across policy areas and budget periods, and the required spending can be difficult to predict. • Monitoring the impact of spending and the value for money achieved, and making better use of this information (and other data) to help inform spending decisions. Financial planningPage 267
Page 268
16Governance Governance Why it’s important Clear and effective governance and risk management is essential to ensure bodies are well managed and have arrangements in place to work together to deliver climate change plans effectively. This is particularly important for climate change, as it is an extremely complex area that requires collaboration and coordination of actions across policy areas and governance levels over extended periods of time. It is essential that climate change plans and objectives are supported by robust and comprehensive governance arrangements. These arrangements may be at an individual organisation level, local area level, or across sectors. They are needed to provide a solid basis for delivery, minimise duplication of effort, and to support transparency and accountability. Governance and risk management arrangements that are not fully developed and relevant could increase the chances of climate change objectives not being achieved. What we’ve found The Scottish Government and public bodies need to ensure that governance arrangements support and reward collaboration, provide effective oversight for programmes of work to tackle climate change, and that risks are effectively identified and managed. Our audit work has found that governance arrangements for tackling climate change in the public sector vary in their clarity and fitness for purpose. For example, performance audits have highlighted: • Unclear roles and responsibilities: a lack of clarity on how the remits and work of different governance groups fit together to ensure a coordinated approach leads to a risk of duplication and inconsistency. GovernancePage 268
Page 269
17 • Weaknesses in performance monitoring, evaluation and reporting arrangements, and performance management: inconsistent or infrequent reporting, alongside gaps in performance monitoring, make it difficult to obtain assurance on progress. • Underdeveloped risk identification and management: a lack of clarity on the evidence used to inform risk assessments and proposed responses increases the chances of necessary actions being missed and climate change and net zero objectives not being achieved. Different types of governance arrangements for climate change There are examples of public bodies establishing climate change specific committees to develop internal climate policy and using partnerships and working groups to oversee the delivery of climate policy across partners. • NHS Dumfries and Galloway established a Climate Emergency and Sustainability (CES) Programme Board which reports to its Performance and Resources Committee. The CES Programme Board helps the NHS board meet its duties to tackle climate change. • Clackmannanshire Council established clear governance arrangements with a Climate Emergency Board and put good links in place to involve communities in the decision-making process. Five Climate Change Forums were set up to support community engagement and promote sustainability across the council area. • The Scottish Government has established the Flood Resilience Strategy Implementation Governance Group to oversee implementation of the National Flood Resilience Strategy. The group includes representatives from the Scottish Government, COSLA, SEPA, Public Health Scotland, Scottish Flood Forum, insurance organisations and other key public bodies and partners. Source: NHS Dumfries and Galloway annual audit 2022/23, Audit Scotland, March 2024; Clackmannanshire Council annual audit 2022/23, Audit Scotland, September 2024; Flooding in communities: Moving towards flood resilience, Audit Scotland, August 2025 GovernancePage 269
Page 270
18 What needs to happen Public bodies need to establish clear and comprehensive governance arrangements for climate change activity that fit with their wider decision- making arrangements. Good governance arrangements support policy, planning and financial decision-making, help identify and address risks to success, and support transparency and accountability. All bodies must keep governance arrangements under review to ensure they remain fit for purpose. In ensuring the fundamental elements of good governance are applied to climate change arrangements, public bodies should aim to: • Integrate climate change considerations into existing governance and business processes and decision-making mechanisms. • Establish tailored governance arrangements for specific large programmes of work to ensure effective oversight. • Align climate change-related governance groups effectively with each other, and with wider corporate governance arrangements. • Establish clear and distinct roles and remits for climate change groups and individuals, with up-to-date documentation. • Provide clear reporting lines and escalation procedures between governance groups. • Establish effective monitoring, evaluation and reporting arrangements with clear indicators to support active performance management. • Ensure that all climate change risks are effectively identified and managed, track progress against actions to manage the risks, and escalate risks where necessary. GovernancePage 270
Page 271
19Public engagement Public engagement Why it’s important Meaningful public engagement is challenging. But it is necessary to help businesses and communities prepare for the effects of climate change, to contribute to the design and delivery of climate change actions, and for successful delivery of the public sector’s climate change response. The effects of climate change, and public bodies’ decisions and actions in response, impact on businesses and communities. Actions by individuals and changes in behaviour will also be required to achieve Scotland’s climate change objectives. Effective engagement with businesses and communities by public bodies is key to achieving this. What we’ve found Public bodies have identified climate change as a priority area for engagement with communities. However, the effectiveness of public bodies’ approaches to this varies. Public engagement on climate change generally aims to: • Inform people and communities about climate change and plans to respond to its impacts. This includes raising awareness of the changes people will need to make to help reduce Scotland’s emissions and increase resilience to the impacts of climate change. • Consult with communities on changes that will impact them, for example building flood defences or legislating for how people can heat their homes. • Involve communities in decision-making and empower them to take action themselves, for example by providing information that will enable residents to be better prepared to respond to flooding in their local area or to make informed choices about options for heating their homes. Public engagementPage 271
Page 272
20 Our performance audit work has highlighted barriers to effective engagement. This ranges from, for example, public disinterest and scepticism about the information provided on flooding risks, to the public calling for clearer information and more engagement on actions to reduce car use. Public bodies may have to navigate polarised views on proposed action to tackle climate change, such as building flood defences. Communities across different council areas can face inconsistent levels of support to take action themselves. While different approaches between councils are to be expected, this means that people and communities in some areas may be more limited in the action they can take than in others. We have also highlighted the need for public bodies to understand and address inequalities in their engagement on climate change. The Scottish Government’s consultation on proposals to regulate how we heat our homes stated that it would consider exemptions for certain groups, such as those living in fuel poverty, the elderly, people with a disability and those living in rural properties. However, early engagement and consultation with groups that may be negatively impacted by a policy is not happening consistently. Public engagement on decarbonising heat in homes The Scottish Government has an important role in ensuring the public get the support they need to make informed decisions on how to heat their homes. To help do this it carried out work to better understand people’s attitudes and experiences in relation to clean heating and energy efficiency standards. It also commissioned research into how to communicate effectively on the heat transition. The Scottish Government plans to evaluate the impact of its public engagement strategy in 2026 and the findings will inform future activity. Source: Decarbonising heat in homes, Audit Scotland, February 2024 Getting the public buy-in needed to deliver behavioural changes relies on building long-term trusting relationships with communities, with a broader focus than just climate-specific issues. Including climate change priorities within existing local plans and initiatives can help support progress in public bodies’ work with communities. For example, some councils have consulted on climate actions through their budget consultations. A focus on local issues and place-based actions is key to ensuring success, through engaging local people in developing solutions and finding opportunities for wider benefits to the local area. Public engagementPage 272
Page 273
21 Empowering the local community: Angus Community Resilience Forum Angus Council supports this community needs-driven initiative made up of community groups from across Angus. The forum has raised awareness about the roles of emergency services and other organisations, clarifying the support available to communities during a crisis. The forum connects Angus Council and community resilience groups, including sharing weather alerts and flood updates. This network allows local communities to act as the ‘eyes and ears’ on the ground, contributing vital information to improve emergency planning, response, and recovery efforts. An external assessment found that community groups felt they had an equal voice in discussions and were empowered to lead on emergency responses in their area where possible, and to involve and train volunteers. Source: Flooding in communities: Moving towards flood resilience (Case studies), Audit Scotland, August 2025 What needs to happen Public bodies need to demonstrate national and local leadership by raising awareness of the actions communities and businesses need to take to tackle climate change, work collaboratively with communities to develop policies to support this, and empower people to take action. Public bodies should actively seek to understand community needs and use that understanding to develop shared actions on climate change. Understanding of, and attention to, equalities and consideration of the characteristics of a just transition are key elements in ensuring effective engagement. Meaningful engagement and effective relationship building with communities includes: • Developing long-term relationships with communities, rather than consulting infrequently on specific issues. Using independent organisations to support this process can help to build trust. • Working collaboratively with local communities and giving them an equal voice, including providing opportunities for them to contribute to policy design, and supporting understanding of the actions and behaviours needed by individuals to help achieve climate goals. • Seeking to inform and empower communities so that they are in the best possible position to take action that supports national and local climate change objectives. Public engagementPage 273
Page 274
22Questions for public bodies Questions for public bodies Our audit work on the public sector’s approach to climate change has identified significant barriers to progress. Public bodies need to overcome these together if Scotland is to make sustained progress towards achieving net zero and building resilience to the impacts of climate change. In doing so, leaders may want to reflect on the following questions: Leadership and collaboration • Who are the key partners, groups and communities you need to work with to achieve your climate change objectives? • What policies, strategies or plans (in your own organisation and/or at a national level) will impact on your ability to achieve your climate change objectives? How well aligned are they? Are there common objectives that you could be collaborating on? • Who is leading on the implementation of climate change policies, strategies or plans? What are the respective roles and responsibilities of individuals, groups and organisations involved in delivery? • What are the opportunities for your organisation to combine or share services or resources to help achieve climate change objectives? What can you and your partners do to make the most of these? Planning for delivery • Do you have clear, detailed delivery plans in place to support your climate-related policies and strategies? To what extent do they include the key elements of effective delivery plans set out on page 12? • Are there any gaps in resources, workforce capacity or skills needed to deliver your climate change objectives? What is your organisation doing to develop actions to address them? What are the arrangements for keeping these under review? • How are you ensuring that climate change considerations are fully integrated into decision-making processes across your organisation? Page 274
Page 275
Questions for public bodies 23 Financial planning • Does your organisation have access to all the information it needs to fully understand the impacts of spending decisions on its climate change goals? • Where can you target spending most efficiently and effectively to reduce emissions and/or build resilience to climate change? • To what extent do your organisation’s financial plans and budgets assess the investment needed to deliver climate change objectives in both the short and longer term? • To what extent do climate change strategies and financial plans detail how the expected investment will be funded? • How are you monitoring the impact of spending on climate change objectives and assessing value for money from this investment? Governance • How far do the climate-related governance arrangements in your organisation go in meeting the elements of good governance set out on page 18? • To what extent are these arrangements aligned with other existing governance arrangements? What are the reporting lines between these groups? • What monitoring and reporting mechanisms are in place to support effective oversight of progress? • To what extent have climate change risks and actions to manage them been identified? Is this reflected in wider risk management arrangements? Public engagement • How are you involving people and communities in decisions that impact them? How are you taking their views and insights into account? • What opportunities are open to individuals and communities to influence and shape your climate change policies and approach? To what extent is this happening? • What role does your organisation have in supporting people and communities to understand the actions and behaviours needed to achieve climate goals, and to empower them to act? To what extent is this happening? • To what extent are climate issues considered and discussed within your broader public engagement? Page 275
Page 276
24Evidence base Evidence base We reviewed the audit findings, judgements and recommendations on climate change from the following performance audit reports: • Scotland’s councils’ approach to addressing climate change, September 2022 • How the Scottish Government is set up to deliver climate change goals, April 2023 • Decarbonising heat in homes, February 2024 • Sustainable transport, January 2025 • Flooding in communities: Moving towards flood resilience, August 2025. We also considered a joint report that Audit Scotland produced with the other UK audit agencies on Approaches to achieving net zero across the UK published in September 2023. We reviewed the 2022/23 Best Value thematic reports on all 32 councils and a sample of individual public bodies’ annual audit reports for 2022/23, as auditors specifically considered climate change arrangements in that audit year. The sample of annual audit reports covered a broad cross-section of audited bodies of different sizes and types, including councils, NHS boards, colleges, the Scottish Government and central government bodies. All our work on climate change can be found on the climate change page on our website. Page 276
Page 277
Transforming the approach to climate change Lessons from public audit Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 www.audit.scot ISBN 978 1 918486 04 9 Page 277
Page 278
This page is intentionally left blank
Page 279
Annual Audit Report Argyll and Bute Council – year ended 31 March 2025 January 2026 Page 279
Page 280
Audit and Scrutiny Committee Argyll and Bute Council Forvis Mazars Lochgilphead The Corner, Bank Chambers PA31 8RT 26 Mosley Street Newcastle upon Tyne 16th January 2026 NE1 1DF Dear Committee Members and Controller of Audit, Annual Audit Report – Year ended 31 March 2025 We are pleased to present our Annual Audit Report for Argyll and Bute Council for the year ended 31 March 2025. The purpose of this report is to summarise our audit findings and conclusions. This report has been prepared in accordance with the responsibilities set out within the Audit Scotland’s Code of Audit Practice (“the Code”). This report is intended solely for the Audit and Scrutiny Committee for the purpose of communicating certain matters that, in our professional judgement, are relevant to your oversight of the financial reporting process. Except where required by law or regulation, it should not be used, quoted or made available to any other parties without our prior written consent. We appreciate the courtesy and co-operation extended to us by Argyll and Bute Council throughout our audit. We would be happy to discuss the contents of this report, or any other matters regarding our audit, with you in more detail. Yours faithfully Mark Outterside (Director) Forvis Mazars LLP – The Corner, Bank Chambers, 26 Mosley Street, Newcastle upon Tyne, NE1 1DF – Tel: 0191 383 6339 – www.forvismazars.com/uk Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 Page 280
Page 281
Contents 01 Executive summary 02 Status of our audit 03 Audit approach and risk summary 04 Significant findings 05 Summary of misstatements 06 Fraud considerations 07 Wider Scope 08 Best Value Appendix A: Internal control conclusions Appendix B: Draft management representation letter Appendix C: Draft audit report Appendix D: Confirmation of our independence Appendix E: Other communications Appendix F: Wider scope and Best Value ratings Appendix G: Current year updates, forthcoming accounting & other issues This document is to be regarded as confidential to Argyll and Bute Council. It has been prepared for the sole use of the Audit and Scrutiny Committee as the appropriate sub-committee charged with governance. No responsibility is accepted to any other person in respect of the whole or part of its contents. Our written consent must first be obtained before this document, or any part of it, is disclosed to a third party. 3 Page 281
Page 282
01Executive Summary Page 282
Page 283
Executive summary Scope We have been engaged to audit the financial statements of Argyll and Bute Council for the year ended 31 March 2025 which are prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2024-25. We have conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs’), relevant ethical and professional standards, and the requirements set out in the Audit Scotland’s Code of Audit Practice 2021. Our responsibilities and powers are derived from our appointment by the Accounts Commission under the Part VII of the Local Government (Scotland) Act 1973. Audit status Our audit procedures are now substantially complete for the year ended 31 March 2025. At the time of preparing this report, there are no significant matters outstanding. Areas of focus and audit approach, and significant findings We have not made any changes to our initial risk assessment and planned audit approach that was communicated to the Audit and Scrutiny Committee in our Annual Audit Plan. Our significant risks and other areas of focus are set out in the ‘Audit approach and risk summary’ section, with a summary of our audit approach over those areas. Significant findings from our audit are set out in the ‘Significant findings’ section. Significant control deficiencies We did not identify any significant deficiencies in internal control. The non-significant control observations that we have identified to date are set out in ‘Appendix A: Internal control conclusions’. Audit misstatements A summary of the adjusted and unadjusted misstatements above our reporting threshold we have identified to date is set out in the ‘Summary of misstatements’ section. 5 Page 283
Page 284
Executive summary (continued) Audit opinion At the time of issuing this report and subject to the satisfactory conclusion of our remaining audit work, we anticipate issuing an unqualified opinion, without modification, as set out in Appendix C. Wider scope We anticipate having no significant wider scope risks to report in relation to the financial management; financial sustainability; vision, leadership and governance; and use of resources to improve outcomes arrangements that the Council has in place. Further details have been provided in section ‘Wider scope and Best Value’ of this report. Best Value We anticipate having no significant risks in arrangements to report in relation to the arrangements that the Council has in place to secure economy, efficiency and effectiveness in its use of resources. We have raised some recommendations relating to our work on the Thematic Review and Effectiveness of Performance Reporting. Further details have been provided in section ‘Wider scope and Best Value’ of this report. We have also produced a separate report for the Thematic Review, which covers the theme of Transformation. Management Commentary and Annual Governance Statement opinion We anticipate that we will have no matters to report in respect of the Management Commentary or the Annual Governance Statement preparation as it is consistent with the financial statements and has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003 and Delivering Good Governance in Local Government Framework 2016. Our proposed Management Commentary and Annual Governance Statement opinion is included in the draft auditor’s report in Appendix C. Matters on which we report by exception We are required by the Accounts Commission for Scotland to report to you if, during the course of our audit, we have found that adequate accounting records have not been kept; the financial statements and the audited part of the Remuneration Report are not in agreement with the accounting records; or we have not received all the information and explanations we require for our audit. We have nothing to report in respect of these matters. Other information We are required to report on whether the other information (comprising of the Management Commentary, Annual Governance Statement, Statement of Responsibilities and the unaudited parts of the Remuneration and Staff Report), is materially inconsistent with the financial statements; is materially inconsistent with our knowledge obtained in the course of the audit; or is materially misstated. No inconsistencies have been identified, and we have issued an unmodified opinion in this respect. 6 Page 284
Page 285
Executive summary (continued) Wider reporting powers Section 101 of the Local Government (Scotland) Act 1973 requires us to give any person interested, the opportunity to question us about the accounting records of the Council and to consider any objection made to the accounts. No such correspondence from electors has been received. Reporting to the group auditor We anticipate reporting that the WGA submission is consistent with the audited financial statements. 7 Page 285
Page 286
Executive summary (continued) Qualitative aspects of Council’s accounting practices We have reviewed Council’s accounting policies and disclosures and conclude that they comply with the Code of Practice on Local Authority Accounting in the United Kingdom 2024-25, appropriately tailored to the Council‘s circumstances. The first set of draft accounts did not include appropriate disclosures for IFRS 16 (in relation to leases and Public Private Partnership arrangements), as there were delays from MUFG, who the Council engaged as a specialist to provide technical support for their lease transition work. This was disclosed in the management commentary in the first set of accounts, and appropriate disclosures were subsequently added to the accounting policies in their updated accounts once MUFG had completed their transition work for the Council. While the draft accounts received on 27 June 2025 did not reflect IFRS 16, a revised version was submitted on 12 November 2025, and each set was prepared to a good quality. Significant matters discussed with management During our audit, we communicated the following significant matters to management: • IFRS 16 transition: As noted above, the Council’s first set of draft accounts did not contain updated disclosures for Leases and Public Private Partnership arrangements under IFRS 16, due to delays from the Council’s specialist technical advisor, MUFG, who assisted with the Council’s transition work and disclosures. This led to a delay in receiving updated accounts (inclusive of the disclosures under IFRS 16), which were not received until November 2025. The updated lease disclosures were of a good quality. We tested leases and PPP arrangements at enhanced risk this year – please see page 22 for more detail. • New payroll system: The Council transitioned from their old payroll system (ResourceLink) to a new system (iTrent) in August 2024. We engaged our internal IT specialist team to undertake additional work around the governance of the data migration of this. One internal control recommendation was identified – please see page 88. We also tested payroll at enhanced risk – please see page 23 for more detail. • Prior period restatements: The Council processed one material prior period adjustment relating to the presentation of Cash and Cash Equivalents. Live Argyll bank balances are transacted through and held within the Council’s own bank accounts and were previously presented as a debtor rather than being included within Cash and Cash Equivalents. These balances were reclassified from Debtors to Cash and Cash Equivalents in the 2023/24 comparative figures with a corresponding creditor recognised to reflect the liability to Live Argyll. There were also non-material prior period adjustments relating to the presentation of Cash and Cash Equivalents, and gross interest paid and received. None of these restatements have had any impact on the surplus/deficit, net assets or reserves position. 8 Page 286
Page 287
Executive summary (continued) Significant difficulties during the audit We have not encountered any significant difficulties and we have had the full co-operation of management. Other matters of significance We encountered no significant difficulties during our audit and had no significant disagreements with management. There was effective co-operation and communication between Forvis Mazars, management, and the Audit and Scrutiny Committee during our audit. All requested information and explanations were provided to us. Other matters we are required by ISA (UK) 260 Communication with Those Charged with Governance to communicate to you have been set out in Appendix E. 9 Page 287
Page 288
02Status of our audit Page 288
Page 289
Status of our audit Our audit work is substantially complete and there are currently no matters of which we are aware that would require modification of our audit opinion, subject to the satisfactory resolution of the outstanding matters set out below. Audit quality control and completion procedures Status Our audit work is subject to ongoing manager and director review and quality control procedures. In addition, we need to update post balance sheet event considerations. We will complete our final review of the accounts Medium upon receipt of the signed version and letter of representation. Status High - Likely to result in a material adjustment or a significant change to disclosures in the financial statements. Medium - Potential to result in a material adjustment or a significant change to disclosures in the financial statements. Low - Not considered likely to result in a material adjustment or a change to disclosures in the financial statements. N/A - Work on Wider Scope and Best Value arrangements therefore no risk of adjustment to the financial statements. 11 Page 289
Page 290
03Audit approach and risk summary Page 290
Page 291
Audit approach and risk summary Changes to our audit approach There have been no changes to the audit approach we communicated in our Annual Audit Plan, issued in June 2025. Materiality Our provisional materiality for the Council at the planning stage of our audit was set at £9,697k using a benchmark of 2% of gross operating expenditure as per the Annual Audit Plan (provisional performance materiality: £7,273k; and provisional clearly trivial threshold: £291k). Our provisional materiality for the Group at the planning stage of our audit was set at £9,810k using a benchmark of 2% of gross operating expenditure as per the Annual Audit Plan (provisional performance materiality: £7,358k; and provisional clearly trivial threshold: £294k). Based on the final financial statement figures, the final overall materiality we applied for the Council was £10,442k (final performance materiality: £7,832k; final clearly trivial threshold: £313k). The final overall materiality we applied for the Group was £10,584k (final performance materiality: £7,938k; final clearly trivial threshold: £317k). Group audit approach We have made some minor changes to our Group audit approach, please see page 16 for more detail. Charitable Trusts Based on the final financial statement figures, the final overall materiality applied for the Charitable Trusts was £16k (final performance materiality: £10k; final clearly trivial threshold : £0.5k). We have provided our consideration of our independence as part of the Council engagement and Charitable Trust engagement in Appendix D. 13 Page 291
Page 292
Audit approach and risk summary (continued) Significant risks Fraud risk Judgement Error Substantive audit procedures Tests of controls Misstatement identified Control recommendations Conclusion Page ref to finding Management override of controls Yes Yes No Yes No No No Risk satisfactorily addressed. 18 Valuation of the net defined benefit (liability)/surplus No Yes Yes Yes No Yes No Risk is satisfactorily addressed but we identified some minor disclosure misstatements on the pension notes. 30 Valuation of property, plant and equipment No Yes Yes Yes No No Yes Risk satisfactorily addressed, but we identified some internal control recommendations. 88 and 91 14 Page 292
Page 293
Audit approach and risk summary (continued) Other key areas of judgement, and enhanced risks Fraud risk Judgement Error Substantive audit procedures Tests of controls Misstatement identified Control recommendations Conclusion Risk satisfactorily addressed, although there were several adjustments to the financial statements (as a result of MUFG – Lease liabilities including PPP (Public Private Ye 28-No Yes Yes Yes No Yes the Council’s technical advisor – providing their IFRS 16 data Partnership) contracts s after the date that the draft accounts were published). Accuracy and completeness of staff costs Ye Risk satisfactorily addressed, although we noted an internal following change in payroll/HR system No Yes Yes Yes No No s control recommendation. Page ref to finding 29 87 15 Page 293
Page 294
Audit approach and risk summary (continued) Overview of our group audit approach You engaged us to audit the group financial statements of Argyll and Bute Council and Group. Based on our risk assessment and the financial information for the year ending 31 March 2025, we determined that certain components consolidated into the group financial statements should be subject to either a full scope audit or a specific scope audit, as set out in the table below. Component name % Group Expenditure Location Auditor Scope Changes to scope since planning? Argyll and Bute Council 98% Kilmory, Lochgilphead, Argyll, PA31 8RT Forvis Mazars Parent - a full audit of the financial information. No Argyll and Bute Integration Joint Board 0% Campbeltown, PA28 6LE Forvis Mazars A full audit of the financial information. We initially intended to perform specific procedures on the Integration Joint Board’s accounts, but we have completed the full audit alongside the Council audit. Yes Dunbartonshire and Argyll and Bute Valuation Joint Board 0.3% Kilbrannan House, Bolgam St, Campbeltown, PA28 6JY Forvis Mazars Audit of specific balance – the Pension asset/liability. We did not intend to perform any procedures on these accounts but noted on review of the draft accounts that there are material gross figures for Pensions included as part of the Valuation Joint Board’s accounts. Yes Campbeltown Live Argyll 1.6% Aqualibrium. Kinloch Road, Campbeltown, Forvis Mazars Audit of specific balance – the Pension asset/liability. We obtained a specific IAS 19 report for this work. No Argyll, PA28 6EG Common Good accounts 0.1% Kilmory, Lochgilphead, Argyll, PA31 8RT Forvis Mazars N/A – this has not been scoped into our group work on the grounds of materiality. No Audit scope definitions Full scope audit: an audit of the component’s financial information prepared for group reporting purposes using component performance materiality. Audit of account balance(s), class(es) of transaction, and/ or disclosures(s): an audit of specific account balance(s), class(es) of transaction, and/ or disclosure(s) included in the component’s financial information prepared for group reporting purposes, using component performance materiality. Group engagement team instructed engagement procedures: specific audit procedures performed over the component’s financial information, as instructed by the group engagement team, using component performance materiality. 16 Page 294
Page 295
04Significant findings Page 295
Page 296
] blank blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Significant risks Management override of Description of the risk controls Management at various levels within an organisation are in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. Due to the unpredictable way in which such override could occur there is a risk of material misstatement due to fraud on all audits. You should assess this risk as part of your oversight of the financial reporting process. How we addressed this risk We addressed this risk through performing audit work over: • accounting estimates impacting amounts included in the financial statements; • consideration of identified significant transactions outside the normal course of business; and • journal entries recorded in the general ledger and other adjustments made in preparation of the financial statements. Audit conclusion There are no significant issues to report regarding management override of controls. 18 Page 296
Page 297
blank blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Significant risks Valuation of the net defined Description of the risk benefit (liability)/surplus As at 31 March 2025, the net defined benefit liability was £16.984m. The valuation of the Council’s net liabilities/assets includes use of discount rates, inflation rates, mortality rates etc., all of which should reflect the profile of the Council’s employees and other appropriate data. Due to the high degree of estimation uncertainty associated with the valuations, we have determined there is a significant risk in this area. The valuation of the Council’s net liabilities/assets includes use of discount rates, inflation rates, mortality rates etc., all of which should reflect the profile of the Council’s employees and other appropriate data. Due to the high degree of estimation uncertainty associated with the valuations, we have determined there is a significant risk in this area. How we addressed this risk We addressed this risk through: • challenging the reasonableness of the Actuary’s assumptions that underpin the relevant entries made in the financial statements; • critically assessing the competency, objectivity and independence of the Actuary; • liaising with the auditors of the Pension Fund to gain assurance that the overall IAS19 procedures and controls in place at the Pension Fund are operating effectively; • compared assumptions to expected ranges; and • agreed data in the Actuary’s valuation report for accounting purposes to the relevant accounting entries and disclosures in the Council’s financial statements. Audit conclusion Other than some minor disclosure issues (which have been reported per Section 05 of this report), there are no significant issues to report regarding the valuation of the net defined benefit (liability)/surplus. 19 Page 297
Page 298
] blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Significant risks Valuation of property, plant Description of the risk and equipment The Council held land and buildings (including council dwellings) with a net book value of £455.9m at 31 March 2025. The Council has adopted a rolling revaluation model which involves other land and buildings being revalued over a five-year cycle. This may result in individual assets not being revalued for several years. This creates a risk that the carrying value of those assets that have not been revalued in year is materially different from the year end fair value. Valuations are based on specialist and management assumptions and changes in these can result in material changes to valuations. Due to the high degree of estimation uncertainty associated with valuations, we have determined there is a significant risk in this area. How we addressed this risk We addressed this risk through: • assessing the scope and terms of engagement with the in-house Valuer; • assessing the competence, skills and objectivity of the in-house Valuer; • assessing how management use the in-house Valuer’s report to value land and buildings included in the financial statements; • testing the accuracy of the data used in valuations; • challenging the Council and in-house Valuer’s assumptions and judgements applied in the valuations; • reviewing the valuation methodology used, including the appropriateness of the valuation basis; • considering the reasonableness of the valuation by comparing the valuation output with market intelligence; • testing a sample of revaluations in the year, by agreeing the revaluations recorded in the Annual Accounts to the in-house valuer’s reports. As part of this testing, we checked whether the movements have been accounted for in accordance with the Code; 20 Page 298
Page 299
] blank blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Significant risks Valuation of property, plant and equipment (continued) How we addressed this risk (continued) We addressed this risk through: • challenging management’s assessment for those assets not subject to valuation in the year; • for those valued on Existing Use Value on a market comparable basis, we will check market movements to assess the materiality of potential movement for 2024/25; and • for those valued on a Depreciated Replacement Cost basis, which would be impacted by changes in build costs during the year, we tested management’s analysis of changes in the Build Costs Information Service (BCIS) index and assessed any decisions management made in this regard. Audit conclusion Based on our audit work, we have obtained sufficient, appropriate assurance. There are two control recommendations that have carried through from previous years – please see page 88 and 91. 21 Page 299
Page 300
blank blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Enhanced risks Lease liabilities including PPP (Public Private Partnership) contracts Description of the risk Enhanced risk due to the implementation of a new accounting standard in 2024/25 (IFRS 16 Leases). The Council has the following PPP contracts: • Schools Non-Profit Distributing Organisation (NPDO) Public Private Partnership; and • Schools Hub Design, Build, Finance and Maintain Contract (DBFM) Public Private Partnership. IFRS 16 changes the definition of a lease compared to IAS 17 and IFRIC 4. The Council will apply this definition to new leases only and will grandfather its assessments made under the old standards of whether existing contracts contain a lease. The new standard also applies to the Council’s PPP arrangements from 1 April 2024. On transition to IFRS 16 on 1 April 2024, the Council will apply the standard retrospectively without restatement. Additional new disclosures will also be required. The Council has previously made disclosures in its financial statements; however, this is a complex area, hence we have assessed it as an enhanced risk. How we addressed this risk We addressed this risk through: • critically review the accuracy and completeness of the Council’s assessment and review the changes to the PPP models; • review the accounting treatment; • ensure the required disclosures have been made; and • seek other evidence as appropriate. Audit conclusion Based on our audit work, we have obtained sufficient, appropriate assurance. We have included the IFRS 16 transition adjustments per the adjusted misstatements schedule, as these had not been processed per the draft accounts. Note that the PPP CIES adjustments (per page 28) include the correction of a historical error in the old PPP model, which has been processed this year to ensure the starting PPP balances were on the correct opening basis. We also noted that the NPDO model was not operational in 2024/25, and the DBFM model (created by MUFG – the Council’s technical advisors) was hard coded. Work was performed to reverse engineer these models to become formula driven. 22 Page 300
Page 301
blank blank Significant findings The significant findings from our audit include our conclusions regarding the significant risks we identified and other key areas of judgement, which are set out in this section. Enhanced risks Accuracy and completeness Description of the risk of staff costs following change in payroll/HR system The Council have changed their payroll/HR system in-year (during August 2024), from ResourceLink to iTrent. There is a risk relating to data migration, as this involves a significant amount of payroll/HR data being migrated from one system to another, which increases risks in relation to accuracy and completeness of this data. How we addressed this risk We addressed this risk through: • reviewing the Council’s arrangements for ensuring the iTrent system is accurate and complete; • reviewing key files to ensure that these reconciled and were accurately recorded in the financial statements; • increasing our sample size of staff costs by testing at enhanced risk; and • using an internal Forvis Mazars IT expert/specialist to review the governance behind the data migration. Audit conclusion Based on our audit work, we have obtained sufficient, appropriate assurance. We have noted one control recommendation from the data migration governance – please see page 87. 23 Page 301
Page 302
Significant findings (continued) Wider responsibilities – statutory reporting The 1973 Act allows any persons interested to inspect the accounts to be audited and the underlying accounting records of the Council. The act also allows any persons interested to object to the accounts. No such objections have been raised. We are required to notify the Controller of Audit when circumstances indicate that a statutory report may be required. • Section 102(1) of the 1973 Act allows us to prepare a report to the Commission about the Council’s accounts; matters that have arisen during the audit that should be brought to the attention of the public; or the performance of the Council in their duties relating to Best Value and community planning. No such reports have been prepared. • Section 102(3) of the 1973 Act allows us to make a special report to the Commission if an item of account is contrary to law; there has been a failure on someone’s part to bring into account a sum which ought to have been brought into account; a loss has been incurred or deficiency caused by the negligence or misconduct of a person, or by the failure of a body to carry out a duty imposed on them by any enactment; or a sum which ought to have been credited or debited to one account of a body has been credited or debited to another account and the body has not taken, or is not taking, steps to remedy the matter. No such reports have been prepared. • Section 97A of the 1973 Act allows us to undertake or promote comparative and other studies to make and publish recommendations for the securing by local government bodies of Best Value, improving economy, efficiency and effectiveness in the provision of services by local government bodies and improving the financial or other management of local government bodies. No such recommendations have been prepared. 24 Page 302
Page 303
05Summary of misstatements Page 303
Page 304
Summary of misstatements Unadjusted misstatements Our overall materiality, performance materiality, and clearly trivial (reporting) threshold were reported in our Annual Audit Plan, issued in June 2025. Any subsequent changes to those figures are set out in the ‘Audit Approach and Risk Summary’ section of this report. Management has assessed the misstatements in the table below as not being material, individually or in aggregate, to the financial statements and does not plan to adjust. We only report to the Audit and Scrutiny Committee unadjusted misstatements that are either material by nature or which exceed our reporting threshold. Details of adjustment Nature Assets Liabilities Reserves CIES Blank Blank £’000 £’000 £’000 £’000 Dr: Short term Debtors Cr: Fees, charges and other service income Being the extrapolated error resulting from an under accrual of income. 556 -556 Plus – aggregated unadjusted misstatements brought forward from 2023/24 audit Being the unadjusted errors identified in the 2023/24 audit that impact upon 2024/25. 2,549 -1,200 0 -1,349 Aggregate effect of unadjusted misstatements blank 3,105 1,200 0 1,905 - - We will obtain written representations confirming that, after considering the unadjusted misstatements, both individually and in aggregate, in the context of the financial statements taken as a whole, no adjustments are required. 26 Page 304
Page 305
Summary of misstatements (continued) Adjusted misstatements The misstatements in the table below have been adjusted by management. We report all individual misstatements above our reporting threshold that we identify during our audit and which management had adjusted and any other misstatements we believe the Audit and Scrutiny Committee should be made aware of. Details of adjustment Nature Assets Liabilities Reserves CIES Blank Blank £’000 £’000 £’000 £’000 Dr: Gross Expenditure (Roads and Infrastructure) Cr: Gross Income (Roads and Infrastructure) Being the adjustment to rectify the double counting of internal transactions. 6,334 -6,334 Dr: Gross Income (various lines) Cr: Gross Expenditure (various lines) Being the adjustment to rectify errors arising from internal transaction adjustments. 419 -419 s 27 Page 305
Page 306
Summary of misstatements (continued) Adjusted misstatements (continued) The misstatements in the table below have been adjusted by management. We report all individual misstatements above our reporting threshold that we identify during our audit and which management had adjusted and any other misstatements we believe the Audit and Scrutiny Committee should be made aware of. Details of adjustment Nature Assets Liabilities Reserves CIES £’000 £’000 £’000 £’000 -1,001 3,195 -2,194 3,679 -62 -4,621 1,004 Blank Dr: Interest payable and other charges Cr: Gross expenditure (Education) Cr: Reserves Dr: Property, Plant and Equipment Dr: Reserves Cr: Other liabilities (Short term) Cr: Other liabilities (Long term) Blank Being the adjustments made to the Comprehensive Income and Expenditure Statement following the implementation of IFRS 16 in relation to Public Private Partnership (PPP) schemes. Being the adjustments made to the Balance Sheet following the implementation of IFRS 16 in relation to Public Private Partnership (PPP) schemes. 28 Page 306
Page 307
Summary of misstatements (continued) Adjusted misstatements (continued) The misstatements in the table below have been adjusted by management. We report all individual misstatements above our reporting threshold that we identify during our audit and which management had adjusted and any other misstatements we believe the Audit and Scrutiny Committee should be made aware of. Details of adjustment Nature Assets Liabilities Reserves CIES Blank Blank £’000 £’000 £’000 £’000 Dr: Interest payable and other charges Dr: Reserves Cr: Gross expenditure (various lines) Cr: Gain on initial recognition of lease – Capital contribution Being the adjustments made to the Comprehensive Income and Expenditure Statement following the implementation of IFRS 16 in relation to Leases. 215 290 -356 -149 Dr: Property, Plant and Equipment Cr: Other liabilities (Short term) Cr: Other liabilities (Long term) Cr: Provisions (Long term) Cr: Reserves Being the adjustments made to the Balance Sheet following the implementation of IFRS 16 in relation to Leases. 6,015 -1,946 -3,846 -7 -216 Aggregate effect of adjusted misstatements blank 9,694 10,482 2 786 - 29 Page 307
Page 308
Summary of misstatements (continued) Disclosure misstatements We identified the following disclosure misstatements during our audit that have been corrected by management: • There was no accounting policy included for IFRS 15 – Revenue from contracts with customers. • There was no individual disaggregating note included within the accounts for Interest Payable, and Interest and Investment Income. • Per Note 31 (Defined Benefit Pension Schemes), the ‘Change in Financial and Demographic Assumptions’ figure was presented as a net figure – it should be disaggregated into separate assumption line figures. • Per Note 31 (Defined Benefit Pension Schemes), the disclosure on the Virgin Media legal case was not up to date. • Per Note 31 (Defined Benefit Pension Schemes), the figure for past service costs was disclosed as £0k – it should be £276k. • Per Note 15 (Property, plant and equipment), the disclosures on the statutory override (in relation to infrastructure) did not contain enough detail. • The presentation of the Cash Flow Statement had changed from the indirect method, to the direct method. Whilst this is permitted under the Code, the change in presentation needs to be accompanied by a clear explanation. • Per Note 14 (Related Parties), the figure for Bookfan Ltd Trading (per Note 14.2) was incorrectly disclosed as £71k – this should be £91k. • Per Note 14 (Related Parties), a related party for one of the Councillors had not been included within the disclosure on Note 14.3. • On the Group Balance Sheet, the ‘Investment in Associates and Joint Ventures’ figure is split out between long term/short term assets and liabilities – this should be presented as one net figure under long term assets. • On the Group Comprehensive Income and Expenditure Statement, the restated figures for 23/24 from the single entity statement had not been updated. • Per the Remuneration Report, under ‘Other Departures’, there was an exit package incorrectly disclosed as £67,464, which should be £81,937. This means the overall total should be £242,971, rather than £228,498 (which it is per draft accounts). 30 Page 308
Page 309
06Fraud considerations Page 309
Page 310
Fraud considerations We have a responsibility to plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. Your responsibilities Management has primary responsibility for the prevention and detection of fraud. It is important that management, with your oversight, place a strong emphasis on fraud prevention, which may reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud because of the likelihood of detection and punishment. This involves a commitment to creating a culture of honesty and ethical behaviour which is reinforced by your active oversight. Our responsibilities We have a responsibility for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether due to fraud or error. The distinguishing factor between fraud and error is whether the underlying action that results in a misstatement is intentional or unintentional. Two types of intentional misstatements are relevant to us – misstatements resulting from fraudulent financial reporting, and misstatements resulting from the misappropriation of assets. ISA presumed fraud risks As set out in the ‘Audit approach and risk summary’ section, the risks of fraud in management override of controls was identified as a significant risk. Our overall approach to fraud Assignment and supervision Inquired with management and of appropriate audit the Audit and Scrutiny personnel Committee Obtained written application of accounting Evaluated the selection and representation from policies management Incorporated elements of Maintained professional unpredictability into our scepticism audit procedures Our overall conclusion We did not identify any actual or suspected fraud involving group or component management, employees with significant roles in the group’s internal control or others, where the fraud resulted in a material misstatement in the group financial statements. 32 Page 310
Page 311
07Wider Scope Page 311
Page 312
Commentary on Wider Scope Overall Summary Page 312
Page 313
Commentary on Wider Scope Wider Scope summary As auditors appointed by the Accounts Commission, our wider scope responsibilities are set out in the Code of Audit Practice 2021 and sits alongside Best Value requirements detailed in the Local Government (Scotland) Act 1973. The Code requirements broaden the scope of the 2024/25 audit and allow us to use a risk-based approach to report on our consideration of the Council’s performance of best value and community planning duties and make recommendations for improvement and, where appropriate, conclude on the Council’s performance. The Code’s Wider Scope framework is categorised into four areas: • financial management; • financial sustainability; • vision, leadership and governance; and • use of resources to improve outcomes. Overall summary by reporting criteria From the satisfactory conclusion of our audit work, we have the following conclusions: Reporting criteria Commentary page reference Possible significant risks? Significant risks identified? Other recommendations made? Financial management 36 No No No Financial sustainability 41 Yes – see page 42. No No Vision, leadership and governance 46 Yes – see page 47. No No Use of resources to improve outcomes 52 No No No 35 Page 313
Page 314
Commentary on Wider Scope Financial management Financial management is concerned with financial capacity, sound budgetary processes and whether the control environment and internal controls are operating effectively. Page 314
Page 315
Financial management (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Financial management culture The Council demonstrates an effective culture in terms of financial management. The Council produces an annual Treasury Management Strategy, an Annual Report, and a detailed Medium Term Financial Plan. The most recent Medium Term Financial Plan (called 'Budget Outlook 2026-27 to 2030-31') was taken to the Policy and Resources Committee in December 2025. This noted that the in the mid-range scenario (after measures to balance the budget), the estimated budget gap would be £6.2m in 2026-27 and would total £31.1m over the period from 2026-27 to 2030-31. This is based on a 5% increase in council tax (for illustration purposes), and before other measures to balance the budget are progressed, including policy savings options. Budget updates are taken to the Policy and Resources Committee on a regular, rolling basis throughout the year, with key updates presented typically in November/December, and a formal budget-setting is reported in February of each year. The Council has appropriate and effective financial management arrangements in place. No significant risks identified. 37 Page 315
Page 316
Financial management (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Financial management culture (continued) The Council has plans to place to address the funding gap issues it faces in the future, although some of these plans are still in early stages. These are based around service transformation (reviewing and redesigning services to be more efficient/sustainable) and expanding digital services (investing in technology to enhance and streamline key services). They also intend to carefully manage reserves and have noted that over- reliance on reserves is not sustainable or enough to close the budget gap alone. We have reviewed the Policy and Resources Committee minutes on a rolling basis throughout the year and have obtained sufficient assurance that the Council carefully monitors their financial position and identifies mitigations that can address issues where necessary. Financial risks are also reported to the Policy and Resources Committee. The most recent analysis was presented in December 2025, covering both Council-wide and departmental risks, with notable risks including severe weather costs, an unfunded pay award, and a Council Tax income reduction. (See previous page). (See previous page). 38 Page 316
Page 317
Financial management (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Accountability Budget reports are presented annually to the Council. The budget for 2025-26 was presented in February 2025 and covers 2026-27 to 2029-30. As noted above, a revised Budget Outlook was taken to the Policy and Resources Committee in December 2025, covering 2026-27 to 2030-31. The budget for 2025/26 has incorporated several measures to balance the budget - these include an increase in council tax, management/operational savings, and the use of reserves (£1.558m), noting that the use of reserves is "one-off in nature", and intended to be used as a gap reduction in 2025-26 only. Budget update reports are presented to the Policy and Resources Committee throughout the year. From of our review of minutes, we have noted that five of these Committee meetings took place throughout 2025, and budget updates and financial monitoring reports were presented each time. Our review of these reports also notes that they contain sufficient detail for Council members to scrutinise. The Council's general fund reserves as of 31 March 2025 are £112.7m. The Council has a policy of holding a minimum uncommitted balance of 2% of its budgeted annual net expenditure, to have a buffer against unforeseen costs or events. Per Note 6.1 in the financial statements, the Council has a contingency balance of £6.539m, which is equivalent to 2% of the Council’s budgeted net expenditure for 2025-26. The Council has appropriate budget monitoring and reporting arrangements in place, with appropriate contingency funds in place in accordance with policies. No significant risks identified. 39 Page 317
Page 318
Financial management (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Arrangements to prevent and detect fraud, error and other regularities, bribery and corruption The Council maintains its own fraud and corruption policies. There are established arrangements for preventing and detecting fraud, including codes of conduct for officers, an anti-fraud strategy, and a whistleblowing policy. The Council has an established internal audit team, with regular reports (including the Internal Audit Plan and Head of Internal Audit Report) being taken to the Audit and Scrutiny Committee and interrogated by members. The annual Head Internal Audit report provided a reasonable level of assurance on the adequacy of internal controls and governance arrangements within the Council. We have considered IT general controls and other key business process controls as part of our audit planning in 2024/25. We did not identify any significant control issues with the controls in place. We also received signed letters from both management and the Audit and Scrutiny committee, which did not raise any issues in terms of controls or issues throughout the year. The Council has appropriate arrangements in place to prevent and detect fraud and corruption. No significant risks identified. 40 Page 318
Page 319
Commentary on Wider Scope Financial sustainability Financial sustainability looks forward to the medium and longer term to consider whether the body is planning effectively to continue to deliver its services or the way in which they should be delivered. Page 319
Page 320
Financial sustainability (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank 1 Significant Risk in Arrangements Identified Work undertaken and the results of our work Financial sustainability Work undertaken Before implementing measures to balance the We reviewed the Council's: budget, the 2025/26 budget gap stood at £10.938 million. The budget also highlights a gap of - medium to long term financial strategy; £9.528m in 2026/27 rising to a cumulative budget - financial position and track record in delivering planned recurrent and non-recurrent savings in 2024/25; gap of £29.537m by the end of 2029/30 based - financial performance in 2024/25 and updates to its financial planning during the year, including the implications for upon a ‘mid-range’ scenario. The Council’s ‘worst general reserves balances; case’ scenario highlights a potential £55.999m - regular reporting to members on financial performance, savings plans and financial risks; and cumulative budget gap by the end of 2029/30. - progress in developing plans to address future year budget gaps. This represents a risk in relation to financial sustainability, impacting on the future provision Results of our work of services in the Council’s area. We have reviewed the Council's Budget Outlook 2026-27 to 2030-31, which was presented to the Policy and Resources Committee in December 2025. There is a significant funding gap forecast for this period - under a mid- range scenario, the Council may face a £14.2m funding gap in 2026-27, which could cumulatively rise to £58.5m by 2030-31. Measures to balance the budget of £8m have been identified for 2026-27, reducing the budget gap to £6.2m, whilst 2030-31 has identified measures of £27.4m to balance the budget, which are based on an indicative council tax increase of 5%, and before any other measures are presented for decision in February 2026 (such as Policy savings options). 42 Page 320
Page 321
Financial sustainability (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified 1 Financial sustainability (continued) Work undertaken and the results of our work Results of our work (continued) Under the best-case scenario, a budget gap of £1.4m is predicted in 2026-27, rising to £7.8m over the five-year period. The Council have noted that this is a difficult outlook for them to face, and any variations in assumptions (especially Scottish Government grant funding) would have a major impact. We have also reviewed the Council's revenue budget monitoring report, which was taken to the Council in June 2025. This shows that performance against budget for 2024-25 was an underspend of £1.905m, which was 0.6% of the net budget for the year (note that this was after accounting for automatic earmarking, plus two earmarkings approved as part of the 2025-25 budget setting). In terms of performance against budget, departmental controllable expenditure was £2.2m over budget - this was primarily due to overspends in relation to increases in bus contracts for school/public transport, increased winter maintenance costs and a saving unachieved in the year relating to a RIS review. There were also significant costs incurred (£0.79m) in terms of Storm Darragh, which occurred in December 2024. This overspend was offset by an underspend on Council Central costs (mainly due to a big underspend of £3.3m against budget on the Loans Fund), and a net over recovery of income of £1.2m in relation to Council Tax performance. In 2024-25, the General Fund balance decreased by £3.04m, to £112.7m (2023-24 - £115.7m). The decrease was primarily due to funds earmarked for specific purposes used during the 2024-25 financial period (£26.5m), although this was partially offset by the underspend in 2024- 25 (£1.9m), earmarking previously agreed and created during the year (£13.3m), and new automatic earmarking at the end of 2024-25 (£8.3m). 43 Page 321
Page 322
Financial sustainability (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified Work undertaken and the results of our work 1 Financial sustainability (continued) Results of our work (continued) In terms of reporting to members in relation to financial performance, this is done on a regular basis, primarily through the Policy and Resources Committee. Financial monitoring reports are presented on a bi-monthly basis for revenue, risks and reserves, and on a quarterly basis for capital and treasury. The most recent report was presented in December 2025 and covers the six-month period to October 2025. The initial revenue budget for 2026-27 included the delivery of savings options throughout the year, totalling £2.8m. There are 15 options which impact on 2025-26 - 8 of which have been delivered (£1.4m), whilst the remaining 7 (£1.4m) are on track to be delivered. A detailed breakdown of these has been provided, outlining the approved savings options (which were approved in February 2025), and tracking progress against each one, noting the future year potential recurring savings as well. Whilst challenges remain, and we will continue to monitor arrangements in future years, we have concluded that the arrangements described above mitigate the financial sustainability risk. 44 Page 322
Page 323
Financial sustainability (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Financial planning There are several papers which have been presented to the Policy and Resources Committee in 2025. These include the Medium- Term Financial Plan (titled Budget Outlook 2026-27 to 2030-31') presented in December 2025. The Council also produces formal financial monitoring reports, which cover revenue, capital, reserves, and any associated risks. As noted earlier, financial monitoring reports are presented on a bi-monthly basis for revenue, risks and reserves, and on a quarterly basis for capital and treasury. We have reviewed these reports as part of our review minutes. The most recent update was taken to the December 2025 Committee and covers the financial year up to October 2025. The updated Budget Outlook paper projects the following cumulative budget gap (based on a mid-range scenario): - 2026-27: £14.2m - 2027-28: £29.8m - 2028-29: £38.9m - 2029-30: £48.6m - 2030-31: £58.5m The main budget pressures identified are in relation to pay awards/staff costs (noting that staffing costs are a significant part of the Council's budget, and even small increases have a major impact), inflationary pressures, the rising costs of energy and utilities, rising demand in social care services, and severe weather/climate events. The Council is taking several actions to mitigate the budget gap - these include streamlining services to increase recurring savings, increasing fees and charges, using reserves carefully (i.e. for short term issues, rather than for longer term gaps), and using the Council's risk matrix to assess and prioritise any mitigating actions. An increase of 9.9% in council tax was also approved in February 2025. In terms of the Council's capital programme, forecast gross expenditure is £212.3m, against an approved budget of £212.1m, showing a forecast overspend of £0.2m. The report lists progress against the physical delivery of the capital programme (i.e. how many projects are on track, and how many projects are off track) and considers proposed budget changes. Risks against the capital plan are also considered - for example, concerns about the uncertainty of future capital receipts, supply chain disruptions, and inflationary pressures. The Council have effective financial planning measures in place and are conscious of the challenging financial position that the Council faces in future years. No significant risks identified. 45 Page 323
Page 324
Commentary on Wider Scope Vision, leadership and governance Vision, Leadership and Governance is concerned with the effectiveness of scrutiny and governance arrangements, leadership and decision making, and transparent reporting of financial and performance information. Page 324
Page 325
Vision, leadership and governance (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank 1 Significant Risk in Arrangements Identified Work undertaken and the results of our work Clarity of the strategy, priorities and plans to implement the Work undertaken vision We reviewed: The Council's Strategic Plan 2023/2027, also known as the Corporate Plan, outlines the vision - the Council's progress in implementing its revised Corporate Plan and other key policy documents; and key commitments for the Council. During the - considered how the Council's revised Corporate Plan maintains clarity of vision, and how changes are previous year's audit, we noted that the Strategic communicated; and Plan and other key policy documents were being - how the Council ensures alignment between the Corporate Plan and other key Council strategies, such as revised due to a change in administration, with an the medium-term financial plan and corporate savings plan). updated Strategy and other key policy documents scheduled for publication in March 2025. Results of our work We therefore consider there to be a risk that these The Council presented their revised Corporate Plan in May 2025, for consideration and approval to go to the strategic documents may be inconsistent with full Council. We have noted that the Corporate Plan refers to an annual business plan for 2025-26 (which is other related policy documents, potentially intended to set out deliverables and monitor performance against strategic outcomes), but as noted in the impacting the clarity of the Council's vision and December 2025 Audit and Scrutiny Committee, this has still not been produced and presented to the Council. implementation of the administration’s policies. The revised Corporate Plan is available for the public to view on the Council's website. 47 Page 325
Page 326
Vision, leadership and governance (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Work undertaken and the results of our work Results of our work (continued) We have considered the updated Corporate Plan (2025-27) against the older version (Corporate Plan 2023-27), which had been approved by the Council in June 2023. There is a bigger emphasis on transformation throughout the revised version, which identifies that the Council needs to increase their transformation activity to address financial sustainability concerns. In terms of key priorities, the revised plan has seven corporate priorities (relating to communities, children, environment, speaking up for Argyll and Bute, sustainability, transport/infrastructure, and housing), and they are similar to those in the original version, but again there is a greater emphasis on sustainability and transformation. In particular, the corporate priority relating to sustainability details the more specific priorities that the Council has, with one of the key points being that the Council wants to provide the best services they can with the money they have available. Action steps linked to this include making the most of new digital technologies, such as artificial intelligence. The revised plan is also supplemented by underpinning principles called Connect for Success. This model has been designed around seven principles (One Council One Place One Approach, Purpose and Mission Focus, Employee empowerment, Data and evidence driven decision- making, Learning Council, Agile, and Maximise opportunities that technology offers). These principles are very much linked to the Corporate Plan itself - for example, maximising the opportunities that technology offers ties into the transformation activities that are embedded within it. Blank Significant Risk in Arrangements Identified 1 Clarity of the strategy, priorities and plans to implement the vision (continued) 48 Page 326
Page 327
Vision, leadership and governance (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified Work undertaken and the results of our work 1 Clarity of the strategy, priorities and plans to implement the vision (continued) Results of our work (continued) The Council have also produced a Corporate Improvement Plan Action Plan 2025-28. This has specific outcomes linked to key areas (transformation, performance, community engagement, finance, and leadership and workforce) - for example, under transformation, one of the outcomes is about identifying opportunities to resolve data challenges through the production of Power BI reports, to support the Connect for Success principle relating to data and evidence driven decision-making. Each outcome is supported by success measures (for example - increasing available Power BI reports by 6 per quarter), with a people/department lead and target date also attached. Most of these outcomes have target dates in 2026, with a few in 2027. Based on the work performed, we believe this risk has been addressed, although we have raised a recommendation in terms of effective performance management, which is linked to the revised Corporate Plan. Please see page 66 for more detail. 49 Page 327
Page 328
Vision, leadership and governance (continued) Our overall assessment (continued) Area assessed Our findings Our judgements Significant risks identified Governance arrangements The Council's governance arrangements are in line with the Local Code of Corporate Governance (the Code), which is consistent with the principles of the CIPFA/SOLACE revised framework for 'Delivering Good Governance in Local Government'. The Council publishes an Annual Governance Statement as part of their annual accounts. There is also a Council Constitution, which is available on the Council's website, and was last updated in February 2025 - this covers standing orders, financial regulations, the scheme of administration and delegation, and ethical framework that the Council works with. In terms of oversight, the Council has various committees - these include Policy and Resources, Development and infrastructure, Community Services, and Audit and Scrutiny. In particular, the Audit and Scrutiny committee provides an independent appraisal and scrutiny of the Council's governance arrangements. Through our review of minutes and attendance at the Audit and Scrutiny Committee, we have observed effective challenge from members. The Council meetings are well attended and are open to the public. Minutes of these meetings can also be viewed on the Council's website. The Council’s governance arrangements are appropriate and allow effective scrutiny and challenge. No significant risks identified. 50 Page 328
Page 329
Vision, leadership and governance (continued) Our overall assessment (continued) Area assessed Our findings Our judgements Significant risks identified Financial and performance information Regular financial monitoring reports are presented to the Policy and Resources Committee. Reports are presented on a bi-monthly basis for revenue, risks and reserves, and on a quarterly basis for capital and treasury. These reports are sufficiently detailed, and cover updates on the revenue budget, capital programme, reserves position and any associated financial risks, and the mitigating actions the Council has in place to address these. In terms of performance, the Council publishes an Annual Report each year, which is available to the public. The purpose of this report is to demonstrate how the Council has delivered its services throughout the year and progressed against its corporate priorities. It also considers the financial position of the Council. The 2024/25 Annual Report was published in October 2025, and is comprehensive - it contains each corporate outcome, which is split into separate corporate outcome indicators. Each indicator has a target attached, and the Council's progress against this is tracked via numerical and written data, with historical performance data also included, alongside commentary where relevant. The Council's arrangements for reporting financial and performance information to board and committees is conducted effectively. No significant risks identified. 51 Page 329
Page 330
Commentary on Wider Scope Use of resources to improve outcomes Audited bodies need to make best use of their resources to meet stated outcomes and improvement objectives, through effective planning and working with strategic partners and communities. This includes demonstrating economy, efficiency, and effectiveness through the use of financial and other resources and reporting performance against outcomes. Page 330
Page 331
Use of resources to improve outcomes (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Resources deployed to improve strategic outcomes The Council's Annual Report for 24/25 demonstrates that their performance has improved in 2024/25. In terms of the corporate outcome indicators (of which there are 47 in total), 17 are on track or above target, 10 are off track, under target or have no data, and 20 have no target attached. The Annual Report also considers the Council's performance against the Local Government Benchmarking Framework (LGBF). In 2024/25 - 60% of Argyll and Bute Council's indicators were in quartiles 1 and 2 (performance above the Scottish average), whilst only 46% were in these quartiles in 2023-24. Service highlights include care services (where 84.2% of care services were graded as good or better in Care Inspectorate inspections - considerably higher than the Scottish average of 81.9%), street cleanliness (80%, which is significantly higher than the nationally recognised pass rate of 67%), and waste management (achieving 68.3%, compared to the target of 45%). Lower performing indicators are in terms of geographical coverage of 4G/5G mobile connectivity (89% against the target of 95%), percentage of children achieving appropriate development milestones by Primary 1 (61% against a target of 70%), and distribution of the Discretionary Housing Payment (DHP) fund (89.2% distributed, against a target of 96%). For those areas which are not meeting their targets, action points/plans have been raised within the Annual Report where relevant. The Council have effectively deployed resources to improve strategic outcomes. No significant risks identified. 53 Page 331
Page 332
Use of resources to improve outcomes (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Needs of service users being met In January and February 2025, the Council ran a high-level survey, where they asked residents of Argyll and Bute what their priorities were in terms of the services that the Council provides. Feedback was received from 871 residents, and there were almost 2,000 comments from the respondents. Residents noted waste management, public transport and roads as being the services that they used most, whilst roads, waste management and early education were raised as the areas that are most important for overall wellbeing. The survey also gathered views around paying more for local services and asked for suggestions in terms of improving services. This demonstrates that the Council considers the needs of their service users whilst prioritising spend on services. The Council's updated Corporate Plan for 2025-27 also evidences that the needs of service users are considered in terms of future planning. For example, there are priorities relating to developing school curriculums with jobs of the future in mind (i.e. ensuring young people are gaining the necessary skillset to develop a career in the area), transport (designing a new Transport Strategy to improve connectivity), and goals around environment and sustainability (consideration of waste policies in terms of cutting carbon emissions). The updated Corporate Plan demonstrates that service user feedback has been considered. The Council considers the needs of service users and aligns its planning priorities with these needs. No significant risks identified. 54 Page 332
Page 333
Use of resources to improve outcomes (continued) Our overall assessment Area assessed Our findings Our judgements Significant risks identified Arrangements to deliver continuous improvements in priority services The Council's updated Corporate Plan 2025-27 was presented to the Policy and Resources Committee in May 2025. The plan was updated due to a change in administration. This clearly sets out the Council's seven priority areas as follows: - Communities - Children and young people - Environment - Speaking up for Argyll and Bute - Sustainable service delivery - Transport, infrastructure and digital connectivity - Housing, economic growth and population Each corporate priority is then broken down into smaller, specific priorities (for example, under 'Children and young people', one of the priorities is 'Develop our school curriculums with the jobs of the future in mind'. Each of these specific priorities have next steps/action plans noted in the plan. The plan also states that the Council will produce an annual Business Plan where they set out deliverables and monitor performance against these strategic plans. We have noted that per the minutes from the Audit and Scrutiny Committee in December 2025, an Annual Business Plan for 2025/26 has not yet been completed and presented. An update of the outcomes from the 2024/25 Business Plan was presented to the Council in November 2025. The Council have arrangements in place to deliver continuous improvements in priority services, although we have noted that they have still not produced an Annual Business Plan for 2025/26. No significant risks identified. 55 Page 333
Page 334
08Best Value Page 334
Page 335
Best Value Best Value summary Under the Code of Audit Practice, the audit of Best Value is fully integrated within our annual audit work. We are required to assess the seven Best Value themes at the Council over the period of the audit appointment. We have used a risk-based approach that is proportionate to the size and type of the body, to assess whether the Council has made proper arrangements for securing Best Value and is complying with its community planning duties. We have also followed up on previously reported Best Value findings and have assessed the pace and depth of improvement implemented by the Council. At least once every five years, the Controller of Audit will report to the Accounts Commission on the Council’s performance in meeting its Best Value duties. We conduct thematic reviews as directed by the Accounts Commission. In 2024/25 this will be about transformation. The Council is included in the third year of the programme which runs from October 2025 to August 2026. We have prepared a separate management report to document the findings of this work. Performance Audit and Best Value staff also prepare a report for the Controller of Audit using information and judgements on the pace and depth of continuous improvement reported in this Annual Audit Report. The Council is not included in the second year of the programme which runs from October 2024 to August 2025. At the planning stage of the audit, we undertook work to understand the arrangements that the Council has in place under each of the reporting criteria and we considered whether there were any risks to our audit in those arrangements. We have kept our understanding of arrangements under review and updated our risk assessment throughout the audit to reflect emerging issues that may suggest significant risks in arrangements exist. The following slides outline the work that we have undertaken for each of the seven Best Value themes and any improvements or risks in arrangements that have been identified as part of our assessment. We have reported recommendations for the risks identified. 57 Page 335
Page 336
Best Value (continued) Overall summary by reporting criteria From the satisfactory conclusion of our audit work, we have the following conclusions: Reporting criteria Commentary page reference Possible significant risks? Significant risks identified? Other recommendations made? Overall conclusion Best Value 59 No No No Satisfactory. Effectiveness of performance reporting 63 Yes No Yes We have made 1 Level 2 recommendation. Otherwise, overall conclusion is satisfactory. Thematic reviews 69 Yes No Yes We have made 3 Level 2 recommendations. Otherwise, overall conclusion is satisfactory. Statutory Performance Indicators 79 No No No Satisfactory. 58 Page 336
Page 337
Best Value (continued) Our overall assessment Area assessed Our findings Our judgements Service improvement considerations Significant risks identified Vision and leadership As part of our Wider Scope work, we have considered: • The Council’s revised Corporate Plan, how the vision has evolved and how it aligns with other strategies. • The Connect for Success operating model. • Evidence of continuous improvement and transformation. Please see page 47. The Council has revised their Corporate Plan, which has a clearer focus on transformation, and is underpinned by the Connect for Success principles. Whilst the Council has a clear strategic direction, it is still in the earlier stages. This will be further refined once their Annual Business Plan for 2025/26 is produced. None identified. No significant risks identified. Governance and accountability As part of our Wider Scope work, we have considered: • Governance arrangements, including oversight via various committees, and disclosures per the Annual Governance statement. Please see page 50. • Financial management – please see page 37. The Council has strong governance arrangements in place, and we have found evidence of scrutiny, challenge and effective decision making from attendance at Audit Committees and review of minutes from Council meetings. None identified. No significant risks identified. 59 Page 337
Page 338
Best Value (continued) Our overall assessment (continued) Area assessed Our findings Our judgements Service improvement considerations Significant risks identified Effective use of resources As part of our Wider Scope work, we have considered: • Financial management – including medium term financial planning, treasury management and monitoring of financial risks. Please see page 37. • Financial sustainability – which considers whether resources are being used effectively over the medium and longer term. Please see page 42. The Council has an effective culture in terms of financial management, with risk management incorporated within, and good arrangements in terms of financial monitoring and accountability. In terms of financial sustainability, the financial outlook is challenging, but the Council understands the difficult position and is making appropriate arrangements to address this. None identified. No significant risks identified. Partnerships and collaborative working As part of our Best Value Thematic Report work, we have considered: • How the Council is working with other bodies to deliver transformational changes. • Whether there are any funding arrangements between the Council and partners for ongoing projects. Please see page 69 for more detail. The Council has worked with other bodies to deliver change (for example, they have a significant joint funding agreement with the Scottish/UK Government via the Rural Growth Deal). They are also considering a Single Authority Model, which would involve collaborating with other bodies (such as NHS Highland), although this is still in early stages. None identified. No significant risks identified. 60 Page 338
Page 339
Best Value (continued) Our overall assessment (continued) Area assessed Our findings Our judgements Service improvement considerations Significant risks identified Working with communities As part of our Wider Scope work, we have considered: • The needs of service users, and how the Council considers the needs of communities in their plans. Please see page 54. As part of our Best Value Thematic Report work, we have considered: • How the Council has engaged with communities in transformation projects. Please see page 69. The Council has demonstrated effective engagement with communities (through means such as the resident survey), and this feeds into their strategic priorities. None identified. No significant issues identified. Sustainability We did not assess this theme in 2023/24. N/A N/A N/A 61 Page 339
Page 340
Best Value (continued) Our overall assessment (continued) Area assessed Our findings Our judgements Service improvement considerations Significant risks identified Fairness and equality As part of our Best Value Thematic Report work, we have considered: • How the Council is uses Integrated Impact Assessments to inform their transformation plans. Please see page 69 for more detail. The Council uses Integrated Impact Assessments to ensure transformation proposals consider equality issues (such as socio-economic impacts and consumer duty). None identified. No significant issues identified. 62 Page 340
Page 341
Best Value (continued) Effectiveness of performance reporting Effective performance management arrangements should be in place to promote the effective use of the local authority’s resources. Performance is systematically measured across all areas of activity, and performance reports are regularly scrutinised by managers and elected members. The performance management system is effective in addressing areas of underperformance, identifying the scope for improvement and agreeing remedial action. We have outlined below a summary of what the Council is reporting in relation to service performance including the Council’s assessment of progress against its service priority measures and reporting on its relative performance (from the Local Government Benchmarking Framework and other information used locally). 63 Page 341
Page 342
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank 1 Significant Risk in Arrangements Identified Work undertaken and the results of our work Effective performance management Work undertaken We recommend that the Council ensure We have: the revised Corporate Plan includes Key Performance Indicators (KPIs). These KPIs will help • Reviewed the KPI/performance metrics used by the Council, and how these align with the Corporate Plan. assess Council performance, addressing the risk • Reviewed the appropriateness of KPIs. that performance may not be effectively monitored. • Reviewed the Council’s updated Corporate Improvement Plan and alignment with other key strategic documents and understood the Council’s arrangements to monitor and deliver this. In 2023/24, we reported that the Council's Corporate Improvement Plan (CIP) concluded in 2022, and the Results of our work Council intended to publish an updated CIP in Please see the ‘Vision, leadership and governance’ section of our Wider Scope work, where new have 2024/25. Consequently, we identified a risk that the Council reviewed the Council’s updated Corporate Improvement Plan and alignment with other key documents (such might not track progress in achieving its Connect for as the Medium-Term Financial Plan). Success objectives. We therefore recommended that the Council updated its CIP to ensure alignment with other key Performance reports are presented on a quarterly basis for the four main areas (Bute and Cowal, Helensburgh strategies and plans, including its workforce plan. and Lomond, Mid Argyll, and Oban, Lorn and the Isles). To date in the 2025/26 financial year, updates have been presented for financial quarter 1 and financial quarter 2. These reports are structured around the Council's seven corporate priorities, and track progress against each specific outcome. Outcomes have their progress tracked against historical trends/targets, and a supporting commentary is also provided. We have noted that some of the outcomes do not have specific targets as such (for example, the number of dog fouling complaints, although historical data is also provided to track improvements). 64 Page 342
Page 343
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified Work undertaken and the results of our work 1 Effective performance management (continued) Results of our work The outcomes are based on the Council’s Corporate Plan 2022-2027, although a revised Corporate Plan has subsequently been produced (2025-27). Thus, the Corporate Outcomes still need to be revised to be fully aligned with the updated Corporate Plan. The revised Corporate Plan incorporates the 7 key principles of Connect for Success (maximising technology, agility, one Council, one place, purpose and mission focus, empowerment, learning Council, and data and evidence driven). We recommend that the Council’s outcomes are fully aligned with the updated Corporate Plan and have specific targets which can be tracked. The Council uses a Performance Improvement Framework to ensure that it delivers upon its strategic priorities and ensures that the Council delivers Best Value. We have noted that the most recent Performance Improvement Framework on the Council's website is from 2019, and that the Council's approach to performance management and reporting is under review. We recommend that an updated copy of this is published on the Council’s website. We have raised a recommendation in relation to this – please see the next page. 65 Page 343
Page 344
’ Best Value (continued) Identified risks in use of resources to improve outcomes arrangements and recommendations for improvement As a result of our work we have identified risks in the Council’s Best Value arrangements. These identified risks have been outlined in the table below. We have assigned priority rankings to each of them to reflect the importance that we consider each poses to your organisation and, hence, our recommendation in terms of the urgency of required action; see Appendix F for further details. Bl an 1 Best Value risks identified Recommendation for improvement k Council s response and implementation timescale Effective Performance Management – Level 2 The Council should update its corporate outcomes, Management’s response There is a risk that the Council’s performance so they are fully aligned with the revised Corporate The Council is aligning revised Corporate Outcomes with the management and reporting arrangements may not Plan, following the change in administration. Each updated Corporate Plan and strengthening performance monitoring, be fully effective if the Corporate Outcomes are not outcome should include a measurable target to with an updated Performance Improvement Framework to be fully aligned with the revised Corporate Plan. The enhance performance monitoring. The Council published. This will ensure clearer targets, improved reporting and Performance Improvement Framework has also not should also ensure their Performance Improvement full alignment of strategic priorities across our planning and been updated for several years. If not addressed, Framework is fully updated. performance processes. the Council might struggle to monitor and report progress against its strategic priorities. Responsible officer Head of Customer Support Services Implementation date By 31st March 2027 66 Page 344
Page 345
Best Value (continued) Effectiveness of performance reporting (continued) Improvement plans reflect a pace and depth of improvement that will lead to the realisation of the local authority’s priorities and the long-term sustainability of services. The Council should demonstrate a trend of improvement over time in delivering its strategic priorities. We have outlined below our assessment on whether the Council can demonstrate a trend of improvement over time in delivering its priorities. Effectiveness of performance reporting theme Our findings Our judgements Our conclusions Significant risks identified Improvement plans The Council produce an Annual Report each year. The aim of this report is to present to the public an overview of the Council's performance against its Corporate Plan priorities, and to highlight the Council's achievements, ongoing challenges and financial performance for the year. This report incorporates Local Government Benchmarking Framework (LGBF) data, so the Council can compare and track its performance against other Scottish authorities. In 2024/25, 60% of the Council's indicators were in quartiles 1 and 2, meaning their performance is above the Scottish average. The Council's internal auditors completed verification work on the data that was returned to the LGBF and offered a substantial level of assurance for all indicators reviewed. This was presented to the Audit and Risk Committee in September 2025 The Annual Report notes that there are improvement plans in key areas of under-performance (such as financial sustainability, housing and care services). The Council’s Annual Report demonstrates that they are making improvements in various areas, and there are action plans in place for those areas that are underperforming. As noted earlier, the outcomes are still aligned with the older Corporate Plan and should be updated in line with the Council’s revised documents. Whilst the Council is addressing underperformance, its outcomes need to be revised in line with the updated Corporate Plan. No additional significant risks identified. 67 Page 345
Page 346
Best Value (continued) Effectiveness of performance reporting (continued) Improvement plans reflect a pace and depth of improvement that will lead to the realisation of the local authority’s priorities and the long-term sustainability of services. The Council should demonstrate a trend of improvement over time in delivering its strategic priorities. We have outlined below our assessment on whether the Council can demonstrate a trend of improvement over time in delivering its priorities. Effectiveness of performance reporting theme Our findings Our judgements Our conclusions Significant risks identified Improvement plans (continued) As an example - some care services have been graded as below "good" by the Care Inspectorate. The Council has an improvement plan in place (recruitment for more staff, more workforce training), and progress against this is measured by Care Inspectorate re-inspections and oversight from the Integration Joint Board committee. As noted earlier, the Corporate Outcomes included per the Annual Report are based on the older version of the Corporate Plan (2022-2027) – a new plan (2025-27) has subsequently been produced. (See previous page). (See previous page). (See previous page). 68 Page 346
Page 347
Best Value (continued) Thematic reviews 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. As appointed auditors of the Council we are required to report on Best Value and related thematic work as prescribed by the Accounts Commission. For the thematic work in 2024/25, we are required to carry out an overview of transformation. As part of this review, we are required to report on the areas documented in the table below. Thematic themes Our findings Our judgements Significant risks identified Transformation planning The Council has built transformation into its core plans and budget approach, and a wide range of programmes are underway to help modernise services and address financial pressures. However, several key elements, including the overarching Transformation Strategy, are still at an early stage, so it is not yet possible to demonstrate their full impact. The Council is being proactive in terms of taking steps to embed transformation into its strategic plans and should ensure their overarching Transformation Strategy has been completed by March 2026. As part of our Thematic Report on Transformation, we have raised the following recommendation: The Council has not yet produced a Transformation Strategy – Level 2 The Council should ensure their overarching Transformation Strategy is produced by their target date of March 2026 and is followed by a costed action plan. Programme management The Council is developing a Programme Management Office for transformation activity, although a short life working group has been appraising different options, Transformation projects are generally monitored via strategic committees, or through programme boards and senior management teams. Capacity and specialist skills are ongoing challenges in term of resourcing transformation projects , with a recent employee survey noting that managers leading change are under workload pressures. The Council should consider operating a Programme Management Office to monitor their transformation activity. They should also ensure they have sufficient resources and capacity to fulfil transformation projects. As part of our Thematic Report on Transformation, we have raised the following recommendations: The Council does not have a fully operational Programme Management Office for their transformation activity – Level 2 The Council should consider the creation of a Programme Management Office to manage Transformation and other major projects. This will ensure oversight and increase the pace of change. 69 Page 347
Page 348
Best Value (continued) Thematic reviews (continued) Thematic themes Our findings Our judgements Significant risks identified Programme management (continued) (See previous page). (See previous page). The Council is facing challenges in terms of resourcing their transformation programmes effectively – Level 2 The Council should ensure appropriate resource and capacity to deliver transformation projects. 70 Page 348
Page 349
Best Value (continued) Thematic reviews (continued) Thematic themes Our findings Our judgements Significant risks identified Partnership working and community engagement The Council has worked with partners on several major initiatives (such as the ‘Our Modern Workspaces’ project) and is in the early stages of exploring a potential Single Authority Model, which could offer a more streamlined structure incorporating NHS Highland, the Scottish Government and other key partners. Whilst the ongoing Rural Growth Deal project demonstrates major partnership investment, this is more ‘investment focused’ in nature, rather than focusing on delivering savings. The Council is still developing their Transformation Strategy, which is due to be completed by March 2026. The Council is actively engaging with partnership working and community engagement where possible. We have not identified any significant risks in this section. Impact of transformation The Council’s new Corporate Improvement Plan lists priorities in relation to transformation, such as embedding the ‘Scottish Approach to Service Design’ and expanding the use of artificial intelligence technology. However, many of these targets are set for 2026 and beyond, which means it is still too early to fully assess the impact of these actions. We have noted that the Council uses Integrated Impact Assessments to ensure that equality is considered when putting together transformation proposals. The Council has good processes for assessing equality impacts. We have reviewed a case study for the ‘Our Modern Workspace’ project, which demonstrated a positive impact on communities. A lot of the Council’s other transformation plans are still in earlier stages, so it is too early to assess the full impact that they have had. We have not identified any significant risks in this section. 71 Page 349
Page 350
Best Value (continued) Follow up of previously-reported recommendations We are required to follow up findings from our thematic reviews in the previous years. In December 2024, we reported 6 recommendations to the Council to address risks identified from our thematic review. As part of our work in 2024/25, we followed up the progress made by the Council against the recommendations made, and determined whether the risks remained during the year. b l 1 Thematic review finding as Management response and a n previously reported implementation timeframe k Work undertaken and judgements made in 2024/25 Conclusions reached Workforce Data and IT Systems Management Response: The key Conclusions Progress against the recommendation: outcome here is to ensure the council The Council has identified it could is able to easily track vacancies. We The Council has engaged with a software supplier, We have noted that the response to this make better use of the data available will actively engage with our software and they have had an initial assessment carried out. recommendation is still ongoing, and we will to inform is workforce planning and supplier and will explore all options in The findings from this noted that it is not review the updates as part of our work in is currently replacing its exiting HR ensuring the council can report on this straightforward to maintain records of vacancies 2025/26. and Payroll system. important metric. within the configuration of the new HR and payroll system. The issue will be reviewed and a solution Implementation timescale: sough when the new recruitment/onboarding September 2025 functionality is live. The work package for this has been rescheduled by the Project Board for completion by the end of March 2026. Integrating New Strategic Plans Management Response: The people Progress against the recommendation Conclusions strategy and strategic workforce plan The new Council administration is will be reviewed annually. The first annual progress report was submitted to Recommendation has been addressed – bringing an updated Corporate Plan Head of Customer Support Services in December satisfactory. and strategic frameworks into effect Implementation timescale: June 2025 for management scrutiny. We have reviewed 2 from 2024/25. Existing Workforce 2025 this progress report, and it contains detail on Plans and People Strategy performance highlights, achievements, key objectives are to be achieved by challenges for the future, upcoming milestones, and 2028 and may need to be revisited. progress against Key Performance Indicators (such as turnover rate and average time to hire). 72 Page 350
Page 351
Best Value (continued) b l a n k Thematic review finding as previously reported Management response and implementation timeframe Work undertaken and judgements made in 2024/25 Conclusions reached 3 Review of Flexible Working Policy The Council is currently in the process of updating aspects of its operational activities to accommodate the hybrid working style. This is based on a newly introduced Flexible and Hybrid Working policy which is yet to be reviewed. Management Response: Impact measures for the flexible and hybrid working policy are set out in section 10 of the policy document. These will be monitored and reported regularly. Implementation timescale: June 2025 Progress against the recommendation This action has been completed, and report presented to the Strategic Management Team. We have reviewed the report, which notes that the Council’s flexible working policy is valued by employees, and there is minimal evidence that flexible working influences recruitment or staff leaving. Recommendations in the report include the need for clearer processes, and stronger promotion of the flexible working policy during recruitment. Conclusions Recommendation has been addressed – satisfactory. 4 Workforce skills and Capacity KPIs The Council is yet to perform comprehensive reviews and assessments to determine cost savings and benefits of its workforce measures. There is a lack of clear KPI’s that would allow management to continually monitor savings and other benefits from workforce skill and capacity measures. Management’s response: KPIs for Agile working will be identified in the project documentation. General KPIs for Strategic Workforce plan and People Strategy will be included in the first annual review (outlined above) Implementation timescale: June 2025 Progress against the recommendation KPIs (Key Performance Indicators) have been included in the project documentation for the Agile project. People Strategy KPIs have been set out in the review document, and the Council will continue to monitor these on an annual basis. Conclusions Recommendation has been addressed – satisfactory. 73 Page 351
Page 352
Best Value (continued) b l a n k Thematic review finding as previously reported Management response and implementation timeframe Work undertaken and judgements made in 2024/25 Conclusions reached 5 Agile Project implementation The Agile Working framework is still at its inception stage, with a project Initiation document laying out aims and objectives along with Success measures. However, there was limited mention of how these objectives will be achieved, and SMART targets are yet to be agreed. Management’s response: Objectives and Actions for Agile Project will be reviewed and agreed with ELT Implementation timescale: April 2025 Progress against the recommendation Initial goals and actions have been agreed with the ELT (Executive Leadership Team). Benchmarking has been undertaken in relation to generic job descriptions for admin/project roles. Conclusions Recommendation has been addressed – satisfactory. 6 Workforce Monitoring The Council has several reviews lined up which are targeted for completion within the 24/25 Financial year, looking at Workforce Planning measures and other projects which have recently been implemented. Management’s response: The HR and OD manager will provide a 6 monthly progress report on actions within the workplan specifically linked to workforce planning or people strategy actions. Implementation timescale: September 2025 Progress against the recommendation A monthly highlight report is presented to the Head of Customer Support Services, and this includes updates on priority actions linked to the People Strategy and Strategic Workforce plan. Progress reporting will be added to the service quarterly reporting dashboard by 31/03/2026. Conclusions We have noted that the response to this recommendation is still ongoing, and we will review the Council’s progress reporting implementation as part of our work in 2025/26. 74 Page 352
Page 353
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank 1 Significant Risk in Arrangements Identified Work undertaken and the results of our work Agency staff costs Work undertaken In 2023/24, we reported that workforce trends outlined in the Strategic Workforce Planning We performed the following work: Priorities indicated that temporary and casual staff increased to approximately 16% of the • Updated our understanding of the Council’s arrangements for monitoring and reporting the impact of high turnover of workforce. We therefore highlighted a risk that staff, and agency staff. high turnover of staff and reliance on agency • Updated our understanding of the strategies and plans the Council has implemented to mitigate the risks associated with recruitment may result in increased costs and the current turnover levels. diminished service quality. Results of our work The Council’s spend on agency staff is monitored via their financial monitoring reports, which are taken to the Policy and Resources Committee. These show actual employee costs against budgeted employee costs, and the reasons for these variances. Where agency staff have been used to cover vacancies, this has been explained. These reports also include key financial challenges, and agency staff costs are mentioned within this. For example, the October 2025 financial monitoring report states that spend on agency staff to support Social Work is a key challenge, due to recruitment and retention challenges. It is evident that agency staff costs are still creating pressure for the Council, but these are being actively monitored. The financial monitoring reports also contain proposed actions to address financial challenges. In terms of agency staff costs (for Social Work), the Council have stated that they intend to utilise their close working relationship with the Health and Social Care Partnership to support the costing of a plan to stabilise the service. This also includes an exit plan from the reliance on agency staff. 75 Page 353
Page 354
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified Work undertaken and the results of our work 1 Agency staff costs (continued) Results of our work For social work (which is the main area impacted by agency staff costs), the workforce is monitored through reports produced by Argyll and Bute Integration Joint Board (which is one of the Council’s joint ventures, with NHS Highland). These reports contain detailed data covering current headcounts, turnover levels, vacancy levels and detail around appraisals and training. This demonstrates that there are systems in place for collecting and reviewing workforce data. The data relating to appraisals (in the Council, these are less formalised and known as ‘quality conversations’) and training is notable, as these conversations allow employees and managers to discuss goals and learning/development needs. The aim of these conversations is to enhance employee satisfaction, which ultimately should lead to smaller turnover rates. Whilst agency staff are used to maintain safe staffing levels, the Council/Integration Joint Board have noted this is not a long-term solution. The evidence we have reviewed above demonstrates that the Council are aware of this, are actively tracking their staff data, and are identifying ways to decrease staff turnover and reliance on agency staff. 76 Page 354
Page 355
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank 1 Significant Risk in Arrangements Identified Work undertaken and the results of our work Workforce Strategy Work undertaken In 2023/24, we reported that the Council had implemented a new people strategy and strategic We performed the following work: workforce plan, extending to 2028. We identified a risk that the Council's strategic workforce plans • Reviewed Council’s strategic workforce plan to understand alignment with other strategic documents. may not be aligned with the updated Corporate • Considered key assumptions used in developing plan. Plan and other key strategies, including the • Update understanding of how updates to workforce strategy inform budget reporting. MTFP. There is a risk that workforce planning does not align with other strategic plans, including the MTFP. Results of our work We have reviewed the Council’s updated Corporate Plan 2025-27 and compared this against the Strategic Workforce Planning Priorities for 2024-28, alongside other key strategic documents. Although the Workforce Planning was produced before the updated Corporate Plan (following a change in administration), the two documents show alignment. Workforce priorities are a key part of the Council’s transformation agenda, and ensuring the Council’s transformation activities can be resourced efficiently. The Workforce Strategy is also aligned and underpinned by the principles of the Council’s Connect for Success People Strategy. This presents key themes in relation to people, including attracting and keeping talented people, providing a positive employee experience, supporting learning and growth, and championing change and innovation. Each of these themes has a more detailed explanation and list of commitments over the life of the strategy, and is also linked to the relevant overarching Connect for Success theme (such as Purpose and Mission, Empowerment etc.) 77 Page 355
Page 356
Best Value (continued) Significant risks We have outlined below the significant risks in arrangements that we have identified as part of our continuous planning procedures, and the work undertaken to respond to each of those risks. Blank Significant Risk in Arrangements Identified Work undertaken and the results of our work 1 Workforce Strategy (continued) Results of our work There are several assumptions which underpin the Workforce Planning. For example, in terms of technology, this is expected to create capacity and opportunities for redesign in the workforce, and there are likely to be efficiencies that can be gained from new technologies, such as artificial intelligence. This again links to the Council’s Corporate Plan 2025-27, which recognises transformation as a key driver for the Council in the future. There are several other assumptions included, including working pattern assumptions (with the assumption that hybrid/flexible working will continue in the future, which is in line with the Council’s approach to working, and assumptions relating to workforce supply and demand, recognising the temporary/agency arrangements are likely to continue to some extent in the future). These assumptions are all reasonable, and in line with our knowledge of the Council. The Council’s Workforce Strategy impacts upon their budgeting and financial monitoring, with the Council recognising that a significant percentage of the budget is allocated to staff costs. The assumptions allow the Council to evaluate their future spending in terms of staff costs, and identify potential savings (for example, using new technologies to streamline tasks where possible), and to identify areas where costs might be likely to rise (for example, agency costs). Overall, we are satisfied that the Council’s Workforce Strategy contains appropriate assumptions, is aligned with other strategic documents, and influences the Council’s budgeting reporting. 78 Page 356
Page 357
’ Best Value (continued) Statutory Performance Indicators We are required to report on the Council’s effectiveness and appropriateness of arrangements in place for complying with the Direction issued in December 2021, including the balance and timeliness of reporting to members along with its accessibility for citizens and communities. The table below details our overall assessment of the Council’s statutory performance indicators arrangements: Council s arrangements Our findings Our judgements Significant risks identified Statutory Performance Indicator 1: Improving local services and local outcomes Through the Council's Annual Report, they have provided a balanced view of how their services are performing regarding their strategic priorities. Whilst achievements are highlighted throughout, there is also evidence that weaker areas have been considered, and steps to improve local services and outcomes have been listed. It is also clear that communities have been involved in terms of agreeing outcomes with partners. These outcomes have been developed alongside the Community Planning Partnership, which comprises bodies from the public sector, third sector and local communities. The Council have also used the Local Government Benchmarking Framework (LGBF) to monitor their performance against other Scottish Councils. The Council's Annual Report demonstrates that performance has improved over the last year - 60% of their indicators are now in quartile 1 or 2 (compared to 46% in the previous year), which demonstrates performance is above the Scottish average. The Council has appropriate arrangements in place to comply with Statutory Performance Indicator 1. No significant risks identified. 79 Page 357
Page 358
’ Best Value (continued) Statutory Performance Indicators We are required to report on the Council’s effectiveness and appropriateness of arrangements in place for complying with the Direction issued in December 2021, including the balance and timeliness of reporting to members along with its accessibility for citizens and communities. The table below details our overall assessment of the Council’s statutory performance indicators arrangements: Council s arrangements Our findings Our judgements Significant risks identified Statutory Performance Indicator 2: Demonstrating Best Value The Council's Annual Report demonstrates that it assesses its performance in terms of Best Value. The Council reports across their key service lines (including education, social care and housing) in terms of corporate outcomes, including results of inspections and reviews. Examples include: • Percentage of children living in poverty • Percentage of apprentices who find success after completing the Modern Apprentice Programme • Number of affordable social sector new builds completed This is also interrogated by members across various committees, such as the Policy and Resources committee, and service-specific groups. The Council ensures that its reporting is accessible across diverse communities - for example, reports are published electronically, but alternative versions such as large print/translated copies are also available. The Council also considers results from external bodies who provide scrutiny - form example, the percentage of care services that are graded as 'good' or better in Care Inspectorate inspections. The Council has appropriate arrangements in place to comply with Statutory Performance Indicator 2. No significant risks identified. 80 Page 358
Page 359
AAppendices A: Internal control conclusions B: Draft management representation letter C: Draft audit report D: Confirmation of our independence E: Other communications F: Wider scope ratings G: Current year updates, forthcoming accounting & other issues Page 359
Page 360
Appendix A: Internal control conclusions Other deficiencies in internal control A deficiency in internal control exists if: • A control is designed, implemented, or operated in such a way that it is unable to prevent, detect, and/ or correct potential misstatements in the financial statements; or • A control that is necessary to prevent, detect, and/ or correct misstatements in the financial statements on a timely basis is missing. The purpose of our audit was to express an opinion on the financial statements. As part of our audit, we have considered the Council’s internal controls relevant to the preparation of the financial statements to design audit procedures to allow us to express an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Council’s internal controls or to identify any significant deficiencies in their design or operation. The matters reported in Appendix A are limited to those deficiencies and other control recommendations that we have identified during our normal audit procedures and which we consider to be of sufficient importance to merit being reported. If we had performed more extensive procedures on internal control, we might have identified more deficiencies to report or concluded that some of the reported deficiencies need not in fact have been reported. Our comments in Appendix A should not be regarded as a comprehensive record of all deficiencies that may exist or improvements that could be made. This Appendix sets out the internal control observations that we have identified as at the date of this report. These control observations are not, in our view, significant control deficiencies but have been reported to management directly and are included in this report for your information. In our view, there is a need to address the deficiencies in internal control set out in this section to strengthen internal control or enhance business efficiency. Our recommendations should be actioned by management in the near future. 82 Page 360
Page 361
Appendix A: Internal control conclusions (continued) Other recommendations in internal control Provision of Employee Contracts Description of deficiency During the testing of payroll expenses, we experienced difficulty in sourcing the original contracts for the majority of individuals selected. Thus, the Council provided alternatives such as Offer of Appointment and Contractual Amendments as well as agreeing employee details to the Council's iTrent system. Potential effects The provision of original contracts confirms that an individual is legitimately employed and that an individual is acknowledges the conditions of their employment. Thus, due to the Council's inability to provide contracts for all the samples tested increases the risk of payments being made to employees who do not exist. Recommendation The Council should ensure that they retain a copy of the latest employee contract for each employee as evidence of legitimate employment. Management response For long-standing employees in particular, original contracts are not always available due to the age of records. Employment is evidenced through alternative documentation and system records. The Council continues work to ensure the latest contractual terms are retained and accessible going forward. 83 Page 361
Page 362
Appendix A: Internal control conclusions (continued) Other recommendations in internal control Historic split between Education and Social Work expenditure Description of deficiency During the testing of expenditure, we identified that some expenditure is split between Education and Social Work. Upon enquiry of the split, the Council stated that it is an agreed historic split between Education and Social Work (62% SW and 38% E). It has been the same rates for years, they believe it is based on the percentage of time that relates to the residential element of the placement and the proportion of education but there is no specific calculation. Potential effects There is a risk that expenditure for each service department is misstated due to the reliance on this historic split and the absence of a review of this calculation. The historic split may no longer accurately reflect the percentage of time spent in each area. Recommendation The Council should review this historic split to ensure it is still appropriate. Management response The appropriateness of the split will be reviewed to confirm if it remains reflective of service activity. 84 Page 362
Page 363
Appendix A: Internal control conclusions (continued) Other recommendations in internal control Loans Fund – Treasury Management Strategy Description of deficiency Having reviewed the 2024/25 and 2025/26 Treasury Management Strategy reports, and the 2024/25 Treasury Management Annual Report, the Council is yet to disclose a breakdown of the future Loans Fund repayments as required by the Local Government Finance Circular 7-2024 - Loans Fund Accounting. Potential effects If no detailed repayment breakdown is provided, it makes it more difficult for Councillors/the public to understand the long-term impact of the Council's borrowing. Recommendation The Council should review the latest Finance Circular regarding Loans Fund Accounting (7-2024) and ensure all Treasury Management reports are prepared in accordance with the Scottish Government's requirements. Management response The Council will review the 2026/27 reports and include a table setting out future Loans Fund repayments to ensure alignment with the disclosure requirements. 85 Page 363
Page 364
Appendix A: Internal control conclusions (continued) Other recommendations in internal control Cash and Cash Equivalents – Missing reconciliation Description of deficiency Council is unable to provide a reconciliation for the 'LEADER Plus' Bank Account as they cannot find this amount in the ledger. We know the amount (£1k) exists as we have obtained the bank confirmation. Therefore, there is a difference between ledger amount and actual monies held. The initial scheme was in 2000-2006 so pre-dates their current accounting system. It appears that it’s most likely that they distributed funds and this account may have been ring-fenced for that purpose as EU funding often required demonstrable ring-fencing. Potential effects There is a risk that the amounts held differ from the amounts reported. Recommendation The Council should ensure the ledger reflects actual monies held. Management response Further work will be undertaken to determine the most appropriate accounting treatment and ensure the ledger reflects the actual monies held. 86 Page 364
Page 365
Appendix A: Internal control conclusions (continued) Other recommendations in internal control Payroll Data Migration – No formal rollback activities Description of deficiency Based on our inquiry with the client and review of the data migration project management controls, the following artifacts/documents were not available for our review: • Roll-Back Plan: A rollback plan did not exist. It was understood Rollback activities were intended to be performed by the Payroll Team on an as-needed basis, with any corrective actions coordinated with the Systems Development Team. § • Roll-Back Activities: A rollback procedure was executed in December 2024 after the payroll period was incorrectly advanced to February 2025 instead of January 2025. The issue was successfully corrected; however, the process lacked a formal logging mechanism and a structured audit trail was not maintained. Potential effects Absence of appropriate project management procedures/controls may lead to the following: • High-level rollback documentation may prevent effective system restoration if the migration fails. • Incomplete governance documentation reduces assurance over the integrity and control of the migration process. • Missing project artefacts weaken auditability and evidence of compliance with project management and IT governance standards Recommendation The Council should introduce a Roll-Back Plan for any future system changes. All activity should also be logged to create a clear audit trail. Management response This issue arose during the one-off implementation of the new payroll system in 2024/25 and has now passed. However, the Council will ensure that formal rollback plans and audit-trail logging are built into any future one-off system changes to strengthen governance and assurance. 87 Page 365
Page 366
Appendix A: Internal control conclusions (continued) Follow up on previous internal control points We set out below an update on internal control points raised in prior periods. Property Plant and Equipment Valuation Reconciliations - Brought Forward from Prior Year Description of deficiency The Council has improved its reconciliations in regard to results of revaluation exercises and summaries in that it now prepares and maintains a file reconciling the results of the inhouse valuation process undertaken under Programme 1 and Programme 2 to the associated disclosure note in the financial statements. Nonetheless, there is scope to improve the reconciliations further by maintaining clear records on how area inputs are recorded as in some instances these details were difficult to agree to the underlying records. Current year update: The Council continues to produce Programme 1 and 2 documents with summaries of revalued assets. It also produces a document summarising the valuation dates and type for all assets allowing reconciliation to be performed. There is still potential for layout of this to be improved. Potential effects The lack of this reconciliation contributed to making this audit area time consuming to reconcile the area values in the valuation reports with the underlying supporting documents for instance the maps and architects’ area schedules. This also led to additional requests being made during the audit process. Recommendation As regular practice, management should prepare and maintain a reconciliation of the results of any revaluation exercises conducted with the fixed asset registers/general ledger and maintain summaries that agree as appropriate including to the underlying supporting records such as maps and architects’ plans. Management response (updated for 24/25) Further refinement of supporting area records will be progressed as part of ongoing process improvements. 88 Page 366
Page 367
Appendix A: Internal control conclusions (continued) Dormant/Inactive Bank Accounts Description of deficiency We noted that the Argyll and Bute Council administers numerous bank accounts, several of which were dormant during the period. From our audit testing, it is not clear whether these accounts are actively monitored, due to the low level of activity in each. Current year update: There are still some accounts that appear dormant/inactive. One bank account has been closed in the period. Upon discussion with management they intend to leave some of the accounts with low balances open for similar reasons. Potential effects Bank statements should be obtained and reconciliations performed for all bank accounts, including those with zero balances and little or no activity, by a member of the finance group who does not have access to withdraw from the accounts. These reconciliations should be independently reviewed by a person independent of the reconciliation process. Maintaining and monitoring dormant/inactive accounts uses resources that could be better used elsewhere and may present an opportunity for the account to be used for inappropriate or fraudulent purposes. Recommendation A review of open bank accounts should be carried out periodically to identify dormant accounts. Any accounts that are no longer required should be closed as soon as possible. Management response (updated for 24/25) A small number of low activity accounts remain open for operational reasons and will continue to be monitored through regular bank reconciliations. 89 Page 367
Page 368
Appendix A: Internal control conclusions (continued) Inconsistency in Related Party Records Description of deficiency Our testing on related parties identified that one Policy Lead for Health and Social Care is disclosed in the Senior Councillors Remuneration in the accounts but not on the website of the Council. Current year update: No such issues were noted during our testing in the 2024/25 audit. Potential effects Inconsistent related party information could be misleading to users of the financial statements/members of the public who access the Council’s website for accountability. Recommendation Management should perform an exercise regularly to ensure that there is consistency of disclosure between the financial statements’ information and the Council website. Management response Management accepts that process improvements could be made to minimise the risk of any future discrepancies. Action will be taken to ensure that information is disclosed consistently between the annual accounts and the Council website, through performing regular reconciliations. 90 Page 368
Page 369
Appendix A: Internal control conclusions (continued) Property Plant and Equipment Valuations - Concerto system Description of deficiency We noted that during testing of PPE valuations the asset records and floor areas held on the Concerto system were inconsistent with area inputs used in the valuer certificates. It was noted that not all additions/ amendments to asset areas were updated. Current year update: There are still some differences across the area inputs used by the valuer and asset records/floor areas on Concerto system. Potential effects The lack of this reconciliation contributed to making this audit area time consuming to reconcile the area values in the valuation reports with the underlying supporting documents for instance the maps and architects’ area schedules. This also led to additional requests being made during the audit process. Recommendation Management should ensure there are clear controls and processes in place to ensure that information on Concerto is kept accurate and up to date. Management response (updated for 24/25) The geography of Argyll and Bute makes it difficult to inspect and measure all properties so existing records are relied upon in some circumstances supplemented by information from other sources such as the Assessor. As part of the rolling programme there is an ongoing process to continue to improve records and consistency within the available resources. 91 Page 369
Page 370
Appendix A: Internal control conclusions (continued) Expected Credit Loss Description of deficiency We noted during our testing of Debtors, when considering the application of the CIPFA Code/IFRS 9 Financial Statements in relation to expected credit losses, that the Council had not done a detailed assessment of the Expected Credit loss for the year. Current year update: No such issues were noted in the 24/25 audit during our testing. Potential effects Non-compliance with the Code’s requirements on Expected Credit Losses. Recommendation We recommend that the Council management should ensure the Expected Credit loss calculation for the Council includes an assessment of the losses on the basis of 12-month expected losses for the qualifying debtors. 92 Page 370
Page 371
Appendix B: Draft management representation letter Mark Outterside Forvis Mazars The Corner 26 Mosley Street Newcastle upon Tyne NE1 1DF DD/MM/2026 Dear Mark, Argyll and Bute Council - Audit for Year Ended 31 March 2025 This representation letter is provided in connection with your audit of the financial statements of Argyll and Bute Council (the Council) and Group for the year ended 31 March 2025 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2024/25 (the Code), and applicable law. I confirm that the following representations are made on the basis of enquiries of management and staff with relevant knowledge and experience (and, where appropriate, inspection of supporting documentation) sufficient to satisfy myself that I can properly make each of the following representations to you. 93 Page 371
Page 372
Appendix B: Draft management representation letter My responsibility for the financial statements and accounting information I believe that I have fulfilled my responsibilities for the true and fair presentation and preparation of the financial statements in accordance with the Code, as amended by applicable law. My responsibility to provide and disclose relevant information I have provided you with: • access to all information of which I am aware that is relevant to the preparation of the financial statements such as records, documentation and other material; • additional information that you have requested from us for the purpose of the audit; and • unrestricted access to individuals within the Council and Group you determined it was necessary to contact in order to obtain audit evidence. I confirm as Section 95 Officer that I have taken all the necessary steps to make me aware of any relevant audit information and to establish that you, as auditors, are aware of this information. As far as I am aware there is no relevant audit information of which you, as auditors, are unaware. I confirm that there is no information provided to you as part of the audit that I consider legally privileged. Accounting records I confirm that all transactions that have a material effect on the financial statements have been recorded in the accounting records and are reflected in the financial statements. All other records and related information, including minutes of all Council and committee meetings, have been made available to you. Accounting policies I confirm that I have reviewed the accounting policies applied during the year in accordance with International Accounting Standard 8 and consider these policies to faithfully represent the effects of transactions, other events or conditions on the Council and Group’s financial position, financial performance and cash flows. 94 Page 372
Page 373
Appendix B: Draft management representation letter Accounting estimates, including those measured at fair value I confirm that the methods, significant assumptions and the data used by the Council and Group in making the accounting estimates, including those measured at fair value, are appropriate to achieve recognition, measurement or disclosure that is in accordance with the applicable financial reporting framework. Contingencies There are no material contingent losses including pending or potential litigation that should be accrued where: • information presently available indicates that it is probable that an asset has been impaired or a liability had been incurred at the balance sheet date; and • the amount of the loss can be reasonably estimated. There are no material contingent losses that should be disclosed where, although either or both the conditions specified above are not met, there is a reasonable possibility that a loss, or a loss greater than that accrued, may have been incurred at the balance sheet date. There are no contingent gains which should be disclosed. All material matters, including unasserted claims, that may result in litigation against the Council and Group have been brought to your attention. All known actual or possible litigation and claims whose effects should be considered when preparing the financial statements have been disclosed to you and accounted for and disclosed in accordance with the Code, as amended by applicable law. Laws and regulations I confirm that I have disclosed to you all those events of which I am aware which involve known or suspected non-compliance with laws and regulations, together with the actual or contingent consequences which may arise therefrom. The Council and Group has complied with all aspects of contractual agreements that would have a material effect on the accounts in the event of non-compliance. 95 Page 373
Page 374
Appendix B: Draft management representation letter Fraud and error I acknowledge my responsibility as Section 95 Officer for the design, implementation and maintenance of internal control to prevent and detect fraud and error and I believe I have appropriately fulfilled those responsibilities. I have disclosed to you: • all the results of my assessment of the risk that the financial statements may be materially misstated as a result of fraud; • all knowledge of fraud or suspected fraud affecting the Council and Group involving: - management and those charged with governance; - employees who have significant roles in internal control; and - others where fraud could have a material effect on the financial statements. I have disclosed to you all information in relation to any allegations of fraud, or suspected fraud, affecting the Council and Group’s financial statements communicated by employees, former employees, analysts, regulators or others. Related party transactions I confirm that all related party relationships, transactions and balances, have been appropriately accounted for and disclosed in accordance with the requirements of the Code, as amended applicable law. I have disclosed to you the identity of the Council and Group’s related parties and all related party relationships and transactions of which I am aware. Future commitments The Council and Group has no plans, intentions or commitments that may materially affect the carrying value or classification of assets and liabilities or give rise to additional liabilities. 96 Page 374
Page 375
Appendix B: Draft management representation letter Service Concession Arrangements I am not aware of any material contract variations, payment deductions or additional service charges in 2024/25 in relation to the Council and Group’s service concession arrangements that you have not been made aware of. Subsequent events I confirm all events subsequent to the date of the financial statements and for which the Code, as amended by applicable law, require adjustment or disclosure have been adjusted or disclosed. Should further material events occur after the date of this letter which may necessitate revision of the figures included in the financial statements or inclusion of a note thereto, I will advise you accordingly. Going concern To the best of my knowledge there is nothing to indicate that the Council and Group will not continue as a going concern in the foreseeable future. The period to which I have paid particular attention in assessing the appropriateness of the going concern basis is not less than twelve months from the date of approval of the accounts. Annual Governance Statement I am satisfied that the Annual Governance Statement (AGS) fairly reflects the Council and Group’s risk assurance and governance framework and I confirm that I am not aware of any significant risks that are not disclosed within the AGS. Annual Report The disclosures within the Annual Report and Remuneration Report fairly reflect my understanding of the Council and Group’s financial and operating performance over the period covered by the financial statements. 97 Page 375
Page 376
Appendix B: Draft management representation letter Unadjusted misstatements I confirm that the effects of the uncorrected misstatements are immaterial, both individually and in aggregate, to the financial statements as a whole. A list of the uncorrected misstatements is attached to this letter as an Appendix. Please make sure the appendix is attached to the letter and not cross-referenced to the appendix in the Annual Audit Report. Prior period adjustments A prior period adjustment/reclassification was identified and impacted upon the figures in [applicable accounts]. As a result, the prior period figures have been restated. I confirm that I have disclosed to you all the relevant information to support the prior period adjustment and its disclosure notes within the financial statements and I deem the disclosure to be complete and accurate to the best of my knowledge. Yours faithfully, Kirsty Flanagan Section 95 Officer Date: XXXX 98 Page 376
Page 377
Appendix C: Draft audit report Independent auditor’s report to the members of Argyll and Bute Council and the Accounts Commission Report on the audit of the financial statements Opinion on the financial statements We certify that we have audited the financial statements in the annual accounts of Argyll and Bute Council and its group (“the Council”) for the year ended 31 March 2025 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the Comprehensive Income and Expenditure Statement, the Movement in Reserves Statement, the Balance Sheet, the Cash Flow Statement and notes to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25 (the 2024/25 Code). In our opinion the accompanying financial statements: • give a true and fair view of the state of affairs of the Council and its group as at 31 March 2025 and of its income and expenditure of the Council and its group for the year then ended; • have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2024/25 Code; and • have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003. Basis for opinion We conducted our audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We were appointed by the Accounts Commission on 18 May 2022. Our period of appointment is five years, covering 2022/23 to 2026/27. We are independent of the Council and its group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard were not provided to the Council. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern basis of accounting We have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. 99 Page 377
Page 378
Appendix C: Draft audit report Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the ability of the Council and its group to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. These conclusions are not intended to, nor do they, provide assurance on the current or future financial sustainability of the Council and its group. However, we report on the Council's arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland Website. Risks of material misstatement We report in our Annual Audit Report the most significant assessed risks of material misstatement that we identified and our judgements thereon. Responsibilities of the Section 95 Officer and the Audit and Scrutiny Committee for the financial statements As explained more fully in the Statement of Responsibilities, the Section 95 Officer is responsible for the preparation of financial statements, that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Section 95 Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Section 95 Officer is responsible for assessing the ability of the Council and its group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there is an intention to discontinue the operations of the Council and its group. The Audit and Scrutiny Committee is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements. 100 Page 378
Page 379
Appendix C: Draft audit report Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities outlined above to detect material misstatements in respect of irregularities, including fraud. Procedures include: • using our understanding of the local government sector to identify that the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003 are significant in the context of the Council and its group; • inquiring of the Section 95 Officer as to other laws or regulations that may be expected to have a fundamental effect on the operations of the Council and its group; • inquiring of the Section 95 Officer concerning the policies and procedures of the Council and its group regarding compliance with the applicable legal and regulatory framework; • discussions among our audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and • considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the Council‘s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report We have audited the parts of the Remuneration Report described as audited. In our opinion, the audited parts of the Remuneration Report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Section 95 Officer is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities and the unaudited part of the Remuneration Report. 101 Page 379
Page 380
Appendix C: Draft audit report Our responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except on the Management Commentary and Annual Governance Statement to the extent explicitly stated in the following opinions prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Management Commentary and Annual Governance Statement In our opinion, based on the work undertaken in the course of the audit: • the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and • the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). Matters on which we are required to report by exception We are required by the Accounts Commission to report to you if, in our opinion: • adequate accounting records have not been kept; or • the financial statements and the audited part of the Remuneration Report are not in agreement with the accounting records; or • we have not received all the information and explanations we require for our audit. We have nothing to report in respect of these matters. 102 Page 380
Page 381
Appendix C: Draft audit report Conclusions on wider scope responsibilities In addition to our responsibilities for the annual accounts, our conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in our Annual Audit Report. Use of our report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, we do not undertake to have responsibilities to members or officers, in their individual capacities, or to third parties. [Signature] Mark Outterside, Director For and on behalf of Forvis Mazars LLP Forvis Mazars LLP 26 Mosley Street Newcastle upon Tyne NE1 1DF XX January 2026 103 Page 381
Page 382
Appendix D: Confirmation of our independence We communicate any matters which we believe may have a bearing on the independence or the objectivity of Forvis Mazars LLP and the audit team. As part of our ongoing risk assessment, we monitor our relationships with you to identify any new actual or perceived threats to our independence within the regulatory or professional requirements governing us as your auditors. We confirm that no new threats to independence have been identified since issuing our Annual Audit Plan and therefore we remain independent. 104 Page 382
Page 383
Appendix D: Confirmation of our independence (continued) Fees for work as the Council’s auditor We reported our proposed fees for the delivery of our work under the Code of Audit Practice in our Annual Audit Plan presented to the Audit and Scrutiny Committee in June 2025. Having substantially completed our work for the 2024/25 financial year, we can confirm that our fees are as follows: Area of work 2024/25 fees 2023/24 fees Auditor remuneration £262,260 £251,690 Pooled costs £6,590 £9,170 Contribution to PABV costs £60,940 £63,850 Sectoral cap adjustment £1,010 £(110) Total fees £330,800 £324,600 Fees for other work We confirm that we have not undertaken any non-audit services for the Council in the year. Fees for audit of Charitable Trusts The audit fee in table above does not include the cost of auditing the Council’s charitable trusts. Having substantially completed our work for the 2024/25 financial year, we can confirm that our fee for the audit of these is £9,250 (2023/24 fees were £9,000). Services provided to other entities within the Council's group In addition to auditing the Council’s charitable trusts, we are providing audit services to the following entities in the Council’s group: • Argyll and Bute Integration Joint Board (total fee of £34,000) • Dunbartonshire and Argyll and Bute Valuation Joint Board (total fee of £10,000) • Live Argyll (total fee TBC) 105 Page 383
Page 384
Appendix E: Other communications blank Other communication Response Compliance with Laws and Regulations We will obtain written representations from management that all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements have been disclosed. External confirmations We did not experience any issues with respect to obtaining external confirmations. Related parties We did not identify any significant matters relating to the audit of related parties. We will obtain written representations from management confirming that: a. they have disclosed to us the identity of related parties and all the related party relationships and transactions of which they are aware; and b. they have appropriately accounted for and disclosed such relationships and transactions in accordance with the requirements of the applicable financial reporting framework. Going Concern We have not identified any evidence to cause us to disagree with the Section 95 Officer that the Council will be a going concern, and therefore we have not identified any evidence to cause us to consider that the use of the going concern assumption in preparation of the financial statements is not appropriate. We will obtain written representations from management, confirming that all relevant information covering a period of at least 12 months from the date of approval of the financial statements has been taken into account in assessing the appropriateness of the going concern basis of preparation of the financial statements. 106 Page 384
Page 385
Appendix E: Other communications (continued) blank Other communication Response Subsequent events We are required to obtain evidence about whether events occurring between the date of the financial statements and the date of the auditor’s report that require adjustment of, or disclosure in, the financial statements are appropriately reflected in those financial statements in accordance with the applicable financial reporting framework. We will obtain written representations from management that all events occurring subsequent to the date of the financial statements and for which the applicable financial reporting framework requires adjustment or disclosure have been adjusted or disclosed. Matters related to fraud Our audit was designed to obtain reasonable assurance whether the financial statements as a whole are free from material misstatement due to fraud. Please refer to the section titled ‘Fraud considerations’ for our fraud considerations and conclusion. We will obtain written representations from management and, where appropriate, the Audit and Scrutiny Committee, confirming that a. they acknowledge their responsibility for the design, implementation and maintenance of internal control to prevent and detect fraud; b. they have disclosed to the auditor the results of management’s assessment of the risk that the financial statements may be materially misstated as a result of fraud; c. they have disclosed to the auditor their knowledge of fraud or suspected fraud affecting the entity involving: i. management; ii. employees who have significant roles in internal control; or iii. others where the fraud could have a material effect on the financial statements; and d. they have disclosed to the auditor their knowledge of any allegations of fraud, or suspected fraud, affecting the entity’s financial statements communicated by employees, former employees, analysts, regulators or others. 107 Page 385
Page 386
Appendix E: Other communications (continued) blank communication System of Quality Management National Fraud Initiative Other Response To address the requirements of ISQM (UK) 1, our firm’s System of Quality Management team completes, as part of an ongoing and iterative process, a number of key steps to assess and conclude on our firm’s System of Quality Management, including: • Ensuring there is an appropriate assignment of responsibilities under ISQM (UK) 1 and across Leadership • Establishing and reviewing quality objectives each year, ensuring ISQM (UK) 1 objectives align with our firm's strategies and priorities • Identifying, reviewing, and updating quality risks each quarter, taking into consideration a number of input sources (such as FRC / ICAEW review findings, internal monitoring findings, findings from our firm’s root cause analysis and remediation functions, etc.) • Identifying, designing, and implementing responses as part of the process to strengthen our firm's internal control environment and overall quality • Evaluating responses and remediating control gaps or deficiencies We perform an evaluation of our system of quality management on an annual basis. Our latest evaluation was performed as of 31 August 2024. Details here of that assessment and our conclusion are set out in our 2023/2024 Transparency Report, which is available on our website here. The National Fraud Initiative (NFI) in Scotland is a counter-fraud exercise led by Audit Scotland and overseen by the UK’s Cabinet Office, designed to prevent and detect fraud. The NFI uses data analytics to compare information held on individual by different public bodies to highlight the existence of fraud or error. The NFI exercise for 2024/25 has commenced, and data uploads have been submitted to the Cabinet Office for review. As at 16/11/2025 (per update report taken to the Audit and Scrutiny Committee), 5,612 matches are complete (over 11 operational areas), and 5,532 have cleared, with 80 errors. More uploads have been given to the Cabinet Office in November 2025 and will be matched once released. 108 Page 386
Page 387
Appendix F: Wider Scope and Best Value ratings We need to gather sufficient evidence to support our commentary on the Council’s arrangements and to identify and report on any risks. We will carry out more detailed work where we identify significant risks. Where significant risks are identified we will report these to the Council and make recommendations for improvement. In addition to local risks, we consider challenges that are impacting the public sector as a whole. We have assigned priority rankings to each of the risks identified to reflect the importance that we consider each poses to your organisation and, hence, our recommendation in terms of the urgency of required action. The table below describes the meaning behind each rating that we have awarded to each wider scope area based on the work we have performed. Rating Level 1 Description The identified risk and/or significant deficiency is critical to the business processes or the achievement of business strategic objectives. There is potential for financial loss, damage to reputation or loss of information. The recommendation should be taken into consideration by management immediately. Level 2 The identified risk and/or significant deficiency may impact on individual objectives or business processes. The audited body should implement the recommendation to strengthen internal controls or enhance business efficiency. The recommendations should be actioned in the near future. Level 3 The identified risk and/or significant deficiency is an area for improvement or less significant. In our view, the audited body should action the recommendation, but management do not need to prioritise. 109 Page 387
Page 388
Appendix G: Current year updates, forthcoming accounting & other issues Applicable for IFRS Reporters Current and forthcoming accounting issues New standards and amendments Effective for accounting periods beginning on or after 1 January 2023 IFRS 17 Insurance Contracts (issued May 2017) and Amendments to IFRS 17 Insurance Contracts (Issued June 2020) • IFRS 17 Insurance Contracts (IFRS 17) is a new standard that will replace IFRS 4 Insurance Contracts (IFRS 4). The standard sets out the principles for the recognition, measurement, presentation and disclosure about insurance contracts issued, and reinsurance contracts held, by entities. The amendments, issued subsequently in June 2020, do not change the fundamental principles of IFRS 17 and are aimed at helping companies implement the standard and make it easier for them to explain their financial performance. The EU has endorsed the adoption of IFRS 17, although with some changes to the version issued by the IASB. In May 2022, the UK Endorsement Board (UKEB) adopted the standard and the associated amendments. Amendments to IFRS 17 Insurance Contracts: Initial Application of IFRS 17 and IFRS 9 (Issued December 2021) • The amendments address potential mismatches between the measurement of financial assets and insurance liabilities in the comparative period because of different transitional requirements in IFRS 9 Financial Instruments (IFRS 9) and IFRS 17. The amendments introduce a classification overlay under which a financial asset is permitted to be presented in the comparative period as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset in the comparative period. The classification overlay can be applied on an instrument-by-instrument basis. The amendments have been UK-adopted and endorsed by the EU. Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements: Disclosure of Accounting Policies (Issued February 2021) • The amendments set out notable new requirements for accounting policy disclosures that change the requirements for entities to disclose material accounting policy information, rather than significant accounting policies, and not to disclose immaterial accounting policy information, explaining that accounting policy information taken in isolation is unlikely to be material, but it is when the information is considered together with other information in the financial statements that may make it material. Earlier application is permitted. The amendments have been UK-adopted and endorsed by the EU. Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (Issued February 2021) • The amendment introduces a new definition for accounting estimates and clarifies how entities should distinguish changes in accounting policies from changes in accounting estimates. The distinction is important because changes in accounting estimates are applied prospectively only to future transactions and other future events, but changes in accounting policies are generally applied retrospectively to past transactions and other past events. Earlier application is permitted. The amendments have been UK-adopted and endorsed by the EU. 110 Page 388
Page 389
Appendix G: Current year updates, forthcoming accounting & other issues (continued) Applicable for IFRS Reporters Current and forthcoming accounting issues (continued) New standards and amendments (continued) Effective for accounting periods beginning on or after 1 January 2023 IFRS 18 Presentation and Disclosure in Financial Statements (Issued April 2024) • IFRS 18 Presentation and Disclosure in Financial Statements (IFRS 18) is a new standard that replaces IAS 1 Presentation of Financial Statements. The new standard aims to increase the comparability, transparency and usefulness of information about companies’ financial performance. It introduces three key new requirements focusing on the presentation of information in the statement of profit or loss and enhancing certain guidance on disclosures within the financial statements. 111 Page 389
Page 390
Appendix G: Current year updates, forthcoming accounting & other issues (continued) International Standard on Auditing (UK) 600 Revised - Special considerations - Audits of group financial statements (Including the work of component auditors) ISA (UK) 600 deals with the special considerations that apply to audits of group financial statements, including those circumstances when component auditors are involved. The auditing standard has been revised. The revised standard is effective for audits of group financial statements for periods beginning on or after 15 December 2023. The revisions made to ISA (UK) 600 impact how we perform audits of group financial statements, and how we communicate our audit strategy and audit findings arising from audits of group financial statements, going forward. This page sets out the key changes made to ISA (UK) 600 and how Forvis Mazars will apply the requirements of the revised standard in practice. Key changes The previous ISA (UK) 600 included prescriptive requirements in respect of the audit procedures required over ‘significant components’ of a group, i.e., a ‘full scope’ audit of a significant component’s financial information relevant to the group financial statements was required. Forvis Mazars defined a ‘significant component’ as one that contributed to the group financial statements more than 15% of the materiality benchmark selected to determine group materiality, e.g., if we had determined materiality using a profit before tax benchmark, any component that contributed more than 15% of the group’s reported profit before tax would be classified as a significant component and a ‘full scope’ audit would be performed over that component’s financial information. ISA (UK) 600 Revised eliminates the 'significant component' concept, opting instead for consideration of risks of material misstatement at the assertion level of the group financial statements that are associated with components. This results in a group audit that is better focused on the risks of material misstatement of the group financial statements and affords greater flexibility in how we classify components and how we may design the nature and extent of audit procedures to be performed over a component’s financial information, i.e., we can determine the nature and extent of the audit procedures to be performed over a component’s financial information based on the specific risks relevant to the group financial statements. ISA (UK) 600 also, however, removed the option to limit the procedures performed over a ‘non-significant’ component’s financial information to desktop analytical procedures. We are now required to perform substantive audit procedures (or a combination of substantive audit procedures and tests of controls) over the group financial statements, including the financial information relating to components in the group, until the residual, untested balances, classes of transaction and disclosures in the group financial statements are below our group materiality. This is to ensure that aggregation risk (the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole) is addressed appropriately. In combination, these changes may result in a change to the nature and extent of the audit procedures we perform over the financial information of components on a group audit compared to previous years and may result in components that were not previously in scope of our group audit being brought into scope going forward to ensure that we address aggregation risk appropriately. 112 Page 390
Page 391
- Appendix G: Current year updates, forthcoming accounting & other issues (continued) International Standard on Auditing (UK) 600 Revised - Special considerations - Audits of group financial statements (including the work of component auditors) Key changes (continued) To ensure consistency of approach, Forvis Mazars will apply the definitions set out below when performing audits of group financial statements going forward: Key component Material component Any component: Any component, other than a key A component, that is not a key component, that contributes to one or component or a material component, i. Which is greater or equal to 15% of more group financial statement areas that is scoped into a group audit to the benchmark chosen for calculating an amount that is above group financial reduce the risk of material misstatement group materiality (key by size); or statement materiality. of the group financial statements to an acceptably low level (based on size or ii.Where the specific nature or risk) in situations when, after assessing circumstance of its financial which components are key components information make it likely to include and material components, the significant risks of misstatement of the aggregate amount of a financial group financial statements (key by statement area related to un-scoped risk). components is still above group financial statement materiality. Non material component 113 Page 391
Page 392
Appendix G: Current year updates, forthcoming accounting & other issues (continued) International Standard on Auditing (UK) Revised - Special considerations - Audits of group financial statements (including the work of component auditors) Key changes (continued) Definition of ‘component’ - The definition of ‘component’ has been revised to “an entity, business unit, function or business activity, or some combination thereof, determined by the group auditor for the purposes of planning and performing audit procedures in a group audit”. This provides clarity on how components may be identified in a group audit and may result in a change to how we identify components on a group audit compared to previous years. For example, we may group separate legal entities (e.g., subsidiaries) in a group based on common characteristics (such as common management, common information systems, and common geographical locations) and treat those components as a single component, when appropriate to do so. Common controls - The definition of ‘group-wide’ controls has been removed and we are instead required to consider ‘common controls’, being controls that operate in a common manner for multiple entities or business units. This may assist us in grouping separate legal entities, business units, functions, or business activities in a group into a single component for the purposes of a group audit; or it may result in us grouping specific account balances or classes of transaction recorded by individual legal entities, business units, functions, or business activities into a single population for the purposes of our audit procedures. For audits where we are adopting a controls-based audit strategy, this may result in efficiencies, as we can rely on a single control for the purposes of the audits of more than one component where that control is common to those components. Definition of ‘engagement team’ - The definition of ‘engagement team’ has been revised to include component auditors. While this change may seem inconsequential, it forms part of the overall changes intended by ISA (UK) 600 Revised to enhance two-way communication between the group auditor and component auditors during a group audit. This will result in enhanced direction and supervision of component auditors by the group auditor during a group audit. Calculation of component materiality - The requirement to set overall materiality for a component has been removed. We are now only required to determine component performance materiality. Other changes - ISA (UK) 600 Revised includes new and revised requirements and application material that better aligns the standard with recently revised standards such as ISQM (UK) 1, ISA (UK) 220, and ISA (UK) 315. The new and revised requirements also strengthen our responsibilities related to professional scepticism, planning and performing a group audit, two-way communications between the group auditor and component auditors, and audit documentation. These changes are to encourage proactive management of quality at the group engagement level and the component level; reinforce the need for robust communication and interactions during a group audit; and foster an appropriately independent and challenging sceptical mindset. Scope of audit work to be performed over a component’s financial information - Forvis Mazars will, going forward, determine the scope of work to be performed over a component’s financial information on a group audit using the definitions set out below: Full scope Specific scope Group Engagement Team Instructed Procedures Designing and performing audit procedures on the entire financial information of a component. Designing and performing audit procedures on one or more specified account balances, classes of transaction, and/ or disclosures of a component. Performing specified audit procedures, as designed and instructed by the group engagement team. 114 Page 392
Page 393
Contact Forvis Mazars Mark Outterside Director – Public Sector Audit Tel: 07824 086 593 mark.outterside@mazars.co.uk The contents of this document are confidential and not for distribution to anyone other than the recipients. Disclosure to third parties cannot be made without the prior written consent of Forvis Mazars LLP. Forvis Mazars LLP is the UK firm of Forvis Mazars Global, a leading global professional services network. Forvis Mazars LLP is a limited liability partnership registered in England and Wales with registered number OC308299 and with its registered office at 30 Old Bailey, London, EC4M 7AU. Registered to carry on audit work in the UK by the Institute of Chartered Accountants in www.auditregister.org.uk England and Wales. Details about our audit registration can be viewed at www.auditregister.org.uk under reference number C001139861. VAT number: GB 839 8356 73 © Forvis Mazars 2024. All rights reserved. Page 393
Page 394
This page is intentionally left blank